OVERSIGHT BOARD AGENDA: 11/9/17 ITEM: 7.1

SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY OF THE CITY OF SAN JOSE

MEMORANDUM TO: OVERSIGHT BOARD FROM: RICHARD A. KEIT MANAGING DIRECTOR

SUBJECT: DATE: SEE BELOW NOVEMBER 3, 2017

APPROVED: DATE: rixDSsL. uUjVY

SUBJECT: Quarterly Update Report on Successor Agency Obligations in Disposition and Development Agreements and Covenants, Conditions & Restrictions In-Force.

BACKGROUND

On November 10, 2016, Successor Agency staff presented a status report in response to the Oversight Board’s request for a list of open Disposition and Development Agreements (DDAs). The report listed DDAs; Covenants, Conditions, and Restrictions (CCRs); and other types of loans and agreements affecting real property, which were still in effect. It included the contracting entity, project name and current term of the agreements. After presentation and discussion of the status report, the Oversight Board directed staff to return with a summary report on the nature of the obligations identified in the agreements.

The Oversight Board also requested quarterly updates to the list of active agreements. Therefore, on February 9, 2017, a second status report was prepared and presented to the Oversight Board.

ANALYSIS

This third Status Report regarding Successor Agency Obligations summarizes in Attachments A and B the key provisions for each agreement. Although the provisions vary for each agreement, common covenants include obligations related to the operation, maintenance and use of the property, non-discrimination, compliance with laws, Agency’s rights to access the property, and the Agency’s right to inspect and audit the owner’s books. OVERSIGHT BOARD November 3, 2017 Subject: Quarterly Update Report - Obligations in DDAs and CC&Rs Page 2

Attachment A includes Disposition and Development Agreements (DDAs) that are currently, in force. Included in Attachment A is the term of the DDA, its key provisions and lists the Successor Agency as the responsible party for administrative oversight.

Attachment B includes two added CCRs. As highlighted, No. 42, pertains to the office building located at 303 Almaden Boulevard with BP 303 Almaden Associates LLC; and No. 43, was discovered in connection with the proposed expansion of the Adobe Headquarters in the downtown. The Declaration of Restrictions was recorded against certain properties in the Park Center Project Area in 1967. The recorded Declaration of Restrictions was amended in 1969 and remains in full force and effect.

Successor Agency staff continue to receive copies of audited financial statements and other required documentation from developers or property owners to ensure compliance with the terms of the agreement. This information is also provided to the auditors in conjunction with the Successor Agency’s annual fiscal audit.

Despite the complexity of these agreements and the number of open DDAs, CCRs and other active agreements, Successor Agency staff has attempted to allocate a reasonable amount of time to monitor these agreements and to follow-up with the key individuals of the contracting entity when required documentation has not been submitted or material obligations have not been completed. With a pressing need to compile and analyze data for the refunding of Successor Agency bonds, during the last quarter, less time has been allotted to this effort. Once the bond refunding is complete, staff will increase the time to monitor the DDAs and CC&Rs.

Although, the timeframe may be reduced depending on Successor Agency workload and staffing as the wind-down continues; Successor Agency staff will continue to manage and monitor most DDAs and active loans that have termination dates within two years and CCRs that have on-going financial obligations of the contracting entity. The City Administration will ultimately decide when to transfer oversight of each DDA and CCR to City staff and more specifically the appropriate department to receive the transfer based on the type of agreement, loan or CC&R and the ability of that department to take on added contract management responsibilities.

FISCAL IMPACT

The financial obligations of the former Redevelopment Agency have been completed for the agreements listed on Attachment B. Furthermore, the corresponding CCRs recorded against the property have no further financial assistance or financial interest requirements of the Successor Agency or City of San Jose. OVERSIGHT BOARD November 3, 2017 Subject: Quarterly Update Report - Obligations in DDAs and CC&Rs Page 3

EVALUATION AND FOLLOW-UP

Staff will continue to update the Oversight Board on a quarterly basis regarding the status of the DDAs, loans and OCRs. Future reports will contain additional information regarding transferring oversight of the agreements, loans and CC&Rs as the City Administration determines the timing of transfers based on departmental workload.

