City of Emeryville
C A L I F O R N I A
M E M O R A N D U M
DATE: January 16, 2024
TO: Paul Buddenhagen, City Manager
FROM: Chadrick Smalley, Community Development Director
SUBJECT: An Ordinance Of The City Council Of The City Of Emeryville Approving And Authorizing The City Manager To Enter Into And Execute A Lease Disposition And Development Agreement Between The City Of Emeryville And EAH, Inc. And Related Ground Leases For The Development And Operation Of An Affordable Housing Project At 5890, 5900 And 6150 Christie Avenue (APNs 049-1493-003, 049-1493-004 And 049-1493-005) And Authorizing The City Manager To Take Actions Necessary To Execute The Lease Disposition and Development Agreement And Related Ground Leases (CEQA
Determination: Exempt Pursuant State CEQA Guidelines Sections 15268(a) And 15332)
RECOMMENDATION
Staff recommends that the City Council adopt the first reading of the above-referenced ordinance approving and authorizing the City Manager to execute a Lease Disposition and Development Agreement ("LDDA") and associated Ground Leases with EAH, Inc. for the development and operation of an Affordable Family Housing Project on the Cityowned property at 5890, 5900 and 6150 Christie Avenue.
BACKGROUND
The City owns three parcels at 5890, 5900 and 6150 Christie Avenue, which total 2.01 acres, bounded to the north by Christie Park, to the west by Christie Avenue, to the east by the Marketplace Redevelopment Project, and to the south by a parking structure that serves an office building at 5850 Shellmound Way. Together, these properties comprise the “Christie Sites” (Assessor Parcel Numbers 49-1493-3, -4 and -5).
On June 21, 2022, the City Council adopted Resolution No. 22-082 authorizing staff to release a Request for Proposals (“RFP”) for the redevelopment of the Christie Sites. As articulated in the RFP, the City’s key objectives for the redevelopment of the Christie Sites include:
1. Maximize the number of housing units developed on the site.
2. Maximize the number of affordable housing units on the site serving a range of target income levels from extremely low income to market rate.
3. Develop family friendly housing providing three- and/or four-bedroom units and 5890, 5900 and 6150 Christie Avenue LDDA
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amenities accommodating people of all ages on the site.
4. Develop an energy efficient and carbon neutral (preferably Net Zero Energy) development.
5. Expand Christie Park.
6. Provide connections to the Marketplace Redevelopment Project, and integration with existing and planned pedestrian routes and bikeways.
7. Develop sustainable commercial or non-profit transportation use (e.g. electric bike rental) as an ancillary retail use.
On November 15, 2022, the City Council adopted Resolution No. 22-153 selecting EAH Inc. (“EAH”) as the first-choice developer for the design and development of the Christie Sites and authorized the City Manager to execute an Exclusive Right to Negotiate Agreement (“ERN”) with EAH, for the purpose of negotiating the LDDA.
The ERN was executed on March 23, 2023, and included an initial negotiation period of 180 days (to September 19, 2023), additionally, the ERN provided authorization for the City Manager to extend the negotiation period for an additional 180 days (to March 17, 2024). During the term of the ERN, staff and EAH negotiated the terms of the LDDA with periodic updates provided to the City Council in closed session.
The LDDA, included as Exhibit A to the attached ordinance, and accompanying form of Ground Lease (Exhibit G to the LDDA) has been negotiated with and agreed to by EAH.
The following sections of this staff report provide an overview of the major provisions of the LDDA and Ground Lease.
DISCUSSION
Agreement Structure
As noted above, the agreement with EAH is arranged as an LDDA with the form of Ground Lease as an exhibit to the LDDA, similar to the structure of the agreement for the 4300 San Pablo Avenue Intergenerational Affordable Housing Project. Because this project is anticipated to be developed in three phases, the LDDA applies to the entire site, including expansion of Christie Park, and each of the three phases will be implemented through three separate Ground Leases. The LDDA establishes the scope of development, the conditions precedent to the conveyance of the three leasehold interests in the property, and a schedule for performance of certain milestones, while the form of Ground Lease addresses the construction and operation of each of the three phases of the development.
LDDA
Scope of Development
The LDDA establishes that the Development shall consist of no fewer than 362 affordable family residential units targeted to households with incomes between 30% and 80% of Attachment 1
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area median income, of which a minimum of 25% of the residential units will be 3-bedroom units and no more than 15% of the residential units in each building will be studio units.
