STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of January 23, 2024
TO: Mayor and Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Timothy Rood, AICP, Community Development Director SUBJECT: Development Update
RECOMMENDED ACTION:
Receive a report from staff on the status of major development projects, take public comment, and ask any questions of staff or applicants present. This item is for information only.
EXECUTIVE SUMMARY:
Approved development projects are key to the City’s strategy to grow the local economy, affirmatively further fair housing, and accommodate its 995-unit Regional Housing Needs Allocation (RHNA) for the 2023-2031 Housing Element cycle. However, changed economic conditions, including higher interest rates, lower prevailing rents, and higher construction costs, have challenged the feasibility of several previously approved developments. Several developers of approved projects have requested accommodations from the City, including extension of entitlements and the use of infrastructure financing programs available under state law.
Major project applicants were asked to provide updates on project activities, which are summarized below for major commercial and residential development projects. Applicants have also been invited to attend the meeting and respond to questions from the Council.
BACKGROUND:
Several factors have combined to challenge the economic feasibility of development in recent years. These include interest rates, construction costs, and prevailing rents.
Interest Rates
The rapid rise in interest rates in the past two years has negatively affected development feasibility in the current market. As shown in Figure 1 below, with a series of rapid increases beginning in March 2022, the Federal funds rate has risen from a historic low of 3.25% in March 2020 to 8.5% today. The higher cost of borrowing means that a given rental income stream is able to support much lower costs for construction and land.
Figure 1. Bank Prime Loan Rate 2020-2023 (source: Federal Reserve) Construction Costs
Construction costs also rose dramatically during the pandemic. The California Construction Cost Index (CCCI) published by the State is based upon the Building Cost Index average for San Francisco and Los Angeles as produced by Engineering News Record. The CCCI by increased 13.4% in 2021, 9.3% in 2022, and 9.4% in 2023, or a total of 35.6% over the three-year period.
Prevailing Rents
Meanwhile, according to a June 2023 report from CBRE Economic Advisors, while the Bay Area average for residential rental rates increased by 3.3% year over year, Northwest Contra Costa County experienced an 0.8% decrease year over year, the largest decrease of any subregion besides Downtown San Francisco. See Figure 2. By the third quarter report in September 2023, the year-over-year decline in West Contra Costa was 1.0% Figure 2. Bay Area Submarkets Year over Year Rent Changes June 2023 (source: CBRE) In summary, rising interest rates, rising construction costs, and falling prevailing rents mean that projects that were financially feasible when approved in 2020-22 may now be infeasible, because the costs to finance their construction at current rates would exceed the rental or sales revenues achievable in today’s market, resulting in what is termed “negative residual land value”.
Residual land value is a measure of what a developer would be able to pay for the land, given a set of assumptions regarding capital and operating costs and revenue. Residual land value, in essence, represents the developer’s land budget. A higher residual land value means that a proposed development project is likely to be more feasible and therefore to attract investors and obtain financing. A negative residual land value—a land budget below $0—means that a proposed development project is not feasible without offsetting incentives.
ANALYSIS
The following is a summary of the approval, entitlement, construction and compliance status of the City’s major development projects.
Housing Projects
The City’s mandated Regional Housing Needs Allocation (RHNA) for the 2023-31 cycle includes 344 Very Low-Income units (affordable to households earning below 50% of Area Median Income or AMI), 198 Low-Income units (51-80% AMI), 126 Moderate-Income units (80-120% AMI), and 327 Above Moderate-Income (over 120% AMI).
The City’s draft 6th Cycle Housing Element has been through four review cycles with three separate reviewers at HCD and is still not certified as of HCD’s most recent comment letter dated January 12, 2024. The draft Housing Element includes a Housing Plan that meets the RHNA with a combination of inclusionary affordable units within approved mixed-income projects (Owl Ranch, Bayfront Blocks MP&O as entitled, and Hill Town) along with potential 100% affordable housing developments on vacant (Loop Site) and underutilized sites in the New Town Center area (Hercules Transit Center, Caltrans corporation yard).
HCD’s latest letter includes the following comment:
Approved/Pending Projects: While the element now demonstrates the anticipated affordability of approved or pending projects, it must still demonstrate the availability of projects in the planning period. Specifically, the element should discuss any remaining steps and barriers to development in the planning period and add or modify programs as appropriate. Additionally, the element could add or modify programs to monitor the progress toward completion in the planning period and commit to alternative action, if necessary, by a specified date.
