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State Housing Officials Find "Plaza" Project Exempt from Surplus Land Act

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By Jorge Casuso

Editor's note: This article was updated at 1:20 p.m. Wednesday to include a comment from the City.

March 24, 2020 -- California housing officials on Tuesday paved the way for the City to resume negotiations with developers of the proposed "The Plaza at Santa Monica" project, saying it is exempt from amendments to the State's recently expanded Surplus Land Act.

The City qualifies for an exemption because it orally entered into an exclusive negotiating agreement (ENA) with the developer before September 30, 2019, the cut-off date set by the amended law, according to Department of Housing and Community Development (HCD).

The agreement does not need to be in writing since it does not constitute a lease or sale of the property, Deputy Director of Housing Policy Zachary Olmstead wrote a letter to the developer's attorney, Dave Rand.

In addition, the Surplus Land Act "does not explicitly prohibit an oral or constructive ENA," Olmstead wrote.

The finding comes one month after the City Council halted negotiations on the proposed project over concerns it may not meet the requirements of the amended law that went into effect January 1 ("City Halts Negotiations on 'The Plaza' Project,'" February 26, 2020).

The unanimous vote came after City Attorney Lane Dilg expressed concerns the proposed 99-year ground lease for the City owned property at Fourth Street and Arizona Avenue could trigger the amended law.

She said the City would wait for clarification from DHCD before taking further action on the proposed 357,000-square-foot mixed-use hotel development.

The City said it is "reviewing and considering the implications of the letter."

"Future Council action on this project will take place in open session at a time to be determined in accordance with the realities of the current public health emergency," City spokesperson Constance Farrell told the Lookout.

According to Olmstead's letter, Rand stated that the City and the developer, Clarett West, "had a non-written ENA in place on September 30, 2019."

Rand also informed HCD that after the expiration of the written ENA the City "has not negotiated with any other person or entity regarding the property."

The negotiations were recently halted "because of HCD's involvement in providing advice to the City on the SLA issues," Rand told HCD, according to Olmstead's letter.

"The facts, taken together," Olmstead concluded, "strongly evidence the fact that the City and the developers had an exclusive negotiating agreement in place as of September 30, 2019."

A representative for Clarett West said the developer looks forward to resuming negotiations with the City.

"We know the City is focused on the most important thing which is keeping Santa Monicans safe," the spokesperson said.

"That said, when things hopefully do normalize, we look forward to restarting negotiations with the City staff and bringing the project before the Planning Commission and the City Council."

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