Three (3) of the residential units may be unrestricted manager’s units. If the Developer desires to establish additional units as manager’s units those units shall be subject to the income restrictions in the Affordable Housing Covenant. The Development is expected to be developed in three phases as follows (i) Building A which will consist of approximately 126 residential units, the expansion of Christie Park, childcare or after school space within the building, and retail space of approximately 1,500 square feet; (ii) Building B which will consist of approximately 132 residential units and (iii) Building C which will consist of 104 residential units. Any change in the number of units must be approved by the City. Each phase and building will include furnished resident common amenity spaces, laundry rooms, rooftop decks, bike storage facilities with storage lockers, landscaped open areas, outdoor children’s play areas and parking lifts to minimize the parking footprint of the Development. The Development shall include between one quarter (.25) and one half (.5) parking spaces per residential unit, be designed as Net Zero Energy ready, and be designed as an all-electric building consistent with City's applicable "REACH" codes. The Development will include on-site public art as required by Emeryville Municipal Code Section 3-2.403a.
Conditions Precedent to Disposition of Leasehold Interest The LDDA sets forth the following conditions precedent to conveyance of each leasehold interest to EAH. Prior to closing of each Ground Lease, EAH must submit and obtain City approval of the following items:
Planning Entitlements
EAH is expected to submit an application for entitlement of the entire project under the process provided in SB 35 (Government Code Section 65913.4) which allows for streamlined, ministerial approval of certain housing projects. By using the SB 35 process, the Development is expected to receive entitlements within 180 days of the effective date of the LDDA.
Financing Plan,
The LDDA includes an initial FinancingProposal (Exhibit E to the LDDA) for each phase which is EAH’s best estimate of the costs and funding sources that will be utilized for the Development. EAH is required to conduct competitive bidding for the selection of the construction and permanent lenders, as well as the tax credit investor, in order to obtain the most competitive pricing, terms and conditions. EAH may seek Project Based Vouchers or other tenant subsidies, however EAH may not delay proceeding with the Development in expectation of receiving a commitment of Project Based Vouchers. A revised Financing Plan for a particular Phase, including commitment letters from funders, is required to be submitted for City review 20 days prior to EAH’s submittal of any application for Low-Income Housing Tax Credits (“Tax Credits”) for a particular Phase.
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Construction Drawings and Building Permit
EAH is required to submit construction drawings both for the City’s review for consistency with the LDDA, and separately, to obtain a Building Permit for each Phase.
Both of these submittals are required within 30 days of receipt of an award of Tax Credits from the Tax Credit Allocation Committee (“TCAC”) for a particular Phase.
Construction Contract
EAH must submit the proposed construction contract for each phase of the Development within 60 days of submittal of construction drawings for that phase.
The City’s review of the construction contract is limited to determining that costs are consistent with the approved Financing Plan, the contractor is licensed and acceptable to the City, the terms of the construction contract are consistent with the LDDA and Ground Lease, and that prevailing wage, indemnification, and insurance requirements are included.
Bonds
The submittal of a labor and materials bond and performance bond is required within 60 days of submittal of construction drawings. The bonds must be for an amount equal to the cost of construction as indicated in the construction contract and naming the City as co-obligee.
Insurance
EAH must submit evidence of insurance consistent with the requirements of the Ground Lease, prior to execution of each Ground Lease. T h e Ground Lease requires commercial general liability with excess liability, auto liability, worker’s compensation, builder’s risk, and property insurance.
Site Remediation
EAH is responsible for any Hazardous Material remediation required for the property and shall negotiate and obtain an executed agreement with all regulatory agencies pursuant to the California Property Reuse and Revitalization Act of 2004. The cost of site remediation shall be the sole responsibility of EAH; however, the City shall provide approximately $1,400,000 in Brownfield Revolving Loan funds to assist with the remediation.
Amenity Plan
EAH shall submit for City approval an amenity plan for each phase of the Development in conjunction with the submittal of the construction plans. The amenity plan must include: the type of amenity to be included in each phase; the square footage of each amenity space; anticipated programming for each amenity space, the furniture, fixtures and equipment to be included in each amenity space; a resident access plan for each amenity; operational hours for each amenity; and potential secondary use of amenity space.
