Hayward, California

The project in Hayward has yet to be defined because the City has sent inconsistent messages about its needs and desires.  We own the 1.4 acre parcel situated between two parcels, both of which are owned by the City of Hayward.  Our property holds the 11-story tower that used to be the home of Hayward’s City Hall until the 1989 Loma Prieta earthquake.  On our southern boundary is the 2.4 acre multi-level garage that holds 700 cars.  On our northern boundary is a 2.1 acre parcel of unimproved land that was once the home of the Hayward Convention Center.  Our property also enjoys the benefit of two parking easements.  The first and more important of the two is the Parking Easement Agreement dated July 31, 1998.  The essence of the agreement provides 50% of the parking in the garage to and for the benefit of the tower.  The practical effect of this easement is that it renders title unmarketable in the event the City wanted to sell this parcel.  The only possible buyer for this parcel would be the owner of the tower–and we would only have an interest in purchasing the garage as part of a global agreement with the City for the redevelopment of the entire 5.9 acre site.   The second easement provides access to the roof of the Safeway grocery store in the shopping center contiguous to the tower and the former convention center, adding approximately another 100 parking spaces for the benefit of the tower.

When we met with the City in the summer of 2014, we understood that the City was eager to see the three separate parcels aggregated into one site and have one spectacular project developed on the 5.9 acre site.  If the City Manager and her team liked the proposal they would fast-track the project through an entitlement process thought to take between 6-12 months.  After a great deal of study and work with architects we made a presentation to the City on April 9, 2015 for a 557 unit class-A apartment community consisting of 5 floors above a podium in class III and V construction.   Our project was very well received and we accelerated our design work in preparation for a more detailed presentation with staff in the planning department.  It was not long after the April 9th presentation that we were greeted with the unwelcome news that some members of the City Council wanted to see a mixed-use project on the site.  They would only approve our residential project so long as it also contained some office space.  Some members of the City Council wanted a hotel, a definite deal-killer.   We were stunned by the commitment to such a position because the City hired three consultants to study and make recommendations for the highest and best use of the 5.9 acre site and the report indicated that our site would not be a good location for the office space or hotel.  An exclusively residential project was recommended and that’s precisely what we proposed.

Subsequent to the April 9th presentation, we have examined every possible iteration of the project and formed the following conclusions:
 

    1. A mixed-use project on the 5.9 acre site is not economically viable and we cannot proceed on this basis;
       
    2. The only residential project that offers economic viability is an attached townhouse development of approximately 112 units.  The class-A apartment community may also work if rents in Hayward continue to climb.  Construction costs have increased more and faster than the rent increases seen in Hayward.  The problem with this observation is that it contains speculation on what the market can bear.  There are no class-A apartment communities in Hayward.  Indeed, virtually no multi-family projects have been built in Hayward in 25 years.  However, directly across the street from our property is the 316 unit Creekwood Apartments.   Creekwood is now getting more than $3.00psf for its studios and 1 bedroom units in a project that is about 30 years old and has little in the way of amenities.
       
    3. Converting the tower to 150 luxury condominiums and ignoring the development potential of the two City parcels may offer the best return.   This option was originally a back-up position in the event the City was determined to see a mixed-use project on the 5.9 acre site.  However, recent market surveys indicate that this may be the best approach.  The entitlement issues would be fewer and easier to satisfy.