HomeMy WebLinkAboutCC RES 04-41
RESOLUTION NO. 04-41
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF TUSTIN, CALIFORNIA, APPROVING THE
SALE OF A 1.036-ACRE PROPERTY OWNED BY THE
TUSTIN COMMUNITY REDEVELOPMENT AGENCY
LOCATED AT 191 AND 193-195 EAST MAIN STREET
PURSUANT TO HEALTH AND SAFETY CODE
SECTION 33433
The City Council of the City of Tustin does hereby resolve as follows:
I.
The City Council finds and determines as follows:
A.
The Tustin Community Redevelopment Agency (the "Agency") is engaged
in implementation of the "Redevelopment Plan" for the Town Center Area
Redevelopment Project (the "Redevelopment Project"); and
B.
Section 33430 of the California Community Redevelopment Law (Health &
Safety Code 33000, et seq.: "CRL") authorizes the Agency to sell or lease
real property for redevelopment purposes; and
C.
In order to implement the Redevelopment Plan, the Agency proposes to
enter into a certain Disposition and Development Agreement (the "DDA"),
with Prospect Village, LP, a California Limited Partnership (the
"Developer") pursuant to which (a) the Agency would sell to Developer
that certain Agency-owned real property located at the northwest corner of
Main Street and Prospect Avenue and know as 191 and 193-195 East
Main Street (the "Property"); (b) Developer would construct a mixed-use
retail, office and live-work housing project on the Property and, upon
completion, sell at least ten (10) of the twelve (12) live-work units for
proprietor owner-occupancy and require that such units remain proprietor
owner-occupied for the period of the restrictions set forth therein; and (c)
Developer would construct certain required public improvements
(collectively the "Project"); and
D.
In its current condition, the Property is a blighting influence on the
Redevelopment Project area; and
E.
The Project will remove the blighting influence described above and
provide a mixed-use retail, office and live-work market rate housing
project; and
Resolution No. 04-41
Page 1 of 29
I.
L.
M.
F.
The public improvements contemplated for the Project are of benefit to the
Redevelopment Project Area or the immediate neighborhood in which the
Redevelopment Project is located; and
G.
Pursuant to Section 33433 of the CRL, the City Council of the City of
Tustin after a public hearing, is required to approve an Agency sale of
property acquired in whole or in part from tax increment moneys; and
H.
Agency staff has prepared, and the City Council has reviewed and
considered, a report pursuant to Section 33433(a)(2) of the CRL attached
hereto as Exhibit "A" and incorporated herein by this reference, setting
forth:
(a) A copy of the proposed Sale documents, i.e. the DDA; and
(b) A summary which describes and specifies all of the following:
(i) The cost of the DDA to the Agency, including land
acquisition costs, clearance costs, relocation costs, the cost
of improvements to be made by the Agency, plus the
expected interest on any loans or bonds to finance the
agreements;
The estimated value of the interests to be sold to Developer,
determined at the highest and best uses permitted under the
plan;
(iii) The estimated value of the interests to be sold, determined
at the uses and with the conditions, covenants and
development costs required by the sale; and
(iv) An explanation of why the sale of the property will assist in
the elimination of blight, with reference to all supporting facts
and materials needed upon making this explanation.
The DDA contains all of the terms, covenants, conditions, restrictions,
obligations and provisions required by state and local law; and
(ii)
The City Council has duly considered all of the terms and conditions of the
DDA and believes that the sale under the DDA is in the best interests of
the City of Tustin and the health, safety, morals and welfare of its
residents, and is in accord with the public purposes and provisions of
applicable state and local law and requirements; and
Pursuant to Section 33433(a)(1) of the CRL the City Council has held a
duly noticed public hearing on the proposed DDA, at which public hearing
all persons were given an opportunity to be heard.
II. The City Council hereby finds and determines, based upon substantial evidence
provided in the record before it:
Resolution No. 04-41
Page 2 of 29
A.
That the foregoing recitals are true and correct.
B.
That the City Council has received and heard all oral and written testimony
regarding the proposed sale to Developer and Developer's proposed
development of the Property in connection therewith and to any other
matters pertaining to this transaction.
C.
That the sale of the Property will assist in the elimination of blight in the
Redevelopment Project area and is consistent with the implementation
plan adopted by the Agency for the Town Center Area Redevelopment
Plan pursuant to Section 33490 of the CRL.
D.
That the consideration for the Agency's sale of the Property pursuant to
the DDA is not less than the fair reuse value at the use and with the
conditions, covenants and development costs authorized by the DDA.
The foregoing findings are based upon the record of the joint public
hearing on the sale and approval of the DDA, and the report prepared in
accordance with CRL Section 33433 (a)(2).
PASSED AND ADOPTED by the City Council of the City of Tustin at a regular
meeting held on the 17th day of May, 2004.
ATTEST:
E.
<f ~ I~
TONY KAWY>.SHIMA,
Mayor
~/h cO ~
PAMELA STOKER,
City Clerk
Resolution No. 04-41
Page 3 of 29
STATE OF CALIFORNIA)
COUNTY OF ORANGE) SS
CITY OF TUSTIN )
I, Pamela Stoker, City Clerk and ex-officio Clerk of the City Council of the City of Tustin,
California, do hereby certify that the whole number of the members of the City Council of
the City of Tustin is five; that the above and foregoing Resolution No. 04-41 was duly
passed and adopted at a regular meeting of the Tustin City Council, held on the 1 ih day of
May, 2004 by the following vote:
COUNCILMEMBER AYES:
COUNCILMEMBER NOES:
COUNCILMEMBER ABSTAINED:
COUNCILMEMBER ABSENT:
KAWASHIMA, BONE, DAVERT, HAGEN, THOMAS
NONE
NONE
NONE
(5)
(0)
(0)
(0)
1røJY\cQ,~
PAMELA STOKER,
City Clerk
Resolution No. 04-41
Page 4 of 29
Exhibit A of Resolution No. 04-41
Fair Reuse Analysis and Summary Report
Resolution No. 04-41
Page 5 of 29
KEYSER MARSTON ASSOCIATES INC.
