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Item No.: 8.2
DRAFT--Contact the Office of the City Clerk at (408)535-1260 or [email protected] for final document.
RESOLUTION NO.
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN JOSE
AUTHORIZING: (A)THE DIRECTOR OF HOUSING, OR THEIR
DESIGNEE, TO NEGOTIATE AND EXECUTE (1) AN EXCLUSIVE
NEGOTIATION AGREEMENT FOR A THREE-YEAR TERM, AND TWO
SIX-MONTH EXTENSIONS, AT THE CITY’S DISCRETION, AND ANY
ANCILLARY DOCUMENTS WITH EPISCOPAL COMMUNITY
SERVICES OF SAN FRANCISCO AND AFFILIATES, FOR A FINAL
PROPOSAL FOR: (I) THE CONVERSION OF THE EXISTING ARENA
HOTEL PROJECT INTO HOUSING UNITS RESTRICTED TO
HOUSEHOLDS WITH AREA MEDIUM INCOME AND RENTS
CONSISTENT WITH THE PROJECT'S HOMEKEY AGREEMENT; AND
(II) THE POTENTIAL FUTURE CONSTRUCTION OF MIXED- INCOME
HOUSING ON THE EXISTING PARKING LOT PORTION OF THE SITE, SERVING HOUSEHOLDS EARNING AT OR BELOW 120% OF THE
AREA MEDIAN INCOME; (2) A RIGHT OF ENTRY AGREEMENT WITH
EPISCOPAL COMMUNITY SERVICES OR ITS AFFILIATES TO
ALLOW ACCESS TO THE ARENA HOTEL PROPERTY TO CONDUCT
THE DUE DILIGENCE NECESSARY TO SATISFY THE MILESTONES
TO BE SET FORTH IN THE EXCLUSIVE NEGOTIATION AGREEMENT; (3) A THREE -YEAR EXCLUSIVE NEGOTIATION AGREEMENT WITH
THE POSSIBILITY OF TWO SIX- MONTH EXTENSIONS, AT THE
CITY’S DISCRETION, AND ANY ANCILLARY DOCUMENTS,
INCLUDING A RIGHT OF ENTRY AGREEMENT WITH THE SECOND
HIGHEST SCORING RESPONDENT, PROPERTYWORX LLC OR ITS
AFFILIATES FOR THE FINAL PROPOSAL OF A HOUSING
DEVELOPMENT PROJECT ON THE ARENA HOTEL PROPERTY, IF
EPISCOPAL COMMUNITY SERVICES IS UNABLE TO
SUCCESSFULLY EXECUTE AN AGREEMENT WITH THE CITY OR
DOES NOT COMPLY IN A TIMELY AND DILIGENT MANNER WITH
ANY MATERIAL OBLIGATION UNDER THE EXCLUSIVE
NEGOTIATION AGREEMENT; AND (B) CITY MANAGER, HOUSING
DIRECTOR, OR THEIR DESIGNEES, TO NEGOTIATE AND EXECUTE:
(1) AN AMENDMENT TO THE HOMEKEY PROGRAM STANDARD
AGREEMENT WITH THE CALIFORNIA DEPARTMENT OF HOUSING
AND COMMUNITY DEVELOPMENT TO REMOVE A0729 SAN JOSE
L.P., URBAN HOUSING COMMUNITIES LLC, AND HOMEFIRST
SERVICES OF SANTA CLARA COUNTY AS CO -APPLICANTS, CO -
GRANTEES, OPERATOR, DESIGNATED PAYEE, AND/OR OTHER
RESPONSIBLE PARTY IDENTIFIED IN THE STANDARD
AGREEMENT AND RELATED HOMEKEY DOCUMENTS FOR THE
ARENA HOTEL, AND TO IDENTIFY THE CITY AS THE SOLE
GRANTEE AND RESPONSIBLE PARTY UNDER THE STANDARD
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Council Agenda: 10-06-2026
Item No.: 8.2
DRAFT--Contact the Office of the City Clerk at (408)535-1260 or [email protected] for final document.