As shown in Table 1 below, if built as approved, the housing projects described in this report would contribute 21 Low Income units, 31 Moderate-Income Units, and 1,093 Above Moderate-Income Units toward the RHNA, for a total of 1,145 new housing units.
Table 1. Approved Housing Projects Included in 6th Cycle Housing Element Project
Extremely/Very Low Income
(0-50% AMI)
Low Income
(50-80% AMI)
Moderate Income
(80-120% AMI)
Above Moderate-Income
(>120% AMI)
Total Units
Owl Ranch
0 1
1 38
40 Bayfront Blocks MPO
0 20
0 367
387
Hill Town
0 0
30 568
598
Sycamore Crossing
0 0
0 120
120
Total
0 21
31 1,093
1,145
Owl Ranch
This 40-unit single-family subdivision on the site of the former McLeod Ranch at 215 Skelly was approved on September 27, 2022. The development will include two affordable for-sale units, one Low-Income and one Moderate-Income. The project’s final map has been recorded and land development is underway. Delays attributed to EBMUD by the applicant, D.R. Horton, have delayed wet utility installation until Spring 2024, and vertical construction is now anticipated in the summer. Model homes and sales offices are now estimated to open in the early fall of 2024, when sales would begin.
The developer has engaged HouseKeys, Inc. to manage the sales process for the two affordable units per City policy. HouseKeys has administered home ownership, rental, and financing programs for California municipalities, including the cities of Morgan Hill, Campbell, San Francisco, Burlingame, Gilroy, San Ramon, Santa Clara, and Hayward.
In December 2023, the developer inquired with staff regarding the potential use of the Statewide Community Infrastructure Program (SCIP) to finance the City’s development impact fees for the development. The SCIP program allows a builder/developer to finance public infrastructure projects or City impact fees through the formation of a SCIP assessment district (or Community Facilities District) that will levy an annual assessment on the future residential parcels. The City adopted the SCIP program in 2006 and amended it in 2016 to require the City Council’s approval for a SCIP application, which was previously left to the discretion of the City Manager. If the developer chooses to pursue this option, after a complete application for the SCIP program has been received, deemed complete, and reviewed by staff and applicable outside agencies, the application will be scheduled for hearing by the City Council as required.
Bayfront
Following the successful opening of The Exchange (Block N) in 2020 and The Grand (Blocks Q&R) in 2021, the master developer, Ledcor, completed planning entitlement and building plan review for two additional rental apartment buildings, to be known as The Mint (Blocks M&P) and Harbor House (Block O). MP&O were initially approved for 476 apartment units, which was reduced to 387 units by a Minor Modification to M&P that was approved on September 28, 2021. This design and unit mix modification, based on additional third-party market research from OPTIM Real Estate Services, provided for an increased number of 2- and 3-bedroom units popular with roommates, couples, and families, and a decreased number of studios and 1-bedroom units. Based on the approved plans and the project’s Affordable Housing Covenant approved on July 27, 2021, the City’s draft Housing Element anticipates 20 Low-Income affordable units in this phase of the Bayfront, along with 367 Above Moderate-Income units.
Ledcor has indicated that it has discussed the potential sale of The Grand to various workforce housing groups including Catalyst Housing on behalf of the California Community Housing Agency for conversion of the current market-rate units at The Grand to workforce housing with three tranches of affordability 60%-80% (Low), 81%-100% (Middle), and 101%-120% (Moderate) of AMI, like The Exchange.
Since mid-2022, Ledcor has been seeking financing for this next phase of development of the Waterfront Master Plan. However, even after removing Block O and its 120 units from its offering, the developer has been unable to secure both construction debt and LP equity capital to finance the construction of Blocks M&P. This is due in part to the very slow lease up and low occupancy rate at The Grand (reported as approximately 73% for the market-rate units after 30 months of leasing), as well as the combined effects of higher interest rates, higher exit capitalization rates, higher construction costs, and near zero percent growth in rents.
Although building plan review for MP&O was completed, no building permit was pulled, and the building permit application lapsed after six months of inactivity. The project could not be built without being redesigned to meet the current 2022 California Green Building Code, at considerable expense.
Alternative Proposal
Ledcor has indicated to staff in November 2023 that they will be proposing to entitle an alternative development scheme for blocks KLMP&O, to consist of approximately 175 row houses in three different varieties, including some work-live and live-work townhomes. Ledcor has indicated that it intends to develop this scheme in a manner compliant with the Waterfront District Master Plan and to request expedited review under the housing streamlining provisions of SB 330.