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WWW.UYSER"AkSTON.CO"
REAL ESTATO
kED'VELOP"'NT
AFFOkDA.e, HO""NO
ECONOMIC DEV2LOPM.NT
MEMORANDUM
Los AHG""
Calvin E. HoIHs.1I
Kathl..o H. H.,d
Jom.. A. Roh'
r..1 C. Andmon
a"iory D. Soo-Hoo
S4H DIEGO
amid M. Trimble
r..1 C. Mom
To:
Mr. James Draughon, Redevelopment Program Manager
City of Tustin
S4H FRAHmco
A. Jerry Key."
Timothy C. Kelly
K... E,,', 'unk
D,bb;, M. Km
Rob", J. Wstmore
From:
James Rabe
Date:
April 26, 2004
Subject:
Fair Reuse Analysis - Prospect Village
Pursuant to your request, Keyser Marston Associates, Inc. (KMA) prepared a fair reuse analysis
of Prospect Village (Project) proposed by Prospect Village LP (Developer). Specifically, the
Developer is proposing to construct 9,300 gross square feet (8,589 leaseable square feet) of
commercial uses and 12 owner! proprietor live-work units. The Project is to be located in the
area bounded by Main Street, Prospect Avenue, Third Street and Prospect Lane (Site) In the
City ofTustin (City).
As proposed, the Developer will acquire the parcels comprising the Site from the Tustin
Community Redevelopment Agency (Agency). The Site is 1.04 acres and includes two vacant
buildings of approximately 6,200 square feel identified as 191 and 193 -195 West Main Street.
NATURE OF THE ASSIGNMENT
The purpose of the KMA anàlysis is to determine the fair reuse value for the Agency-owned
parcel given the proposed scope of development and the obligations contained in the
Disposition and Development Agreement (Agreement). Fundamental to this valuation is the fact
that the Agency-owned parcel is being sold for development and not speculation. Thus, the
Agreement restricts, among other things, the scope of development, establishes the timeframe
under which the development must proceed and controls the future use of the Site.
Resolution No. 04-41
Page 6 of 29
04O4Oo14.T\JS,jAR"""
.""nnMM>
CELEERATING 30 YEARS OF SERVlCE roOUR CuENTS
To:
Subject:
Mr. James Draughon, City of Tustin
Fair Reuse Analysis - Prospect Village
April 26,2004
Page 2
DEFINITION OF FAIR REUSE VALUE
The fair reuse value can be defined as the highest value in terms of money, which a property is
expected to bring for a specific use in a competitive and open market given the conditions
established by the Agency, The fair reuse value is predicated on the assumption that the buyer
and seller are each acting prudently, knowledgeably and that the price is not affected by
external stimulus. Also, essential to an estimate of fair reuse value is the notion that the Agency
is interested in selling land for near-term development, and that the land is not sold for
speculation.
Implicit in this definition is the consummation of a sale as of the specified date, and the passing
of title from seller to buyer under conditions whereby:
.
Both parties are well informed and well advised, each party is acting prudently in their
own best interest.
.
The property will be cleared in a reasonable time.
The definition of fair reuse value is further augmented due to certain conditions imposed by the
Agency and assumptions as follows:
.
The seller is a public agency having definite controls over the development. Due to the
complexity of the overall development plan~ the Developer must contend with a series of
regulations and controls that are not common in the conventional real estate market.
The Agency must maintain a continuing surveillance with respect to the ability of the
Developer to perform within the prescribed conditions.
The Developer is faced with various development requirements and time restrictions
imposed by the development program, This limits the pool of potential developers to
those with adequate financial and productive resources to fulfill the specific Agency
requirements, To appeal to i limited market of potential buyers, the fair reuse value
must be equated to the maximum price a restricted and limited market is warranted in
paying based upon risk and investment retum factors.
.
A project being developed under the auspices of an Agreement may also be provided
with financial and non-financial incentives. The value enhancement created by these
incentives must also be considered in the determination of the fair reuse value for the
property .
CELEIYUI7NG 30 YEARS OF SERIIlCE TO OVA CllEN'1S
Resolution No. 04-41
Page 7 of 29
04040'4.TUS;JAR,gbd
"""""'M'
To:
Subject:
Mr- James Draughon, City of Tustin
Fair Reuse Analysis - Prospect Village
April 26, 2004
Page 3
PROJECT DESCRIPTION
The Developer has proposed to construct a mixed-use project, which will include the following
uses:
.
3,000 square feet of restaurant space (plus 593 square feet of outdoor dining space);
773 square feet of retail space;
4,816 square feet of second floor commercial space;
12 detached owner/proprietor multi-story live-work units;
On-site parking for the live-work units and commercial space; and
Public Improvements located adjacent to the Site within the public right-of-way and
public alley around the Site's perimeter,
DEVELOPER OBLIGATIONS
The Agreement imposes the following responsibilities on the Developer:
1.
The Developer must accept conveyance of the Site from the Agency under the terms of
the Agreement for a price of $855,000.
2.
The Developer must demolish and remove the existing improvements on the Site.
3.
The Developer must develop a high quality mixed-use development with approximately
8,589 leaseable square feet of commercial space facing Main Street, six live-work units
facing Prospect Avenue and six live-work units facing Prospect Lane. Building
improvements and landscaping must be consistent with the terms of the Agreement.
4.
The Developer must install the Public Improvements.
5.
The Developer shall provide escrow instructions consistent with the Agreement and pay
in escrow the following:
a.
One-half of all escrow fees;
b.
Recording fees;
c.
Any state, county, city or other documentary stamps and transfer taxes; and
d.
The premium for the title insurance policy.
