Report Prepared by: Frank Quintero, Deputy City Manager
Title
SUBJECT: Approval of Valley Children’s Hospital’s Request to Approve a Modified Second Amendment and Restated Grant Deed
REPORT IN BRIEF:
Considers approving Valley Children’s Hospital’s request to approve a modified Second Amended and Restate Grant Deed with minor changes to the terms related to Covenant to Construct.
RECOMMENDATION
City Council - Adopt a motion:
A. Approving the modified Second Amended and Restated Grant Deed between the City of Merced and Valley Children’s Hospital for 301 E. Yosemite Avenue (Assessor’s Parcel Number 231-040-021); and,
B. Authorizing the City Manager to execute the necessary documents.
Body
ALTERNATIVES
1. Approve, providing direction to staff; or,
2. Provide alternative 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
Charter of the City of Merced, Section 200, et. seq.
CITY COUNCIL PRIORITIES
As adopted in the Fiscal Year 2025-2026 Budget
DISCUSSION
Background
Valley Children’s Hospital (VCH) 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 site is located at 301 E. Yosemite Avenue immediately east of the Yosemite Crossing commercial center (Attachment 1.)
At the time of purchase, VCH proposed to build a pediatric primary and specialty care medical office building on the site that could total up to 40,000 square feet. Now, VCH has engaged a consultant and designer to evaluate Merced’s office market potential with an emphasis on medical services.
The original Purchase and Sale Agreement contained a Covenant to Construct provision which expired on October 5, 2024. An Amended and Restated Grant Deed was approved with a six-month extension by Council on September 16, 2024, with an expiration date of March 16, 2025.
New Extension Request
On March 3, 2025, staff was directed to offer an extension of a modified Second Amended and Restated Grant Deed to VCH through December 31, 2025. The extension was predicated on VCH hiring a consultant and designer to evaluate Merced’s office market for potential tenant mix and occupancy. VCH hired a real estate consultant and architect and are actively evaluating Merced’s office demand and marketing the potential project. At this time, it is uncertain how much of the office space will be occupied by VCH.
Key provisions of the Grant Deed remain the same including the City’s right to re-purchase the site at the original sales price should VCH not meet the Covenant to Construct. The Covenant to Construct is scheduled to expire on December 31, 2025.
The Repurchase Price of the subject site shall be the original price sold minus the Broker’s Commission and minus $1,000 per month for every month during the extension period.
IMPACT ON CITY RESOUCES
No appropriation of funds is needed at this time.
ATTACHMENTS
1. Location Map
2. Proposed Modified Second Amendment and Restated Grant Deed