AGREEMENT; AND (2)DOCUMENTS NECESSARY TO UNWIND,
TERMINATE, OR AMEND PROJECT AGREEMENTS WITH URBAN
HOUSING COMMUNITIES LLC OR A0729 SAN JOSE L.P.,
INCLUDING THE GROUND LEASE, THE ACQUISITION AND
REHABILITATION GRANT AGREEMENT, OPERATING
AGREEMENTS, GRANT AGREEMENTS, OR OTHER RELATED
AGREEMENTS
WHEREAS, the City of San José (“City”) City Council desires to adopt this resolution for the reasons set forth in the memorandum, dated August 10, 2026, from the Director of Housing, Erik L. Soliván, for the October 6, 2026 City Council meeting (“Memorandum”); and
WHEREAS, the City is the owner of certain real property located at 817 The Alameda, San José, California, commonly known as the Arena Hotel, consisting of approximately
1.39 acres or 60,548 square feet (“Property”); and
WHEREAS, in March 2023, the City purchased the Property for approximately $22.9 million, using approximately $17.9 million in California Department of Housing and Community Development (“HCD”) Homekey Program grant funds and $5.0 million in Measure E funds, and the Arena Hotel has since operated as interim housing for individuals at risk of homelessness; and
WHEREAS, the Property is funded in part under the Homekey Standard Agreement No. 21-HK-17232, under which the City, A0729 San Jose L.P., and Urban Housing Communities LLC, and HomeFirst Services of Santa Clara County are presently identified as co-grantees and/or other responsible parties; and
WHEREAS, between 2023 and 2025, the City worked with Urban Housing Communities LLC regarding the future redevelopment of the Property, but the proposals submitted during that period were determined not to be financially feasible, and the City therefore sought a new development partner for the Property; and
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Council Agenda: 10-06-2026
Item No.: 8.2
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WHEREAS, in December 2025, the Housing Department issued Request for Proposals No. 12-15-2025 seeking qualified developers to design, finance, and construct housing on City -owned properties, including redevelopment of the Arena Hotel Property; and
WHEREAS, following evaluation of the proposals received through the competitive process, Episcopal Community Services of San Francisco (“ECS”) was selected as the highest-ranked respondent for the Arena Hotel Property, and the Housing Department issued a notice o f intent to award an Exclusive Negotiation Agreement (“ENA”) to ECS on May 11, 2026; and
WHEREAS, Episcopal Community Services (ECS) brings over 40 years of experience and a proven track record in developing, operating, and managing permanent supportive housing, including extensive expertise navigating the State Department of Housing and Community De velopment’s (HCD) Homekey program requirements from acquisition through long-term compliance; and
WHEREAS, the proposed conversion of the Arena Hotel is structured to meet all Homekey criteria and deliver fully self -contained units under Housing First principles within the City's required delivery timeframe to fulfill the 89 -unit requirement for households at or below 30% of Area Median Income; and
WHEREAS, physical condition and zoning assessments conducted by ArtHaus Partners confirmed the site is structurally sound and suitable for conversion, with Phase 1 focused on the immediate Homekey -compliant renovation and Phase 2 exploring additional capacity and mixed- income development options to be refined during the Exclusive Negotiating Rights Agreement (ENA) period; and
WHEREAS, the City desires to provide ECS the opportunity to exclusively negotiate with the City regarding a proposed redevelopment of the Property consisting generally of: (i) SAW:GAR:MMV
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Item No.: 8.2
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conversion of the existing Arena Hotel into permanent housing consistent with the affordability and other requirements of the Homekey Program; and (ii) the potential future construction of additional mixed-income housing on the existing parking lot portion of the Property serving households earning up to 120 percent of area median income (“Project”); and
WHEREAS, consistent with the updated Conversion Plan submitted to HCD on July 24, 2026, the contemplated first phase of the Project would convert the existing Arena Hotel into approximately 89 fully self -contained permanent supportive housing units and one manager’s unit, serving households earning at or below 30 percent of area median income, while a potential subsequent phase would contemplate development of additional mixed-income housing on the parking lot portion of the Property; and
WHEREAS, the City desires to enter into an ENA with ECS for a term of three years, with the possibility of two additional six-month extensions at the City’s discretion, to allow ECS to perform due diligence, pursue entitlements and environmental review, evaluate financing, and complete other predevelopment activities necessary to develop a final proposal for the Project; and
WHEREAS, in connection with the ENA, the City desires to enter into a Right of Entry Agreement with ECS or its affiliates permitting reasonable access to the Property for purposes of conducting due diligence, tests, studies, investigations, and other predevelopment activities required to satisfy the milestones established under the ENA; and
