Title
Report regarding a resolution authorizing the City Manager to execute a Third Amendment to the Purchase and Sale Agreement with Eden Housing for the former City-owned parcel at 201 Baden Avenue and another resolution approving Budget Amendment Number 25.055 to remove a budget designation for the project and approving the rescission of a Letter of Intent to fund a canceled affordable housing project at 201 Baden Avenue (Pierce Abrahamson, Management Analyst II)
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RECOMMENDATION
Staff recommends that the City Council adopt two resolutions. The first would authorize the City Manager to execute a Third Amendment to the Purchase and Sale Agreement with Eden Housing for the former City-owned parcel at 201 Baden Avenue and reimburse Eden Housing for predevelopment costs associated with the canceled senior affordable housing project at the site. The second resolution would approve Budget Amendment Number 25.055 to remove a budget designation in Fund 823 for the project and approve the rescission of a Letter of Intent to fund the canceled affordable housing project using the Local Housing Trust Fund (LHTF) grant award from the California Department of Housing and Community Development (HCD).
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BACKGROUND
The former City-owned property at 201 Baden Avenue (“the Property”) is improved with a retired firehouse. In 2017, the City determined that the underutilized Property presented an opportunity for redevelopment and issued a Request for Qualifications (“RFQ”) to potential developers. Based on the RFQ responses, the City selected a development team comprised of a commercial owner/user to restore and convert the firehouse to office and a residential developer. Ultimately, Eden Housing, Inc (“Eden”), a nonprofit affordable housing developer, was selected as the housing development partner.
In November 2021, the City and Eden executed a Purchase and Sale Agreement (the “PSA”) pursuant to which Eden would purchase an approximately 0.3-acre portion of the Property (the “Eden Parcel”), the portion not occupied by the retired firehouse. While the appraisal value of the Property at the time was $1,440,000, the City sold the Eden portion for $1.00 as a form of a land donation in exchange for Eden developing a 100% affordable senior housing project. The original PSA required Eden to execute a purchase agreement with the owner of the adjacent property, 199 Airport Boulevard, on which an existing KFC restaurant is located (the “KFC Parcel”), to build a larger 82-unit project.
In addition to the land donation, the City Council approved a Letter of Intent in September 2021 to fund the project using a prospective $2,362,500 LHTF grant award from HCD. While HCD approved the City’s grant application in April 2022, the Letter of Intent conditioned the funding commitment upon a Council authorization to appropriate the LHTF funds received from HCD into Fund 205 for the proposed project. As of April 2025, Council has not approved such an authorization. Notwithstanding, there is a $1,025,000 budget designation in Fund 823 reserved for a predevelopment loan from Fund 823 for Eden Housing, though Eden never formally requested these funds.
Eden Housing Transaction
To reach the 82-unit count, the original PSA required Eden to acquire the neighboring parcel at 199 Airport Boulevard by December 31, 2022, and develop the project across both parcels. Given challenges in acquiring 199 Airport Boulevard, however, the City executed a time extension amendment in 2022 and subsequently again in 2023 that also allowed Eden to move forward with a smaller 68-unit project on 201 Baden alone. The second PSA amendment also included a schedule of performance and a reversionary clause that allows the City to re-convey the Property if the project remains uncompleted by December 2024. As of April 2025, the project has not cleared any additional performance milestones specified in the PSA. While Eden submitted a pre-application for the project’s Planning entitlements, the project has not yet advanced to a full application or otherwise receive any necessary approvals. Prior to granting the two PSA amendments, the City expected Eden to complete construction of an 82-unit affordable housing project across two parcels by February 2023.
On September 17, 2024, Eden sent a letter to the Economic and Community Development Department (ECD) requesting the City retake ownership of the site and reimburse Eden $247,605 for incurred project costs.
