Main Street property may go back on market
CITY HALL — Officials here have settled a lawsuit with a local developer who claimed that bureaucratic delays on his Main Street project cost him millions of dollars.
The City Council agreed to settle with Howard Jacobs for $125,000, despite the fact that a Santa Monica Superior Court judge ruled last year City Hall was not to blame for the delays. Jacobs filed suit in 2001 and had been seeking $2.5 million. The case was on appeal.
“The council wanted to make a good faith gesture and to jump-start this project,” said Deputy City Attorney Cara Silver, who feels the case has dragged on long enough. “As a result, the building has been standing vacant and is an eyesore.”
Jacobs, who used to own the property on the north end of Main Street, has transferred the land to his former company, 2000 Main Street LLC. Jacobs’ representatives for 2000 Main Street wouldn’t comment on who owns the company, except to say that an ownership group represents the corporation. Other sources close to the property say Jacobs, who now lives in Florida, serves as a consultant to the LLC.
The corporation plans to develop what was once the Pioneer Boulangerie Bakery, located on the north end of Main Street, which has been vacant for years. Many city officials and residents consider the area a blight on the neighborhood — the abandoned building was home to vagrants, and attracted litter and graffiti. It was recently demolished to make way for new luxury apartments and commercial shops.
The development site occupies the entire block bounded between Neilson Way and Main Street, and Bay Street and Bicknell Avenue, as well as another parcel across the street.
The larger site, on the west side of Main Street, was the location of the former bakery.
When Jacobs first proposed the development, he alleged City Hall dragged its feet in completing the environmental impact review for the project, finalizing it several months after the supposed deadline. Jacobs has said in the past that the delay has cost him nearly $3 million because he was sitting on land that he had to pay for — $115,000 a month for the mortgage, insurance and maintenance of the property. He claims the city delayed him his right to get a return on his investment in a timely manner.
Jacobs’ permit application to develop a mixed use project on the site was deemed complete in April 2000 and the draft environmental impact report was completed in August 2000, according to city officials. The Planning Commission denied the project in December 2001. The Santa Monica City Council reversed the Planning Commission’s decision and approved the project in February 2002.
After he finally got the green light, Jacobs backed off on his lawsuit. However, further delays in getting permit approvals and alleged overcharging of fees relating to those permits, prompted Jacobs to file another claim and revive his lawsuit, sources said.
Jacobs had filed a letter with City Hall, protesting the fees, which is the first step in litigation.
“Howard alleged that the city overcharged, delayed and there was a miscalculation of the permit fees,” Silver said, adding certain plan check fees will be waived. “So the overall settlement disposes of the litigation and any further claims... The amount also reflects fees that he paid.”
Both sides see the settlement as a victory —if City Hall had lost on appeal, it could have ended up paying millions of dollars. If 2000 Main Street LLC. had lost its appeal, it would have gotten nothing.
“Any good settlement involves compromise,” said Steven Schiffres, a West- LA based attorney who represents 2000 Main Street LLC. “Both parties shared common goals in resolving this matter.”
Schiffres, who works at Rosoff, Schiffres & Barta, a boutique law firm specializing in business and real estate litigation, said once the terms of the settlement are delivered in writing, the appeal case will be pulled from the courts.
Schiffres wouldn’t specifically comment on why his clients settled for a much lower amount than what was sought in the original lawsuit except to say that it was-n’t just about the money.
“The value of the settlement is not limited purely to the economics of the case,” Schiffres said. “It also has to be recognized that we are the appellant in the case.”
As part of the settlement, a mutual agreement was reached on how long construction and the building permits will apply to the project. A building permit was issued on Feb. 23 and there will be a six-month extension on it after it expires.
Some sources close to the development say Jacobs is gathering all the necessary permits to make the property more desirable for another developer to purchase.
The property had been put on the market in November 2002 for $27 million, but it was taken off the market about eight months ago, according to real estate agents. John Walsh, an agent with Marcus & Millichap Real Estate Investment Brokerage Co., told the Daily Press in March that it was taken off the block because the ownership group no longer wanted to sell it. However, he expected the land would be up for sale again later this year at a price yet to be determined.
Along with the price tag comes all the approvals and conditions given by the Santa Monica City Council to build the 170,000-square-foot, four-story, 133-unit housing and retail development. And now with the settlement agreement, building permits are part of the selling price as well.
Jacobs’ investment not only includes millions of dollars in plan preparations and the price of the property itself, but also hundreds of hours spent in the public review process. Jacobs had envisioned the ground floor of the buildings’ retail space to have neighborhood-serving stores and upstairs, luxury apartments for rent.
Jacobs, who has developed seven other properties in Santa Monica, has been battling City Hall for more than four years to get the project approved. The project has gone through at least four major revamps since Jacobs first purchased the property.
Originally published in the Santa Monica Daily Press print edition on May 20, 2004. Read the original PDF.