Resolution No. 04-41
Page 8 of 29
0404044.11JS,JAR';I>d
'9830.001.003
CElEJJR.lT1NGJO YEARSOFS£RY1CETOOUR CUDm
To;
Subject:
6.
7.
8.
Mr. James Draughon, City of Tustin
Fair Reuse Analysis - Prospect Village
April 26, 2004
Page 4
The Developer shall submit to the Agency evidence of obtaining the financing necessary
to undertake the Project in accordance with the Agreement.
a,
A commitment in writing from a permitted mortgage for the funding of the
improvements,
b.
Evidence satisfactory to the Agency of sources of equity capital sufficient to
cover the difference between construction cost and financing by mortgage loans.
The Developer shall begin and complete all construction and development with the times
specified in the Schedule of PerfolTl1ance per the Ag reement.
The Developer shall be responsible for any and all costs directly or indirectly related to
the development of the Project, including but not limited to, acquisition of the Site and
construction of the Public Improvements.
AGENCY OBLIGATIONS
Under the Agreement, the Agency must complete the foUowing responsibilities:
1.
2.
3,
4.
04O4"'.ruS,, AA,obd
,""'."'1(10.,
The Agency shall convey the Agency-owned parcel to the Developer for $855,000,
The Agency agrees to open an escrow for conveyance, and provide escrow instructions
consistent with the Agreement. and shall pay the following in escrow fees:
a-
One-half of all escrow fees;
b.
Costs necessary to place the title to the Agency-owned parcel in the condition for
conveyance required by the provisions of the Agreement;
c.
Cost of drawing the Grant Deed; and
d,
Notary fees.
The Agency shall timely and properly execute, acknowledge and deliver the Grant Deed,
conveying title to the Agency-owned parcel to the Developer, together with an estoppel
certificate certifying that Developer has completed all acts necessary to entitle Developer
to such conveyance in a=rdance with the Agreement.
The Agency will make available 65 existing parking spaces at the adjacent Tustin Water
Yard under a non-exclusive parking license agreement between the Developer and the
Agency.
CELEBIUT1NG30 YEARSOPSBRYlCBroOURCUE/m
Resolution No. 04-41
Page 9 of 29
To:
Subject:
Mr. James Draughon, City of Tustin
Fair Reuse Analysis - Prospect Village
April 26, 2004
Page 5
5-
Agency's financial participation is expressly limited to conveying fee ownership interest
in the Agency-owned parcel to the Developer, at a price of $855,000 as set forth in the
Agreement.
6.
The City's financial participation is expressly limited reimbursing Developer for the
installation of public improvements not-to-exceed $880,000.
ANALYSIS
To evaluate the Project's financial viability, KMA reviewed the Developer's construction cost
estimates and income projections. KMA then independently estimated the land residual value
that would be required to make the Project financially feasible. The KMA pro forma analysis for
the Project is organized as follows:
Table 1:
Table 2:
Table 3:
Table 4:
Table 5:
Table 6:
Estimated Construction Costs - Commercial
Estimated Net Operating Income - Commercial
Estimated Fair Reuse Value - Commercial
Estimated Construction Costs - Live-work
Projected Sales Revenues - Live-work
Estimated Fair Reuse Value - Live-work
KMA has not included the costs of the Public Improvements as the Agency has committed to
fund these costs.
Estimated Construction Costs. Commercial (Table 1)
Acquisition costs
The KMA analysis is a residual land value analysis; that is an analysis that establishes how
much the Developer can afford to pay for land, Typically, no land acquisition costs are included.
Direct Costs
Table 1 outlines the estimated Project costs, which are based on the following assumptions,
including that the Developer will not be required to pay prevailing wages:
1.
KMA assumed an asbestos removal allowance of $1 00,000.
Resolution No. 04-41
Page 10 of 29
""044.TUS,JAA,~
"""'0/1100.'
CELEBRA17NG 30 YE.4l1S OF SERVICE TO OIlR ClJENTS
To:
Subject:
Mr. James Draughon, City of Tustin
Fair Reuse Analysis - Prospect Village
April 26, 2004
Page 6
2.
The estimated total on-site costs are $73,000.
3.
Shell construction costs are e$tlmated at $80 per square foot; tenant improvement
allowances are estimated at $20 per square foot for the retail space, $25 per square foot
for the second floor space and $80 per square foot for the restaurant space, for a total
cost of $1,149,000.
Total direct costs are estimate at $1,322,000.
Indirect Costs
The indirect costs are estimated as a percent of direct costs or on a per square foot basis.
1.
KMA estimated the architecture, engineering and consulting fees (6,0%); taxes,
insurance, legal and accounting costs (1.5%); development management (5.0%); and an
allowance for contingencies (5,O%) as a percentage of direct costs for a total of
$231,000.
2.
KMA assumed an allowance of $103,000 for project public permit and fees ($12.00 per
square foot based on Input from City staff).
3.
KMA estimated the marketing and leasing expense at $43,000, $5.00 per square foot of
GBA.
KMA estimates the indirect costs to be $377,000.
Financing Costs
The financing costs include interest during construction and loan origination fees on the
construction and permanent financing. The interest rate on the debt and equity financing is
estimated to be 7.5%. Loan origination fees are set at 2,0 points, and are based on financing at
a 60% loan to value ration. KMA estimates the total financing/closing costs at $96,000.
Total Construction Costs
KMA estimates the total construction costs at $1 ,795,000, $209 per square foot of building.
040404-4.TUS:JAR:Qbd
19830.001.003
CEUiBlUTlNOJO YEARSOFSERVlCHOOUR CUEIm;
Resolution No. 04-41
Page 11 of29
To:
Subject:
Mr. James Draughon, City of Tustin
Fair Reuse Analysis - Prospect Village
April26,2004
Page 7
Estimated Net Operating Income. Commercial (Table 2)
Gross Rental Income
As noted in KMA's October 28, 2003 memorandum report, estimated rents in the area are $1.25
per square foot per month for retail space and $1,75 per square foot per month for restaurant
space on a triple-net basis. These rents and the proposed tenants are summarized in the table
below.
