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EXCLUSIVE NEGOTIATING RIGHTS AGREEMENT FOR THE OPEN WINDOW PROJECT
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RECOMMENDATION
City of Stockton
It is recommended the City Council adopt a resolution approving a 365-day Exclusive Negotiating Rights Agreement between the City of Stockton and Open Window Project, LLC, for the proposed Open Window mixed-use project in Downtown Stockton.
Parking Authority
It is recommended the Parking Authority of the City of Stockton adopt a resolution approving a 365-day Exclusive Negotiating Rights Agreement between the Parking Authority and Open Window Project, LLC, for the proposed Open Window mixed-use project in Downtown Stockton.
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Summary
Revitalizing Downtown Stockton has been identified as a priority by the City Council. Presently, the City of Stockton is reviewing an application for a master development plan of a 15 square-block area in downtown Stockton. While the majority of the property is privately-owned, the plan area also includes various City-owned and Parking Authority-owned property in Downtown Stockton. Resolutions are being presented to both the City Council and the Parking Authority to enter into an Exclusive Negotiating Rights Agreement (attached as Exhibit 1 to both resolutions) with Open Window Project, LLC, (Developer) for the purpose of potentially negotiating a market rate Purchase Option and Development Agreement for a proposed mixed-use, infill development project in Downtown Stockton.
DISCUSSION
Background
The Open Window Project is a proposed infill development project consisting of a 15 square-block area in Downtown Stockton bound by Miner Avenue to the north, Main Street to the south, Aurora Street to the east, and Sutter Street to the west. The proposed project includes approximately 1,400 residential dwelling units, as well as 200,000 s.f. of retail and flex space, 90,000 s.f. of commercial office space, and 110,000 s.f. of industrial/art warehouse and studio space. In total, the project would produce a maximum of 400,000 s.f. of non-residential floor area of which approximately 250,000 s.f. would be net new non-residential space.
Open Window Project is a limited liability company whose majority decision making authority lies with Ten|Space Development, which is a real estate development firm specializing in urban infill and adaptive reuse. Ten|Space is already an investor in downtown Stockton improvement projects such as: the Newberry building, the Campus daycare facility, Papa Urb’s Grill, the Huddle, and is a partner in the proposed Grand View Village project.
Of the roughly 65 parcels included within the project area, over 55 are privately held, three are owned by the City of Stockton, and five are owned by the Parking Authority of the City of Stockton (Attachment A - Project Site Map and Attachment B - Aerial Photo). In May 2014, the City issued a Request for Information (RFI) seeking qualified candidates for adaptive reuse of the three City-owned properties which resulted in two responses, neither of which met the specified criteria included in the RFI. There has been very little interest in market rate based transactions for these properties prior to the Open Window Project’s proposal.
The three City-owned parcels are described below:
• 149-170-08 - Commercial Hotel
• 149-170-09 - Main Hotel
• 149-170-12 - St. Leo Hotel
The five Parking Authority-owned parcels include:
• 139-250-26 - Paved Lot
• 149-170-25 - Paved Lot
• 149-180-05 - Paved Lot
• 149-180-17 - Paved Lot
• 149-180-21 - Dirt Lot
Although these properties comprise only eight out of the approximately 65 parcels included within the master development plan, they are an important component as they are situated within the plan area. The Open Window Project already controls over 40 of the parcels in the footprint. These parcels could be combined with the City and Parking Authority parcels to maximize the ability to construct new or rehab existing residential and commercial structures. Therefore staff is requesting to move forward with an exclusive negotiating rights agreement with the Developer.
Present Situation
The proposed mixed-use, infill development project aligns with the City Council’s goal of revitalizing Downtown Stockton. As a result, staff has prepared an Exclusive Negotiating Rights Agreement (Agreement) for the subject City and Parking Authority-owned property that would be in effect for 365 days.
An Exclusive Negotiating Rights Agreement allows City staff to negotiate specific terms associated with a Purchase Option and Development Agreement, including the acquisition of City and Parking Authority-owned property. During the term of the Agreement, the City is required to refrain from consideration of proposals from other developers for the subject parcels and agrees not to solicit proposals from others regarding acquisition and/or development of the subject properties.
This Agreement will allow the Developer the given timeframe for conducting due diligence and for the City/Parking Authority and Developer to further negotiate a market rate Purchase Option and Development Agreement. This project has the potential to serve several key Downtown Stockton development objectives, as well as supporting recommendations included in the 2012 Urban Land Institute report and the Economic Development Strategic Plan recently adopted by Council last February, namely the attraction of private investment in the downtown core, generation of jobs through business expansion to the area, attraction of new residents to downtown, and quality urban design.
It’s important to note that this Agreement merely prevents the City from negotiating the sale of the subject properties with anyone else and is not a binding agreement to actually sell the property. It allows time for the City and Developer to conduct their due diligence and will expire one year from the date of execution. Staff will return to the City Council for consideration of a Purchase Option and Development Agreement should negotiations prove successful.
It is recommended that an Exclusive Negotiating Rights Agreement be approved between the City of Stockton, Parking Authority, and Open Window Project, LLC, to begin negotiations on the specific property for the possible development of new residential and commercial space in Downtown Stockton.
FINANCIAL SUMMARY
There is no fiscal impact associated with the execution of the Exclusive Negotiating Rights Agreement with Open Window Project, LLC.
Attachment A - Project Site Map
Attachment B - Aerial Photo