Mission Gateway developer returns to city with phased construction proposal that would begin apartment work in early spring

A new timetable for the Mission Gateway project calls for the first phase to be apartments above retail at Johnson and Roeland Drives.
A new timetable for the Mission Gateway project calls for the first phase to be apartments above retail at Johnson and Roeland Drives.

The developer of the long-stalled Mission Gateway project and city officials have negotiated a tentative agreement that, if all approvals occur, would begin construction of apartments and retail along Johnson Drive by March 31.

The new memorandum of understanding (MOU) between Tom Valenti of the Cameron Group and the city is expected to be considered Wednesday by the Mission City Council. It lays out a phased timetable for building the $162 million development that’s been languishing for a decade.

“We are trying to find a way to kickstart this and get construction started as soon as possible,” Valenti said. “This is how we can start where we can take the risk and have construction going on so people feel confident this project is happening.”

An MOU is a non-binding agreement that serves a a blueprint for final, detailed negotiations. For its part, Mission officials say they will consider incentives, including tax increment financing and a community improvement district. No dollar amounts are included in the memorandum.

“The MOU is not commonly used, but the developer views it as an important step to clearly communicate their assertion that certain development incentives are necessary to make it financially feasible to construct the project,” according to a staff report to the Council.

“The MOU states that the developer intends to request consideration of various development incentives in connection with the project, and that the city agrees to consider the same in good faith.”

The Mission Gateway project remains a mixed-use development in the memorandum. The work however, is broken down into three phases with final completion anticipated by spring 2019.

Here are the phases and timetable:

-Phase 1. Construction of approximately 50,642 square-feet of “small shop” commercial and restaurant uses beneath 168 apartments along the Johnson Drive/Roeland Drive corridor. Phase 1 work would begin by March 31 and completed by April 30, 2018.

-Phase 2. Construction of a 1,700-space, three-level garage to serve the entire project and a 200-room Aloft and Element hotel with a 15,624 square-foot restaurant. Phase 2 and Phase 3 would begin in the fall of 2017 and would be completed by spring 2019.

-Phase 3. Construction of approximately 110,000 square feet of “junior-anchor/’big box'” commercial and retail space. The retail would be located where a Walmart originally had been planned at Johnson Drive and Roe Avenue. Walmart dropped out of the project in early October.

In addition, the MOU calls for office construction at the Mission Gateway development should market demand arise.

As for the public financing assistance, the memorandum proposes the city approve 20-year tax-increment financing plans for the project. It would allow the developer to be reimbursed the new or incremental property taxes, sales taxes and hotel guest taxes generated. Valenti said the initial apartment and retail construction could be started without TIF.

It also calls for a Community Improvement District that would allow the developer to levy a one-cent additional sales tax over 22 years. Those revenues would be used to help pay for the project.

The developer also is asking for a sales tax exemption on construction materials for each phase of the project.

The MOU calls for the revenues from the incentives to be received on a “pay-as-you-go” basis as they are generated to repay eligible development costs.

It also says the city may be asked to consider issuing a special obligation bond that would be repaid by the incentive revenues. The city would not be asked to back those bonds with its credit.

“It’s a way to go forward without the city taking risk, but we’re looking for a moral commitment from the city that the project can’t happen without TIF and CID bonds,” Valenti said.

The developer said the proposed MOU would allow him to move forward with the first phase of the project to demonstrate both to Mission residents and potential tenants it’s a real deal.

He said he’s made good progress with one potential large retail tenant for the later phase, but much work still needs to be done. The franchise fee already has been paid for the Aloft and Element hotel.

“The goal of this project is to at least try to get our money back, if we don’t make a little money,” Valenti said. “We have no opportunity to make money unless we do the hotel and the mid-size retail.

“We’re motivated financially. We’re in a worse hole if only phase one gets done.”