City Council Memorandum
TO: HONORABLE MAYOR AND CITY COUNCIL DATE: JUNE 11, 2024
FROM: COMMUNITY & ECONOMIC DEVEL OPMENT WARD: 1
DEPARTMENT
SUBJECT: PURCHASE, SALE, AND DEVELOPME NT AGREEMENT WITH PELICAN
COMMUNITIES, LLC FOR THE SALE OF CITY-OWNED VACANT LAND LOCATED AT 3911 UNIVERSITY AVENUE AND 3775 FAIRMOUNT
BOULEVARD, IDENTIFIED AS ASSESSOR’S PARCEL NUMBERS 214-252-019 AND 213-261-029, FORMERLY KNOWN AS THE DOWNTOWN TERMINAL
PROPERTY, FOR THE DEVELOPMENT OF A MIXED-USE STUDENT HOUSING PROJECT, TOTAL SALES PRICE OF $200
ISSUE:
Approve the Purchase, Sale, and Development Agreement with Pelican Communities, LLC for the sale of City-owned vacant land locat ed at 3911 University Av enue and 3775 Fairmount Boulevard, identified as A ssessor’s Parcel Numbers 214- 252-019 and 213-261-029, formerly known as the Downtown Terminal Property, for the development of a mixed-use student housing project, total sales price of $200.
RECOMMENDATIONS:
That the City Council:
1. Approve the Purchase, Sale, and Development Agreement with Pelican Communities, LLC for the sale of City-owned vacant land located at 3911 University Avenue and 3775 Fairmount Boulevard, identified as Assessor’s Parcel Numbers 214-252-019 and 213-261- 029, formerly known as the Downtown Terminal Property, for the development of a mixed- use student housing project; and
2. Authorize the City Manager, or his designee, to execute the Agreement with Pelican Communities, LLC, including making minor and non-substantive changes and to sign all documents necessary to complete the transaction.
COMMITTEE RECOMMENDATION:
On December 17, 2020, the Economic Development, Placemak ing, and Marketing/Branding Committee (Committee), with Former Chair Fie rro, Former Vice Chai r Edwards and Member Hemenway present, reviewed and considered a jo int development proposal from Overland Former Downtown Terminal Site – PSDA ● Page 2
Pelican Riverside (OPR), an affiliate of the entity Pelican Communities, LLC and unanimously directed staff to negotiate a Purchase, Sale, and Development Agreement for the development of a mixed-use student housing project for the Riverside Community College District (RCCD) to be presented to the City Council for final consideration and approval.
On October 21, 2021, the Committee, with Former Chair Fierro, Former Vice Chair Edwards and Member Hemenway present, 1) received and filed an update from staff on the subject site regarding the disassociation of RCCD from the propos ed development project, and 2) directed staff not to issue a new Request for Proposals (RFP) for the subject Property and to proceed with the original development proposal from OPR to be presented to the City Council for final consideration and approval.
BACKGROUND:
On August 8, 2017, the City Council approved t he surplus disposition of the Property and authorized the marketing and sale of the Property at fair market value in accordance with the City’s Administrative Manual Section 08.003.00 for the Disposition and Sale of City-Owned Real Property.
On April 8, 2019, staff issued a Request for Proposals (RFP) fo r the development of the subject site and on July 8, 2019, one joint development proposal was received from OPR for a mixed-use student housing project for the Riverside Community College District (RCCD).
On October 9, 2019, during negotiations with OPR, Governor Newson signed into law Assembly Bill 1486 (AB 1486) which governs the process for the disposition of surplus property.
Subsequently thereafter, all public agencies are required to give a 60-day Notice of Availability (NOA) to affordable housing developers listed with the State Housing & Community Development Department (HCD), in addition to sending a not ice to all public agencies, for the possible development of affordable housing.
On August 20, 2020, the Committee received an update and provided in put on the potential disposition of the subject site. Staff were directed to adhere to the requirements of AB 1486. As a direct result, staff and the Cit y Attorney’s Office concluded that AB 1486 rendered the RFP null and void.
On August 21, 2020, staff sent a written NOA to the required public agencies and to all affordable housing developers who registered with HCD. On October 20, 2020 (the deadline for interested developers to respond), staff rece ived one joint development propos al from OPR to construct a mixed-use student housing project on the subject site for RCCD.
On December 17, 2020, once the noticing period was complete, the Committee directed staff to negotiate the Agreement with OPR for a mixed-us e student housing project to be presented to the City Council for consideration and approval.
