Should additional weekly rentals be allowed in Old Town?

 

Please come to the City Council meeting this Monday, 7pm and help us stop MORE ….vacation rental approvals here in Old Town.

I have lived next to a party house for the past 4 years and I don’t wish that nightmare on anyone.  It’s not allowed in any other part of our city, so why just in Old Town?

Please come and speak. We need to get 4 votes of the council to approve and ’emergence’ ordinance to stop the approvals except for those that have already approved.

The City has received approval requests for TWENTY (20+)  licenses so far even thouogh there are actually FORTY (40+) vacation rentals advertising in Old Town right now!

Please ask your neighbors to show up on Monday also.

How much is enough?

Thank you,
Marc Loopesko

Who’s Side are out Council Members On? DWP Struggle About to Get Dicey!

(THIS IS ANOTHER IN A SERIES OF NOTICES BY A LARGE GROUP OF LOCAL CITIZENS TO KEEP ALL OF US ADVISED ON WHAT THE COUNCIL IS TRYING TO FORCE THROUGH TO BENEFIT THE DEVELOPERS OF THE DWP PROPERTY.  WE’VE BEEN ADVISED BY A 3RD PARTY THAT A DEVASTING DOCUMENT WILL BE INTRODUCED TONIGHT TO THWART THOSE EFFORTS….IF THE COUNCIL ALLOWS IT TO BE INTRODUCED AS EVIDENCE.)

Dear Friends,  We really need to be heard at the Plannning Commission on Wednesday, May 2nd at 7PM  This is public trust land and we need to stand up

Please come and be heard.  Seal Beach is not an accident!  It took hard work to make this city what it is. WE need you to show up and let the council know that no matter how much they keep putting off  the DWP problem….WE’RE NOT GOING AWAYf …….PLEASE !!!

1) First, we’re  not sure why a feasibility study is relevant given that the developers bought the land with the zoning for a hotel already in place.  The feasibility of the hotel is their issue, not the public’s.  Why does it matter if they decide later it’s not feasible.

2) Even if “feasibility” is somehow relevant, the studies are completely flawed in both set up and in the actual calculation.

Set up

– A feasibility study would not include the historical cost of the land purchased. A feasibility study would be used to determine if hotel can be built, and then to back into what price one could afford to pay for the land.  Doing it the other way is not “feasibility” ……it is simply calculating profitability, retroactively.  A developer’s profitability is certainly not the public’s concern, unless they were planning to share their profits with the public if they got  a good deal.

–  Even if  their historical land cost is somehow relevant, including a return for their “sunk cost” of the past 10 years of holding the land in the cost-basis is simply unreasonable in a “feasibility” study.  And it’s even more unreasonable when land values generally declined over that period.  Again, how is their return or their “opportunity cost” of any concern to the public?

Calculations

First, the financial models done by Kosmont are simply wrong.  They made a couple math errors that invalidate the entire analysis.

Math errors:

– Interest expense is held constant throughout the entire 10 projection period on all the scenarios.  Obviously that’s incorrect, as interest expense will vary with debt balances.  Balances will increase as they lose money and will decrease as they pay down debt.  In their first scenario, for example, the effect is so dramatic that in year 10 projected interest expense is $1.3 million more that it would be.

– They make the same mistake in calculating Terminal Enterprise Value. They assume the debt balance is the same at the end  of the 10 years,when in fact it would have declined from $$21.5mm to only $5.0mm, in scenario one for example. Similar for all the other scenarios.

– The IRR in scenario 1, using THEIR numbers, but correcting the math mistake, would make the projected IRR go from 16% to 26%.

– Interest expense in couple of the scenarios appear to simply be wrong.  And it reduces the returns dramatically.

Unrealistic Assumptions:

– Kosmont assumes that the interest rate would stay the same for all 10 years.  Naturally, when the hotel gets to a steady state, as projected by year 5, they would be able to refinance at better rates.