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Residential Marketing Plan
EAH’s submittal of a marketing plan, consistent with the Affordable Housing Agreement, is required within 60 days of the award of Tax Credits from TCAC. This is a standard requirement for all projects with affordable units and the Marketing Plan outlines the process by which EAH will market the units and conduct the lottery.
Supportive Services Plan
Within 60 days of award of Tax Credits from TCAC, EAH must submit a Supportive Services Plan consistent with the LDDA and Affordable Housing Agreement. The Supportive Services Plan shall include services tailored specifically to support families and households residing at the Development and to purposefully integrate the residents of all phases into a cohesive community.
Property Management Plan
EAH must submit a Property Management Plan within 60 days of the award of Tax Credits. The Property Management Plan must include a maintenance schedule and budget, provide for the semi-annual inspection of units, establishment of a maintenance fund, and requirements for annual reporting to the City on maintenance.
The Property Maintenance Plan will also include a schedule for interior renovations and future capital needs assessments.
Construction License Agreement
EAH shall have entered into a Construction License Agreement with the City to provide for: the construction of the expansion of Christie Park; the demolition of the existing building at 5900 Christie Avenue; site work, utilities and infrastructure work for the first and second phase of the Development; and construction staging on the second phase site not ground leased in the first phase of development.
Memorandum of Understanding related to Market Drive
EAH shall have used diligent efforts to enter into a Memorandum of Understanding (“MOU”) with Emeryville Holdings (DE) LLC, the owner of the Emeryville Public Market, regarding the configuration and location of landscaping and other site improvements related to the conversion of Market Drive to a pedestrian right of way. If EAH has made good faith and diligent efforts and is unable to obtain an MOU, the City shall waive this condition at its reasonable discretion.
Other
Additionally, prior to closing of the Ground Lease, EAH must not be in default and there must not be any litigation challenging the project; and EAH must remit $250,000 to the City for the payment of the City’s costs associated with construction monitoring. 5890, 5900 and 6150 Christie Avenue LDDA
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Initial Financing Plan
The LLDA includes an initial Financing Plan, which is EAH’s best estimate of costs and funding sources for which each phase within the Development will be competitive. The total development cost for the first phase (Building A) is $114.18 million, second phase (Building B) is $115.21, and third phase (Building C) is $95.03 million. The sources of funds for the initial financing plan includes the following:
Building A Building B Building C Total
City of
Emeryville
Measure C
$11,830,000 $7,000,000 $4,830,000 $23,660,000
Tax Credits $52,376,344 $53,904,551 $44,489,012 $150,769,907 Permanent
Loan
$10,880,866 $12,128,815 $9,602,477 $32,612,158
Federal Home
Loan Bank
AHP
$1,290,000 $1,330,000 $1,050,000 $3,670,000
Equitable
Com. Revit.
Grant
$1,000,000 $0 $0 $1,000,000
Gap Sources
(TBD)
$25,585,842 $29,290,874 $25,517,318 $80,394,034
General
Partner Equity
$10,207,821 $10,296,735 $8,579,225 $29,083,781
Deferred
Developer
Fee
$1,012,482 $1,260,230 $970,613 $3,243,325
Total
Sources
$114,183,355 $115,211,205 $95,038,645 $324,433,205
Transfers
The LDDA allows certain, specific types of transfers typical of affordable housing projects, including transfer of the leasehold interest and EAH’s duties and obligations to a partnership, provided EAH remains the general partner and the partnership will be eligible for a property tax exemption, the admission of an investor as a limited partner for purposes of syndicating Tax Credits (subject to City’s review and approval of the amended partnership agreement), transfer of the general partner’s interest in the partnership if the general partner is removed by the investor for cause following default (subject to the City’s review and approval of the replacement general partner), and transfer of EAH’s leasehold interest from the partnership back to EAH, or a nonprofit affiliate of EAH, at the end of the 15-year compliance period for the Tax Credits.
All other transfers are subject to the City’s sole discretion and require the submittal of 5890, 5900 and 6150 Christie Avenue LDDA
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information to the City sufficient for the City to determine the qualifications of the transferee.
Default
The LDDA provides that, if the City, despite good faith and diligent efforts, is unable to convey the leasehold to EAH and EAH is otherwise entitled to the conveyance, or if any of the conditions precedent to conveyance of the leasehold proves to be impossible to meet, despite EAH’s good faith and diligent efforts, and the City is otherwise ready to convey the leasehold, a “no-fault” termination may be initiated by either the City or EAH and neither party would have any rights against or liabilities to the other.
