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File Number: 22-705 however, it quickly became apparent that they would not be able to meet all of the lender’s conditions prior to the required closing date of December 31, 2022. Based on these challenges, the Developer proposed a closing arrangement by which the Developer would make a down payment on the property and the City would provide the developer a ‘takeback’ loan to serve as ‘bridge’ or seller financing for the remaining purchase price until the market stabilizes and the Developer is able to secure long term financing. The City’s staff and legal team consulted with industry experts and advisors to review the proposal, including Debbie Kern with the real estate advisory firm of Keyser Marston and James Fabian with the City’s Financial Advisor, Fieldman Rolapp and Associates. These experts noted that they are seeing developers experience similar challenges in the regional market and provided feedback on proposed terms. Based on their feedback and further research, a counter proposal was provided, and the following proposed takeback loan terms are proposed at this time: ·Down payment by Cal Coast - $5 million - nonrefundable and available to the City upon Close of Escrow ·Takeback Loan by City - $24.88 million - with no cash disbursements required of City o Term - initial term of 6 months, with two 3-month extensions (up to 12 months) o Interest - market rate interest at the current prime rate, beginning at 7.5% adjustable at each extension ·Developer payment obligations are established through a Promissory Note and secured through a Deed of Trust Following evaluation and consultation, staff finds the above terms to be appropriate for the Project and market. The market rate interest will generate additional revenue for the City beyond what would normally be generated on public investments, does not provide any economic subsidy to the Developer, and will motivate the Developer to obtain long-term financing. The Promissory Note and Deed of Trust will provide the City appropriate collateral and security to ensure rights to take back the property if the loan is not paid. If the loan is not issued, or if the loan is not repaid and the property returned to the City, and the property is not sold prior to December 31, 2022, the sale of the Single Family property to the Developer and the Ground Leases would not close this year, and the property would need to be offered through the Surplus Lands Act process. This is a lengthy and formal process defined by statute, which requires that cities offer surplus property to specified development groups, including affordable housing developers, to result in a minimum of 15% - 25% affordable housing. This is not preferred or recommended because the City would have less control during the process, the value of the property would likely diminish, and the length of time before housing is built at the site would likely increase. Several additional changes are also proposed to the timing of requirements in the DDA and PSA in order to reflect the normal timing of such steps in the development process and facilitate the timely closing of the sale and leases. Similar to the Second Amendment to the DDA and PSA, several conditions precedent to the sale and leases are amended to be ‘Post Closing Requirements’, including a final financing plan and insurance. Following the Developer’s discussions with labor representatives, further language is provided related to the Project Labor Agreement requirement. Per their agreement, the Developer will enter into a Labor Relations Development Agreement at this time, with their General Contractors entering into agreed-upon Project Labor Agreements prior to each phase of the Project. Page 3 City of San Leandro Printed on 12/14/2022