The development would be subject to the approved Bayfront parking operations agreement approved on June 27, 2023, which requires 10% of off-street parking spaces created through development, up to a maximum of 216 spaces, to be shared with the public once rail or ferry service begins at the waterfront, by mutual agreement, or when average peak hour demand (either weekday or weekend) for on-street parking reaches 85% capacity in any of the three Bayfront neighborhoods identified in the WDMP (The Village, Bayfront Boulevard Mixed-Use, and Crescent Heights), as determined by a parking study conducted by a qualified parking consultant. Such a study may be conducted by either party at any time, with each party bearing its own costs and expenses.
The Bayfront project’s Affordable Housing Covenant approved on July 27, 2021 requires that 5% of a proportionate mix of units be rented to households earning no more than 60% of Area Median Income (AMI). The Bayfront Implementing Development Agreement provides a pathway for the developer to request that one-quarter of the required affordable units be 80% rather than 60% AMI, and on July 13, 2021 the City Council declined Ledcor’s request for this accommodation, maintaining the IDA’s 60% requirement and including clarifying language for the proportionality requirement per the City’s Affordable Housing Policy, which was adopted on February 23, 2021. The proportionality requirement means that the mix of affordable unit types must be provided in proportion to the overall unit mix. The project’s Affordable Housing Plan Implementation Agreement was executed on July 21, 2021 per the Council directive.
Because the Bayfront project is within a half-mile radius of the planned Hercules Hub, it falls under the Metropolitan Transportation Commission’s Transit-Oriented Communities (TOC) policy, which seeks to support the region’s transit investments by creating communities around transit stations and along transit corridors. Adopted in 2022, the TOC Policy establishes a range of different zoning, station access, and anti-displacement policies and programs for areas around rail station areas and bus rapid transit stops. Agencies affected by the policy must choose their compliance path from the options for each topic that are applicable to their situation. Many of the options require specific funding commitments to qualify. The TOC Oolicy is part of Plan Bay Area 2050, the region’s long-range plan for transportation, housing, the economy and the environment. In future One Bay Area Grant (OBAG) funding cycles, MTC intends to condition grant awards on TOC Policy compliance. Currently the City does not have policies or programs that fulfill all of the TOC Policy requirements. Therefore, staff is working with MTC and its consultants to develop options for the Council to consider to bring the City into compliance with the policy.
Affordable Housing Accommodation Request
On December 12, 2023, the City received a letter from Ledcor (Attachment 2) requesting that the City Council consider an affordable housing accommodation request to amend the Affordable Housing Plan Implementation Agreement to allow all 58 of the 80% AMI units in The Exchange to be credited toward the projects 60% AMI Affordable Unit requirement per its IDA.
In 2021, The Exchange (Bayfront Block N) was sold to California Community Housing Agency, a Joint Powers Authority in which the City participates. As a result of that sale, The Exchange includes 58 units (one-third of the total) that are limited to renters at 60%-80% AMI, plus 57 units limited to renters at 81%-100% AMI, and lastly 56 units limited to renters at 101%-120% AMI. If the amendment were approved, Ledcor estimates that the 5% inclusionary requirement would be deemed satisfied for the entire master plan and thus no additional affordable units would need to be produced. Modification of the Affordable Housing Plan Implementation Agreement would require City Council approval, which will be scheduled for consideration at a future meeting.
Rezoning any housing site to a lower density or non-residential use, or approval of a subsequent project with fewer units than assumed in the Housing Plan, will require the City to make up the lost housing capacity by upzoning other sites per the “no net loss” provisions of Government Code Section 65863 (SB 330). The City’s Housing Plan shows only 5 units of “surplus capacity” for Low-Income units based on the state-mandated density assumptions for vacant and underutilized sites. Therefore, losing the Bayfront project’s 20 Low-Income units would create a deficit of 15 Low-Income units that would need to be accommodated elsewhere in the city.
After a complete application for the KLMP&O alternative proposal has been received, deemed complete, and reviewed by staff and applicable outside agencies, the project will be scheduled for hearing by the Planning Commission and City Council.
Hill Town
The Hill Town project was approved on April 14, 2020 for up to 597 attached multifamily units and 4,200 square feet of neighborhood commercial on a 44.2-acre site, for an average gross density of 13.5 du/ac. Following extensions per state law, the project’s planning entitlements will expire April 14, 2024.