ProDosed Tenant
Retail
Restaurant
Office
SQuare Feet
773
3,000
4,816
Rent/SF
$15.00
$21.00
$15.00
Annual Rent
$12,000
$63,000
$72,000
Total gross annual rent is estimated at $147,000. KMA assumed a vacancy rate of 5.0% or
$7,000, which equates to an effective gross income (EGI) of $140,000,
Operating Expenses
The following summarizes the operating expenses and the underlying assumptions.
1.
KMA assumed a management fee equal to 4.0% of EGI, which equates to $6,000.
2.
KMA assumed capital reserves equal to 2.0% of effective gross income or $3,000.
The annual stabilized net operating income (NOI) is estimated at $131,000.
Fair Reuse Value - Commercial {Table 3)
The fair reuse land value for the commercial portion of the Project is equal to the difference
between the amount of private investment supported by the Project and the estimated
development costs. The amount of private investment that can be obtained is dependent upon
the NO! projected to be generated, in combination with threshold retums that will be required by
the lender, the equity provider, and the Developer to compensate for the inherent risk
associated with the investment.
KMA estimates that the commercial portion of this type project requires a 10.5% return on cost
to create a viable project. As shown in Table 3, the $131,000 of NOI will support $1,248,000 of
private investment assuming the 10,5% return requirement. Considering construction costs of
$1,795,000, the fair reuse value for this portion of the Project is a negative $547,000.
Resolution No. 04-41
Page 12 of 29
CELE8//AT1NG30 YEoflISOFSERYlCE mOUR CUEJm
04O4044.TUS:JAR"bd
"""""""""
To:
Subject:
Mr, James Draughon, City of Tustin
Fair Reuse Analysis - Prospect Village
April 26, 2004
Page 8
Estimated Construction Costs - Llve-work (Table 4)
Acquisition costs
The KMA analysis is a residual land value analysis; that Is an analysis that establishes how
much the Developer can afford to pay for land. Typically, no land acquisition costs are included.
Direct Costs
Table 4 outlines the estimated residential project costs, which are based on the following
assumptions including that the Developer will not be required to pay prevailing wages:
1.
On-site costs are estimated at $26,000 per unit, $312,000.
2.
Building shell constnuction costs are estimated at $95 per square foot of gross building
area, $2,733,000. This cost is high but reflects a high quality of improvement as
requested in the Agreement.
Total direct costs are estimate at $3,085,000,
Indirect Costs
The indirect costs are estimated as a percent of direct costs or on a per square foot basis.
1,
KMA estimated the architecture, engineering and consulting fees (6.0%); taxes,
insurance, legal and accounting costs (3.0%); and an allowance for contingencies
(5.0%) as a percentage of direct costs for a total of $432,000.
KMA assumed an allowance of $218,000 for project public permit and fees ($18,200 per
unit based on information provided by City staff).
2.
3,
KMA estimated the marketing and sales office expense at $9,000 per unit, $108,000.
4,
Development management is estimated at 3.0% of gross sales. $207,000.
KMA estimates the indirect costs to be $965,000,
C£/.E8RA71NG 30 YEARSOFSERV/CE TO OUR CU£NTS
Resolution No. 04-41
Page 130f29
040404<.'TUS"'-R:gbd
19830.00"""
To:
Subject:
Mr, James Draughon, City of Tustin
Fair Reuse Analysis - Prospect Village
April26,20O4
Page 9
FinancIng Closing Costs
The financing costs include interest during construction, loan origination fees, closing costs and
warranties.
1.
KMA has assumed a 14-month construction and absorption schedule for the residential
portion of1he Project. Based on 1his, KMA estimated interest costs at $312,000.
2.
Loan origination fees are estimated at $4,100 per unit, $49,000.
3.
Commissions, closing costs and warranties are estimated at $34,300 per unit, $411,000.
KMA estimated total financing/closing costs at $772,000,
Total ConstructIon Costs
KMA estimates the total construction costs at $4,822,000, $401,800 per unit.
Projected Sales Revenue - Residential (Table 5)
The projected sales prices for the live-work units are summarized below:
Prospect Avenue
Prospect lane
Unit Size (SF)
2,831
2,034
Price/SF
Price Der Unit
$221.00
$258,00
$625,000
$525,000
Total sales revenues for the Project are estimated at $6,900,000.
Fair Reuse Value - LIve-work (Table 6)
The fair reuse land value for the Project Is equal to the difference between the sales revenue
generated by the residential portion of the Project, the estimated development costs and a
reasonable developer profit. The developer's profit compensates it for the inherent risk
associated with the acquisition, construction and sales of the units. KMA has reviewed a
number of residential projects in Southem Callfomia. For these projects, the developers have
typically required a profit equal to 10% of project sales revenue, Given the nature of the
proposed Project and its location within the City, KMA believes that a reasonable developer
profit is 10% of sales revenues.
Resolution No. 04-41
Page 14 of 29
CEu/lRATINGJO Y£ARSOF'SERVTCETOOURCUENTS
0404044,TLS,JAR,gbd
"""'M' no.
To:
Subject:
Mr. James Draughon, City of Tustin
Fair Reuse Analysis - Prospect Village
April 26, 2004
Page 10
The sales revenues projected to be generated by the Project total $6,900,000. When this is
reduced by KMA's $4,822,000 development cost estimate and a threshold developer profit of
$688,000 (10% of sales), the fair reuse value for the residential portion of the Project is
$1,390,000.
