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Council gives Cornerstone 120 days to renegotiate 410 B Street development agreement
Summary
After staff reported Cornerstone Properties missed post‑closing obligations on the 410 B Street purchase, the council unanimously approved a 120‑day extension to allow staff to renegotiate performance terms; the agreement includes a city option to repurchase for $1.34 million the council may still pursue if renegotiation fails.
Santa Rosa city staff told the council Wednesday they had issued a notice of default to Cornerstone Properties 2 LLC after the developer failed to meet post‑closing obligations tied to the city's 2021 sale of 410 B Street. Council unanimously approved a 120‑day extension to allow staff to negotiate amendments that would shorten construction timelines and secure assurances before entitlements are completed.
Jill Scott, the city's real estate manager, told the council the sale closed in August 2021 under an atypical timeline because the buyer sought to qualify for an Opportunity Zone investment. In exchange for the accelerated sale, the purchase and sale agreement contained post‑closing obligations requiring Cornerstone to obtain entitlements and pull building permits on related parcels within specified timeframes. Scott said Cornerstone asked for and received an 18‑month extension from the city manager; after that second extension expired, staff reported Cornerstone had still not submitted applications and staff issued a notice of default on Aug. 29, 2024.
Scott told council that city staff met again with Cornerstone and its attorneys, who said they could entitle the 410 B Street parcel but were unclear whether they could proceed to construction in a timely manner. Under the contract, the city retains a repurchase (call) right at $1,340,000. Staff recommended exercising the repurchase right if renegotiation failed, but the council instead authorized a 120‑day extension to give staff time to negotiate an amended agreement with clearer financing and construction assurances.
City Attorney's office noted publicly available litigation involving Cornerstone principals that could affect the company’s ability to secure financing for construction. Councilmembers who supported the extension said it gives staff a defined, short window to secure stronger performance guarantees or to return with a recommendation to exercise the city's repurchase option. Councilmember comments reflected a balance between not wanting to push a developer out of a multi‑parcel scheme and avoiding an open‑ended delay: several councilmembers said they would expect evidence of financing, a clear entitlement schedule and firm construction milestones if the developer seeks further extensions.
Council voted unanimously to extend the deadlines by 120 days and asked staff to pursue negotiated amendments that would include tightened timelines and proof‑of‑financing requirements; if talks fail, staff may return to council to exercise the city’s contractual repurchase option or to initiate other remedies under the purchase and sale agreement.