On October 21, 2021, staff presented an update to the Committee and recommended that a new RFP be issued as the development proposal no longer included RCCD. The Committee directed staff not to issue a new RFP, but to instead pr oceed with the original pr oposal from OPR and continue negotiating a Purchase, Sale, and Development Agreement to be presented to the City Council for consideration and approval.
On June 16, 2022, as negotiations continued, devel oper concerns regarding the interpretation and application of AB 1486 to the proposed student housing mixed-use development delayed the Former Downtown Terminal Site – PSDA ● Page 3
progression of the Agr eement. Staff received a response from HCD regarding the interpretation of AB 1486 and its application to dormitory student housing projects . More specifically, whether the law applied to dormitory student housing projec ts, and if so, the interpretation of affordable income levels and rent limits per unit (as sta ff understood the law) or per bed, as understood by OPR. The State HCD response noted that the la w applied, and the project should be developed per unit, not bed count, as it relates to affordable income levels and rent limits.
The developer and staff continued negotiations, but challenges remained in gaining compliance with AB 1486 and its applic ation of affordable housing require ments. Staff continued to engage with HCD with support from Senator Roth’s Office and Former Councilmember Edwards to revisit the interpretation of the law an d its application to the develop ment proposal. After several collaborative meetings between HCD, staff and our developmen t partners, HCD declared the project exempt from the Surplus Land Act and AB 1486, setting a new precedence in California for all new student housing developments.
On May 2, 2023, HCD issued notice (Exhibit I) approving the development proposal, which facilitated the recommencement of negotiations for the Agreement.
DISCUSSION:
The 2.7-acre site located west of Market Street and spanning fr om Mission Inn Avenue to University Avenue is owned by the City of Rivers ide (City). Approximatel y half of the site was formerly occupied and leased to the Riversi de Transit Agency and Greyhound Bus Lines. The other half was occupied by the Riverside Police Department and the City’s Parking Authority. All former structures have sinc e been demolished and a portion of the Property has been used for the off-street parking of the Main Library since opening in June 2021. The Main Library occupies approximately 1.02 acres of the site facing Mi ssion Inn Avenue while the remaining approximate
1.68 acres is available for private development facing University Avenue.
The Property is located, as shown on the aerial site map below, near the intersection of University Avenue and Market Street within the Raincross District of the Downtown Specific Plan. Downtown has become a diverse, vibrant, twenty-four-hour area; where people can work, live, shop, and learn, and where arts and cultur e are an integral component of the urban setting. The Property represents an opportunity for the City to enc ourage an intense mixture of residential and retail/office space within a pedestrian-oriented environment.
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Development Proposal
The joint proposal is summarized in the table below:
Proposed Project:
Housing: 392 student beds – 100,000 sq. ft.
Retail: 12,000 sq. ft.
Office: 16,700 sq. ft.
Library Plaza Café: 1,950 sq. ft.
Parking Garage: 335 spaces
Purchase Price:
$200 plus Library Parking Negotiated
Library Parking:
60 public parking stalls
Estimated Cost:
$78 Million
Estimated Construction
Jobs Created:
200
Estimated Annual Tax
Revenue Generation:
$567,661
Pelican Communities and Overland Development Qualifications The developers bring over 75 years of combined experience, including extensive track records of successful collaboration and working in part nerships on public and private developments throughout California. Pelican is an innovative bu ilder of unique high-qual ity mixed-use in-fill communities and was formed in the late 1990’s for the purpose of developing site-specific mixed- use in-fill projects in highly desirable in-fill loca tions throughout California, with their most recent project in Riverside being the Merrill Brownstones. Overland Deve lopment brings 28 years of focused development expertise throughout the City of Riverside and has been involved in many downtown specific projects including Imperial Hard ware Lofts, 9+Main Residential, Main Street Pedestrian Mall revitalization, Hilton Hampton Inn, and the current under construction Hilton Home 2 Suites.
An evaluation committee consisting of Successor Agency, Economic Development, Public Works, and Planning staff, was convened to evaluate the OPR joint development proposal. The evaluation committee carefully reviewed and c onsidered the joint development proposal and collectively determined that OPR has suffici ent development experience to undertake the acquisition and development of the Property as proposed.
To execute the Agreement, the joint development proposal will be consummated through Pelican Communities, Limited Liability Company (LLC) at the developer’s request. A new LLC between both parties (Pelican Communities and Overland Development) will be established thereafter and transferred pursuant to Section 6.1.6 of the Agreement after the due diligence period.