PROJECT FAIR REUSE VALUE
The fair reuse value for the Project is the combination of the fair reuse value of the two
components, Thus, as shown below, the fllr reuse value for the Project is $843,000,
Fair Reuse Value - Commercial
Fair Reuse Value - Residential
Project Fair Reuse Value
($547,000)
$1.390,000
$843,000
. LIMITING CONDITIONS
The conduct of any valuation is necessarily guided. and its results influenced, by the terms of
the assignment and the assumptions, which together form the basis of the study, The following
conditions and assumptions, together with the lesser assumptions embodied in this report,
constitute the framework of our analysis and conclusions.
The estimate of fair reuse value for the propO$!iI Project assumes compliance with the following:
1.
The Developer is responsible for acquisition of the Site.
2.
The Project must include approximately 8,589 square feet of retail, restaurant and office
uses and 12 owner/proprietor occupied live-work units,
3.
T~e development must conform to the requirements of the Agreement.
It is assumed that the property is in good and marketable condition; no title search has been
made, nor have we attempted to determine the ownership of the property. The value estimate
is given without regard to any questions of title, boundaries or encroachments. It is also
assumed, that all assessments, if any, are paid.
No legal description of the property was fumlshed. In-lieu of the legal description, our
understanding of the property was Illustrated by the plot plans and tract maps provided to us by
the redevelopment agency.
CELEßJUTING 30 YEARS OF SERVICE TO OUR CuElm
Resolution No. 04-41
Page 150f29
_.TUS~AR:gbé
"""'M1"'"
To:
Subject:
Mr. James Draughon, City of Tustin
Fair Reuse Aoalysis - Prospect Village
April 26, 2004
Page 11
We assume that the development of the Site will be in conformance with the applicable zoning
and building ordinances,
Information provided by such informed local sources as governmental agencies, financial
institutions, realtors, buyers, sellers and others was weighed In the light in which it was supplied,
and checked by secondary means. However. no responsibility is assumed for possible
misinformation.
Attachments
Resolution No. 04-41
Page 160f29
040404HUS:JARgbd
"'30.001.003
CÉLEBIU77NGJO YEARSorSERVlCETOOUR CUENTS
TABLE 1
ESTIMATED CONSTRUCTION COST. COMMERCIAL
VillAGE PROJECT
TUSTIN. CALIFORNIA
Land AcQullltien
l.nd~ulsllion SO Allowance SO
50
II. ~
Sit. Coots
Asbestos Removal $100.000 Allowance SI00.000
On-Site Work 7,266 Square Feel $10.00 ISf 13.000
To/ll Site Coats $113,000
8ulldlnl1 COlt.' 'þtll TI
Mein SI. Reloll. Preservation 0 Soua" Feet 1110.00 ISf 125.00 ISf 10
Main St. Retail- Now 773 Sq..... Fuet S90.00 ISf $20.00 1St 85.000
Mail1 SI. Re.lauranl- New 3.000 Square Feel S90.00 ISf lBO.OO 1St SIO.OOO
Main Street Office- New 4.61eSQu...F.., 590.00 ISf - $25.00 1St 554.000
Prelpect Ave. Commercial Re'eil 0 Square Foel 1110.00 IS! 120.00 151 0
Prospect ~n. Office 0 Square Feal SIIO.OO 1St 525.00 ISf
Tollr Shell & 71 Cost. 1,149,000
Totol Direct Co.t. 51.322.000
III. Indirect COlt.
Archllecluro & Enginee'f1\ 6.00% Direct Cosls 19,000
Permits & Foes 512.00 ISq. Foot 8.589 Sf 103,000
Txs.llnsJt.gl.lAcClng. 1.50°/. Direct Co"s 20.000
Lealing Commission $5.00 /Sq. Foot 8.589 Sf 43,000
Development Monagement 5.00% Dirocl Costs 68,000
Contingency 5.00% I)ireet Cos ¡¡ 68.000
Totallndlraet COlts $377.000
IV. Flnanclne Coli.
Bundin9 Inters'"~ S1.195.000 Finenced 7.50% 'nlerel' 181,000
Finanetng Fees' $149.000 Financed 2.00 Poln" 15.000
Total Financing Cos.. $96,000
Iv. Total Con,tnJcllon Coota (Excluding land) 51.reS.ooo I
1 Estlmaled cos ¡¡ based on KMA's experience wilh similar project, In the region.
2 AssumES 1.0 year building p8flod and 60% avarag. oulstandlng loan balance.
3 Assumes 60'>', loan to veluo ralio.
Prepared by: Keyser Marston Associates, Inc.
Fllename:Un Juice1- Village Project- ,ou..;KMA Retall;4/271¡OO4;8:47 AM;kee
Resolution No. 04-41
Page 17 of 29
TABLE 2
ESTIMATED NET OPERATING INCOME - COMMERCIAL
VilLAGE PROJECT
TUSTIN. CAllFOrtNlA
~
Main SI. Retai" Prese..aHon
Main St. Relall, Newl
Mein St. Rastaurant- New'
Main St. Office. Nevi
Prospact Ave. Commercia' Retail'
Prospaellane Offloa'
Gro.. Incomo
0 Sf
773 Sf
3.000 Sf
4,816 Sf
0 Sf
0 St
$0.00 1St
$15.00 ISf
121.00 ISf
115.00 1St
10.00 ISf
$0.00 ISf
$0
12.000
63.000
12.000
0
0
1147,000
(7.ooo)
1140.000
(16.000)
(3,000)
($9.000)
$131.000 I
(La..): Vacancy & Collaclion
Effoctlvo Gro.. Incomo
5.00% Retail & Off'.e Space Income
II.
O."'lln. Ex..n...
Management Fee
Resa..es
Tot.1 Expon...
4.00% Effective Gross income
2.00% Effective Gross Inoome
1111.