The Central Hercules Plan noted that the vision for former tank farm site was "evocative of the Italian hill towns built centuries ago" and envisioned "urban density in a highly livable, marketable, picturesque package." City records indicate the developer, Santa Clara Valley Housing Group, acquired the site in 2005 and their design team met in 2007-08 with City staff, a joint Planning Commission/City Council informal review team, the town architect, and City-recommended consultants for over a year and a half to develop an initial plan for Hill Town. Site remediation for residential use was completed in 2015.
The project is bound by the 2008 Development and Owner Participation Agreement for Hill Town Redevelopment Project. As approved, Hill Town would include 30 Moderate-Income affordable units per its development agreement and conditions of approval. This is 23% of the City’s Moderate-Income RHNA allocation for the 6th cycle (2023-31).
Project conditions of approval require the following community benefits:
5% of units affordable to Moderate-Income residents (30 affordable units) Bus facilities such as turnouts along San Pablo Avenue and “Dial-A-Ride” passenger pick-up areas within the Hill Town development $5,000 per unit in-lieu fee approximately $3 million total) fee for the City to use at its discretion for parks and recreation Multiple parks, a new traffic signal on San Pablo, and a new sidewalk connecting from the top of San Pablo to Safeway The Hill Town site ranges in elevation from 20 to 160 feet, with many steep slopes. Due to the site’s location, condition and topography, extensive corrective grading, geotechnical work and fill are required to create level sites for development to occur. The site has active oil lines, EBMUD transmission mains and PG&E transmission lines, all of which need to be relocated outside of the development area. A less efficient grading operation is required to keep the existing lines active while the new alignments and facilities are constructed before the switchover. The site requires a 1,200-foot off-site sewer extension, estimated at $558,000 in September 2022. Total off-site improvements were estimated at $4,477,000, equivalent to about $7,500 per unit. Phase 1 total sitework and onsite infrastructure costs were estimated at $37.9 million.
Proposed Mello-Roos District
The passage of Proposition 13 in 1978 severely restricted local government in its ability to finance public capital facilities and services by increasing real property taxes. The "Mello-Roos Community Facilities Act of 1982" provided local government with an additional financing tool. The Proposition 13 tax limits are on the value of the real property, while Mello-Roos taxes are equally and uniformly applied to all properties within the district. A Mello-Roos District is an area where a special tax is imposed on those real property owners within a Community Facilities District. Such a district has chosen to seek public financing through the sale of bonds for the purpose of financing certain public improvements and services, which may include streets, water, sewage and drainage, electricity, infrastructure, schools, parks and police protection for newly developing areas. The tax homebuyers pay is used by the district to make the payments of principal and interest on the bonds.
Due to Hill Town’s high on-site and off-site infrastructure costs, a proposed Mello-Roos financing district for the project was discussed by the City Council on May 11, 2021, October 19, 2021 and January 18, 2022. A preliminary engineer’s estimate indicated the development could qualify for up to $51 million in Mello-Roos infrastructure costs. Scenarios presented to Council included Mello-Roos packages ranging from $24 to $34 million, with assessments ranging from 1.8% to 2.0% on estimated valuations of $650k and $750k for each of 200 ownership units. Special assessments would range from $3,640 to $5,700 per year under this scenario. The developer indicated at the time that the project would be financially infeasible without a Mello-Roos district.
On January 18, 2022, the Council did not approve the Mello-Roos proposal. Since then, the developer has advised staff that the previously quoted Mello-Roos assessment rate of 1.8% would yield approximately 20% less bonding capacity for construction today than the 2021 estimate due to higher interest rates, yielding $17.4 million for construction costs today, compared to $21 million in 2021. The developer has indicated that if the Council is willing to revisit the Mello-Roos question, they are open to discussion.
On January 10, 2024, SCVHG also requested that the Council extend the entitlements for two to three years in order to keep the approved project design viable, independent of the Mello-Roos question. After a complete application for the entitlement extension has been received, deemed complete, and reviewed by staff and applicable outside agencies, the extension will be scheduled for hearing by the City Council as required.
