AGENDA ITEM
TO: HONORABLE MAYOR
AND MEMBERS OF THE CITY COUNCIL
FROM: CARLO TOMAINO
CITY MANAGER
BY: GREG KAPOVICH
COMMUNITY DEVELOPMENT DIRECTOR
SUBJECT: EXCLUSIVE NEGOTIATION AGREEMENT WITH RED MOUNTAIN GROUP
title
summary
Summary:
Red Mountain Group, based in Santa Ana, California, is a private real estate investment and development firm with a national portfolio of over 5 million square feet. The developer specializes in revitalizing underutilized commercial and retail properties and maintains a strong track record of working with cities to support long-term economic development and commercial corridor reinvestment.
On June 24, 2025, the developer entered into a 240-day Exclusive Negotiation Agreement (ENA) with the City to negotiate the purchase and development of a 1.98-acre City-owned site on Cherry Avenue between Willow Street and 27th Street. The executed ENA expired on March 29, 2026. During the 240-day agreement, the developer performed both a void analysis and an economic market analysis to determine the highest and best use for the site. These analyses contributed to a preliminary design that includes an approximate 1,000 square-foot drive-through restaurant, a 6,000-7,200 square-foot multi-tenant retail building, and a surface parking lot that dedicates a portion of its space to 23 electric vehicle charging stations. The developer also evaluated existing environmental conditions and engaged potential tenants.
Staff collaborated with Red Mountain Group on a proposed second ENA to provide the additional time to negotiate a Disposition and Development Agreement for the purchase and sale of the 1.98-acre site. The proposed second ENA includes an initial 120 calendar day term and may be extended upon mutual agreement for two additional 60-day periods, if needed. Staff recommends that the City Council approve the proposed ENA, substantially in the form presented, to initiate DDA negotiations with Red Mountain Group for the potential development of the Cherry Property sites.
Strategic Plan Goal(s):
Goal No. 1 Financial Stability: Ensure the City’s long-term financial stability and resilience.
Goal No. 3 Economic Development: Improve the local economy, support local businesses, and create a vibrant downtown core.
Goal No. 4 Infrastructure: Maintain and Improve the City’s physical infrastructure, waste system, and recreational spaces.
recommendation
Recommendation:
Staff recommends that the City Council approve the Exclusive Negotiation Agreement (ENA) between the City of Signal Hill and Red Mountain Group for the development of the Cherry Site. The site, located on Cherry Avenue between Willow Street and 27th Street, comprises multiple parcels totaling approximately 1.98 acres. Staff also recommends that the Council authorize the City Manager to execute the ENA.
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Fiscal Impact:
The recommended action carries no fiscal impact. The property developer, Red Mountain Group, funds all costs associated with work during the proposed exclusive negotiation period.
Background:
The Signal Hill Redevelopment Agency acquired various properties between 2010 and 2011. The State of California dissolved all redevelopment agencies through ABX1 26 and ABX1 27. Following the dissolution, the City of Signal Hill became the Successor Agency for these properties. In 2012, AB 1484 established new procedures for disposing of and transferring former redevelopment properties; this included a requirement for the Successor Agency, the local Oversight Board, and the California Department of Finance (DOF) to approve a Long-Range Property Management Plan (LRPMP). On February 20, 2015, the DOF approved the LRPMP, which authorized the Agency to transfer the Cherry properties to the City for future development.
The subject site sits on Cherry Avenue between Willow Street and 27th Street and comprises multiple parcels. In total, the site consists of approximately 1.98 acres, as described in the attached exhibit (Attachment A). Historically, the site hosted a wide range of uses, including automobile service and repair, metal fabrication, manufacturing, and dealerships. The site has also served surface parking and commercial purposes, such as offices, restaurants (including the former Giant Grinder Deli), retail, and storage. Past oil operations on the site also left a total of six wells that will require additional work by the developer.
Analysis:
Red Mountain Group specializes in revitalizing underutilized commercial and retail properties. The developer shared a preliminary redevelopment plan for the subject site featuring a 1,000 square-foot drive-through restaurant, a multi-tenant retail building, and a surface parking lot with 23 electric vehicle charging stations. This design reflects the developer's market demand studies and its evaluation of the environmental conditions left by previous oil and automotive uses. Additionally, the design incorporates feedback from the developer's outreach to prospective tenants. The concept would create a walkable commercial center that brings diverse amenities to the community and supports small business opportunities. The proposal offers a forward-thinking approach to activating the site with high-quality commercial uses.
On June 24, 2025, the developer entered into a 240-day Exclusive Negotiation Agreement (ENA) with the City to negotiate the purchase and development of a 1.98-acre City-owned site on Cherry Avenue between Willow Street and 27th Street. The executed ENA expired on March 29, 2026. During the 240-day agreement, the developer performed both a void analysis and an economic market analysis to determine the highest and best use for the site. During this time, the developer also conducted due diligence of the site and assessed the market economics, including tenant suitability, for the site. Staff feels the developer made substantial progress during the initial period for the City Council to consider additional time for the developer and the City to finalize a conceptual design with prospective tenants.
The proposed second ENA would secure the Cherry Site for Red Mountain Group for another 120 days and allow the developer additional time to negotiate a DDA. The City has no obligation to reimburse Red Mountain Group for costs incurred during the exclusive negotiation period, such as expenses for engineering, architecture, legal, or planning consultants. Red Mountain Group bears sole responsibility for all costs associated with formal project submittals and environmental documents under the California Environmental Quality Act (CEQA). As with any complex project, the ENA allows the parties to extend the negotiation period for two additional 60-day periods, if unforeseen circumstances arise.
Under the terms of the ENA, Red Mountain Group must provide the City with a detailed financial plan for the development. Staff has highlighted key clauses of the ENA below and attached the full agreement (Attachment A) for the City Council’s review.
• Deposit: The developer provides a $10,000 deposit to defray third-party costs, such as consultant and attorney fees, during the Negotiation Period.
• Developer Paid Costs: The developer pays all fees for engineers, architects, financial consultants, or other contractors related to studies, environmental reviews, or design activities.
• Due Diligence and Environmental Review: Red Mountain Group will perform due diligence and any legally required environmental reviews under CEQA. The developer pays all costs related to this process.
• Disposition and Development Agreement (DDA): The City and Red Mountain Group shall negotiate the terms of a DDA for the mixed-use development.
Conclusion:
Revitalizing the site would significantly benefit the Cherry Avenue commercial corridor by transforming vacant, blighted parcels into a productive destination. The proposed development can enhance neighborhood character, increase foot traffic, generate local tax revenue, and support the City’s economic goals, offering a marked improvement over the site’s current condition. During the initial 240-day ENA, the developer made substantial progress towards redevelopment and successfully performed a void analysis, economic market analysis, and environmental due diligence. RMG also evaluated tenant suitability and completed preliminary site design. Staff recommends that the City Council approve the proposed ENA, substantially in the form presented, to accommodate DDA negotiations with Red Mountain Group and to finalize a conceptual design with prospective tenants for the development of the Cherry Property sites.
Reviewed for Fiscal Impact:
________________________
Siamlu Cox
Attachments:
A. Red Mountain Group Exclusive Negotiation Agreement