Nal Oooratlna Incoma
, Tripla ne"enL
, Office rents are nel of expenses acual to $4.00 per squor.lool
Resolution No. 04-41
Prepared ~~1~Qtt6riJAs'oclate..lnc
Filenama:Utt Ju<:el. VIllage Project. reuse;KMA R.lail:4f27~;8:47 AM;kea
TAB~n
ESTIMATED FAIR REUSE VALUE
V'LLAGE PROJECT
TUSTIN, CALIFORNIA
N,t ODorltln" Income
Retell Not Operellng Inoome
Retell Threshold Return on Inve"menl
Retail Supportable DebVEqully Inu..lment
$131.000
10.50%
11.248.000
II.
Total Dlvel",ment Cools
(11,7g5.000)
1"1.
Ru'duI' Land Vliua
Va'ue Par Squ.... Foot
(1547.°.°0)1
($7508)
Prepared by: Keyse, Marston AsSDCIalas, tnc.
Fi'en,me:Ut1 Juice!. VIIlaga Prbjoct. ",us.:KMA Ratall;4J2712004;B:47 AM;kse
Resolution No. 04-41
Page 19 of 29
TABLE 4
ESTIMATED CONSTRUCTION COSTS - RESIDENTIAL
12 MARKET RATE UNITS & 0 MODERATE INCOME UNITS
V1LLAGE PROJECT
TUSTIN, CALIFORNIA
I. Direct Costs'
On-Sites Costs
Parking
Building Shell
12 Units
o SfGBA
29.190 SfGBA
Total Direct Costs
II. Indirect Costs
Architecture, Eng. & Consulting
Permits & Feesflmpact Fees'
Taxes. Ins. Legal & Acclg
MarkelingfSales Office
Design Center Profit
Development Managemenl
Contingency Allowance
6.0% Direct Costs
12 Units
3.0% Direct Cosls
12 Units
$0 Allowance
3.0% Sales
5.0% Direct Costs
Totallndl....ct Costs
III. Financina/Closina Costs
Interest During Constructlon/Abs. '
Loan Origination Fees
Closing CoslsfWarran!ies>
12 Units
12 Units
12 Units
Total Financing/Closing Costs
IV. Total Construction Cost
Construction Cost Per Unit
Construction Cost Per Sua.... Foot
$26,000 fUnil
$95.00 fSf
$95.00 fSf
$18.200 /Unit
$9,000 ¡Unit
$26,000 fUnit
$4,100 fUnit
$34,300 fUnit
$312,000
0
2,773.000
$3,085,000
$185,000
218.000
93.000
108,000
o
207.000
154.000
$965.000
$312,000
49.000
411,000
$772.000
$4.822,000
$401.800
$165.19
, Eased on KMA's experience with similar projects in tho ,egion.
, Assumes B.O% Interesl rate.
, Assum.. commissions of 3.5% of sales. closing costs of 1.5% of sales and warranties of $5,500.
Resolution No. 04-41
PreparedlØ !Ig9.,aQIOIIQiton Assoclotes.lnc.
File nam.: Uti Juice!- Village Project - ro"ao; R..Cost; 4/2712004
TABLE 5
PROJECTED SALES REVENUES -RESIDENTIAL
12 MARKET RATE UNITS & 0 MODERATE INCOME UNITS
VILLAGE PROJECT
TUSTIN, CALIFORNIA
1. Market Rate Units
Prospect Avenue
Prospect Lane
Plan 3
Plan 4
Plan 5
Plan 6
Plan 7
Total/Average
Number of Units
Price/Unil
Unit Size Base Premium
Total
6
Units
2,831
/Unit
$625,000
$0
/Unit
$3,750,000
6
Units
2,034
/Unit
$525,000
$0
/Unil
3,150,000
0
Units
0
/Unit
$0
$0
/Unit
0
0
Units
0
/Unit
$0
$0
/Unit
0
0
Units
0
/Unit
$0
$0
/Unit
0
0
Units
0
/Unit
$0
$0
/Unit
0
0
Units
0
/Unit
$0
$0
/Unit
0
12
0
2,433
/Unit
$575,000
$0
/Unit
$6,900,000
It. Affordable Units
Prospect Avenue
0
Units
2,831
/Unit
$0
/Unit
$0
Prospect Lane
0
Units
2,034
/Unit
$0
/Unit
0
Plan 3
0
Units
0
/unit
$0
/Unit
0
Plan 4
0
Units
0
/Unit
$0
/Unit
0
Plan 5
0
Units
0
/Unit
$0
/Unit
0
Plan
0
Units
0
/Unit
$0
/Unit
0
Plan 7
0
Units
0
/Unit
$0
/Unit
0
Total/Average
0
0
/Unit
$0
/Unit
$0
w
CD
y
0
-uo III. Total Sales Revenues $6,900,000
O
CD Z
N O
O
A
N A
Prepared by: Keyser Marston Associates, Inc.
File name; Utt Juicel- Village Project - reuse; ResRevenues; 4/2721104
TABLE 6
ESTIMATED FAIR REUSE VALUE. RESIDENTIAL
12 MARKET RATE UNITS & 0 MODERATE INCOME UNITS
VILLAGE PROJECT
TUSTIN. CALIFORNIA
I. Sales Revenues'
Market Rate Units
Affordable Units
Total Salea Revenues
II. Construction Costs
Construction Costs'
Developer Profit'
10.0% Revenues
Total Construction Cost
III. Supportable land Value
Per Unit
Per Square foot
$6,900,000
0
$6.900.000
$4.822,000
688,000
$5.510,000
$1,390,000
$115,800
$36.60
, See TABLE 5
. SeeTABLE4
, Reflect. threshold Developer return identified in the Dovoioper's pro forma.
Resolution No. 04-41
Preparedli~Si!@rdllöonAssociate'.lnc.