If EAH transfers its interest in a way that violates the terms of the LDDA, is declared bankrupt, or suspends or dissolves its business, a developer event of default is triggered and the City may issue a notice of default to EAH with a 60-day period to cure the default (or commence to cure if the default cannot be cured within 60 days). If EAH fails to cure within 60 days or longer, but in no case more than 120 days, the City’s remedies include 1) bringing an action for specific performance; 2) bringing an action for damages; and/or 3) terminating the LDDA.
Schedule of Performance
The LDDA requires EAH to obtain planning entitlements within 180 days of the LDDA’s effective date, submittal of an updated financing plan to the City 20 days prior to application for any financing sources per phase, and submittal of an application for building permits within 30 days of award of Tax Credits per phase. The outside date for closing of the Ground Lease is January 1, 2026 for Phase 1, January 1, 2027 for Phase 2, and January 1, 2028 for Phase 3. These time periods provide EAH with two opportunities to apply for Tax Credits per phase.
Ground Lease
Term
The term of each Ground Lease is 99 years from the date of issuance of a Certificate of Completion for the applicable phase, which is to be issued in conjunction with the Final Certificate of Occupancy for the building permit for each phase of the Development.
Rent
The base rent is $1.00 per year, which will be prepaid by EAH for the entire 99-year term, plus the City’s Pro Rata Share of Net Operating Income after applied first to repayment in full of the City’s Subsidized Loan. EAH also must pay all taxes, license, permit fees, and the costs of any utilities incurred at the Site.
Construction of Development
The Ground Lease requires EAH to commence construction within 60 days of the date of recordation of the memorandum of Ground Lease in the Alameda County Recorder’s Office (the “Commencement Date”), and to complete construction within three years. The Ground Lease reiterates the LDDA requirements for construction to comply with 5890, 5900 and 6150 Christie Avenue LDDA
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prevailing wage requirements, submit payment and performance bonds and maintain insurance. The Ground Lease also requires EAH to obtain the City’s written approval prior to implementing any material changes from the approved construction plans.
Additional Changes and Alterations
For any future changes or alterations during the term of the Ground Lease, the City’s prior approval is required. For construction that is a new building, structure or outdoor facility, substantial remodeling or alterations, additional spaces, or any construction with a cost of more than $250,000 or that reduces the number of bedrooms within any unit, submittal of plans for the City’s review and approval is required.
Maintenance
The Ground Lease requires EAH to maintain all elements of the development (including exterior, interior, landscaping) at no expense to the City, including replacements or renewals when necessary and that replacements be at least equal in quality and class to the original improvements.
Ownership of Improvements
During the term of the Ground Lease, the improvements are the property of EAH. Upon termination of the Ground Lease, the improvements and all stoves, refrigerators and dishwashers installed in the residential units become the property of the City.
Ground Lease Default/Termination
Under the Ground Lease, EAH as tenant can cause a default by 1) not curing a monetary obligation for ten days after notice of a breach; 2) failing to maintain the required insurance; 3) abandoning the property; 4) entering bankruptcy; 5) court order to reorganize; 6) failing to pay taxes and/or assessments; 7) transferring its leasehold interest in violation of the Ground Lease; or 8) defaulting under any other obligation of the Ground Lease.
After notice of a default and opportunity to cure (including the opportunity for limited partners and/or mortgagees to cure), the City may terminate the Ground Lease and take possession of the property and all improvements. The City may also bring an action for specific performance, injunction, and/or damages, and the City may also have a receiver appointed to take possession and perform any other obligations required under Ground Lease.
ENVIRONMENTAL REVIEW
The project is exempt from environmental review under the California Environmental Quality Act (CEQA) pursuant to the statutory exemption at Section 15268(a) of the State CEQA Guidelines, which states that “ministerial projects are exempt from the requirements of CEQA.”
The project is also exempt from environmental review pursuant to the categorical exemption at Section 15332 of the State CEQA Guidelines, which applies to in-fill development projects which meet each of the following requirements:
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(i) The project is consistent with general plan policies and the applicable zoning designation and regulations;
(ii) The development will be constructed on a site of no more than 5 acres; (iii) The Site has no value as habitat for endangered, rare or threatened species; (iv) Approval of the project will not result in any significant effects relating to traffic, noise, air quality or water quality.