– Requiring a 20% IRR over 10 years is not realistic.   Once the hotel gets to a steady state, the required return is much lower, which is why “cap rates” for hotels in the stock market are only 7% right now.  A 5 year window of start-up risk is more appropriate for a 20% return.  In scenario one, if the developer sells the hotel at year 5, they would achieve a 30% IRR.

– The 8% cap rate assumed in the analysis is conservative, given where the market is right now.

Results

Correcting the math errors alone leads to several scenarios that are over 20% IRR. If we slightly adjust a few assumptions to more realistic ones, like cap rate, refinancing rate, using actual cost on the land (which shouldn’t even be included at all in our opinion), then almost every scenario becomes feasible with 16%-30% IRR ranges.

JOIN YOUR NEIGHBORS TONIGHT!

What say you about the old power-plant land?

The Bay City Partners, owners of the 10 acres near Ocean and First, have submitted a “new plan” for development.

To “What’s Up In Seal Beach” …. it looks pretty much the same as the old one.  Still a 70%-30% split…not the 75%-25% that was cast in stone several years ago by the city.  Still taking much of the land along the river for homesites.  Still offering to drop their litigation against the city if the new plan is accepted.

To many of the residents of Old Town the new plan is not new at all. They see their years of struggle to protect that land from over-development and to protect as much public access as possible for our citizens and visitors in jeopardy.

Several of our city councils over the years have adjusted the building restrictions on the 10 acre parcel in an effort to be fair to any potential developers and still protect the neighborhood.  When the present owners bought the land they were well aware of the last, and hopefully final, use restrictions.  Nothing was hidden in the purchase that we know of…and if it was perhaps they should talk to the seller.

To come and plead for additional waterfront exposure for their development many years after the fact hopefully will fall on deaf ears.  A “few more homes” translates into  “many more dollars” and also “a life time of lost access.”

The only reason the land is not a complete bluff park is that the city couldn’t afford to buy it.  To many it is a heartache that anything will be built on that beautiful piece of land.

If we take a look at our neighbor to the south, Huntington Beach, and see what they were promised by the developer of the Bolsa Chica Mesa and what they got we can understand why so many Seal Beach residents are against any change in the existing planned land use of that parcel.

We urge you all to call and/or write to our council and Mayor and tell them  exactly how you feel ..and be sure to tell them where you live!

To those on our email list we encourage you to pass this on to your friends

How to contact the City Council:

District 1 –  (Old Town & Surfside Colony) Charles Antos – 562- 431-2527 ext 1501 E-mail: mavjka2000@aol.com

District 2 – (Leisure World & College Park West) David Sloan (Mayor) 562- 431-2527 ext 1502 E-mail: sloandistrict2@dslextreme.com

District  3 –  (Hill, Coves, Bridgeport & Herron Pointe) Gordon Shanks – 562- 431-2527 ext 1503 e-mail to gorsha@aol.com

District 4 – (College Park East & Town Center) Gary Miller  562- 431-2527 ext 1504 – E-mail: miller.sb.district4@earthlink.net

District 5 –  (Leisure World) Michael Levitt – 562- 431-2527 ext 1505 E-mail: mglevitt@roadrunner.com

Buffet calls out Financial Leaders

Berkshire Hathaway chairman suggests Wall Street execs have gotten off lightly

Buffett used his update on subsidiary Clayton Homes, the largest producer of modular and manufactured homes, to touch off a discussion of the U.S. housing market.

Warren Buffett sees a housing-market turnaround coming. In addressing oversupply, Buffett said the economy reduced new housing starts to a number well below the rate of household formations.

“[This] means that within a year or so residential housing problems should largely be behind us.

To read the entire article go to : http://www.marketwatch.com/story/buffett-calls-out-financial-leaders-2010-02-27?pagenumber=2Buff

Old Town Real Estate is booming …again!

Two homes on opposite corners of Ocean and 7^th both have “Sale Pending” signs on them.  Combined total prices of about $9 million.

Congratulations to Jim Klinsanin’s Bay Realty and Seal Beach Realty. These were two high potential  properties on the “Gold Coast.”

Here Come The Developers Again!

