Report Prepared by: Frank Quintero, Deputy City Manager and Director of Economic Development
Title
SUBJECT: Request from Valley Children’s Hospital to Approve a Second Amended and Restated Grant Deed
REPORT IN BRIEF
Valley Children’s Hospital (VCH) is requesting approval of Second Amended and Restated Grant Deed with changes to the terms related to Covenant to Construct and Repurchase Price.
RECOMMENDATION
City Council - Adopt a motion:
A. Approving the Second Amended and Restated Grant Deed between the City of Merced and Valley Children’s Healthcare for 301 E. Yosemite Avenue (Assessor’s Parcel Number 231-040-021); and,
B. Authorizing the City Manager to execute all the necessary documents.
Body
ALTERNATIVES
1. Approve as recommended by staff; or,
2. Provide staff direction; or,
3. Refer to staff for reconsideration as requested by the City Council; or,
4. Defer action until a specific date; or,
5. Deny.
AUTHORITY
Section 200 of the Merced Municipal Code.
CITY COUNCIL PRIORITIES
As adopted in the Fiscal Year 2024-2025 Budget.
DISCUSSION
Background
Valley Children’s Healthcare entered into an agreement to purchase 4.54 acres form the City of Merced (Purchase and Sales Agreement) on February 19, 2019, as approved by the City Council. The subject site was purchased at a price of $2.1-million and the City received the funds. The subject is located at 301 E. Yosemite Avenue immediately east of the Yosemite Crossing commercial center (Attachment 1.)
Subsequently, VCH received Site Plan Review approval on January 16, 2020. During the Site Plan Review meeting, VCH’s design team requested staff to re-evaluate the need and improvements for Children’s Way. City staff assessed vacating Children’s Way allowing for more site plan flexibility. Working on VCH’s request to vacate the Children’s Way right-of-way required coordination with the former owner, The Wathen Group, and the City of Merced. Processing the required right-of-way vacations took longer than anticipated resulting in four Amendments to the Purchase and Sale Agreement. Upon completion of vacating the right-of-way of the former Children’s Way, the escrow closed in October 2022.
Project Description: As a reminder, Valley Children’s Healthcare proposes to develop a pediatric primary and specialty care medical office building on the Former Police Headquarters Site. Valley Children’s pediatricians and pediatric specialists would be the occupants of the medical office building. The first phase of the building may consist of 15,000 to 20,000 square feet. They anticipate that demand for pediatric services in Merced could grow to require a 40,000-square-foot medical office at full build-out.
VCH’s Request: VCH is requesting approval of a Second Amendment and Restated Grant Deed (Attachment 2.) A key objective of any amendment and restatement is to make certain that the restatement supersedes but does not release the prior document. In this case, VCH is asking for the City to consider amending terms in the Grant Deed while maintaining its original provisions. Main terms under consideration for change include the following:
1. Covenant to Construct - Commencement of Construction of the Project shall occur within 5-years after the effective date. Currently, the term is for construction to take place by October 2024.
1(b). Exercise of Repurchase Option: The City shall have 45-days after the expiration of the Pre-Construction Period to exercise its Repurchase Option. Currently, the City has 7-days.
1(c). Repurchase Price - The Repurchase Price of the subject site shall be the original price sold minus the Broker’s Commission and minus $1000.00 per month for every month during the five-year period for a total not to exceed $60,000.00.
The perfect storm of a 2-year pandemic, increasing interest rates, supply chain issues, and increasing construction costs has resulted in delays. VCH resources were severely impacted by the circumstances and is requesting Council to approve the Second Amended and Restated Grant Deed. The Council strongly supported the original transaction, and the project was also supported by the community. The ultimate construction of the VCH facility will enhance healthcare services within the City of Merced.
IMPACT ON CITY RESOUCES
The Second Amendment and Restated Grant Deed does not require any appropriations from the General Fund.
ATTACHMENTS
1. Location Map
2. Proposed Second Amendment and Restated Grant Deed