(v) The Site is adequately served by all required utilities and public services.
The project complies with these requirements as follows:
(i) The project is consistent with the General Plan and zoning requirements (i.e. the Development is consistent with General Plan goals and policies T-G-4, T-P-574, TP-11, PP-P-11, PP-P-19, and UD-G-19, and meets the requirements of the General Plan land use designation of Mixed Used with Residential (“MUR”) as the project includes Multi-Unit Residential and Retail-Small Store); (ii) the site is within an urban area and is less than five acres; (iii) The site’s existing conditions include paved parking lots, two commercial buildings, and limited vegetation thereby ensuring that it cannot serve as a habitat for endangered, rare or threatened species; and that there is no potential for impacts to water quality;
(iv) The transportation study prepared for the project identifies that the site is located within an established transportation network that caters to pedestrians, bicycles and transit users with no significant impacts to traffic or associated adverse impacts to air quality; the project site is located in an area with an existing noise contour of 60- 65 dBA roadway noise and a projected noise counter of 60 dB roadway noise, which fall within a normally acceptable range for Residential- Multifamily and Mixed Use developments; and
(v) The project site is in an urban area that is already served by water, wastewater, stormwater, solid waste, fire, police, and schools.
FISCAL IMPACT
As outlined above, the LDDA includes an initial Financing Plan. The City intends to provide financial assistance (“Subsidy”) to EAH in the form of a loan in an amount not to exceed $23,660,000 for construction of the entire Development. The source for this Subsidy is Measure C Affordable Housing Bond proceeds as outlined in the City’s adopted Housing Bond Expenditure and Administration Plan. The exact amount and timing of Subsidy per phase will be determined when the City approves the Financing Plan for each phase. The City also intends to provide approximately $1,400,000 in Brownfield Revolving Loan Funds (“RLF”) to assist with site remediation. The exact amount of RLF will be determined based on the remediation work required to be completed pursuant to agreements with regulatory agencies.
The City also proposes to provide each phase of Development a 99-year leasehold interest and will receive prepaid rent of $1.00 per year per phase upon execution of each Ground Lease for a total of $297 in rent. Lastly, as a condition precedent to execution 5890, 5900 and 6150 Christie Avenue LDDA
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of the Ground Lease, EAH will remit $250,000 to the City to support the City’s costs of implementing the project, including construction monitoring, legal expenses, and consultant fees. As the timing of these revenues is unknown and pending successful application for Tax Credits, the revenues will be incorporated into the City’s budget at a future date once Tax Credits are secured.
STAFF COMMUNICATION WITH THE PUBLIC
The Development has been the subject of several public meetings, including meetings with the Parks and Recreation Committee, Bicycle and Pedestrian Committee, Public Art Committee and Housing Committee regarding overall design and programming.
Additionally, three community meetings were held regarding the Development, on March 15, 2023, May 30, 2023, and September 16, 2023. The Planning Commission held study sessions regarding the project on July 27, 2023, and December 14, 2023.
On December 14, 2023, the Planning Commission made the determination that the Development conforms to the City’s General Plan in accordance with California Government Code section 65402(c).
CONCLUSION
Staff recommends that the City Council adopt the first reading of the attached ordinance authorizing the City Manager to execute the LDDA and associated Ground Leases with EAH, Inc. for the development of the project. If adopted at second reading, the ordinance will be effective 30 days thereafter, on March 6, 2024, and the LDDA will be executed.
EAH is expected to work to secure funding from various competitive sources including Tax Credits. The LDDA is effective until January 1, 2028, unless the developer does not meet the conditions for conveyance of the leasehold interest in Phase 1 by January 1, 2026, and Phase 2 by January 1, 2027.
Once Tax Credits and all other necessary funding is secured for each phase, and once the other conditions precedent to conveyance of each leasehold interest are satisfied, the Ground Lease per phase may be executed, and construction must commence within 60 days. Construction is expected to require approximately 18 months for each phase and, pursuant to the Ground Lease, must be completed within three years of the commencement of each Ground Lease.
PREPARED BY: Valerie Bernardo, Community & Economic Development Coordinator II
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APPROVED AND FORWARDED TO THE
CITY COUNCIL OF THE CITY OF EMERYVILLE:
Paul Buddenhagen, City Manager
ATTACHMENT:
Draft Ordinance, including Exhibit A, Lease Disposition and Development Agreement with EAH, Inc.