DATE: January 8, 2024
TO: Mayor and City Council
Hayward Redevelopment Successor Agency Board of Directors Hayward Economic Development Corporation Board of Directors FROM: Assistant City Manager
SUBJECT: Adopt Resolutions Pertaining to: City of Hayward Authorizing Conveyance of Funds to the Hayward Economic Development Corporation (Corporation); Hayward Redevelopment Successor Agency Approving the Conveyance Agreement and Consenting to the Transfer of the Property Located at 22631-228522 Foothill Blvd., and the Assignment of the Seller's Rights, Duties, and Obligations to the Corporation; and Corporation Approving the Conveyance Agreement and Assignment of Enforceable Obligations; and Finding the Action is Exempt from CEQA Review
RECOMMENDATION
That the Council adopts a resolution (Attachment II) authorizing the conveyance of $8.6 million to the Hayward Economic Development Corporation for purchase of 1069 B Street, LLC’s leasehold interest in the Cinema Place property and finding the action is exempt from CEQA review.
That the Successor Agency Board of Directors adopts a resolution (Attachment III) approving the Conveyance Agreement and consenting to the transfer of the leasehold interest in the Cinema Place property from 1069 B Street, LLC, to the Hayward Economic Development Corporation, and approving assignment of rights and duties under the various agreements that govern the relationship between the 1069 B Street, LLC and the Successor Agency, as well as finding the action is exempt from CEQA review.
That the Hayward Economic Development Corporation Board of Directors adopts a resolution (Attachment IV) approving the Conveyance Agreement for the transfer of the leasehold interest in the Cinema Place property from 1069 B Street, LLC, to the Hayward Economic Development Corporation, and accepting the assignment of rights and duties under the various agreements that govern the relationship between the Seller and the Successor Agency.
SUMMARY
1069 B Street, LLC, which holds a leasehold interest in the Cinema Place property, recently notified the Successor Agency of its intent to sell and transfer its rights, duties, and obligations regarding Cinema Place. In an effort to further the City’s economic development goals and activities for the downtown area, the recently formed Hayward Economic Development Corporation (Corporation) determined to purchase, from the 1069 B Street, LLC, the rights, duties, and obligations pursuant to the leasehold interest to the Cinema Place Property, for $8.5 million. In order to complete the transaction, the City authorizes a conveyance of $8.5 million from the General Fund, plus closing and other related costs to the Corporation. Furthermore, Successor Agency, as property owner, approves the conveyance agreement.
BACKGROUND AND DISCUSSION
In 2005, the Hayward Redevelopment Agency (RDA) entered into a ground lease with the Cinema Place developer, which expires in 2056, for the Property located at 22631-228522 Foothill Blvd., (APN 428-0066-086 and 428-0066-085) (Property). In 2007, the RDA entered into a Parking Lot Maintenance Agreement with the Cinema Place developer for Municipal Lot 3 (the City oversees the maintenance, including utilities, cleaning contracts, and facility updates). The lease and parking agreements were subsequently transferred to the Hayward Redevelopment Successor Agency (Successor Agency) and the current tenant: 1069 B Street, LLC. 1069 B Street, LLC, holds a leasehold interest in the Property under the Ground Lease and holds specified rights under the Parking Agreement.
On November 8, 2013, the Successor Agency received a "Finding of Completion" from the California Department of Finance (the "Department") pursuant to Section 34179.7 of the Health and Safety Code, confirming that the Successor Agency had made specified required payments under the Dissolution Act and entitling Successor Agency to prepare and submit a Long-Range Property Management Plan (the "LRPMP") for approval by its local oversight board and the Department.
Successor Agency staff prepared a proposed LRPMP, and obtained its local oversight board's approval of the proposed LRPMP. In accordance with Section 34191.3 of the Health and Safety Code, the Successor Agency staff submitted the LRPMP to the Department for consideration. The Department approved the LRPMP by determination letter issued on September 4, 2015.
The Property is subject to the Existing Disposition Agreement, the Ground Lease, and the Parking Agreement are collectively referred to as the "Cinema Place Enforceable Obligations.” Consistent with the Approved LRPMP, the Successor Agency will continue to retain the fee interest in the Property for the entire term of the Cinema Place Enforceable Obligations (through July 11, 2057, but subject to a ten-year extension to July, 11, 2067).