/s/ RICHARD A. KEIT Managing Director

Enel.

For more information, contact Richard Keit, Managing Director, Successor Agency, at 408-795-1849. Attachment A

Successor Agency to the Redevelopment Agency of the City of San Jose Disposition and Development Agreements

Contracting Agreement Key Responsible Entity Term Provisions Department Comments

1 North San Pedro Townhomes, LLC 10/10/2013-Fifty-five years after Certificate of Occupancy Covenants & Restrictions Successor Agency First Community Housing - Audit Rights San Pedro Life I, LLC - City's Inclusionary Housing Policy Blocks bounded by Highway 87 to the west, - Affordable Housing West Saint James Street to the south, North - Park Maintenance Obligations Market Street to the east and Union Pacific - Insurance Requirements Railroad right of way to the north (North San Pedro Residential Project)

1A State of California Department of Housing and 9/13/2011-6/30/2025 Covenants & Restrictions Successor Agency Community Development - Market Rate Units subject to Market Rate Restrictive Covenants - Department Review and Inspection

2 Green Valley Corporation dba Barry 2/24/2009-1/1/2019 If Developer fails to commence construction within twenty- Successor Agency Swenson Builders four (24) months after January 1, 2016, Successor Agency Park View Towers Project shall have the right to repurchase the Property. (formerly First Church of Christ Scientist Project) Agency Parking Rights - 138 space surface parking lot for public parking use Covenants & Restrictions - Developer shall submit to Agency CCRs at least thirty (30) days prior to delivery to the California Department of Real Estate pursuant to state law - Use of the Site - Audit Rights - Insurance Requirements

3 BP Almaden Associates, LLC successor to 6/22/2010-6/22/2070 Contingent upon Developer submitting an application Successor Agency Boston Properties Limited Partnership for a Building Permit for Phase I before or on June 22, 2019 (Plaza at Almaden Office Complex) Covenants & Restrictions - Parking Use and Operations - Office and Retail Space Leasing Obligations - Maintenance Obligations - Insurance Requirements

Page 1 of 1 ATTACHMENT B Successor Agency to the Redevelopment Agency of the City of San Jose Covenants, Conditions and Restrictions (CCRs) and Other Agreements

Contracting Agreement Key Category Entity Term Provisions Comments Owner Participation Agreements (OPA) 1 Enterprise Trust and Investment Company 6/3/2008-6/3/2018 - Audit Rights 5272-5320 Monterey Highway - Operation and Maintenance (Parking Lot Renovations at Edenvale Shopping Center)

2 The Farmers Union Partnership 8/5/1998-8/5/2018 - Audit Rights 151 West Santa Clara Street - Affordability Use (Vendome Apartments Rehab Project) - Operation and Maintenance

3 Green Valley Enterprises 1/14/1999-1/14/2019 - Audit Rights SARA staff manages and collects 84 South First Street - HUD Section 108 Loan Program Requirements building owner's loan payments. (HUD 108 Loan Paid in Full) Building Owner's loan paid in full on 10/24/2017. (Security Building Rehabilitation Project) - Operation and Maintenance - Use/Leasing Obligations of Office/Retail Space

4 San Jose Silicon Valley Chamber of Commerce 12/4/2009-12/4/2019 - Operation and Maintenance 101 West Santa Clara Street - Insurance Requirements (Building Improvements Project)

5 Richard P. Berg & Made S. Berg, Co-Trustees 7/6/2005-7/06/2020 - Audit Rights Adam W. Berg and Ana D. Berg (Owner) - Operation and Maintenance 439 South First Street (Wright-Curtner Building Rehabilitation Project)