File name: Uti Juic.1. Village ProjeC1 - reuse; ResLndVl; 4/2712004
SUMMARY REPORT PURSUANT TO
SECTION 33433
OF THE
CALIFORNIA HEALTH AND SAFETY CODE
ON A
OWNER PARTICIPATION AND DISPOSITION AGREEMENT
BY AND BETWEEN THE
TUSTIN COMMUNITY REDVELOPMENT AGENCY
AND
PROSPECT VILLAGE LP
The following Summary Report has been prepared pursuant to Section 33433 of the California
Health and Safety Code. The report sets forth certain details of the proposed Disposition and
Development Agreement (Agreement) between the Tustin Community Redevelopment Agency
(Agency) and Prospect Village LP (Developer). The purpose of the Agreement is to effectuate
the Redevelopment Plan for the Town Center Redevelopment Project Area (Redevelopment
Plan).
The Agreement requires the Agency to convey approximately 1.04 acres of Agency-owned
parcels located at 191 and 193-195 West Main Street (Site) In the City of Tustin (City) to the
Developer. The Developer is required to construct a mixed-use project comprised of
approxi mately 8,589 leaseable square feet of retail, restaurant and office space and 12
owner/proprietor occupied live-work units (collectively, the Project).
The following Summary Report is based upon information contained within the Agreement, and
is organized into the 101l0wing seven sections:
I.
Salient Points of the Agreement: This section summarizes the major responsibilities
imposed on the Developer and the Agency by the Agreement.
II,
Cost of the Agreement to the Agency: This section details the total cost to the
Agency associated with implementing the Agreement.
III.
Estimated Value of the Interests to be Conveyed Detennlned at the Highest Use
Permitted under the Redevelopment Plan: This section estimates the value of the
interests to be conveyed determined at the highest use permitted under the Site's
existing zoning and the requirements imposed by the Redevelopment Plan.
IV.
Estimated Reuse Value of the Interests to be Conveyed: This section summarizes
the valuation estimate for the Site based on the requir.d scope of development, and the
other conditions and covenants required by the Agreement.
Resolution No. 04-41
Page 23 of 29
O4O_.T\JS:JAft,..
"'30.001.l1O3oO5107104
v,
VI.
VII,
Consideration Received and Comparison with the Established Value: This section
describes the compensation to be received by the Agency, and explains any difference
between the compensation to be received and the established highest and best use
value of the Site.
Blight Elimination: This section describes the existing blighting conditions on the Site,
and explains how the Agreement will assist in alleviating the blighting influence,
Conformance with the AB1290 Implementation Plan: This section describes how the
Agreement achieves goals identified in the Agency's adopted AB1290 Implementation
Plan.
This report and the Agreement are to be made available for public inspection prior to the
approval 01 the Agreement.
I.
A.
SALIENT POINTS OF THE AGREEMENT
Project Description
The Scope of Development defined in the Agreement includes a mixed-use project of
approximately 8,589 square feet 01 retail, restaurant and office uses and 12 live-work units
(Private Improvements). The commercial space is allocated 773 square feet for retail space,
3,000 square feet for restaurant space and 4,816 square feet of second floor office space. In
addition. there is 593 square feet of outdoor dining space.
Also the Project must include 12 ownerJpropñetor occupied live-work units. Six of the units will
front on Prospect Avenue and six units will front on Prospect Lane, The Prospect Avenue
residential units shall have two levels of residential space above 913 square feet of ground floor
retail space; the Prospect Lane residential units shall have two levels of residential above 431
square feet of ground floor retail or office space,
The Scope of Development also includes the construction of the Public Improvements. The
Public Improvements include:
.
.
Full improvement to the public alley to the west of the Site
Full widening and improvement to the west side of Prospect Avenue between Main
Street and Third Street
Undergrounding all overhead utility poles and lines
All directly related design and construction costs associated with the Public
Improvements to be reimbursed by City.
Resolution No. 04-41
Page 24 of 29
"'0404~ TUS,JAR"'"
'.'30.001._7""
2
B.
Developer Responsibilities
The Agreement requires the Developer to accept the following responsibilities:
1.
The Developer must accept conveyance of the Site Irom the Agency under the terms 01
the Agreement for a price of $855,000.
2.
The Developer must demolish and remove the existing improvements on the Site.
3.
The Developer must develop a high quality mixed-use development with approximately
8,589 square footage 01 commercial space facing Main Street, six live-work units facing
Prospect Avenue and six live-work units facing Prospect Lane. Building improvements
and landscaping must be consistent with the terms 01 the Agreement
4.
The Developer must install the PublIc Improvements with the construction of the Private
Improvements.
5,
The Developer shall provide escrow instructions consistent with the Agreement and pay
in escrow the following:
a.
One halt of all escrow lees;
b.
Recording lees;
c.
Any state, county, city or other documentary stamps and transfer taxes; and
d.
The premium for the title insurance policy.
6.
The Developer shall submit 10 the Agency evidence of obtaining the financing necessary
to undertake the Project in accordance with the Agreement.
a.
A commitment in writing from a permitted mortgagee for the lunding of the
improvements.
b.
Evidence satisfactory to the Agency of sources of equity capital sufficient to
cover the difference between construction cost and financing by mortgage loans.
7.
The Developer shall begin and complete all construction and development within the
times specified in the Schedule 01 Performance per the Agreement.
B.
The Developer shall be responsible for any and all costs directly or indirectly related to
the Development, including but not limited to, acquisition 01 the Site and construction of
Private Improvements.
3
Resolution No. 04-41
Page 25 of 29
""""'~T\JS:JAR:"'"
'","".001."""'510""
c,
Agency Responsibilities
Under the Agreement, the Agency must complete the following responsibilities:
1.
The Agency shall convey the Agency-owned parcel to the Developer for $855,000.
2.
The Agency agrees to open an escrow for conveyance, and provide escrow instructions
consistent with the Agreement, and shall pay the following fees in escrow:
a.
One-half of escrow fees.
b.
Costs necessary to place the title to the Agency-owned parcel in the condition for
conveyance required by the provisions of the Agreement;
c.
Cost of drawing the Grant Deed; and
d.