WHEREAS, the ENA is an agreement concerning development negotiations only and does not convey any interest in the Property, constitute approval of the Project, obligate the City to dispose of or lease the Property, or obligate the City to provide financing or enter into any future agreement with ECS; and
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WHEREAS, if ECS is unable to successfully execute an ENA with the City , or does not comply in a timely and diligent manner with any material obligation under the ENA, the City reserves authority to commence exclusive negotiations with the second- highest scoring respondent, Propertyworx LLC or its affiliates, regarding an affordable housing development on the Property; and
WHEREAS, Propertyworx LLC, a joint venture between Community HousingWorks and Cloud Apartments, partner on public-private workforce housing developments in the City by pairing strategic land use entitlement planning with prefabricated "Construction 3.0" technology to accelerate delivery and reduce housing costs; and
WHEREAS, Propertyworx LLC, proposes to redevelop the transit -adjacent Arena Hotel site into 210 modular rental units across two phases, serving households at or below 80% Area Median Income (AMI) in compliance with Homekey guidelines while utilizing modular construction to reduce costs, accelerate delivery, and minimize local disruption; and
WHEREAS, on May 18, 2026, the City requested HCD's approval to amend the Homekey Standard Agreement to facilitate the transition to ECS as the development partner for the Property. On July 20, 2026, the City requested that HCD proceed with the amendment following Urban Housing Communities LLC's decision not to participate in the process ; and
WHEREAS, on July 24, 2026, the City submitted an updated Conversion Plan to HCD confirming that the contemplated developer transition and predevelopment activities would not disrupt operation of the Arena Hotel as an interim housing site; and
WHEREAS, completion of the developer transition and implementation of subsequent agreements for the Property remain subject to HCD's approval of the necessary amendments to the Homekey Standard Agreement; and
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WHEREAS, in connection with the developer transition, the City must also unwind, terminate, amend, or otherwise address existing agreements with Urban Housing Communities LLC and/or A0729 San Jose L.P., which may include the existing ground lease, Acquisition and Rehabilitation Grant Agreement, operating agreements, grant agreements, and other related project documents;
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF SAN JOSE THAT:
1. The Housing Director , or their designee, is hereby authorized to negotiate and execute:
a) An Exclusive Negotiation Agreement for a three- year term, and two six - month extensions, at the City’s discretion, and any ancillary documents with Episcopal Community Services of San Francisco and affiliates, allowing them to entitle a development that for a final proposal for:
(i) The conversion of the existing Arena Hotel project into housing units restricted to households with area medium income and rents consistent with the project's HomeKey agreement; and
(ii) The potential future construction of mixed- income housing on the existing parking lot portion of the site, serving households earning at or below 120% of the area median income; and
b) A Right of Entry Agreement with Episcopal Community Services or its affiliates to allow access to the Arena Hotel property to conduct the due diligence necessary to satisfy the milestones to be set forth in the Exclusive Negotiation Agreement; and
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c) A three-year Exclusive Negotiation Agreement with the possibility of two six-month extensions, at the City’s discretion, and any ancillary documents, including a Right of Entry Agreement with the second highest scoring respondent, Propertyworx LLC or its affiliates for the final proposal of an housing development project on the Arena Hotel property, if Episcopal Community Services is unable to successfully execute an agreement with the City or does not comply in a timely and diligent manner with any material obligation under the Exclusive Negotiation Agreement; and
2. The City Manager , the Housing Director, or their designee, to negotiate and execute:
a) An amendment to the Homekey Program Standard Agreement with the California Department of Housing and Community Development to remove A0729 San Jose L.P., Urban Housing Communities LLC, and HomeFirst Services of Santa Clara County as co-applicants, co-grantees, operator, designated payee, and/or other responsible party identified in the Standard Agreement and related Homekey documents for the Arena Hotel, and to identify the City as the sole grantee and responsible party under the Standard Agreement; and
b) Documents necessary to unwind, terminate, or amend project agreements with Urban Housing Communities LLC or A0729 San Jose L.P., including the ground lease, the Acquisition and Rehabilitation Grant Agreement, operating agreements, grant agreements, or other related agreements.
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ADOPTED this _____ day of ___________, 2026, by the following vote:
AYES:
NOES:
ABSENT:
DISQUALIFIED:
MATT MAHAN
Mayor
ATTEST:
TONI J. TABER, MMC
City Clerk