City Council Report
915 I Street, 1st Floor
Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2022-01193 June 28, 2022
Title: Third Amendment to Purchase and Sale Agreement: 3625 Fong Ranch Road
Location: District 3
Recommendation: Adopt a Resolution: 1) approving the Third Amendment to Purchase and Sale Agreement (“Third Amendment to PSA”) with Anton Fong Ranch Owners, LLC (“Anton”), modifying the sale of real property located at 3625 Fong Ranch Road, APN: 225-0170-064 (the “Property”) to a sale of 17.39 acres for $4 million in cash; 2) approving the revised Regulatory Agreement with Anton for the 96 affordable housing units, in the form attached to the Third Amendment to PSA; 3) authorizing the City Manager or the City Manager’s designee to:
execute the Third Amendment to PSA and implement the revised escrow instructions; at closing execute the revised Regulatory Agreement and Grant Deed; and to take all actions and execute all additional documents as may be necessary to implement the revised Property sale; 4) modifying Sections 1, 3, and 4 of City Council Resolution 2022-0022 to reflect the updated sale at the Property, as specified in the Third Amendment to PSA; 5) rescinding Sections 2 and 8 of City Council Resolution 2022-0022 given the Seller Carryback Loan is no longer needed; and 6) finding that sale of 17.39 acres of the Property is in the best interest of the City under City Code section 3.88.090(A)(2).
Contact: Richard Sanders, Facilities & Real Property Superintendent, (916) 808-7034, [email protected], Department of Public Works; Danielle Foster, Housing Manager, (916) 808-1869, [email protected], Office of Innovation & Economic Development
Presenter: None
Attachments:
1-Description/Analysis
2-Resolution
3-Third Amendment to PSA
Description/Analysis
Issue Detail: On January 18, 2022, Council approved Purchase and Sale Agreement No. 2022-0095 (“PSA”) to sell 22.81 acres of the Property to Anton for $6.4 million. Two minor amendments to the PSA have since been executed to extend the due diligence period based on unanticipated obstacles associated with investigation of the Property. Pursuant to the original PSA, Anton planned to build a total of 555 housing units, of which 406 would be market rate units and 149 would be affordable units.
Anton has conducted numerous inspections and studies of the Property during the due diligence period and determined that development of the Property in accordance with the terms of the PSA is not physically and financially feasible. In particular, Anton discovered that developing the northern portion of the Property was not feasible due to the need for a bridge street crossing over the drainage canal. Accordingly, Anton is now proposing purchase of
17.39 acres south of the drainage canal to develop 384 housing units, of which 288 would be market rate units and 96 would be affordable units. The revised plan would also integrate all of the low-income housing units into the market-rate multi-family buildings, which would not have occurred under Anton’s original plan. Further, this revised plan is no longer a stand-alone tax credit low-income housing project and Anton therefore no longer needs to process a parcel map or obtain a Seller Carryback Loan. The purchase price for the 17.39 acres would be $4 million. The property sale will close after entitlements are approved, which Anton expects will take approximately six months.
The primary differences between the original development plan specified in the PSA and the updated plan specified in the Third Amendment to PSA are described in the following table:
Plan in PSA Updated Plan
Property 22.81 acres 17.39 acres
Purchase Price $6.4 million $4 million
Seller Carryback Loan $1.455 million None
Total Units 555 units 384 units
Market Rate Units 406 units 288 units
Affordable Rate Units 149 units 96 units
Inclusionary Units 42-59 units 96 units
Building Type 4-story 3-story
The sale of 17.39 acres of the Property to Anton without a high-bid process is in the best interest of the City under City Code section 3.88.090(A)(2) because the California Surplus Land Act requires the City to offer its surplus property to the buyer that proposes the greatest number of affordable housing units. Even with Anton’s revised development plan, Anton still proposes the most affordable housing units for the Property.
Policy Considerations: The recommendations in this report are consistent with the provisions of City Code Section 3.04.020, City Code Chapter 3.88 regarding the disposition of real property owned by the City, and the California Surplus Land Act (Government Code section 54220 et seq.).
Economic Impacts: None.
Environmental Considerations:
California Environmental Quality Act (CEQA): The sale of surplus property is exempt from environmental review under CEQA Guidelines Section 15312, Surplus Government Property Sales, because the Property is not located in an area of statewide, regional or areawide concern; it does not have significant values for wildlife habitat; the use of the Property and adjacent property has not changed since the time of purchase; and the PSA does not approve development of the Property. Anton will have to obtain approval of a General Plan amendment, rezoning, and site plan and design review before the conceptual site plan can be developed. During this planning process, the proposed development of the Property will undergo environmental review under CEQA. The PSA does not limit changes to the site plan or limit imposition of mitigation measures to reduce environmental impacts of the proposed project.
Sustainability: Not applicable.
Commission/Committee Action: None.
