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HomeMy WebLinkAbout02 SALE AGENCY PROP 10-04-04 AGENDA REPORT Agenda Item 2 Reviewed: ~ City Manager Finance Director ~ MEETING DATE: OCTOBER 4, 2004 FROM: WILLIAM A. HUSTON, CITY MANAGER REDEVELOPMENT AGENCY STAFF TO: SUBJECT: APPROVAL OF THE SALE BY AGENCY OF PROPERTY FOR A PROPOSED RETAIL PROJECT LOCATED IN THE TOWN CENTER REDEVELOPMENT AREA PROJECT SUMMARY The Tustin City Council is being asked to adopt the resolution approving the sale of Agency-owned property to Makena Great American Newport Company, LLC, for the development of a 7,400 square feet retail building at the southwest corner of EI Camino Real and Newport Avenue. RECOMMEDATION Staff recommends that the City Council adopt Resolution No. 04-85 approving the sale by the Agency property located at 14011 Newport Avenue pursuant to Health and Safety Code Section 33433. FISCAL IMPACT A fiscal analysis of the proposed DDA is provided in the report prepared pursuant to Health and Safety Code Section 33433 and attached as Exhibit A to Resolution No. 04- 85. There will be no fiscal impact to the Agency for the construction of private improvements pursuant to the DDA (Attachment B - Disposition and Development Agreement 04-02). BACKGROUND In April, 2004, the Agency approved an Exclusive Agreement to Negotiate a Disposition and Development Agreement with Makena Great American Newport Company, LLC (the "Developer') in response to the Developer's request for assistance in purchasing a Caltrans surplus site located along the 1-5 freeway for the purpose of assembling larger site for development of a retail center located at 14001 Newport Avenue. The Caltrans surplus site is contiguous to the southerly boundary of the Newport Avenue property owned by the Developer, which is formerly the site of Tustin Transmission and is currently vacant and in need of redevelopment. Makena Great American Newport Company DDA October 4, 2004 Page 2 The Exclusive Agreement to Negotiate was to allow the Developer to proceed in completing preliminary design drawings, detailed economic and cost evaluations, and to allow him to begin serious discussions on the necessary financing for the project. During the Exclusive Right to Negotiate period, the Agency was to use its reasonable and best efforts to acquire the Caltrans surplus site to be subsequently sold to the Developer. On July 29, 2004 the Agency adopted Resolution RDA 04-06 approving the acquisition of real property and entered a Purchase and Sale Agreement with the California State Department of Transportation for the Caltrans surplus site. DISCUSSION Redevelopment Agency Staff have prepared the proposed Disposition and Development Agreement 04-02 between the Redevelopment Agency and Makena Great American Newport Company. The DDA provides for the payment by the Developer to Agency of a purchase price of $189,000 plus acquisition costs for the Caltrans surplus site. The purchase price to be paid is greater than the appraised fair market value and the reuse value of the land and is equal to the Agency's cost of acquiring the property, thus not requiring any public subsidy for the construction of the private improvements on the Site. The DDA requires the Developer to secure all required land use entitlements from the Tustin Planning Commission and City Council, and to obtain private funds necessary for all project costs, including but not limited to, the acquisition of the site, construction of all on-site improvements and all related private improvements as identified in the DDA related to developing the site. The site improvements will be constructed in compliance with all provisions of the DDA and with all "Conditions of Approval" stipulated by the Tustin Planning Commission, the City Council, and other applicable governmental agencies having jurisdiction. The DDA also requires the developer to provide an irrevocable offer to dedicate in fee to the City of Tustin at no cost the easterly ten feet along Newport Avenue for future roadway improvements. Following the public hearing on September 27, 2004, the Planning Commission adopted Resolution No. 3931 finding the disposition of property by the Tustin Community Redevelopment Agency for the proposed Project is in conformance with the Tustin General Plan. Since the site is being purchased by Tustin Community Redevelopment Agency, Health and Safety Code Section 33433 requires the legislative body (the Tustin City Council), after a public hearing, to approve an Agency sale of property that was acquired in whole or in part with tax increment moneys. Makena Great American Newport Company DDA October 4,2004 Page 3 The proposed property sale and infill redevelopment may be categorically exempt from the regulations of the Environmental Quality Act pursuant to Section 15332 (Class 32) of the California Code of Regulations, Title 14, Chapter 3 (Guidelines for the California Environmental Quality Act). The Community Redevelopment Agency has made such a determination for this project. Such determination is on file with the Redevelopment Agency. CONCLUSION The proposed project is consistent with the Implementation Plan's five year plan for redevelopment activities in the Town Center Redevelopment Project Area. The proposed project will