6 John Kimand Kayko Kim and Katsuyoshi Murano 1/18/2006-1/18/2021 - Audit Rights & Ann Fumi Murano, Co-Trustees of the Murano - Operation and Maintenance Family Trust 1998 1167 South King Road (Retail Shopping Center Improvements)

Page 1 of 8 ATTACHMENT B Successor Agency to the Redevelopment Agency of the City of San Jose Covenants, Conditions and Restrictions (CCRs) and Other Agreements

Contracting Agreement Key Category Entity Term Provisions Comments

7 Letitia Building Limited Partnership 3/7/2000-3/7/2025 - Audit Rights SARA staff manages, collects and 66-72 South First Street - Operation and Maintenance analyzes Annual P&L Statements (Letitia Building Rehabilitation Project) and tax return documentation submitted by developer; submits documentation to auditor annually.

8 Center for Training and Careers, Inc. 5/5/2009-5/5/2021 - Use and Operation of Improvements 749 Story Road - Maintenance of Project (Building Rehabilitation Project) - Insurance Requirements

9 Story & King Properties, LLC 1/31/2007-1/31/2022 - Audit Rights 996 South King Road - Operation and Maintenance (Building Improvements)

10 Howard and Jean Spinner 7/23/2007-7/23/2022 - Audit Rights 2045-2059 Woodard Road - Operation and Maintenance (Parking Lot Improvements)

11 Salvatore Campagna, Lena Campagna and 7/23/2007-7/23/2022 - Audit Rights Judith Lopina - Operation and Maintenance 2035-2041 Woodard Road (Parking Lot Improvements)

12 Genesis Group 7/28/2003-7/28/2023 - Audit Rights SARA staff manages, collects and 90 & 98 South Second Street - Agency approval of all lease agreements analyzes Annual P&L Statements; (Foto Mexico/Knights of Pythias Buildings - Operation and Maintenance submits documentation to auditor Development Project) annually. SARA staff reviews and approves tenant lease agreements.

Page 2 of 8 ATTACHMENT B Successor Agency to the Redevelopment Agency of the City of San Jose Covenants, Conditions and Restrictions (CCRs) and Other Agreements

Contracting Agreement Key Category Entity Term Provisions Comments

13 Farmers Union Partnership 9/14/2005-9/14/2025 - Audit Rights SARA staff manages and collects 161 West Santa Clara Street - HUD Section 108 Loan Program Requirements building owner's loan payments. (Masson Building Rehabilitation Project) - Operation and Maintenance SARA staff expects the loan to be paid in - Use/Leasing Obligations of Office/Retail Space full prior to 2019.

14 Design Acquisition Corporation 12/1/2008-12/1/2028 - Owner Covenants (BCA Architects Use) 505 South Market Street - O&M Covenants (Design Acquisition) (Building Rehabilitation - Relocate BCA Architects' Corporate Headquarters to Downtown San Jose)

15 North 4th Street LLC 5/13/2009-5/13/2029 - Audit Rights 1441 N. 4th Street - Operation and Maintenance (Bowling Alley Façade Improvements)

16 Alameda & Stockton LLC 6/5/2007-12/9/2029 - Property shall be occupied or operated as a 777 The Alameda "Whole Foods Market" or "Specialty Grocery Store" (Grocery Store Development Project - Whole Foods Market) for 15 years.

17 Isis Properties, LLC (Dr. Eu) 4/15/2005-4/15/2025 - Audit Rights SARA staff manages and collects 35 and 49 E. Santa Clara Street - HUD Section 108 Loan Program Requirements building owner's loan payments; (Bassler & Haynes and Beach Buildings Rehabilitation Project) - Operation and Maintenance monitors building owner's compliance with - Use/Leasing Obligations of Retail Space maintenance and lease requirements.