Rationale for Recommendation: Approval of the revised sale plan outlined above will allow the City to dispose of the majority of the Property, which has been vacant for more than 18 years. The sale will eliminate a large portion of the costs for maintenance of the Property and provide funds to repay the Storm Drainage Fund (Fund 6011), inclusive of accrued Pool A interest, and provide for much needed affordable and market rate housing.
Financial Considerations: The Property was purchased in 2003 with $2,052,130 from the Storm Drainage Fund (Fund 6011) and $1,400,000 in bond proceeds from the 2002 Capital Improvement Revenue Bonds (CIRB). The total purchase price for this Property is now $4 million. The City must remit a portion of the sales proceeds back into the Storm Drainage Fund (Fund 6011) based on how much would have been accrued if those funds were invested instead in the City’s standard investment pool (Pool A). City staff will reassess Pool A interest earnings at the time of escrow closure to determine the final deposit amount into the Storm Drainage Fund (Fund 6011).
There is a 4% brokerage commission owed to the broker representing the City, and the City will be required to pay its share of prorations of property tax assessments, escrow fees, and transfer taxes. In addition, Department of Public Works staff time will be paid out of the sale proceeds after the close of escrow. These costs and repayment of the Storm Drainage Fund (Fund 6011) will be deducted from the net cash sale proceeds. The remaining net cash sale proceeds will be budgeted in the Innovation and Growth Fund (Fund 2031).
Local Business Enterprise (LBE): Not applicable.
RESOLUTION NO. 2022-
Adopted by the Sacramento City Council
Approving Third Amendment to Purchase and Sale Agreement for Property at 3625 Fong Ranch Road
BACKGROUND
A. On January 18, 2022, City Council approved a Purchase and Sale Agreement and Joint Escrow Instructions, referred to as City Agreement No. 2022-0095 (“PSA”), to sell 22.81 acres of the City-owned real property at 3625 Fong Ranch Road, APN: 225-0170-064 (“Property”) to Anton Fong Ranch Owners, LLC (“Anton”) for $6.4 million. Two minor amendments to the PSA have since been executed to extend the due diligence period based on unanticipated obstacles associated with investigation of the Property.
Pursuant to the original PSA, Anton planned to build a total of 555 housing units, of which 406 would be market rate units and 149 would be affordable units.
B. However, Anton discovered that developing the northern portion of the Property was not feasible due to the need for a bridge street crossing over the drainage canal.
Accordingly, Anton is now proposing purchase of 17.39 acres south of the drainage canal to develop 384 housing units, of which 288 would be market rate units and 96 would be affordable units. This revised plan is no longer a stand-alone tax credit low- income housing project and Anton therefore no longer needs to process a parcel map or obtain a Seller Carryback Loan. The purchase price for the 17.39 acres would be $4 million. City staff recommends execution of a third amendment to the PSA (“Third Amendment to PSA”) to reflect the terms and conditions of the revised development plan for 17.39 acres.
C. The sale of 17.39 acres of the Property to Anton without a high-bid process is in the best interest of the City under City Code section 3.88.090(A)(2) because the California Surplus Land Act requires the City to offer its surplus property to the buyer that proposes the greatest number of affordable housing units. Even with Anton’s revised development plan, Anton still proposes the most affordable housing units for the Property.
D. The recommended Third Amendment to PSA, revised Regulatory Agreement, and other transactions to consummate the sale of 17.39 acres at 3625 Fong Ranch Road to Anton are in compliance with the provisions of City Code Section 3.04.020, City Code Chapter
3.88 regarding the disposition of real property, and the California Surplus Land Act (Government Code section 54220 et seq.).
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:
Section 1. The Third Amendment to PSA with Anton, for the sale of 17.39 acres of real property at 3625 Fong Ranch Road for $4 million, which is attached hereto as Exhibit A, is hereby approved.
Section 2. The revised Regulatory Agreement with Anton for the 96 affordable housing units in the form attached to the Third Amendment to PSA is hereby approved.
Section 3. The City Manager or the City Manager’s designee is authorized to: execute the Third Amendment to PSA (attached hereto as Exhibit A) and implement the revised escrow instructions; at closing execute the revised Regulatory Agreement and Grant Deed; and to take all actions and execute all additional documents as may be necessary to implement the revised sale of 17.39 acres at 3625 Fong Ranch Road.
Section 4. Sections 1, 3, and 4 of City Council Resolution 2022-0022 are revised to reflect the updated sale of 3625 Fong Ranch Road, as specified in the Third Amendment to PSA.
Section 5. Sections 2 and 8 of City Council Resolution 2022-0022 are rescinded given the Seller Carryback Loan is no longer needed.
Section 6. The sale of 17.39 acres at 3625 Fong Ranch Road is in the best interest of the City under City Code section 3.88.090(A)(2).
Attachments:
Exhibit A – Third Amendment to PSA