The old power plant site on First street and to the San Gabriel River is  one of few possible sites left in California for an ocean-front hotel.

Its’  almost 11 acres of undeveloped land on Seal Beach’s coast and its been up for sale for almlost a year with expectations that the buyer would turn the site into a small hotel, not unlike the Seal Beach Inn; The Inn was demolished three years ago to build five upscale homes, some of which we believe are still unsold.

The owner of the land is a Limited Liability Corporation called, Bay City Partners, LLC, and they put it up for sale less than a year ago and are asking $26.5 million for the I0.7-acre parcel.  Seems like a fair mark-up since they paid $4.5 million for it in 2003.

It has been empty for nearly 30 years.

Estimates on building a 150-room hotel at the site were in the $32 million range  last year,  about $215,000 per room, Hotels on the beach in Orange County have been selling for about $460,000 per room according to estimates in August of 2008.

It goes without saying that the city has been very conscious of how that very prominent piece of land would be developed . As long ago as 1996 they voted against cramming in a lot of single family residences on the site because of: destroying views of existing homes, creating additional impact on existing traffic,  and the costs of other services. (Taxes on R-1 property rarely covers  the cost of the services provided by the city.)

Nearby resident Joel Davidson led a group of citizens who campaigned against the two story homes blocking the view of  existing residents when Bay City brought a similar plan before the council in 2003.  At that time, Rocky Gentner, a partner in the Bay City group said Davidson’s view protection ended at his property line and implied that therefore his argument was moot there’s a nice, thoughtful developer.  (Coincidentally, Bay City LLC was a prominent supporter of the pro-three story faction in the 2008 election. Since the defeat of the three story supporters the fence around the power plant property has been lined w/heavy green tarp.  Was that to block the view of the jetty, the marina’s and the landscape west of first street…. in the hopes that we wouldn’t know what we were going to lose if they got their new subdivision approved.) 

In 1996, after extensive meetings and with input from the citizens of Seal Beach, the City Council approved zoning for the property that would allow a 150 room hotel or smaller but let it be known that the open space should be substantial (about 70% )  and citizens should have access to the green space created and they did not want gated communities.  The majority of the land, some of which runs next to the San Gabriel river, would remain available for public use and as open space.

The land originally sold in 2003 (or 2000?) for a reported $4.5 million dollars. Whether Bay City LLC  are the original buyers (after the power plant removal) or not we aren’t sure, however, and and all buyers after 1996, bought it with full knowledge of the city’s zoning requirements and the neighbor’s views.

The city zoned the land as they did, and when they did, so that any prospective buyers would know that 70% of the land was to be left as open space and the city wanted a 150 room (or less) hotel for increased revenues for Seal Beach;  a desire that is even more needed in 2009.

Why Bay City has not been able to sell the land in the last year is anyone’s guess.  One reason might be the $26 and half million price tag.  A hefty price even for Seal Beach. Less than a year ago the firm marketing the land said there were several hotel developers interested and they expected the land to be sold in four to six months. Now Bay City has now come to the city with a proposal for creating 56 lots and building 35 two story homes,  21 “casitas”,  (size not available at this time) and a 75 room hotel with spa, restaurant and pool. 

This proposal seems to be even more egregious than the proposal Bay City brought before the planning  department 6 years ago. 

 

Some advice for Bay City Partners –  You should keep one thing in mind….. The citizens of Seal Beach don’t want to turn our town into another Huntington Beach. We saw what happened there.

We’ve got something magical in this city and we won’t let personal avarice take it away.

Some advice for Seal Beach residents – Watch to see where Bay City ads and/or financially supported stories appear to support the project and remember who looked for dollars rather than supporting the community. 

Seal Beach Real Estate Still in Demand

Seal Beach residential real estate demand continues to grow. Inventory of unsold properties falls.

At the end of April unsold county homes was again less than the month before and new listings were lower than they’d been since Spring of 2006.  Of the more than 10,000 homes unsold nearly 4,000 were “distressed” properties.

In Seal Beach, not surprisingly, the percentage of “distressed homes” was only four and there had been as many as 8 distressed properties in Seal Beach.

