Joint Special Council/BFPD
02/21/23 07:00 PM
City Manager Department
Willie A Hopkins
Contract
Doc ID: 5259
COUNCIL AGENDA ITEM
AGENDA MATTER:
CONSIDERATION OF DEVELOPMENT AGREEMENT WITH MILESTONE HOUSING GROUP, LLC EXECUTIVE SUMMARY:
The City Manager placed this item on the agenda for Council consideration. Staff is recommending that the City Council adopt a resolution terminating the development agreement the City has entered into with Milestone Housing Group, LLC for failure to comply with the terms of the development agreement.
DISCUSSION:
The City Council entered into a development agreement with Milestone Housing Group, LLC (“Milestone Housing Group”) on May 17, 2021 by adopting Resolution No. 5040-2021 (attached as Exhibit D) and signing the development agreement (attached as Exhibit A).
The development agreement was a part of an effort to revitalize downtown Barstow and the project was termed “Reimagine Barstow.” The development agreement was for a vacant 3.3 acre site located at 555 S. 7th Avenue, also known as the Old Hospital site (APN Nos. 0181-122-18; 0181-122-19; 0181-122-20; 0181-122-21).
City staff worked with a technical assistance team on an application for an Affordable Housing Sustainable Communities’ (“AHSC”) grant. The City created a Request for Qualifications process in 2020 for the site, which resulted in submissions by four development partners. The City chose Milestone Housing Group due its experience in completing high-quality affordable housing projects similar to the City of Barstow.
The site is divided into four parcels on which development is allowed, subject to the conditions of the Development Agreement. The first part of the Development Agreement, being approved by this Resolution, grants Milestone Housing Group a ground lease on Parcel 1, a 3.3 acre plot, upon which to construct an affordable housing project with at least 81 deed-restricted units rented at San Bernardino County moderate-income or lower rates (i.e. 80% of Average Median Income-AMI in San Bernardino County or less) for the term of this Agreement for at least 55 years from the commencement date of the Ground Lease. The option to construct affordable housing is conditioned on applying to and receiving an award for the AHSC grant in partnership with the City of Barstow.
The development agreement created a Contract Period between the City and Milestone Housing Group, in which Milestone Housing Group may apply for the 2021 and 2022 AHSC grant. If, at that point, the grant has not been awarded to the City of Barstow, there is an option for a third year of eligibility for 2023 AHSC grant application cycle where the City of Barstow has the sole discretion to choose if they want to keep Milestone Housing Group on the project for a 3rd year. The City has determined that Milestone Housing Group has failed to secure an AHSC grant for 2021 and 2022 and wants to end its partnership with Milestone Housing Group as is its right under the terms of the development agreement.
As part of the agreement, the City agreed to enter into a 99-year ground lease for the site contingent upon Milestone Housing Group constructing deed-restricted affordable housing units on the site.
The City sent Milestone Housing Group a letter on January 21, 2022 informing them of their default and the City’s intent to terminate the development agreement. A copy of this letter is attached as Exhibit B.
Joint Special Council/BFPD
02/21/23 07:00 PM
City Manager Department
Willie A Hopkins
Contract
Doc ID: 5259
COUNCIL AGENDA ITEM
On January 31, 2023, the City received an email from Marcus Griffin, principal and chief financial officer of the Developer, informing the City that the Developer received the City’s January 23, 2023 notice of intent to terminate and “agree that termination is valid based on the deadlines within the agreement.” A copy of this email is attached as Exhibit E.
FISCAL IMPACT:
The City is not expected to incur any negative fiscal impact from terminating the development agreement.
RECOMMENDED ACTION:
The City Council adopt a resolution terminating the development agreement with Milestone Housing Group (attached as Exhibit C) and direct staff to take further steps to terminate the development agreement.
If the development agreement is terminated, then the City plans to assess its options for how to best use the site.
Exhibit A - Development Agreement with Milestone Housing Group, LLC Exhibit B - February 21, 2023 Notice of Termination
Exhibit C - Resolution Terminating Development Agreement with Milestone Housing Group, LLC Exhibit D - Resolution No. 5040-2021
Exhibit E - Email from Marcus Griffin, Principal and CFO of Milestone Housing Group, LLC