18 Fountain Alley, LLC 2/8/2008-2/8/2038 - Audit Rights 28-40 East Santa Clara Street, 27-33 Fountain - Operation and Maintenance Alley, and 37 Fountain Alley (Barber Buildings URM Project)

19 Black Sea Gallery Development LLC 5/25/2005-6/1/2035 - Use of Retail Space SARA staff monitoring retail space use 27 South First Street - Maintenance of Site since the departure of Ross Dress for Less. (Facilitate Retail Use - Ross Dress for Less) - Insurance Requirements

Page 3 of 8 ATTACHMENT B Successor Agency to the Redevelopment Agency of the City of San Jose Covenants, Conditions and Restrictions (CCRs) and Other Agreements

Contracting Agreement Key Category Entity Term Provisions Comments

20 East Side Union High School District of Santa Clara County 6/11/2002-6/11/2042 - Public Use Covenants: Parking Lot at the property James Lick High School shall be available at no cost for public use during 57 North White Road non-school hours (Public Parking Lot Improvements) - Maintenance Obligations - Inspection by Agency

21 San Jose Unified School District of Santa Clara County 5/15/2000-5/15/2040 - Public Use Covenants: Parking Lot at the property Hester Elementary School shall be available at no cost for public use during 1460 The Alameda non-school hours (Public Parking Lot Improvements) - Maintenance Obligations - Inspection by Agency

Disposition and Development Agreements (DDAs) 22 Imwalle Properties, Inc. 2/27/2009-2/27/2024 - Audit Rights 1696 Story Road & 1101 South King Road - Operation and Maintenance (Story/King Retail Development)

23 SJ Real Estate Partners, LLC 8/20/2009-8/20/2029 - Use and Maintenance of Retail Space -Successor in interest to 360 Residences, LLC - Property Based Improvement District Assessments 360 S. Market Street - Conversion of project to rental or for-sale (360 Residences Project) - Insurance Requirements

24 Wilcox Block, LLC 12/15/2008-12/15/2043 - Audit Rights 93-99 South First Street - Operation and Maintenance 17-31 West San Fernando Street - Insurance Requirements (Rehab of former Crescent Jewelers Building)

Page 4 of 8 ATTACHMENT B Successor Agency to the Redevelopment Agency of the City of San Jose Covenants, Conditions and Restrictions (CCRs) and Other Agreements

Contracting Agreement Key Category Entity Term Provisions Comments ` 25 Green Valley Corporation dba Barry Swenson Builders 12/17/2002-4/17/2054 - Audit Rights 925 The Alameda - 45-year Affordability Restrictions (The Lofts @ The Alameda) - Use of the Site - Sale Prices and Income Restrictions - Insurance Requirements

26 Peralta-North San Pedro LLC 12/24/2008-12/24/2058 - Use/Leasing Obligations of Retail Space 73-75 North San Pedro Street - Easement Maintenance & Use (Storm Property Historic Rehabilitation) - Operation and Maintenance - Insurance Requirements

27 F.C. Fairmont, LLC 12/30/2003-11/15/2063 - Use Standards 50 West San Fernando Street - Leasing Obligations (Fairmont Office Building) - Operations and Maintenance - Insurance Requirements - Covenant of Availability of Block 1 Plaza - Covenant of Availability of Block 1 Office Use Parking

28 Chardonnay Associates II 6/23/2011-7/30/2064 - Block 5 Retail Use Standards 115 East San Carlos Street - Operation and Maintenance (Block 5 Garage)

29 Chardonnay Associates II 6/23/2011-7/30/2064 - Block 5 Retail Use Standards 200 South Third Street - Operation and Maintenance (Block 5 Retail)

Page 5 of 8 ATTACHMENT B Successor Agency to the Redevelopment Agency of the City of San Jose Covenants, Conditions and Restrictions (CCRs) and Other Agreements

Contracting Agreement Key Category Entity Term Provisions Comments 30 Block 3 Development Partners, LLC 9/29/2005-Perpetuity Revenue Participation 88 East San Fernando Street - 30% net proceeds from condo sales (The 88 Mixed-Use Residential/Retail Project) - 60% annual net income from retail Covenants & Restrictions - Audit Rights - Use and Maintenance Obligations - Leasing Obligations of Retail Space - Easements - Insurance Requirements DDA - Historic Houses 31 Silicon Valley Habitat for Humanity 10/30/2007-10/30/2017 - Maintenance Obligations SARA staff manages and collects annual 600 East Julian Street - Owner occupied for ten (10) years from initial sworn statements for fiscal year-end audit. occupancy date to amortize loan each year