Notary fees.
3.
The Agency shall timely and properly execute, acknowledge and deliver the Grant Deed,
conveying title to the Agency-owned parcel to the Developer, together with an estopple
certificate certifying that Developer has completed all acts necessary to entitle Developer
to such conveyance in accordance with the Agreement.
4.
The City will make available 59 existing parking spaces at the adjacent Tustin Water
Yard under a non-exclusive parking license agreement between the Developer and the
City.
5.
Agency's financial participation is limited to conveying fee ownership interest in the
Agency-owned parcel to the Developer, at a price of $855,000 as set forth in the
Agreement.
6.
The City's financial participation Is limited to reimbursing Developer for the construction
of the Public Improvements not-to-exceed $880,000.
Resolution No. 04-41
Page 26 of 29
1I4O4045.TUS:JAA'gOd
10830.001.00310510'10<0
4
II.
COST OF THE AGREEMENT TO THE AGENCY
The Agency costs to implement the Agreement include the previous acquisition of the Site. The
Agency acquired the Site for $855,000. As shown below, the total cost to the Agency is
$855,000,
Site Acquisition Cosl
Total Agency Cost
I~ 955 MOl
($ 855,000)
$ 855,000
$1.144.000
$1,999,000
Land Payment at Closing
Present Value of Tax Increment
Total Agency Revenues
Net Agency Cost (Revenue)
$1,144.000
The Agency costs are offset by the land payment received at closing and tax increment
revenues received by the Agency. At closing, the Agency will receive $855,000 acquisition of
the Site. The Agency receives tax increment revenues for affordable housing and general use,
Over the remaining term of the Project Area, the Agency is projected to receive nearly $2.1
million of tax increment revenues, which has a present value, discounted at 6.0%, of
$1,144.000.
Deducting the $855,000 Agency costs from the $1.999,000 Agency revenues, results in net
revenues to the Agency of $1,144,000.
Under the Agreement, the City will reimburse the Developer up to $880,000 for installation of
the Public Improvements that are already a part of its capital improvement program.
III.
ESTIMATED VALUE OF THE INTERESTS TO ESE CONVEYED DETERMINED AT
THE HIGHEST USE PERMmED UNDER THE REDEVELOPMENT PLAN
Section 33433 of the Califomia Health and Safety Code requires the Agency to identify the
value of the interests being conveyed at the highest use allowed by the Agency Site's zoning
and the requirements imposed by the Redevelopment Plan, The valuation must be based on
the assumption that near-term development is required, but the valuation does not take into
consideration any extraordinary use, quality and/or income restrictions are being imposed on
the development by the Agency.
The Agency retained Integra Realty Services to prepare an appraisal of the property. The
appraiser determined that the highest and best use of the Site is to subdivide the Site Into
smaller parcels and to develop owner occupied improvements consistent with zoning
regulations. The appraiser concluded that the sales comparisons utilized provided an adequate
framework from which to gauge expectable value and that the Site has a present value equal to
its estimated value as though vacant and less the cost to demolish with asbestos abatement.
5
Resolution No. 04-41
Page 27 of 29
-'.T\JS:JAR'Ubd
111830.001.1)03I05IO7104
The appraiser determined that the Site in its present condition has a hypothetical market value,
as of April 5, 2004, of $780,000 or $18.35 per square loot.
IV.
ESTIMATED REUSE VALUE OF THE INTERESTS TO BE CONVEYED
KMA, the Agency's real estate advisor, prepared a reuse valuation analysis 01 the Project dated
April 26, 2004, based on the financial terms and conditions imposed by the Agreement. Taking
into account the covenants, conditions and restrictions Imposed by the Agreement, it is
concluded that the fair reuse value of the Site is $843,000.
V,
CONSIDERATION RECEIVED AND COMPARISON WITH THE ESTABLISHED
VALUE
The Agreement requires the Agency to convey the Agency-owned parcel to the Developer at a
price of $855,000.
As previously mentioned, the KMA analysis concluded that the Agency-owned parcel has a fair
reuse value of $843,000, which is less than $855,000 to be paid at closing. Further, the fair
market value of the Site is estimated to be $780,000, which is also less than the amount to be
paid to the Agency. Thus, the consideration to be received by the Agency is equal to or greater
than the established fair reuse value and the fair market value.
VI,
BLIGHT ELIMINATION
The Site currently characterized by the following blighting conditions that will be alleviated by
the Project:
.
Unsafe/dilapidated/deteriorated buildings
.
Physical conditions that limit economic viability and use of lots and buildings (age and
obsolescence)
.
Inadequate public infrastructurelfacilities
.
Depreciated or stagnant property values and/or impaired private investments
The development of the mixed.use project will eliminate the current physical blighting
conditions. Thus, the proposed development fullillsthe blight elimination requirement.
Resolution No. 04-41
Page 28 of 29
04O4_llJS;""':gbd
,..,o.oO'.OO3IDSIO7'"
6
VII.
CONFORMANCE WITH THE AB1290 IMPLEMENTATION PLAN
The Project conforms with several of the objectives defined in the Five Year Implementation
Plan adopted by the Agency in March 2000. Pertinent goals and objectives that are satisfied by
the Project are as follows:
To create a mixed-use Town Center area that combines commercial, office residential
and public uses, which will serve the needs of the community as well as encourage the
healthy growth of the area;
.
To encourage residential development by actively seeking private development in the
redevelopment area;
To increase the level of capital improvements such as the development of the
Columbus-Tustin Park, parking facilities, sidewalk and street landscaping, street
improvements, and related public improvement projects; and
To revitalize and develop amenities in the Project Area, both publicly and privately
financed, as a means of aiding the revitalization of the EI Camino Real section of the Old
Town district in particular.
7
Resolution No. 04-41
Page 29 of 29
_"TUS~AA:9bd
'9830.001.00:wsm.....