After acquiring and razing nearly an entire city block of 1960s-style development, the city of South Lake Tahoe is scheduled to transfer title of the land in the Park Avenue Redevelopment Project next week to the developers.
"I would expect escrow to close by Tuesday or Wednesday," said Judith Von Klug, the city's redevelopment manager.
Title will go to Heavenly Resort Properties, a limited liability partnership between American Skiing Company and Trans-Sierra Investments.
Together, the two companies will pay a $2 million developer's fee for the land.
ASC, as the main developer in the project, will contribute $1,750,000 for the rights to build its four-star Grand Summit Hotel and $35 million gondola near the corner of Park Avenue and U.S. Highway 50. Trans-Sierra Investments, developer of the retail space at the hotel, will pay $250,000.
"Our funds are ready to go," said Stan Hansen, ASC's senior vice president. "We're ready to close."
Title to the land is a key component in ASC's construction schedule for the quarter-share ownership Grand Summit Hotel. Construction on the gondola is already under way, and starting from the top station and working down.
To start work on the Grand Summit, Hansen said the company needs to have title of the property to get a final report from the California Department of Real Estate. That final report will allow the company to convert its hotel unit presales, which currently total $71 million, to binding contracts. The binding contracts are a condition of the company's construction loan.
"The real Achilles heal in this, is the timeliness of the Department of Real Estate public report," Hansen said.
"I'm thinking that 15 to 20 days after we close escrow, we'll have that report. Three to five weeks after that, we'll be able to convert to binding contracts," Hansen said. "That's our best guess at this point."
Hansen's estimation puts the hotel groundbreaking into August, or later. Still, the company is working to start on the project during this building season.
"We're looking at breaking ground in some fashion, even if it's in September," he said.
Those are welcome words to South Lake Tahoe's Mayor Tom Davis.
"Transferring title is a very important part of the deal," Davis said. "The only thing that I would have liked to have seen is the construction loan in place and them starting work but they're still trying to do that for this season, and, as mayor, that would make me very, very happy."
Transferring title before the ASC's loan documents were in place was the only answer to a catch-22 situation, where the city wanted the loan in place before giving up title and ASC needed the title to get the loan, Davis said.
Safeguards are in place to protect the city should things go awry.
A reverter clause exists, with some conditions, that will return title to the city if the developer doesn't build as planned, Von Klug said.
In addition to the clause, ASC has posted a $5 million letter of credit on its commitment to build the resort and gondola. If the company fails to show three documents - a final public report by the Department of Real Estate, a construction loan and payment and performance bonds - by Sept. 15, a week before the letter expires, the city can draw on the funds.
The $5 million is enough to pay for about 2 1/2 years of interest payments on $33 million of bonds the city sold in October to fund the property acquisition portion of the project. Additionally, the city will also have the $2 million from the title transfer in its reserves.
The expiration date on the letter of credit has been extended twice, once from April 28 to June 30, and then to Sept. 22. City staff is looking into what protections the city might need should the letter of credit be extended a third time to accommodate a construction start date of May 2001.
Von Klug said neither side should be blamed for the delays.
"I think (the developers) have moved forward expeditiously and professionally - things just take longer than expected," Von Klug said. "There are no bad guys here - there was just a massive amount of work to be done."
The $350 million Park Avenue Redevelopment Project, which has been in the making for more than eight years, is a joint effort by the city of South Lake Tahoe and private developers.
The city has completed a large portion of its responsibility by acquiring the properties through the process of eminent domain and then demolishing the buildings to make way for new construction.
The leveled land now awaits construction of the Grand Summit Hotel, a parking garage, an ice rink and a retail complex that includes restaurants, shops, and a six-screen theater complex. The city is also planning on adding $30 million in environmental improvements to the area. Construction of a $35-million gondola project that will connect Park Avenue to Heavenly's slopes began on site two weeks ago.
Hansen said ASC is planning to adhere to the projected Grand Summit completion date of July 2002, as outlined in the redevelopment agreement signed last October by all the proponents in the project.