32 Christopher & Michelle McSorley 12/11/2007-12/11/2017 - Maintenance Obligations SARA staff manages and collects annual 465 N. 4th Street - Owner occupied for ten (10) years from initial sworn statements for fiscal year-end audit. occupancy date to amortize loan each year

33 Krista & John Salas 3/25/2008-3/25/2018 - Maintenance Obligations SARA staff manages and collects annual 635 East St. James Street - Owner occupied for ten (10) years from initial sworn statements for fiscal year-end audit. occupancy date to amortize loan each year

34 Spartan Shops 3/2/2001-1/1/2033 - Rental only to San Jose State University Faculty SARA staff manages and collects annual 382, 386, 390, 394 North 4th Street and Staff for 30 years following Initial Occupancy Date sworn statements for fiscal year-end audit. - Maintenance Obligations

Childcare - Smart Start Centers 35 MACSA 5/5/2009-5/5/2024 - Audit Rights 660 Sinclair Drive - Compliance with California Education Code and the California Code of Regulations - Operation and Maintenance - Insurance Requirements

Page 6 of 8 ATTACHMENT B Successor Agency to the Redevelopment Agency of the City of San Jose Covenants, Conditions and Restrictions (CCRs) and Other Agreements

Contracting Agreement Key Category Entity Term Provisions Comments

36 Empire California Investment Child 10/16/2009-10/16/2024 - Audit Rights Care Center LLC - Compliance with California Education Code and 499 North 11th Street the California Code of Regulations - Operation and Maintenance - Insurance Requirements

37 San Jose Conservation Corps and 12/4/2009-12/4/2029 - Audit Rights Charter School - Compliance with California Education Code and 1560 Berger Drive the California Code of Regulations - Operation and Maintenance - Insurance Requirements

38 SJB Child Development Center, Inc. 12/4/2009-12/4/2029 - Audit Rights 1945 Terilyn Avenue - Compliance with California Education Code and the California Code of Regulations - Operation and Maintenance - Insurance Requirements

39 San Jose Day Nursery 9/19/2006-9/19/2041 - Audit Rights 33 North Eighth Street - Compliance with California Education Code and the California Code of Regulations - Operation and Maintenance - Insurance Requirements

Building Rehab 40 Swenson-French No. 1., LLC, 87 North San 3/5/2010-3/5/2030 - Audit Rights SARA staff manages and collects Pedro Partners, LLC, Urban Markets, LLC - Operation and Maintenance building owner's loan payments. 87 North San Pedro Street (El Dorado Building) - Insurance Requirements 196 West St. John Street (Earthquakes Building)

Page 7 of 8 ATTACHMENT B Successor Agency to the Redevelopment Agency of the City of San Jose Covenants, Conditions and Restrictions (CCRs) and Other Agreements

Contracting Agreement Key Category Entity Term Provisions Comments Joint Use 41 ACE Charter School 8/1/2012-08/1/2022 - Joint Use Agreement 625 S. Sunset Avenue - Operation and Maintenance - Insurance Requirements

Other 42 BP 303 Almaden Associates LLC 6/30/2006-Termination of Covenants & Restrictions 303 Almaden Boulevard CCR occurs when building - Operation of Public Plaza is substantially damaged - Use and Maintenance Obligations or destroyed; taken by - Maintenance and Operation of Public Parking Facility eminent domain; or change - Easements of use

43 KBSIII Almaden Financial Plaza LLC 2/21/1967 - Perpetuity Covenants & Restrictions 1 Almaden Boulevard - Prohibited Uses - Review of Plans - Maintenance Obligations

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