If the entitlements lapse as scheduled in April 2024, the site will revert from the approved Planned Development Plan to underlying zoning of PC-R Planned Commercial-Residential Mixed-Use District Rezoning any housing site to a lower density or non-residential use, or approval of a subsequent project with fewer units than assumed in the Housing Plan, will require the City to make up the lost housing capacity by upzoning other sites per the “no net loss” provisions of Government Code Section 65863 (SB 330). The City’s Housing Plan shows only 12 units of “surplus capacity” for moderate-income units based on the state-mandated density assumptions for vacant and underutilized sites. Therefore, losing the Hill Town project’s 30 moderate-income units would create a deficit of 18 moderate-income units that would need to be accommodated elsewhere in the city.
Sycamore Crossing (residential)
This mixed-use residential-hotel-retail project was approved on November 9, 2021 and its entitlements include 120 units of attached housing on the western portion of the site. No affordable units were proposed or required for the project. The Council determined on November 9, 2021 that the project entitlements were vested, subject to remaining conditions of approval, due to preliminary grading work that had occurred on site, which it determined to have satisfied Condition of Approval no. 9, Approval Period.
The master developer, Lewis Management Group, has advised that they are pursuing a partnership with BlackPine Communities and contractual arrangements for BlackPine to purchase the residential site. The development team has indicated that the proposed housing product will be the same as BlackPine is currently constructing in Vacaville at 700 Park on Main and that they are working toward presenting a pre-application to the City in January 2024, prior to submitting a formal application to re-entitle the residential portion of the property with this new product.
Please note that project condition of approval #14 requires the hotel portion of the Sycamore Crossing master plan to complete building plan check and commence actual grading prior to issuance of any residential building permits, unless the City (in its sole discretion) provides a written determination that substantial progress toward construction of the hotel has occurred. See below under “Commercial Development” for information about the hotel and retail components of Sycamore Crossing.
Commercial Projects
Sycamore Crossing (commercial)
The applicant prepared interim phased improvement plans, which include improvements needed to serve the hotel site on an interim basis, including rough grading, the majority of the new street Ohlone Creek Place, a portion of the onsite detention basin and outfall needed to serve the hotel, and complete improvements to the Sycamore Avenue frontage. After three plan check reviews by the City, final comments were provided November 6, 2023 and a final submittal was received in December 2023 The applicant has indicated that construction of these interim phased improvements are planned to begin in May 2024.
The applicant has stated that they have worked to obtain PG&E approval to relocate and underground the existing overhead power line in a private easement behind the back of sidewalk along San Pablo Avenue, with a short overhead segment over Ohlone Creek. The applicant has indicated that a revised intent was submitted to PG&E on July 6, 2023 and an onsite meeting with PG&E was conducted on July 28, 2023. The applicant has stated that as of January 2024, PG&E has completed its design for the replacement facility. The next step is for PG&E to issue a contract with Lewis to advance the relocation.
Since 2021, the developer has had an application and $588,000 deposit on file with EBMUD to relocate the 24” aqueduct/water main that passes through the property. The applicant has stated that they conducted a telephone meeting with Tracy Barrow and Cheryl Ledoux of EBMUD on November 30, 2023, resubmitted their plans, and received a commitment from EBMUD to review and follow up on next steps to advance the aqueduct relocation. The applicant stated they asked EBMUD to consider allowing them to order the pipe material needed to relocate the 24” line due to the 9-month or longer lead time to manufacture and receive the product. The applicant has stated that their intent is to work through the matter with EBMUD and begin the water line relocation effort in earnest (likely in 2025) following receipt of the new pipeline material.
The developer has indicated they have received strong interest from a variety of retail tenants, including fast dining options, and are working to obtain formal commitments, after which they will share that information with the City. The developer has stated that a revised site plan is being prepared to initiate conversations with the City upon approval from a few key tenants.
Hampton Inn
The Hampton Inn and Suites Hotel at Sycamore Crossing was approved in September 2019 for 105 guest rooms in a four-story building adjacent to Ohlone Creek. The hotel is on a separate parcel and was to be developed by a separate entity, WRSJG LLC/Hercules Hospitality LLC, which in fall 2023 opened another Hampton Inn and Suites Hotel in downtown Concord.
The Sycamore Crossing hotel project completed building plan review in 2023, and an interim grading permit application for the hotel site was discussed with staff but was not submitted. On January 11, 2024, the master developer advised staff that the hotel developer had advised them that they were seeking to sell the site and entitlements to another hotel developer.
