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Council Agenda: 06/21/2022
Item No.: 8.2(a)
REVISED – per Administrative update.
RESOLUTION NO. ______________
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN JOSE (A) (1) ACCEPTING AN AWARD OF $25,238,236 IN PROJECT HOMEKEY
2.0 FUNDS FROM THE CALIFORNIA DEPARTMENT OF HOUSING
AND COMMUNITY DEVELOPMENT (“HCD”) IN ORDER TO ADDRESS
HOUSING NEEDS OF INDIVIDUALS AND FAMILIES EXPERIENCING
HOMELESSNESS OR AT RIS K OF EXPERIENCING HOMELESSNESS
THROUGH THE ACQUISITION AND OPERATION OF THE ARENA
HOTEL LOCA TED AT 817 THE ALAMEDA; (2) AUTHORIZ ING THE
CITY MANAGER TO NEGOTIATE AND EXECUTE AN HCD
STANDARD AGREEMENT AND ALL OTHER NECESSARY RELATED
DOCUMENTS TO ACCEPT $25,238,236 IN A CQUISITION FUNDING AND OPERATING SUBSIDY FROM HCD IN PROJECT HOMEKEY 2.0
FUNDS; (3) AUTHORIZING THE CITY MANAGER TO NEGOTIATE AND
EXECUTE AN ASSIGNMENT AND ASS UMPTION AG REEMENT FOR
THE CITY OF SAN JOSE TO ASSUME THE ROLE OF BUYER IN THE
PURCHASE AND SALE AGREEMENT AND JOINT E SCROW
INSTRUCTIONS DATED OCT OBER 14, 2020 , FIRST AMEND ED ON JUNE 30, 20221 , SECON D AMENDED ON NOVEMBER 30, 2021 , THIRD AMENDED ON FEBRUARY 28, 2022, AND FOURTH AMENDED
ON APRIL 26, 2022, BETWEEN IKAIKA OHANA AS BUYER AND MILL VALLEY MOTEL INVEST MENT, INC., MORGAN HILL MOTEL
INVESTMENTS INC., ARENA HOTEL INVESTMENT S, INC., AND
NEEDLES MOTEL INVESTMENT S, LLC., FOR THE PURCHASE OF
THE ARENA HOTEL LOCATED AT 817 THE ALAMEDA, IDENTIFIED
AS APN-261-01-007 FOR A PRICE OF $22,90 0,000 (“PROJECT”); (4)
AUTHORIZING THE DIRECTOR OF HOUSING TO NEGOTIATE AND
EXECUTE GRANT DOCUMENTS AND ALL OTHER DO CUMENTS
WITH URBAN HOUSING COMMUNITIES , OR ITS AFFILI ATE, IKAIKA OHANA (“DEVELOPER”) REGARDING THE REHABILITATION AND
OPERATIONS OF, AND SERVICES FOR THE PROJECT FOR A
GRANT IN THE AMOUNT OF $23,150,672 FROM PROJECT HOMEKEY
2.0 FUNDS AND MEAS URE E F UNDS; (5) AUTHORI ZING THE
DIRECTOR OF HOUSING TO ENTER INTO A GROUND LEAS E WITH
THE DEVELOPER OF THE CITY -OWNED PROPERTY LOCATED AT
817 THE ALAMEDA FOR A TERM OF UP TO 15 YEA RS, FOR THE PURPOSES OF REHA BILITATING AND OPERATING THE PROJECT;
AND (6) APPROVING A TOTAL C OMMITMENT O F $25,238,236, IN PROJECT HOMEKEY 2.0 FUNDS AND $20,85 7,436 IN MEASURE E FUNDS TOTALING $46,095,672 FO R THE ACQ UISITION,
REHABILITATION AND OPERATION OF THE PROJECT
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Council Agenda: 06/21/2022
Item No.: 8.2(a)
REVISED – per Administrative update.
WHEREAS, the City of San José (“City”) has worked alongside the County of Santa Clara (“County”) Office of Supportive Housing to respond strategically and swiftly to the COVID-19 pandemic; and
WHEREAS, to secure funding for new housing opportunities for our unhoused residents throughout the City and County, a plan was put in place to identify sites for upcoming HomeKey Program funding; and
WHEREAS, on September 9, 2021, Housing and Community Development (“HCD”) released its Notice of Funding Availability (“NOFA”) to announce the availability of approximately $1.45 billion of HomeKey grant funding through the Round 2 NOFA (“HomeKey 2.0”) to significantly invest and continue a statewide effort to sustain, and rapidly expand, permanent and interim housing for persons experiencing homelessness or at risk of experiencing homelessness, and who are inherently impacted by, or at increased risk for, medical conditions due to the COVID-19 pandemic; and
WHEREAS, on October 5, 2021, the City Council approved authorizing the City Manager to apply for three HomeKey 2.0 grants, including the Pacific Motor Inn, Arena Hotel, and a City-owned property located at the intersection of Branham Lane and Monterey Road; and
WHEREAS, on May 10, 2022, HCD announced that the City and Urban Housing Communities (“Developer”) had been awarded a HomeKey 2.0 award in the amount of $25,238,236 for acquisition and operation of the Arena Hotel for affordable interim and permanent housing; and
WHEREAS, this approval will authorize the City to accept and receive $25,238,236 in funds from the HCD HomeKey 2.0 Program (“HomeKey”) to fund the purchase of an 89- unit hotel, with a two-bedroom manager’s unit, located at 817 The Alameda, and to NVF:HAH:CEG
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Council Agenda: 06/21/2022
Item No.: 8.2(a)
REVISED – per Administrative update.