remove a blighting influence and contribute to economic revitalization in the Project Area by removing vacant deteriorating buildings and developing a retail project consisting of a 7,400 square foot commercial building. Attached are the proposed Resolution 04-85 with the Section 33433 Summary Report, as Exhibit A thereto. ÇQ¡(~ Redevelopment Program Manager S:\RDA\CC report\Oct 4 04 Makena Great American DDA Section 33433 Report.doc Attachments RESOLUTION NO. 04-85 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUSTIN, CALIFORNIA, APPROVING THE SALE OF A 0.23-ACRES PARCEL BY THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY LOCATED AT 14011 NEWPORT AVENUE PURSUANT TO HEALTH AND SAFETY CODE SECTION 33433 The City Council of the City of Tustin does hereby resolve as follows: I. G. 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 Makena Great American Newport Company, LLC, a California Limited Liability Company (the "Developer") pursuant to which (a) the Agency would sell to Developer that certain Agency-owned real property located at 14011 Newport Avenue (the "Caltrans Parcel"); and (b) Developer would merge the Caltrans Parcel with the Developer-owned parcel located at the southwest corner of Newport Avenue and EI Camino Real and construct a retail project on the site (collectively the "Property" and "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 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 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 Resolution No. 04-85 Page 2 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) (ii) (iii) (iv) 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; 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 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 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 J. K. 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. Resolution No. 04-85 Page 3 II. The City Council hereby finds and determines, based upon substantial evidence provided in the record before it: A. B. That the foregoing recitals are true and correct. 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. 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. D. E. The foregoing findings are based upon the record of the public hearing on the sale and approval of the DDA, and the report prepared in accordance with CRL Section 33433 (a)(2). The proposed property sale and infill redevelopment may be categorically exempt from the regulations of the Environmental Quality Act pursuant to Section 15332 (Class 32) of the California Code of Regulations, Title 14, Chapter 3 (Guidelines for the California Environmental Quality Act). The Community Redevelopment Agency has made such a determination for this project. Such determination is on file with Redevelopment Agency. F. PASSED, APPROVED AND ADOPTED at a regular meeting of the Tustin City Council held on the 4th day of October, 2004. TONY KAWASHIMA MAYOR, CITY OF TUSTIN PAMELA STOKER City Clerk S:\RDA\CC resos\04-85 Makena Great American Newport Company DDA 33433 Report Adopting Resolution.DOC Attachment: Exhibit "A" - Fair Reuse Analysis and Summary Report Resolution No. 04-85 Page 4 STATE OF CALIFORNIA) ORANGE COUNTY ) 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 forgoing Resolution No. 04-85 was duly passed and adopted at a regular meeting of the Tustin City Council, held on October 4, 2004, by the following vote: COUNCILMEMBER AYES: COUNCILMEMBER NOES: COUNCILMEMBER ABSTAINED: COUNCILMEMBER ABSENT: PAMELA STOKER CITY CLERK EXHIBIT A TO RESOLUTION 04-85 SUMMARY REPORT PURSUANT TO SECTION 33433 OF THE HEALTH AND SAFETY CODE ON A OWNER PARTICIPATION AND DISPOSITION AGREEMENT BY AND BETWEEN TUSTIN COMMUNITY REDEVELOPMENT AGENCY AND MAKENA GREAT AMERICAN NEWPORT COMPANY, LLC 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 REDEVELOPMENT AGENCY AND MAKENA GREAT AMERICAN NEWPORT COMPANY, LLC 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 Makena Great American Newport Company, LLC (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 the 0.23-acre Caltrans Parcel (Caltrans Parcel) located at 14011 Newport Avenue in the City of Tustin (City) to the Developer. The 0.68-acre project site consists of the 0.23-acre Caltrans Parcel and approximately 0.45 acres located at 14001 Newport Avenue and 770 EI Camino Real (Site). The Developer is required to construct a one-story, 7,400 square foot retail commercial building and a parking lot for no less than 35 cars (Project). The following Summary Report is based upon information contained within the Agreement, and is organized into the following seven sections: I. II. III. IV. Salient Points of the Agreement: This section summarizes the major responsibilities imposed on the Developer and the Agency by the Agreement. Cost of the Agreement to the Agency: This section details the total cost to the Agency associated with implementing the Agreement. Estimated Value of the Interests to be Conveyed Determined 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. Estimated Reuse Value ofthe Interests to be Conveyed: This section summarizes the valuation estimate for the Site based on the required scope of development, and the other conditions and covenants required by the Agreement. 0409046.TUS:JAR'mm 19630.001.008109/28104 VII. V. 