Willow Avenue Commercial Project
On September 25, 2018, the City Council approved this project, to consist of a mini storage facility along with an auto repair use, car wash, oil change, and tire store contained within eight new buildings (five associated with the self-storage and three related to auto service uses) on a 7.1-acre site at the southeast corner of Willow and Palm Avenues. The mini storage facility opened in June 2022 with a Temporary Certificate of Occupancy for the office building as the developer worked to design and construct a new sewer lift station to serve the project. Since that time, the developer has experienced many challenges delivering the lift station as it requires securing property rights and voluntary participation from multiple landowners. City staff is actively working with the developer to resolve these issues.
Per its development agreement, the Willow commercial project is conditioned to remit Transient Occupancy Tax (TOT) to the City for the storage units once the occupancy rate reaches 90%. To date, no TOT has been remitted, as the applicant has indicated that the occupancy remains below 90%.
Safeway
The Safeway Center project was approved by the City Council on September 26, 2017. Under the direction of the City Manager at the time, the project opened under a Temporary Certificate of Occupancy that was issued on April 14, 2021.
Since the project opened, the development team has completed the bus stop and bus pull-out along San Pablo Avenue. The two remaining conditions of approval are the installation of at least seven EV charging spaces and payment of Transportation Impact Fees (TIF) due, less credits for additional work done at the request of the City. The net TIF due is estimated by the applicant team to be $251,790. Impact fees are required to be collected when building permits are issued, but in this case the fees were deferred under an agreement made by a prior City Manager, to allow the TIF credits to be based upon actual construction costs. An accounting of credit-eligible work was provided by Safeway in August 2023, and backup calculations and exhibits requested by the Public Works Director to validate the estimates were received on January 2, 2024. The developer is currently preparing final documentation to submit to the City for the credit.
A building permit application for EV chargers was submitted by Volta in May 2022 and was reviewed, but comments were not addressed. Volta withdrew from the project in the midst of its pending merger with Shell USA, and the application expired in February 2023. Safeway indicated they are now working with Electrify America to install 11 DC fast chargers and one Level 2 charger in the parking area between the store and San Pablo Avenue. A preliminary sketch plan was provided to staff in August 2023. However, no building permit application has been received as of the preparation of this report.
Particularly after becoming aware of the expired TCO and outstanding TIF in April 2023, Community Development staff has been engaged in discussions with the Safeway/McNellis team to try to resolve the remaining conditions of approval. Staff met with the applicant team on August 15, 2023. A draft Memorandum of Understanding (MOU) was provided by Safeway on September 28, 2023 and returned with City comments on October 12. A revised draft incorporating most of the City’s requests was received from Safeway on December 18, 2023 and returned with proposed final edits on January 4, 2024.
In 2023, Safeway applied for planning and building permits for a solar canopy, backup generator and battery storage project, which received planning approval in June 2023 for an Administrative Design Review Permit as an accessory structure. Building plans for the solar project are still under review, and staff has indicated to the ownership that no building permit will be issued for the solar project until the MOU has been executed to document how the remaining EV charging and TIF payment conditions will be fulfilled.
Franklin Canyon RV Resort
This project was approved by the City Council on February 8, 2022 for 158 RV spaces, 22 tent spaces and a 10,500 square foot clubhouse.
The applicant has advised that the project encountered some issues with EBMUD regarding the water service which required them to move certain components of the project to another area, which was approved through a Minor Modification on November 6, 2023.
The applicant stated their intent was to start the project in 2023, but due to the EBMUD delay and the onset of winter weather they decided to postpone the start until June 2024. The golf course is leased to a third-party operator, Touchstone Golf until May 30, 2024. The lease requires a substantial early termination penalty, which the applicant indicated they had been willing to pay provided construction could start in 2023. However, since pre-construction surveys are now scheduled for April 2024, the applicant determined that terminating the lease early would not make much sense.
The applicant has indicated they are in the process of completing bid packages and selecting a contracting team to build the project. It would be their goal to begin construction in early June 2024.
The initial approval was set to expire on February 8, 2024 (two years after approval). On December 14, 2023, the applicant requested to extend the term for the approval of the RV Resort Project for an additional year, to February 8, 2025. The project approvals allow a one-year extension to be granted administratively by the Community Development Director pursuant to condition of approval #9. The applicant has indicated to staff that they have been diligently pursuing development of the project as evidenced by their request for (and the City’s approval of) a minor modification. Also, the applicant indicates that circumstances have not changed for the project approval, so the current conditions remain adequate to assure that the stated findings on the approval remain valid. The Director approved the extension request on January 11, 2024 and the decision is subject to Council call-up at its January 23, 2024 meeting.