support the rehabilitation and operation of the facility in which to serve extremely-low- income individuals and families; and
WHEREAS, staff recommends City Council authorize the negotiation and execution of an assignment and assumption agreement in order for the City to assume the role of Buyer in the Purchase and Sale Agreement and Joint Escrow Instructions dated October 14, 2020, first amended on June 30, 2021; second amended on November 30, 2021; third amended on February 28, 2022; and fourth amended on April 26, 2022 (collectively PSA) between Ikaika Ohana as buyer and Mill Valley Motel Investments, Inc., Morgan Hill Motel Investments Inc., Arena Hotel Investments, Inc., and Needles Motel Investments, LLC., collectively as Seller (“Seller”) for the purchase of the Arena Hotel located at 817 The Alameda, identified as APN 261-01-007; and
WHEREAS, the purchase price for the Arena Hotel under the PSA is $22,900,000, or $257,303 per affordable unit; and
WHEREAS, the City will acquire the property in an as-is condition pending resolution of due diligence; and
WHEREAS, closing costs will be split between the Seller and City, the City is not represented by a broker in this transaction, the Seller will pay their own brokerage fees and Developer will pay their own consultant fees, if any are due, subject to the Assignment and Assumption Agreement; and
WHEREAS, the Director of Housing will be authorized to negotiate and execute grant documents and all other documents with Developer regarding the rehabilitation, and operations of, and services for the Project for a grant award in the amount of $23,150,672 from Project HomeKey 2.0 Funds and Measure E Funds for a term of up to 15 years; and
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Council Agenda: 06/21/2022
Item No.: 8.2(a)
REVISED – per Administrative update.
WHEREAS, Director of Housing will be authorized to enter into a Ground Lease with the Developer of the City-owned property located at 817 The Alameda for a term of up to 15 years for the purposes of rehabilitation and operating the Project; and
WHEREAS, the Developer has established a mission-driven team consisting of the Developer (Urban Housing Communities), Property Management Company (Hyder & Company) and Tenant Services provider (HomeFirst) to own, manage and operate the Arena Hotel; and
WHEREAS, the City has contracted with Associated Right of Way Services, Inc. to provide relocation planning and assistance to the occupants in accordance with applicable relocation assistance laws and requirements with preliminary relocation cost estimating $95,000 to $145,000; and
WHEREAS, the Environmental Services Department completed a Phase I Environmental Site Assessment of the Arena Motel in June 2021 and determined that there are no significant environmental liabilities that would preclude the City from obtaining ownership of the property for continued use as a motel; and
WHEREAS, it is the long-term goal of the site to provide residents a permanent home in an amenity-rich location with access to employment opportunities, job training resources, and needed medical and social services; and
WHEREAS, accepting the HCD award aligns the City’s local initiatives with the statewide strategy to secure the financial resources needed to combat the homeless crisis impacting our community; and
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Council Agenda: 06/21/2022
Item No.: 8.2(a)
REVISED – per Administrative update.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF SAN JOSE THAT:
1. The City Manager is hereby authorized to accept the award of $25,238,236 in Project HomeKey 2.0 funds from HCD for the acquisition of and operation of the Arena Hotel.
2. The City Manager is hereby authorized to negotiate and execute an HCD Standard Agreement and all other necessary related documents to accept the $25,238,236 award.
3. The City Manager is hereby authorized to negotiate and execute an Assignment and Assumption agreement for the City to assume the role of Buyer in the Purchase and Sale Agreement for the purchase of the Arena Hotel located at 817 The Alameda for a price of $22,900,000.
4. The Director of Housing is hereby authorized to negotiate and execute grant documents and all other documents with Urban Housing Communities or its affiliate regarding rehabilitation, operation and services for a grant award in the amount of $23,150,672 from Project HomeKey and Measure E Funds.
5. The Director of Housing is hereby authorized to enter into a Ground Lease with the Developer for the City-owned property located at 817 The Alameda for a term of up to 15 years for the purposes of rehabilitating and operating the Project.
6. A total commitment of $25,238,236 in Project HomeKey 2.0 Funds and $20,857,436 in Measure E Funds totaling $46,095,672 for the acquisition, rehabilitation and operation of the Project is hereby approved.
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Council Agenda: 06/21/2022
Item No.: 8.2(a)
REVISED – per Administrative update.
ADOPTED this _____ day of ___________, 2022, by the following vote:
AYES:
NOES:
ABSENT:
DISQUALIFIED:
SAM LICCARDO
Mayor
ATTEST:
TONI J. TABER, CMC
City Clerk