REPORT TO COUNCIL
SUBJECT
Title
Authorize the City Manager to Execute the First Amendment to the 1178 Sonora Court Disposition and Development Agreement Between the City of Sunnyvale and Mid-Peninsula Baker Park, Inc. to Extend the Close of Escrow Date and Incorporate the Ability to Enter into a Short-Term Lease with MP Sonora Court Associates, L.P. for the City-Owned Property at 1178 Sonora Court into the Disposition and Development Agreement
Report
BACKGROUND
On February 25, 2020 (RTC No. 20-0115), City Council approved a $14 million Housing Mitigation Fund conditional funding award to MidPen Housing ("MidPen") for the construction of a new 176-unit affordable housing development located at 1178 Sonora Court (the "Property"). At the request of Council, the City and MidPen entered into negotiations for the City to purchase the Property from MidPen and enter into a Disposition and Development Agreement ("DDA") for the project. On May 19, 2020 (RTC No. 20-0500), City Council approved a Disposition and Development Agreement and Purchase and Sale Agreement ("PSA") with Mid-Peninsula Baker Park, Inc., a subsidiary of MidPen, for the affordable housing project.
Pursuant to the DDA and PSA, the City provided a predevelopment loan of $450,000 and purchased the Property from MidPen for $13.55 million. The DDA requires that the City lease the Property to MidPen through a 65-year long-term ground lease for the duration of the project. Pursuant to the DDA, the long-term ground lease is required to begin at close of escrow, which shall occur no later than June 30, 2021. This date was chosen to coincide with the lease termination of the former industrial tenant on the property, Prototek, who had preexisting plans to relocate their office.
In early June of 2021, MidPen contacted City staff with concerns about unexpectedly high possessory interest (PI) taxes applicable to long-term leases that would not be applied to short-term leases. Based on conversations with the Offi...
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