Bayfront (hotel)
Ledcor has indicated to staff that they intend to submit an application for a hotel on Blocks E & G, which are located on the western (Bayfront) side of Bayfront Boulevard between Railroad Avenue and Promenade Street, adjacent to the Hercules Hub site. Preliminary pre-application plans shared with staff in December 2024 showed a four-story, approximately 156,000-square foot building spanning both blocks and including 207 hotel keys, 6,700 square feet of retail space along Bayfront Boulevard, and ballroom, meeting rooms, restaurant, coffee shop and gym/spa amenities. Ledcor has indicated that it intends the hotel project to be compliant with the WDMP. After a complete application for the E&G hotel proposal has been received, deemed complete, and reviewed by staff and applicable outside agencies, the project will be scheduled for hearing by the Planning Commission as required.
America’s Tire
The addition of an 8,938-square foot tire store in the parking lot of the Home Depot at the Creekside Center was approved by the City Council on January 25, 2021. As of January 2024, the project’s building permit is ready for issuance. The developer has indicated the project has gone out to bid to general contractors and that they anticipate receiving bids by March 2024 and breaking ground between April and June 2024. Completion of construction and store opening are anticipated in the first quarter of 2025. These dates are tentative and subject to change.
Sutter Health
Representatives of Sutter Health, a not-for-profit healthcare system that provides care to over 3 million Californians, have indicated to staff their intention to pursue the purchase of two adjacent parcels in the North Shore Business Park for medical office/clinic use and additional parking. As of the preparation of this report, it is staff’s understanding that the property transactions are moving forward.
Sutter Health representatives have indicated that the existing 49,805-square foot building at 200 Linus Pauling would be utilized for imaging, a blood draw station and possibly a small outpatient endoscopy procedure center. The 3.83-acre vacant lot at 100 Linus Pauling would be utilized for parking associated with the medical uses at 200 Linus Pauling and a medical office building in the future.
New Businesses
Hercules welcomed several new businesses in 2023 and is expecting several more to open in 2024:
Dynamite Donuts held its grand opening on August 26, 2023. Dynamite Donuts is located in the Hercules Retail Center at 3700 Sycamore Avenue, Suite 4.
KS Brows, which opened in the fall of 2023 in Creekside Center, 1511 Sycamore Ave., Suite H, provides a range of aesthetic services including eyebrow threading, waxing, facials and Indian cloths.
KS Indian Grocery also opened in the fall of 2023 in the adjacent suite J at Creekside Center.
Learn & Play Montessori School, which operates approximately 15 childcare and daycare facilities in other East Bay cities, purchased the former preschool at 1702 Pheasant Drive and received approval from the Planning Commission in November 2023 to operate a private Montessori school to serve up to 100 children, providing daycare, preschool, kindergarten, and after-school programs within the existing 4,480 square foot building. The facility is currently anticipated to open in early 2024.
Tommy’s BBQ, formerly based in Richmond, received planning approval for a barbecue restaurant in the former Big Belly space at Creekside Center, 1611 Sycamore Avenue, Suite C. Building plans were submitted in November 2023 and are currently under review. Staff has shared information about the City’s Business Attraction Grant program for qualified new eating & drinking establishments with the proprietor and anticipates receiving a grant application for this restaurant.
Tandoori Pizza has signed a Letter of Intent for Suite A at The Exchange but has not yet signed a lease. Tandoori Pizza is a Bay Area chain established in 2015 that offers a fusion between Indian spices and classic Italian flavors. With ten existing locations in Dublin, Fremont, Tracy, Union City, San Ramon, Sunnyvale, Turlock, Mountain House, Brentwood and San Jose, this chain is too large to be eligible for the City’s Business Attraction Grant program for small, local businesses.
FISCAL IMPACT:
There is no fiscal impact from this informational report. As development projects are constructed and occupied, the City will incur costs for additional services and will also receive additional revenue from impact fees, property taxes, and sales tax from the local expenditures of new residents and employees. Hospitality and mini-storage projects will also contribute Transient Occupancy Tax revenue. Some approved development projects are also conditioned to provide additional fee revenue to the City.
ATTACHMENTS:
Attach 1 – Presentation
Attach 2 – Ledcor Affordable Housing Accommodation Request