DAVIS, CA – Tonight, the Davis City Council will consider approval of a Purchase and Sale Agreement to sell the city-owned property at 1021 Olive Drive to HK3 OZ Fund 1 LLC for $570,000.
The agreement, part of the council’s consent agenda, includes binding post-sale development conditions and is projected to advance the city’s affordable housing goals while also contributing to the General Fund and Housing Trust Fund.
The parcel, located between Olive Drive and the Union Pacific rail line, was designated as surplus in April 2022 following a City Council resolution. Since then, the city has pursued disposition of the land in accordance with the Surplus Land Act, California Government Code Section 54221.
The site was identified in the city’s 6th Cycle Housing Element as a high-priority location for infill development to help meet state-mandated Regional Housing Needs Allocation (RHNA) targets.
Following rezoning actions in 2023, the property’s designation was changed from Commercial Service to High-Density Mixed Use (PD-05-22). This zoning change enabled the city to increase the appraised value of the land, which was initially valued at $480,000 in 2022 and reassessed at $570,000 in April 2025.
The sale agreement requires the buyer, HK3 OZ Fund 1 LLC, to comply with multiple post-escrow obligations. These include:
- Securing entitlements for a residential or mixed-use project (with at least two-thirds residential by square footage) within 36 months of closing;
- Submitting a good-faith building permit application within 60 months of closing;
- Constructing a project consisting of approximately 88 units, including no fewer than 14 deed-restricted affordable units—7 for very-low-income households and 7 for low-income households.
Should the buyer fail to meet these deadlines, the city retains an “Option to Repurchase” the property at the original sale price of $570,000.
The site is planned for an “affordable-by-design” project primarily composed of studio and one-bedroom units. In addition to the 14 required affordable units, the remaining 74 units are anticipated to be naturally affordable to moderate-income households due to their size and market context. This would fulfill roughly 22% of the city’s moderate-income RHNA goal.
Proceeds from the sale are to be divided evenly between the General Fund and the Housing Trust Fund. Specifically, $285,000 will be allocated to each. The City Council will also consider a budget resolution authorizing the appropriation of $45,000 from the General Fund portion for Economic Development professional services during FY 2024–25. Future appropriations of $16,000 and $39,000 are planned in the 2025–26 and 2026–27 budget cycles, respectively, along with $185,000 for an Economic Development Revolving Loan Program tied to a separate agenda item involving Inventopia.
The transaction will eliminate city maintenance obligations and return the parcel to the property tax rolls. Based on the $570,000 sale price, the city anticipates an immediate annual increase of approximately $1,300 in property tax revenue. When the proposed development is completed, and if it is assessed at an estimated value of $25 million, annual city property tax revenues could rise to approximately $57,000.
The sale follows a multi-year effort to bring the city’s Housing Element into compliance with state housing law. After the California Department of Housing and Community Development (HCD) rejected the city’s original 2021 Housing Element, a revised version was adopted in January 2023. The 1021 Olive Drive parcel was one of several key sites identified for rezoning to meet lower-income RHNA targets. Subsequent environmental review, including Negative Declarations #04-21 and #03-21, concluded there would be no new significant impacts from development on the site.
A Letter of Interest was submitted by HK3 OZ Fund 1 LLC in November 2024. While a second offer was later received from Palm Communities, a for-profit affordable housing developer, the City Council ultimately chose to proceed with HK3 after closed-session analysis of both proposals.
Escrow is expected to close by May 30, 2025, following City Council authorization. The sale is not anticipated to require further CEQA review, as the use, scale, and density were already evaluated in the city’s previously adopted environmental documents.
The 1021 Olive Drive agreement represents a convergence of state-mandated housing obligations, local fiscal needs, and the city’s long-term economic development objectives. With RHNA deadlines approaching in 2029 and housing production still lagging across much of California, staff view the project as a key opportunity to advance multiple policy goals with no direct subsidy from city resources.
I question the validity of this action. I think the City should put the site up for bid for applications for 100% affordable housing.
The city did that with the site which it owned that is now occupied by Creekside Commons. There were five bids that came in from non-profit and for profit entities.
Thee would be similar interest in the Olive Drive site.
The City Council should withdraw the offer and proceed immediately to a 100% affordable housing option.
“The sale follows a multi-year effort to bring the city’s Housing Element into compliance with state housing law.” At this rate we’ll be compliant . . . when we stop trying.
What a display by the development team at the Council meeting last night. They were so thrilled to be making all this money they just couldn’t wait to tell everyone how much they appreciated it :-|