COUNCIL AGENDA REPORT
TO: Mayor and City Council
FROM: Chenin Dow, Director of Community Development
DATE: June 16, 2026
SUBJECT: Adoption of a Resolution Approving Amendment to Sales and Disposition Agreement (SDA), Estoppel, Amendment, and Partial Assignment of SDA, Subordination Agreement, and Parking Agreement with The Vernon Group
Description:
The City Council will consider adopting a Resolution approving various agreements with Vernon Property Group, LLC in order to effectuate the closing of the Lot 2 property and facilitate development of the Perlman Apartments.
Environmental Notice: The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant t o State Guidelines Section 15060(c)(3) no environmental review is required.
RECOMMENDATION:
Adopt a Resolution authorizing the City Manager to negotiate, finalize , and execute an amendment to various agreements pertinent to the closing on the downtown parcel known as Lot 2 in order to facilitate the development of the Perlman Apartments and the implementation of the Sales and Disposition Agreement dated September 17, 2024, with Vernon Property Group, LLC. These agreements include:
1. Approve the Estoppel, Amendment, and Partial Assignment of the SDA to Danco Group; and
2. Approve the Subordination Agreement by and among the City; Citibank, N.A.; and Santa Maria North Broadway LP, a related party of Danco Group; and
3. Authorize the City Manager to negotiate, finalize , and execute a Parking Agreement with Vernon Property Group, LLC in substantially the form submitted hereto; and
4. Authorize the City Manager to negotiate, finalize , and execute an amendment to the SDA in a form approved by the City Attorney based on the terms outlined in this staff report; and
5. Authorize the City Manager to execute any related documents.
BACKGROUND:
Since the adoption of the Downtown Specific Plan in 2015, the City of Santa Maria has proactively sought the revitalization of the downtown area. Today, those efforts are bearing fruit. Construction is well underway on two key redevelopment projects: the 2 transformation of the former Mervyn’s building to become the Heritage Walk Lofts, consisting of 102 market-rate loft units by Vernon Property Group, LLC (“Vernon”), and the redevelopment of the former Sears building into an El Super grocery store with additional retail space by the Charles Company.
On September 17, 2024, the City entered into an SDA with Vernon for the purchase and development of four parcels of surplus lands concentrated near Broadway and Main Street. The first of these development projects to be constructed will be the Perlman Apartments on Lot 2, which consists of 150 affordable units for families. Following this will be the Alvin Newton Apartments on Lot 3, a mixed -use project featuring 82 market -rate units with a retail component on the ground floor. Both projects are nearing completion of the permitting process.
DISCUSSION:
As the parcels contemplated for development are currently owned by the City, California’s Surplus Land Act requires that a minimum of 25% of all units ultimately built on these parcels provide deed -restricted affordable housing. While unit counts are still being finalized for future phases of the revitalization projects on Lots 1 and 4, the Perlman Apartments are expected to provide all of the required deed-restricted housing.
Vernon is a market-rate developer. As such, they have partnered with the Danco Group (“Danco”) for Lot 2’s affordable housing development. Danco is a fully integrated affordable housing firm founded in 1986, with nearly four decades of experience in real estate development, construction , and property management. Operating primarily throughout California and Arizona, Danco has successfully placed 1,874 units in service and has an additional 6,859 units in the pipeline, demonstrating a proven track record of delivering quality affordable h ousing at scale. Through its development arm, Danco Communities, the firm specializes in leveraging Low Income Housing Tax Credits (LIHTC) and government funding sources to create rental housing serving households earning between 30% and 80% of Area Median Income (AMI), including housing for seniors, veterans, and low-income families. Danco's vertically integrated model – encompassing development, general contracting, and ongoing property management – ensures accountability and quality throughout the full project lifecycle.
Vernon will remain the master developer for the total SDA, partnering 50/50 on the construction component of the Perlman Apartments project. This ensures that the City will enjoy a guaranty of performance not only from Vernon, but also from Danco for Lot 2.
The proposed Estoppel, Amendment, and Partial Assignment of SDA wi ll allow Vernon to assign a portion of their rights and responsibilities under the SDA to Danco. Danco will assume ownership of the project; upon completion, they will also assume property management responsibilities. To date, Danco has been an involved partner alongside Vernon throughout the design process for the Perlman, and has led the successful effort to secure LIHTC funding to make construction possible.
The proposed Subordination A greement is a standard real estate development agreement wherein a given stakeholder in the property – in this case, the City – agrees 3 that its claim to the parcel will be subordinate to the claim of a larger lender in the event of default. This agreement will allow the primary lender for the project, Citibank, to provide the necessary funding for development of the project.
Additionally, a Parking Agreement is proposed to provide Perlman Apartments tenants with access to 55 spaces within the City-owned parking structure located on Main Street east of Broadway. Under the project’s Downtown Permit, these spaces are required as a condition of approval in addition to the 78 on-site spaces. This will aid in resolving parking needs downtown, maximize the use of the underutilized parking structure, and continue to ensure that the City’s obligations under the existing parking agreement for Town Center are met.
Finally, an additional amendment to the SDA is proposed to facilitate construction of the project while also providing new amenities to existing and future residents. Lot 2 will be expanded to include approximately 1,600 square feet of adjacent space for underground drainage facilities, along with nominal additional square footage connecting to the project site to ensure seamless maintenance of the surface area. This will allow for the project to maintain its density and incorporate the needed drainage infrastructure. The surface will remain accessible to the public as part of the adjacent inline park, and will be maintained by Danco.
In return, Danco and Vernon will construct a dog park within the existing inline park, at an estimated value to the City of $280,000. Additionally, they will forego the various fee waivers and reductions outlined in the SDA for L ot 2, consisting of $412,865 in impact fees and $201,535 in permitting fees. In all, the value to the City is approximately $894,400.
Alternative
The City Council may decide not to authorize any or all of the proposed agreements. A denial would create significant delays in construction, possible loss of LIHTC funding, and prevent compliance efforts with Surplus Land Act requirements for disposition of the City- owned parcels, thus creating a roadblock for redevelopment efforts on the remaining lots.
Additionally, a denial would cause the City to forego the dog park and reinstate the fee waivers and discounts previously agreed upon, thus foregoing a total value of approximately $894,400 for the City.
Fiscal Considerations
Approximately $894,400 in total value to the City, including installation of a dog park and foregoing previously agreed upon fee waivers and discounts.
Impact on the Community
The Perlman Apartments will provide 150 units of affordable housing to working families in our community. These cha nges to the SDA will allow for an experienced affordable housing developer to co-develop the project in conjunction with Vernon and leverage its extensive experience to manage the property post-construction.
4 Approval will also facilitate construction of a new dog park for residents to enjoy and generate approximately $614,400 in City revenue, for a total value of $894,400.
Attachment(s)
A. Resolution
B. Estoppel, Amendment, and Partial Assignment of Sales and Disposition Agreement C. Subordination Agreement
D. Parking Agreement