Title
Public Hearing to Afford Cal-Coast Companies an Opportunity to be Heard under Section 5.6 of the Disposition and Development Agreement dated July 22, 2020 and Formal Action by Minute Order of the City Council to Terminate the DDA Only with Respect to the Portions of the Property to which the Default Applies
Staffreport
COUNCIL PRIORITY
• Fiscal Sustainability and Transparency
SUMMARY
In accordance with the Disposition and Development Agreement between the City of San Leandro and Cal-Coast Companies dated July 22, 2020, the City Council affords the Developer the opportunity to be heard at a public meeting before taking action by minute order to terminate the DDA.
BACKGROUND
By letters dated January 10, 2025, and March 14, 2025 the City provided Cal Coast Companies notices of default of the disposition and development agreement (DDA) dated July 22, 2020 (and as subsequently amended on March 17, 2021, June 21, 2022, and December 19, 2022).
Developer’s Default of Schedule of Performance
Section 1.3 of the DDA plainly states: "The obligations of the parties must be completed within the times set forth in the Schedule of Performance." The Developer became in default of the Schedule of Performance provided in the DDA as amended on December 19, 2022. The DDA can be accessed here <https://www.sanleandro.org/DocumentCenter/View/10617/Shoreline-DDA-w-Amnds-1-3-Executed-Reduced?bidId=>.
Failure to Complete Post-Commencement Ground Lease Requirements
Post-Commencement Ground Lease Requirements must have been completed prior to the issuance of permits for Site Preparation, and such permits needed to be obtained by December 22, 2024. Exhibit J-3 to the DDA, the "Revised DDA Schedule of Performance (December 2022 Revision)" under Task 3 ("Site Preparation"), requires that "Developer Completes Post-Commencement Ground Lease Requirements for General Contractor, Construction Contract, and Bonds and Security" ... "Prior to the issuance of Permits for Site Preparation for each Developer Western Elements." (Emphasis added.)
Post-Commencement Ground Lease Requirements means the "City's Ground Lease Commencement Conditions Precedent, as set forth in the DDA, which may be satisfied after the Effective Date of the applicable Ground Lease in lieu of being satisfied before Ground Lease Commencement, within the times set forth in the Schedule of Performance, as described in the Second and Third Amendments to the Purchase and Sale Agreement and Disposition and Development Agreement between the City and Developer." The Developer did not, however, obtain the necessary permits to complete the Post-Commencement Ground Lease Requirements in a timely manner. Exhibit J-3 to the DDA, the "Revised DDA Schedule of Performance (December 2022 Revision)" under Task 3 ("Site Preparation"), requires that "Developer obtains all necessary City and other public agency permits for Site Preparation for Developer Western Elements and commences construction" within "24 months following Effective Date of Ground Leases for Developer Hotel, Developer Restaurant, Market and Multifamily Elements." (Emphasis added.)
"Site Preparation" means, as stated in Exhibit J-3, "all site preparation required for development of each of the Developer Project Elements, as well as the Park Promenades and boat launch," and "shall include tree removal, demolition of existing buildings and hardscape improvements, including but not limited to asphalt pavement, concrete sidewalk, curb and gutter, and other improvements, floodplain and sea level rise mitigation, surcharging, geotechnical mitigation, and rough grading in accordance with the Scope of Development, this Schedule of Performance, and Shoreline Responsibility Map (Exhibit R) of the DDA."
Within "24 months" means December 22, 2024, which is 24 months from the "Effective Date of Ground Leases for Developer Hotel, Developer Restaurant, Market and Multifamily Elements."
On March 14, 2025, the City also sent a default notice to Cal-Coast pursuant to Exhibit J-3 to the DDA, the “Revised DDA Schedule of Performance (December 2022 Revision)” under Task 3 (“Site Preparation”), which requires that “Developer and City enter Public Improvement Agreement for Developer Western Elements and other Public Improvements”… “prior to Permit issuance for Site Preparation for Single Family Element or approval of final map for any future subdivision for Single Family Element,” which was December 30, 2024.
Cal-Coast did not, however, prepare or present to the City any Public Improvement Agreement for Developer Western Elements and other Public Improvements in a timely manner as required by the Schedule of Performance.
There is a time of the essence clause in Section 9.12 of the DDA.
In short, Cal Coast Companies, LLC, Inc. breached Section 1.3 of the DDA, by failing to comply with the terms stated above, and is therefore, in default because the Developer did not complete the Post-Commencement Ground Lease Requirements and the Public Improvement Agreement requirement.
Pursuant to Section 5.1 of the DDA, Cal Coast Companies, LLC, Inc. had 90 days to cure otherwise the City of San Leandro would pursue all legal remedies available under the law, subject to the meet and confer requirements under Section 5.2 of the DDA. Cal-Coast and the City met and conferred in accordance with the DDA.
Recommendation
Afford the Developer an opportunity to be heard through a public hearing. After closing the public hearing, pass a minute order that terminates the Disposition and Development Agreement between the City and Cal-Coast Companies dated July 22, 2020, and as subsequently amended on March 17, 2021, June 21, 2022, and December 19, 2022. The termination would be with respect to portions of the Property to which the default applies, in essence the western elements of the Project.
Minute Order: Motion to Terminate the Disposition and Development Agreement between the City and Cal-Coast Companies, dated July 22, 2020, and as subsequently amended on March 17, 2021, June 21, 2022, and December 19, 2022 for failure to cure the grounds for default, first noticed to Developer on or about January 10, 2025, and then on March 14, 2025, and following the parties’ meet and confer efforts under Section 5.2 of the DDA.
PREPARED BY: Richard D. Pio Roda, City Attorney