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Home My WebLink About23 - Agreement for Purchase and Sale and Escrow Instructions for the Purchase of Real Property at 1201 Dove Street - PowerPoint1201 Dove Street Purchase Agreement CITY COUNCIL November 15,, 2022 Seimone Jurjis, Community Development Director Lauren Wooding Whitlinger, Real Property Administrator pet n c\,FOV7% Existing Police Headqua r. �\� :��:��t»� rters �'W%e'-- NBPD HQ — located at 870 Santa Barbara Drive Shares 4-acre parcel with Fire Station No. 3 Acquired and built by City in 1973 49,284 square feet Slated for Capital Improvement Plan facility replacement in 10-years AA �' Sale Comparables 21 SALE COMPARABLE LOCATIONS rL6) Huntington Beach rat Huntingto State Q,-ar Avg. Cap Rate Avg. Price/SF Avg. Vacancy At Sale $600 4n1% �Av, MESA VERDE Fairview Park Costa Mes Santa a WESTSIQE SALES 12 Mo Transactions IL Market Sale Price/SF .. , Average Market Sale Price 12 Mo Sales Volume Market Cap Rate Irvine GREAT r lhOO L'dR1DOE ?` OAK CREEK Wild Rivers omers Irvine EAST 1RViNE William IRVINE TECHNOLOG RMason �73 CENTER Regional Park IRVINE VV SPECTRUM *� CENTER TURTLE ROCK Turtle Rock Community Park r,Fur,� _HTER nan Library .ardens nFbNA UMAR :,ill SUBMARKET 21� $393 } $19.7M } $194M} 5.9% T San Joaquin L Hills iaa y r ff / NEWPORT COAST 73 ' f 1 4�5 1 MARKET Cove .'+ 4villow Park rr�+ Stagir7g Area �r}}�rj�//�� 320 r + { ,t A1i� +77+ $3Lf rfr � h L. 1 {"'� Top of the Y r $2.313 t 6.1 % 1201 Dove Street - Off Market 167,01 SQL.. F. r�6� �{ ��,�yp� � A � '� ,� �• � .�- J `•1 a $ ;s .... . . . . . . it -: r - - l.-1, :g }yam ~ � � �',.L' Y.��•.;� i _ b r� �9' � �S .•.� � •gyp t',' e l ��yy is ��• '��..'(�h . !. • j b 11 !� •.i fir Prope--`-• Description 3.59-acre site 6-story office building 82,868 square feet 21 existing tenants leases expire between 2023 - 2028 5 spaces available for lease 13,540 square feet Why Purcha 'his Property Now? 1. Willing seller 2. Property characteristics size &location - 3.59 acres 3. Net positive cashflow — $1.2 m/year (5% CAP Rate) 4. Strong demand for large developable lots in Airport Area for multifamily housing 5. Strategic plan — purchase and hold for 10-years generate'- $15 million in income 6. Value of existing PD property in 10-years N $55 million Chance Our Mind- ip 10=Years Net income is projected to be $2,600,000 per year @ a 5% CAP Rate the value is $52 million 1201 Dove Street - Negotiated Purchase Terms Price Deposits Due Diligence Closing L J $3015001000 1% $3051000 — opening 1% $305,000—duediligenceapproval 120-days from opening 30-days from due diligence approval Shared, City to purchase title policy 1201 Dove Str* Phase I Geotechnical Investigation • ALTA Survey Due Diligence Building Condition Inspection Hazardous Materials Survey ADA Compliance Inspection Lease Summary and Review AP Review and Projections Review Title Condition and Proforma Appraisal How Do We Pay For It? 7 FY21-22 Surplus Facilities Financial Planning Fund (FFP) General Fund Capital Improvement Plan Fund (CIP) $24,100,000 $51506,461 $1,450,000 1201 Dove Street - Revenues & Property Management Property management fee 2.5% of gross Current contract expires August 2023 City to issue RFP for new management contract Approximate annual rent income - $1,200,000 • NOI to increase with new leases Purchase Price Current Annual Net Revenue Occupation Rental Rate Change Anticipated Total NOI $30,5001000 $1,200,000 10-Year Operation —90% 26% (3% y-o-y) $15,000,000 15-Year Operation —60-80% 44% (3% y-o-y) $25,000,000 MARKET RENT GROWTH (YOY) 10% 8% 6% 4% L% 0% Forecast 1 1 1 1 1 1 1 1 1 1 _ - rr}� //�IQ -L 1 � 1 -4 % { 1 -4l4 1 -84I1� 1 1 1 1 0 °fix v 1 1 -' 1 %................................. � 1 -14% 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Newport Beach 3 Star M Newport Beach 4-5 Star M Newport Beach Orange County VACANCY RATE 15% fo 14% � 1 % �. All 12% 11% � i 10% � 9% i 8% 2017 2D18 2019 2020 2021 2022 2023 2024 2025 2026 Newport Peach 3 Star ■ Newport Beach 4-5 Star ■ Newport Beach 0 Orange County ecommended Action Authorize the City Manager and City Clerk to execute the Purchase and Sale Agreement and Escrow Instructions Approve Budget Amendment No. 23-028 ext Step Execute Purchase Agreement Open Escrow and pay initial deposit Conduct due diligence review Pay second deposit Close Escrow Questions and Discussion CITY COUNCIL NOVEM BER 15, 2022 Seimone Jurjis, Community Development Director 949-644-3200. siuriisPnewportbeachca.eov Lauren Wooding Whitlinger, Real Property Administrator 949-644-3236, Iwooding&newportheachca.go