The attached Purchase, Sale, and Development Agreement includes the following key provisions:
1. Developers to purchase the Property for a total sum of $200 in exchange for constructing and maintaining 60 proposed parking stalls that will serve the main library as an equivalent to the land value of the Property;
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2. A Reciprocal (Parking) Ea sement Agreement is included to dedicate 60 parking stalls within the proposed mixed-use building’s parki ng garage for the Main Library during operational hours;
3. The Project must comply with all zoning, planning, and building laws, including the applicable design standards, other Land Use Laws, the Agreements, and the applicable project entitlements in the development of the proposed Project.
4. Developers must complete all due diligenc e review and inspections of the Property within 120 days from the Effective Date of the Agreement;
5. Developers must submit app lication to the Planning Divi sion for Design Review and project entitlements within 180 days from the effective date of the Agreement;
6. During the entitlement process, Developers shall provide required Project amenities and operational policies and procedure s designed to the Seller’s satisfaction to insure the safe, secure and harmonious maintenance and operation of a student housing project located within the downtown;
7. Developers must obtain all necessary entit lements and close escrow within 30 months following the effective date of the Agreement; and
8. Developers must start construction of the proposed Project wit hin 30 days from the Close of Escrow and complete constructi on within 24 months fr om the start of construction.
Community Outreach
Pelican Communities, LLC initially conducted public outreach for the devel opment proposal on August 13, 2020, presenting the project to the Do wntown Business Council. Shortly thereafter, the Greater Riverside Chambers of Commerce provided a formal letter of support for the project dated August 19, 2020.
During the March 19, 2024 City Council meeting and prior to presenting the Purchase, Sale, and Development Agreement for consi deration, Staff received directio n to conduct additional public outreach at the request of t he Downtown Area Neighborhood Alliance (DANA) which was supported by the developer. This was due to the signi ficant time lapse that occurred to ensure compliance with the Surplus Land Act, the impacts of the COVID-19 Pandemic, and negotiating final deal points for the Agreement.
Staff attended community out reach meetings with two downtown business/neighborhood associations, including the Downtown Area Neighborhood Alliance (DANA) on April 15, 2024 and the Riverside Downtown Partnership (RDP) on April 18, 2024. The developer presented the proposals with staff support while receiving feedback and comments from both groups. DANA expressed some concern regardi ng a loss of any parking at the downtown library, especially during construction of the student housing project, but generally supported the project with several positive comments received. Th e RDP meeting focused on the Garage 1 and 2 development proposal with minimal feedback or comment received for the Student Housing development proposal.
Affordable Student Housing
Staff negotiated an Agreement with Pelican Communities, LLC that adheres to the requirements of AB 1486 and the Surplus Land Act. Though the de velopment project was found to be exempt Former Downtown Terminal Site – PSDA ● Page 6
from the affordable housing re quirements of the law and subsequent HCD determination, the developer wishes to provide affordable housing for the benefit of the local students and community.
The buyer has agreed to include 10% of the bed count as affor dable. As such, a Regulatory Agreement has been negotiated to ensure compliance with affo rdable housing standards. The intention of the Regulatory Agreement is to ensure that Pelican Communities, LLC, its successors or assignees, and every successor in interest to the Property “shall use, maintain and operate the Affordable Residential Units in accordance wit h the terms and conditions of the Regulatory Agreement, including that the Affordable Residential Units shall only be available to Qualified Tenants at Affordable Rent as s pecified [in the Regulatory Agreement] for not less than fifty-five (55) years”. A covenant will be recorded against the Property and should the use of the building change from student housing to other types of housing, additional affordability restrictions may be required in compliance with the law.
Land Value and Library Parking Agreement
An independent third-party appraiser concluded that the value of the Property is $1,830,000 in its “as-is” condition. Staff has reviewed the report and determined that the appraised value for the Property represents the current fair market value.
To ensure adequate parking is maintained for the adjacent Main Library, staff have negotiated an exchange of the land value for 60 public parking stalls dedicated to the main library and its visitors.
The 60 proposed parking stalls were determined to be adequate by staff and meet the City’s adopted codes and parking standards . When the development project is completed, the Main Library’s parking will be metered, include validation, and remain fr ee for the first three hours, closely aligning with today’s operation on site. Thereafter, those dedicated parking stalls will be available to the public for use downtown during off hours when the library is closed. Public parking rates within the new garage of the mixed-use building shall align with adopted City parking rates, or higher, based on demand as determined by the buyer and in accordance with the terms of the Agreement.