During the Summer of 2023, 1069 B Street, LLC (Seller), informed the Successor Agency of its desire to transfer its rights, duties, and obligations in the Property and under the various agreements that govern the relationship between the Seller and the Successor Agency.
The City of Hayward recently formed the Hayward Economic Development Corporation (Corporation). The City’s intent in forming this public benefit corporation was to allow for the City to continue to achieve its economic development activities and implement the economic development goals of the City. In an effort to further the City’s economic development goals and activities for the downtown area, the Corporation determined to purchase, from the Seller, the rights, duties, and obligations in the Property and entered into negotiations regarding the same.
The Corporation and Seller have reached agreement regarding terms and are ready to sign the Conveyance Agreement, under which the Corporation agrees to buy the Seller's leasehold interest in the Property and assume the Seller's rights, duties, and obligations under Cinema Place Enforceable Obligations for a sum not to exceed $8.5 million. In addition to providing for assignment of Seller’s interest in the Property and Cinema Place Enforceable Obligations, the Conveyance Agreement requires deposits be made, some of which may be reimbursable under specified circumstances if the Conveyance Agreement is terminated, and allows for potential reductions in the purchase price if the Property is not in similar condition as it was described in an August 2023 property condition report. The transfer of interest in the Property from the Seller to the Corporation is subject to approval rights of the Countywide Oversight Board and State Department of Finance.
In order to complete the transfer, City staff recommends authorizing the conveyance of $8.5 million from the City’s General Fund to the Corporation, plus closing and any additional related costs. The conveyance of funds to the Corporation would allow the Corporation to acquire the Seller’s interest in the Property and Cinema Place Enforceable Obligations, which would ensure the continuation and stabilization of businesses in downtown Hayward. Acquisition of the Cinema Place leasehold interest and assignment of rights and duties under various agreements will help maintain the existing tax revenue and jobs and allow for the opportunity for creation of new jobs and opportunities for economic development in the future.
It is intended that these funds will be repaid to the City’s General Fund by the Corporation on an annual basis. To formalize this agreement and terms, City staff will work with the Corporation on a repayment agreement.
Successor Agency staff recommend approval of the Conveyance Agreement and consenting to the Seller's transfer of specified interest in the Property to Corporation and the assignment of the Seller's rights, duties, and obligations under the Cinema Place Enforceable Obligations to the Corporation. Furthermore, the Successor Agency's approval and consent of the transfer from Seller to the Corporation pursuant to the Conveyance Agreement is not subject to Assembly Bill 1486 (“AB 1486”), which pertains to disposition of local agency surplus property, because the Successor Agency is not conveying any interest in the Property, and is only consenting to the transfers from the Seller to the Corporation as contemplated under the Conveyance Agreement.
Environmental Review
This action is categorically exempt from CEQA per State CEQA Guidelines Section 15301, Class 1, Existing Facilities Exemption; Section 15061 (b) (3), General Rule or “Common Sense” Exemption.
ECONOMIC IMPACT
This project supports the City’s efforts to maintain and grow the economy and prevent a vacant downtown anchor site by ensuring active use. A direct quantification of the economic impacts is not estimable.
FISCAL IMPACT
The funding to capitalize the Corporation and allow it to complete the purchase is estimated to be $8.5 million plus closing and any additional costs. Staff estimate the overall initial fiscal impact to the City’s General Fund will be $8.6 million, made as a loan to the Economic Development Corporation. These funds will be repaid over time by the Corporation to the General Fund from lease revenues and operating proceeds of the property. The City conveyance of funds is being made pursuant to the City’s police power authority conferred by California Constitution Article XI, Section 7.
STRATEGIC ROADMAP
The proposed project supports the Strategic Priority of Grow the Economy.
SUSTAINABILITY FEATURES
The actions discussed in this report do have any known direct or identifiable sustainability features.
NEXT STEPS
Following authorization of the conveyance of funds by the City to the Corporation and Successor Agency’s approval of the conveyance by the Seller to the Corporation, the Corporation and Seller will enter into a Conveyance Agreement regarding the Property. Thereafter, the County Oversight Board will review the item and issue a finding of approval, which will be subject to the review of the California Department of Finance.
Prepared and Recommended by: Dustin Claussen, Assistant City Manager Approved by:
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Kelly McAdoo, City Manager
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