Downtown Movie Theater Moves to City Control
In a blow to real estate investors, the City Council approved the purchase of 1069 B Street by the HEDC for $8.6 million.
On Monday the City of Hayward took a major step toward stabilizing Downtown by approving an $8,600,000 loan to the City-controlled Hayward Economic Development Corporation (HEDC). Now it can purchase the downtown movie theater building at 1069 B St and the adjacent parking garage, preventing it from falling into the control of private investment and equity firms.
Hayward Economic Development Corporation
Over the summer of 2023, the owners of 1069 B St—1069 B St. LLC—put the property up for auction without informing the City. After being told by a local resident who noticed it listed for auction, City Manager Kelly McAdoo met with the City Council in Closed Session to figure out what to do about it.
They were then hit with news that Century Theaters was thinking of pulling out of the building, as well. After “incentivizing” them to stay for 3 more years with reduced rent, the City started taking more drastic steps.
They developed the Hayward Economic Development Corporation in response, a non-profit public benefit corporation staffed by City Staff and managed by the City Council.
The HEDC was created in response to the potential sale of 1069 B Street. “I had concerns,” City Manager Kelly McAdoo said, “that a speculative investor or shell holding company might purchase this property at auction and not do anything with it and let it go vacant and let the movie theater leave and then we’d be stuck with yet another vacant building downtown.” Given the state of downtown, she was right to be concerned.
HEDC’s whole purpose is to step in to do things that the Free Market won’t, like rent a vacant storefront instead of letting it sit in a portfolio and be used for capital loss carryover—a fun financial trick to turn losses into money. The movie theater has been an obvious candidate due to its prime location and because Cinemark was looking to pull out.
The purchase price is $8,600,000 and will be funded by a loan from the City’s General Fund to the HEDC. 1069 B Street currently makes $634,000 per year—at a low point in theater attendance—and all of that profit will go back to HEDC and allow it to repay the loan with interest.
This is a financial investment in Downtown by our municipal government and I am here for it. It pulls a valuable property from the private market and gives the City—and by extension the community—a say in how its run. But some on Council were wary of the purchase, despite their direct involvement and approval at multiple stages.
Cost Concerns
Some on Council, especially Councilmembers Roche and Andrews, were concerned about the amount of money being spent and how that would affect the City Budget. McAdoo explained that even if, somehow, all of the tenants left and they couldn’t get anyone to move in, having ownership of the building meant that the City has options for what to do—including sell it to get the money back, if needed. It was expected to fetch $10,000,000 during the auction, so it’s possible even a sale could turn a profit for the City.
But that didn’t stop Councilmembers Andrews and Roche from cringing at the expense. Roche, especially, was worried about the cost and whether or not the City would be able to manage the building, even though the City Manager explained that the next step after purchase would be to hire a property manager. She said she was skeptical of the plan and wanted the money to be used elsewhere.
Andrews and Roche both cited the Stack Center and La Vista Park, worrying that they wouldn’t be funded after the purchase. McAdoo explained that they have $30,000,000 and $20,000,000 price tags, respectively, and will still be funded using other money—most likely by extending Measure C.
What both failed to understand is that this purchase is a real estate investment which will pay itself back with money. The Stack Center and La Vista Park are also investments, but the returns are social benefits—important and necessary, but fundamentally different than a real estate purchase. And there are already funding plans for both of those projects that are separate from the General Fund.
What Does This Mean For Me?
This was a pivotal moment in the trajectory of the City of Hayward. If you dream of opening a brick and mortar business in the City, you have a lot to look forward to. “This corner, this site—I think it will change the entire B Street corridor,” Mayor Mark Salinas said, “It will change downtown. And now, we have this opportunity to own this and to really do what every absent building owner has failed to do in the past.”
The City will also have a chance to be a model landlord, essentially shaming the other landlords for how poorly they operate. “Here’s our chance,” he continued. “Here’s the one opportunity we have to establish a a model site. That’s why I brought up cleanliness standards. That’s why I brought up retail standards.”
Starting with 1069 B Street, the HEDC could turn Downtown around. It could use the space in creative ways that serve the community as opposed to the bottom-line of an investment portfolio. And it could use this property to keep the ball rolling on other properties, using it—as Councilmember Syrop confirmed—as collateral for loans to purchase other buildings downtown.
And once the loan is paid back, the City could drop the rent because it is a non-profit entity. And if the landlord gets sloppy or things get bad, the City Council can be held responsible in a way that private people can’t. If you want change you can email them, meet with them, or show up to a Council meeting and demand it. It’s as close as we can get to true public control.
A Rare Split Vote
When it came time to vote, Councilmember Andrews relented and voted in favor of the project. Though she insisted—multiple times—that she was only approving it if the Stack Center and La Vista Park were funded and that there is a balanced budget for the next year. “Can we build a park and can we build the Stack Center and can we do this?” Mayor Salinas asked, “Absolutely.”
But Councilmember Roche would not budge. Despite being involved with every prior step of the project, at the 11th hour she balked at the price tag and voted against the approval. I don’t think I’ll ever understand why.
As the lone vote against it, the funding was approved without her and the City is one step closer to publicly controlled real estate.