DATE: November 19, 2024
TO: Mayor and City Council
FROM: Director of Public Works
SUBJECT
Title
Adopt a Resolution Authorizing the City Manager to Execute a Lease Agreement with Montecito Development LLC, for Property Located at the Hayward Executive Airport
End
RECOMMENDATION
Recommendation
That Council adopts the attached Resolution (Attachment II) authorizing the City Manager to negotiate and execute a lease agreement with Montecito Development LLC, for the development of Airport property at the former California Air National Guard (CANG) site.
End
SUMMARY
The CANG site at the Hayward Executive Airport (Airport) has been vacant since 1980, and it was officially released to the City by the United States Government in 2012. For over ten years, the City has marketed the parcel for aeronautical use, but interest has been minimal due to the Pandemic and current market conditions that favor non-aeronautical use.
Over time, staff has received inquiries about non-aeronautical use of the property, with Montecito Development previously expressing strong interest for a “flex” type of development that included mainly warehouse space, and some retail and office, as well as space for a museum shell building honoring the Tuskegee Airmen. Council declined to consider the proposed development as it did not meet the City’s basic requirements and requested that the property be re-evaluated for the best and highest use. Accordingly, Montecito pivoted away from a warehouse to advanced manufacturing. The City subsequently entered into an Exclusive Negotiating Agreement (ENA) with Montecito Development (Attachment III). The outcome of discussions was a Term Sheet (Attachment IV) outlining basic deal points in a potential lease agreement.
The developer revised the conceptual plans to better align them with the City’s vision for the property and requested to enter into a lease agreement with the following deal points:
• 50-year lease term
• Two phase development plans with Advanced Manufacturing ground lease in Phase 1 (8.776 acres), and a proposed Public Safety Center as Phase 2 (8 acres), if an agreement can be reached.
o Rent calculation for Phase 1, prior to issuance of a Certificate of Occupancy or
Temporary Certificate of Occupancy (TCO).
a. 8.776 acres x 43,560 = 382,283 sq ft.
b. 382,283 x $0.12/sq ft = $45,874 annually.
c. $45,874 divided by 12 = $3,823 monthly fee.
o Rent Calculation Phase 1, after issuance of a Certificate of Occupancy or TCO:
1. Non-aeronautical rate of $1.18 per sq ft, per year.
a. 8.776 acres x 43,560 = 382,283 sq ft.
b. 382,283 x $1.18/sq ft = $451,094 annually.
c. $451,094 divided by 12 = $37,591 monthly fee.
o Rent Calculations Phase 2 before a Certificate of Occupancy or TCO :
1. Non-aeronautical rate of $0.12 per sq ft, per year.
a. 8 acres x 43,560 = 348.480 sq ft.
b. 348,480 sq ft x $0.12/sq ft = $41,818 annually.
c. $41,818 divided by 12 = $3,485 monthly fee.
o Rent calculations Phase 2, after Certificate of Occupancy or TCO:
1. Non-aeronautical rate of $1,18 per sq ft, per year.
a. 8 acres x 43,560 = 348,480 sq ft.
b. 348,480 sq ft x $1.18/sq ft = $411,206 annually.
c. $411,206 divided by 12 = $34,267 monthly fee.
Subject to further negotiation with Montecito Development, and as described in the ENA they request a dollar for dollar offset to fees owed the Airport for all soils investigations, biological field examinations, engineering analysis and the like with the developer providing the City with copies of all technical reports for its use during the entitlement of each phase.
Montecito plans to submit a development application once the lease is fully executed, making it ‘subject to’ reclassification of the entire site to non-aeronautical use by the FAA. Development of the parcel will commence once it is reclassified by the FAA and the zoning designation for the site is changed from Airport Terminal - Airport Commercial, to Airport Terminal - Commercial; both requests will be submitted for review in the near future.
ATTACHMENTS
Attachment I Staff Report
Attachment II Resolution
Attachment III Exclusive Negotiating Agreement
Attachment IV Term Sheet