Sycamore North: Sell It, Change It or Tear It Down?

The City of Hercules is waiting for an offer to buy the mixed-use building from a nonprofit organization that would likely turn all of the project’s 96 residential units into affordable housing.

“The bottom line is we’re in a really tough spot with Sycamore North,” said Municipal Services Director John Stier.

Through its redevelopment agency, Hercules has spent $35 million on the project, which is only about half built. Of the $35 million, nearly $29 million came from a state loan and bond money that will need to be paid back, Stier said. He said Sycamore North will take another $26 to $32 million to complete and is only valued—at the low end—at $25 million once finished. Even if the project is sold, the city will still owe tens of millions on it. The city owns the land Sycamore North sits on, while its redevelopment agency owns the building itself.

Stier said the city is not ready to release the name of the nonprofit interested in buying Sycamore North.

He said even with a potential buyer, the city is is looking at a number of alternatives to deal with the project.

The city could try to rework Sycamore North’s affordable housing element, Stier said. As it stands, 74 of its 96 residential units are intended to be affordable housing. Unless a nonprofit seeking tax credits buys the building, the high number of affordable housing units generally lower the property’s value, Stier said. In fact, the higher the building costs and the lower the valuation, the more desirable a project is to certain nonprofits looking for tax credits.

The city is also looking at selling the residential units individually or even tearing the residential part of the mix down. The building includes 40,000 square feet of retail on the ground level, with residential units above.

Sycamore North sits adjacent to the city’s Bayside neighborhood, which is characterized by its pristine Craftsman replicas and closeness to San Pablo Bay.

Some residents, like former police officer Bill Kelly, have voiced concern about Sycamore North’s affordable housing mix.

“(W)ithin my experience as a police officer, I have encountered many instances where large concentrations of very low income households helped establish a breeding ground for drug trafficking, prostitution and gang-related violence,” Kelly wrote in a to the Hercules City Council, Kelly asked the city to require any future owner of Sycamore North to carefully screen prospective residential tenants for the building.

“Should it be that such a buyer is unwilling to meet these standards, it might well be in the best interest of our citizens to tear down this structure and risk being sued by the state, rather than endangering the public’s safety,” Kelly wrote.

As a result of that letter, the city is “starting to get a ground swell of support over tearing it down,” from residents, said Stier.

Stier said the city intends to vet its options and receive input from residents on Sycamore North soon. A town hall meeting may be  as early as this month.