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Title:
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1016 N. 2nd Street Development Agreement RFP-CED23-SSR - Authorization for Sale and Redevelopment of City-Owned Parcels (Ordinance S-51809) - District 7
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Title
1016 N. 2nd Street Development Agreement RFP-CED23-SSR - Authorization for Sale and Redevelopment of City-Owned Parcels (Ordinance S-51809) - District 7
Description
Request to authorize the City Manager, or his designee, to enter into a disposition and redevelopment agreement, and other agreements as necessary (Agreements), with Pennrose, LLC or its City-approved designee, for the sale and redevelopment of three City-owned parcels totaling 0.4 acres located at 1016 N. 2nd Street (Site). Further request to authorize the City Treasurer to accept funds related to this item.
Report
Summary
The City acquired the Site in 2004 as collateral from a previous development agreement to support a proposed mixed-use project. The project was not constructed and the City retained ownership of the Site. In 2023, City Council authorized the issuance of a Request for Proposals (RFP) for the Site (RFP-CED23-SSR). The RFP sought a mixed-use high-rise development and required any proposals with a residential use to designate at least 20 percent of the proposed units as affordable or workforce housing.
Pennrose, a national development firm with more than 50 years experience delivering mixed-income and affordable housing, submitted the sole proposal received by the City for this RFP. This developer is currently constructing Garfield III, a 60-unit affordable housing community located at 1510 E. Portland Street, which is set to open this year. The proposal for the Site represents a $20 million capital investment and envisions a five-story, 64-unit affordable housing community (Project) that will feature approximately 4,650 gross square feet of commercial space and 32 parking spaces. All residential units within the Project will be restricted to tenant households earning no more than 60 percent of the Area Median Income.
The City and Pennrose (Developer) have negotiated the following business terms:
Within six months of Council authorization, the parties will enter into a Development Agreement (DA).
Developer will have 36 months from the commencement of the DA to secure a building permit to construct the Project.
City will sell the Site to the Developer for $1.5 million.
Ten thousand dollars of the Developer’s $50,000 proposal guarantee will become non-refundable upon Council authorization of these business terms, with the remaining $40,000 becoming non-refundable only after the Developer successfully receives a tax credit award. The proposal guarantee will be applied to the purchase price.
Developer will have 30 months from construction commencement to complete the Project.
Following Project completion, Developer will record a deed restriction on the Site restricting it to affordable housing for a term of 40 years.
The Agreements will include other terms and conditions as needed, and deadlines for performance benchmarks may be modified at the City's discretion.
Procurement Information
In November 2023, the Community and Economic Development Department issued RFP-CED23-SSR for the disposition and redevelopment of the Site. One proposal was received and staff verified the proposal was responsive to the RFP requirements. On February 9, 2024, an award recommendation was posted and staff began negotiations with the Developer.
Financial Impact
The Project will create a one-time sale revenue to the City of $1.5 million, which will be distributed to the Downtown Community Reinvestment Fund. In addition, the construction of the Project is estimated to generate approximately $300,000 in construction sales taxes.
Public Outreach
Staff presented the details of the Project to the following groups:
Hance Park Conservancy - February 6, 2025.
Downtown Voices Coalition - February 8, 2025.
Central City Village Planning Committee - February 10, 2025.
Evans Churchill Community Association - February 12, 2025.
Location
The Site includes three individual parcels (APNs 111-36-029A, -029B and -030) and is collectively referred to as 1016 N. 2nd Street.
Council District: 7
Previous Council Action
This item was recommended for approval by the Economic Development and Housing Subcommittee at the March 26, 2025 meeting by a vote of 4-0.
Department
Responsible Department
This item is submitted by Deputy City Manager John Chan and the Community and Economic Development Department.