“It is irreparable,” Sorrell said.
Dick Davis, managing partner in Student Suites Inc., declined to discuss the stop-work order, directing questions to the city.
“We’re still trying to work out why we were asked to stop,” Davis said.
Sorrell said he didn’t know if demolition contractor Steve R. Rauch Inc. was aware that that portion was not to be demolished. Rauch could not be reached for comment.
An $18 million to $20 million 200-unit student housing project is to be constructed on the site by Missouri-based Student Suites Inc. in partnership with nonprofit United Housing and Community Services Corporation of California. The city pledged up to $1 million for demolition and other costs associated with the former Schwind building next door to the former Daily News building.
Daily News owner Cox Media Group contributed $1 million for environmental remediation and demolition of the newspaper building.
Sorrell said there had been questions about the economic feasibility of retaining the 1922 portion, but the developer was required to make a case to the Landmarks Commission for permission to tear it down and had not done so.
The financial penalty for violating the city’s rule is small — probably about $500, said Sorrell — but the company will be expected to cover the cost of mitigating the loss.
“We will sit down with the developer and have notified the president of the Landmarks Commission,” said Sorrell. “We will work with their architects and come up with a mitigation.”
The stop-work order comes as the project hit an unexpected delay in obtaining federal permission to use some of the land for the student housing project. Davis said that deed restriction has held up financing.
“We have the funding ready to go,” he said. “All the documents have been completed and the underwriters are waiting to sell the bonds, but we cannot sell it with that deed restriction on that property.”
Sorrell said the deed restriction by the U.S. Department of Housing and Urban Development dates to the 1970s or 1980s when federal funds were used to convert the Schwind building from a motel to low-income housing. When HUD sold the building to the city in 2000, the city agreed that it would only be used for affordable housing.
City officials are now trying to get the restriction moved to an affordable housing project planned for the David Building on East Third Street, Sorrell said.
But HUD is unable to approve the change because Congress neglected to include the necessary authority for HUD in this fall’s appropriations continuing resolution, so nothing can be done until a new appropriations resolution is considered in January, Sorrell said.
He said the project may need to be redesigned so that the 10-15 percent of the land where the Schwind once stood is not included in phase one, allowing financing to move forward.
Staff writers Jeremy Kelly and Tom Beyerlein contributed to this report.
About the Author