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. VI. 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 of the Agreement. I. SALIENT POINTS OF THE AGREEMENT A. Project Description The Scope of Development defined in the Agreement includes a one-story, 7,400 square foot retail commercial building with outdoor patio space and a parking lot for no less than 35 cars. The Project also includes an irrevocable requirement to dedicate 2,143 square feet along Newport Avenue for future street widening. B. Developer Responsibilities The Agreement requires the Developer to accept the following responsibilities: 1. The Developer must accept conveyance of the Caltrans Parcel from the Agency under the terms of the Agreement for a price of $189,000, plus Agency Transaction Expenses, less any advance paid to Caltrans from the EAN Deposit. 2. The Developer must demolish and remove the existing improvements on the Site. 3. The Developer must develop a one-story, 7,400 square foot retail building with an outdoor patio and a parking lot for no less than 35 cars. Building improvements and landscaping must be consistent with the terms of the Agreement. 4. The Developer must irrevocably dedicate the 2,143 square feet along Newport Avenue. 2 0409046.TUS:JAR:omm 19630.oo1.ooB~91261O4 5. The Developer shall provide escrow instructions consistent with the Agreement and pay in escrow the following: a. 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. 6. The Developer shall submit to the Agency evidence of financing necessary to undertake the Project in accordance with the Agreement. a. A commitment in writing from a permitted mortgagee for the funding of the improvements. b. Evidence satisfactory to the Agency of sources of equity capitai 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 of Performance per the Agreement. 8. The Developer shall be responsible for any and all costs directly or indirectly related to the Development, including but not limited to, acquisition of the Site and construction of the Private Improvements. c. Agency Responsibilities Under the Agreement, the Agency must complete the following responsibilities: 1. The Agency shall acquire the Caltrans Parcel. 2. The Agency shall convey the Caltrans Parcel to the Developer for $189,000. a. The Agency agrees to open an escrow for conveyance, and provide escrow instructions consistent with the Agreement. 3. The Agency shall timely and properly execute, acknowledge and deliver the Quit Claim Deed, conveying title to the Caltrans Parcel to the Developer. 4. Agency's financial participation is limited to conveying fee ownership interest in the Caltrans Parcel to the Developer, at a price of $189,000 as set forth in the Agreement. 3 0409046.TUS:JAR:emm 19630.001.006109/28104 II. COST OF THE AGREEMENT TO THE AGENCY The Agency costs to implement the Agreement are limited to the acquisition of the Caltrans Parcel. The Agency is scheduied to acquire the Caltrans Parcel for $189,000. As shown below, the total cost to the Agency is $189,000. Acquisition Cost Total Agency Cost $ 189.000 $ 189,000 $ 189,000 $ 416.327 $ 733.582 Land Payment at Closing Present Value of Tax Increment Total Agency Revenues Net Agency Revenue $ 544.582 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 $189,000 for acquisition of the Caltrans Parcel. 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 $733,582 million of tax increment revenues, which has a present value, discounted at 6%, of $416,327. The Agency revenues of $733,582 exceed the Agency costs of $189,000, so the net Agency revenues from the Project are $544,582. III. ESTIMATED VALUE OF THE INTERESTS TO BE CONVEYED DETERMINED AT THE HIGHEST USE PERMITTED UNDER THE REDEVELOPMENT PLAN Section 33433 of the California 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, quaiity and/or income restrictions are being imposed on the development by the Agency. The Agency and Caltrans have entered into a purchase and sale agreement for the Agency to purchase the Caltrans Parcel for the fair market value of $189,000. The Developer is acquiring the Caltrans Parcel from the Agency at fair market value in the amount of $189,000 plus Agency Transaction Expenses. 4 0409046.TUS:JAR,mm 19630.001.008109/28104 IV. ESTIMATED REUSE VALUE OF THE INTERESTS TO BE CONVEYED Taking into account the covenants, conditions and restrictions imposed by the Agreement, it is concluded that the fair reuse value is the same as the fair market value, namely $189,000. V. CONSIDERATION RECEIVED AND COMPARISON WITH THE ESTABLISHED VALUE The Agreement requires the Agency to convey the Caltrans Parcel to the Developer at a price of $189,000. As previously mentioned, the Caltrans Parcel has a fair market and fair reuse value of $189,000. Thus, the consideration to be received by the Agency is equal to 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 infrastructure/facilities 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 fulfills the blight elimination requirement. 5 0409046.TUS:JAR'mm 19830.001.006109/26/04 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, 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. 6 0409046.TUS:JAR,mm 19630.001.006109126104 Refer to RDA Item 1 for Disposition and Development Agreement (DDA 04-02)