DISCUSSION
Staff recommend that the City Council adopt a resolution authorizing the City Manager to execute a Third Amendment to the Purchase and Sale Agreement with Eden Housing, Inc. for the former City-owned parcel at 201 Baden Avenue. The PSA contains two noteworthy points for Council consideration: the re-conveyance of the Property back to City ownership, and reimbursing Eden $66,192 for incurred project costs from Fund 823.
As part of a separate resolution, staff recommends Council approve Budget Amendment Number 25.055 to remove the $1,025,000 budget designation in Fund 823 for a predevelopment loan that never materialized and approve the rescission of a Letter of Intent to fund the canceled affordable housing project at 201 Baden Ave using the 2021 LHTF grant award.
Reconveyance of the 201 Baden Property
While the City is not obligated to retake the Property from Eden, the PSA provides legal allowance for the City to do so given the contractual performance obligations Eden has not met by specified deadlines. Staff recommends Council to pursue the re-conveyance as staff have limited confidence the project will proceed given Eden’s disinterest in further pursuing it per their September 2024 letter to ECD.
An additional factor in favor of re-conveyance of the property would be the capacity to re-allocate the $2,362,500 Local Housing Trust Fund (LHTF) grant award the City received from the California Department of Housing and Community Development (HCD) in 2022 currently committed to 201 Baden. Staff has already consulted with HCD and received preliminary support for re-allocating the award to another project that satisfies LHTF program guidelines, with final approval pending the submission of a Council resolution authorizing this change. Staff believe the LHTF program requirements, namely expending funds for eligible uses by August 2027, could be better met with a more viable and timelier affordable project.
Reimbursing Eden Housing
As noted earlier in this report, Eden requested alongside the property re-conveyance to the City a $247,605 reimbursement to Eden or incurred project costs. Given that the 201 Baden senior affordable project was a joint venture between the City and Eden, staff received direction from Council during the closed Council session of March 12, 2025, to negotiate the reimbursement costs with Eden to ensure City taxpayers are only reimbursing Eden for costs related to the purchase and sale of the property and work products of usable benefit to the City. On May 7, 2025, City staff and Eden agreed to a tentative proposal as follows for Council consideration:
Table 1: Proposed City Reimbursement to Eden for Incurred Project Costs
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Building Appraisal |
$3,393 |
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Land Acquisition |
$1,326 |
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Environmental Consulting |
$27,493 |
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Geotech / Soils Report |
$6,000 |
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Permits & Fees - Other |
$6,281 |
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Reversion Estimate |
$15,000 |
|
Recording Costs |
$6,699 |
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Total |
$66,192 |
The $66,192 reimbursement to Eden from Fund 823 has a proposed condition to require the transmission of all environmental/geotechnical reports related to the project, including, but not limited to, the Phase 1 ES, to the City.
FISCAL IMPACT
The fiscal impact of adopting these resolutions includes an expense of $66,192 to be charged to Fund 823 to reimburse Eden Housing for project costs incurred to date. Notwithstanding, adopting these resolutions would also allow the City to pursue the re-allocation of the $2,362,500 LHTF award towards a more viable and timelier project. By retaining the LHTF award to the 201 Baden project, the City risks losing the grant award given the August 2027 encumbrance deadline set by executed grant contract with HCD. At this time, staff do not believe there is a viable path forward for a senior affordable project at 201 Baden Ave within this timeline. Notwithstanding, the City will obtain environmental and geotechnical documents such as a Phase I ESA report should the City wish to pursue future development at the site at a later time.
CONCLUSION
Staff recommends that the City Council adopt two resolutions. The first would authorize the City Manager to execute a Third Amendment to the Purchase and Sale Agreement with Eden Housing for the former City-owned parcel at 201 Baden Avenue and reimburse Eden Housing for predevelopment costs associated with the canceled senior affordable housing project at the site. The second resolution would approve Budget Amendment Number 25.055 to remove a budget designation in Fund 823 for the project and approve the rescission of a Letter of Intent to fund the canceled affordable housing project using the Local Housing Trust Fund (LHTF) grant award from the California Department of Housing and Community Development (HCD).