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To th~ Honorabl~ ~a¥or'and City Council <br /> From th~ City ~anag~r <br /> <br /> EXECUTIVE SUMMARY <br /> <br />Date <br />February 25, 2002 <br /> <br />Subject <br />Childcare facility On city-owned land in Redwood Shores located adjacent to water <br />tank "A" and the proposed Residential Suites Hotel at the southern terminus to Twin <br />Dolphin Drive. <br /> <br />Recommendation <br />It is recommended that the Council approve the First Amendment to the Ground <br />Lease with Shores Childcare, LLC and authorize the City Manager to execute same. <br /> <br />Executive Summary <br />Shores Childcare, LLC submitted the successful bid for the development of an <br />approximately 10,000 square foot childcare facility with space for approximately 150 <br />children on a 1.2 acre City-owned parcel adjacent to water tank "A". Mr. Max Keech <br />is the managing general partner of Shores Childcare, LLC. The project will <br />additionally include approximately 8,000 square feet of office space above the <br />childcare facility. The office use must be compatible with the childcare facility. <br /> <br />The Ground Lease contains a provision for the City and Mr. Keech to equally share <br />in any rents that exceed $4.50 per square foot per month. This provision was <br />negotiated so that Mr. Keech would not be able earn any extraordinary profits from <br />this project as a result of the City's financing. <br /> <br />The childcare facility will be developed on land owned by the City pursuant to a 50- <br />year Ground Lease. At termination of the lease, ownership of the Leasehold <br />Improvements constructed on the site will revert to the City. <br /> <br />Shores Childcare, LLC had 24 months from April 2001 to remove contingencies and <br />begin construction. Upon completion of construction, the City has agreed to provide <br />long-term financing over a 20-year period for up to $3.2 million of the cost of the <br />facility. The interest rate on this Promissory Note (loan) is a variable rate loan and is <br />calculated by adding 1.50% to the interest the City receives on its investments in the <br />State of California Local Agency Investment Fund (LAIF). LAIF is a variable rate <br />investment vehicle that operates in a manner similar to a money market fund. <br /> <br />Mr. Keech found that he is unable to obtain the rental rates he anticipated would be <br />available and has requested that the City modify the terms upon which the City <br /> <br /> Page 1 of 7 <br /> <br /> <br />