The cost to construct and maintain the 60 parking stalls within the garage of the proposed mixed- use building will exceed the fair market value of the Property in its “as is” condition. For example, typical parking stall construction today averages about $40,000 per stall. 60 stalls x $40,000 = $2,400,000 without consider ation of ongoing maintenance therea fter. The buyer has agreed to pay the City the sum of $200 as the purchase price in the Agreement and will record a Perpetual (Parking) Easement Agreement for the required main library parking to be constructed and maintained by the buyer.
Parking during Construction
Riverside Parking Services currently offers 60-minut es of free parking in all Public Garages. In response to comments received during the recent public outreach conducted, during construction of this project, Parking Services will provide a 2-hour validation in addition to the 60-minutes free parking for Garages 3 and 7, whic h are the closest parking garages to the Main Library. A validation machine will be provided to the Main Library staff to assist patrons during construction of the new mixed-use student housing development.
Community Benefit
In addition to the newly developed parking provided for the Main Library and the monetary savings on the continued maintenance and operation of the Property, t he proposed development will benefit the City by generat ing additional real property taxes, increased direct and indirect sales tax revenue, and increased utility user tax re venues. The annual recurring revenues generated Former Downtown Terminal Site – PSDA ● Page 7
from the project are estimated to total $567,661.
The development proposal will also facilitat e approximately 200 constr uction jobs and produce more needed student housing and affordable stud ent housing options for the Riverside community. Increasing student housing and affordable student housing bolsters economic growth, builds safe and sustainable communities, supports the downtown economy, promotes diversity and helps ensure equity within the local housing market.
As such, staff recommends t hat the City Council approve the Agreement with Pelican Communities, LLC for the disposition and development of the Property.
The Housing and Human Services Director, Librar y Director and Public Works Director concur with this report and its recommendation.
STRATEGIC PLAN ALIGNMENT:
This item contributes to the following:
Strategic Priority 2 – Community Well-Being and Goal 2.1: Facilitate the development of a quality and diverse housing supply that is available and affordable to a wide range of income levels; and
Strategic Priority 3 – Economic Opportunity and Goal 3.3: Cultivate a business climate that welcomes innovation, entrepreneurship, and investment.
The item aligns with each of the five Cross-Cutting Threads as follows:
1. Community Trust - The process of selecting t he joint development proposal was accomplished through the issuance of an AB 1486 solicitation. The response was reviewed by staff to ensure transpar ent decision-making based on sound policy in a timely and reliable manner.
2. Equity – The City is supportive of racial, ethnic, religious, sexual orientation, identity, geographic, and other attributes of diversity and is committed to advancing the fairness of treatment, recognition of right s, and equitable distribution of services. Approving the development proposal and Agreement ensures every member of the community has equal access to share in the benefits through community progress.
3. Fiscal Responsibility – The City is a prudent stewar d of public funds and ensures responsible management of the City’s financial resources while providing quality public services to all. The Property is currently underutilized. The disposition of the Property sanctions the responsible management of t he City’s finances while facilitating beneficial investment in the City of Riverside.
4. Innovation – Facilitating the development of a mixed-use student housing project demonstrates that Riverside is inventive and timely in meeting the housing needs for all Riverside residents.
5. Sustainability & Resiliency – Facilitating the developm ent of a mixed-use student housing project demonstrates that Riverside is committed to meeting the housing needs of the present without compromising the needs of the future.
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FISCAL IMPACT:
The total fiscal impact of this action is $200. T he subject Property is City-owned with a value of $1.83 million. However, in lieu of receiving the total value of the land, the City will receive 60 dedicated parking stalls to support the main library at an estima ted construction cost of $2.4 million. Title, escrow, and miscellaneous related cl osing costs for a total not to exceed $10,000 shall be deducted from the $54,900 deposit. The estimated net proceeds from the sale in the amount of $200 shall be deposited in to the Parking Fund-Sale of Land and Buildings revenue account number 0000570-380010.
Prepared by: Chris Christopoulos, Community & Economic Development Deputy Director
Approved by: Jennifer A. Lilley, Community & Economic Development Director Certified as to
availability of funds: Kristie Thomas, Finance Director/Assistant Chief Financial Officer Approved by: Rafael Guzman, Assistant City Manager Approved as to form: Phaedra A. Norton, City Attorney
Concurs with;
___________________________
Steven Robillard, Chair
Economic Development Committee
Attachments:
1. Purchase, Sale & Developm ent Agreement with Exhibits
2. Presentation