There were 360 homes for sale in Seal Beach in March but that number had fallen by April.

Although there are similarities between Seal Beach’s numbers and the county’s, Seal Beach is still a real estate anomaly in the state.  Seal Beach listings do have similar timelines regarding how long they are listed before selling but when one considers the much higher per-foot cost of Seal Beach homes it is understandable they are on the market for longer periods.  

Now that there are fewer homes for sale and more buyers for Seal Beach homes the listing times should clearly shrink, however, Seal Beach can’t be used as an indicator for what we should expect for the entire county.

PNC’s CEO on the “Stress Test” and economy

On Monday, May 12, 2009,  James Rohr, Chairman and CEO of PNC Bank was interviewed on a business show regarding the so called “stress test” that many U.S. banks recently had to go through and his thoughts on the process as well as how it impacted PNC.

In general it seemed (to this reporter) that Rohr thought the stress test was an excellent idea.  It showed “worst case” scenarios for banks;  i.e. “what if the worst possible things happened to your investments, loans, etc.  Could the bank survive?”

In the case of PNC, in order to survive a worst case scenario PNC would need another $600 million dollars.  Rohr promptly made changes in PNC’s portfolio and financial situation to make sure that by year end, or by first quarter of 2010 at the latest, PNC would have that $600 million to survive a “worst possible” situation, should it occur, which no one really expects to happen.

Not being a financial guy I was very impressed with how Mr. Rohr spoke in straight forward language I could understand. If there was a criticism of the  Obama Administration I didn’t hear it.

He said that 2009 was going to be tough for banking in general.  He believes that real estate prices will keep falling; there are many more mortgages that will fail and foreclosures that will follow but he feels that the great majority of U.S. banks will be better off in 2010 and beyond than they have been in the past.

PNC is based in Pennsylvania, however, they have branches throughout the U.S. You can go to their site and find jobs that are available all over the U.S. 

OC Homes Still Not a Bargain

According to a recent article featured in the Orange County Register, OC home prices are back to 2002 levels, however “as of March, Realtors peg the median selling price of an Orange County home at $444,520. That’s 2.54 times what the latest reading for all U.S. homes was: $175,200.”    Accounting for the OC Premium (surf, sand & sun) it appears OC home prices would still need to fall another 17% to be considered affordable.  Will this happen or is a market recovery on the way?  Only time will tell. 

To read the full article in the OC Register click here.

For Sale – 5 Income Properties – Not Yet Listed!

REAL ESTATE NEWS FLASH – This entire portfolio of properties being offered for sale, but not yet listed in the MLS. If you’ve been waiting for the opportunity to purchase income producing properties or a single family home… now is your opportunity. Here are the properties being offered

– 125 2nd Street – 4 units, (2) large 1 bedrooms, (1) 1 bed, (1) studio. Monthly income $5,465, insurance $148 monthly, water $150. Fully occupied. List price (estimated) $1.1k – $1.2k~

– 215 Ocean Avenue – Single Family, double lot, inland side of Ocean ave, second story balcony with ocean view, rear deck, expansive backyard, 2 car “off street” garage. List price (estimated) $2.2k~

-1409 Ocean Avenue – 3 units. Monthly income $4,800, insurance $144 monthly, water $150 monthly. Fully occupied. List price (estimated) $900k – $1 million.

– 313 Central Avenue – 3 units. Front house is 3 bed 1 bath, (1) 1 bed, (1) studio. Monthly income $4,425, insurance $141 monthly, water $150. Listed Price TBD.

– 238 5th Street – 3 units. Front house is 3 bed 1 bath, (1) 2 bed, (1) 3 bed apartment. Total monthly income $6,900. I believe this sits on a double lot. List price (estimated) $1.2k – $1.3k~

If you’d like more information, or to schedule a showing call Nat Ferguson directly at (562) 761-7165. These properties will not be listed for 24 hours. This is your opportunity to to beat other buyer’s to these deals.   You may also visit Nat’s website for more information.

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