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Home My WebLink About04 - Marina Park LeaseCITY COUNCIL AGENDA ITEM NO. 4 CITY OF NEWPORT BEACH BYTHE c11r 'At OFFICE OF THE CITY MANAGER cirr of i AUGUST 23, 1993 AUG 2 3 1gq,3 APPROVED TO: MAYOR AND CITY COUNCIL FROM: DEPUTY CITY MANAGER SUBJECT: MARINA PARK LEASE ACTION: If desired, accept recommendation of the Income Property Committee to affirm the mobile home park as the highest and best use of the property and direct staff to commence negotiations to extend the lease. The Income Property Committee (Cox and Sansone) met August 2nd to review the attached staff report. The following factors contributed to their recommendation: -the downturn in the real estate market -the surplus of multi -family residential and commercial property -the inability to convert the property to a marina without a charter amendment to condemn the beach -the revenue performance of mobile homes compared to other uses -the short term, low risk revenue projections The direction to commence negotiations does not commit the Council to extend the lease. Under direction of the Income Property Committee, staff will negotiate lease terms and rental rates and return to the Council. t enneth J. lino KJD:mk Attachment CITY OF NEWPORT BEACH OFFICE OF THE CITY MANAGER JULY 13, 1993 TO: INCOME PROPERTY COMMITTEE COUNCIL MEMBERS COX AND SANSONE FROM: DEPUTY CITY MANAGER SUBJECT: MARINA PARK LEASE NEGOTIATIONS ACTION: Determine that the existing mobile home park is the highest and best use and direct staff to commence lease extension activities. BACKGROUND: Marina Park is a 4.09 acre beach front parcel originally granted to the City in 1919 for one dollar by Pacific Electric Railroad. Once used as a campground, it currently contains a 58 space mobile home park with 2 additional coaches for the manager and assistant manager. Current net income is approximately $550,000 annually. The current lease expires in year 2000 and the residents have asked to commence negotiations to extend it. DISCUSSION: The City Council Policy on Revenue Producing Property (attached) states that the first step in lease negotiations is to establish highest and best use for the property. As an alternative to the mobile home park, alternative uses such as commercial, residential, mixed use or perhaps a marina need to be considered. Regarding a potential marina, consideration must be given to Section 1402 of the City Charter which states: there shall be reserved forever to the people the public use of a strip of bay front land above mean high tide not less than 85 feet in depth of the City - owned waterfront property bounded on the west by the south easterly line of 19th Street and bounded on the east by ... (the Legion Hall) ..." Essentially, without a charter amendment, the beach in front of Marina Park cannot be disturbed. Other uses such as residential or a mixed use such as the 28th Street Marina are discussed below. • The mobile home park provides to the City the highest net income per square foot of any of the City's large land holdings. (see attachment) Any conversion would entail a drop in short term income, and considerable additional dollars would need to be invested before any appreciable gain could be realized. Page 2 No conversion could occur until sometime after the existing lease expires on March 15, 2000. Undoubtedly, relocation costs would be incurred notwithstanding the existing lease. After that time, a large investment of funds and considerable construction time would be required. The brief analysis on the accompanying chart indicates that potential conversion will be no more and possibly less profitable than the existing mobile home park. RECOMMENDATION Considering the City's current financial condition and the down turn in the real estate market (particularly the bankrupt 28th Street Marina), the mobile home park appears to be the lowest risk and highest return alternative. Staff recommends the action cited above. r Kenneth J. Deli KJD:mb r_ . t MARINA MOBILE HOME PARK REVENUE COMPARISON BETWEEN CONTINUED USE AND CONVERSION TO CONDOMINIUMS Rental Income from Mobile Homes Current Total Potential Total Monthly Current Monthly Potential Space Number Rent Rent Rent Rent A & B 25 $922 $ 23,050 $1,300 $ 32,500 C & D 22 748 16,456 900 19,800 E 11 700 7,700 800 8,000 Total Monthly $ 47,206 $ 61,100 Total Annual $566,472 $733, 200 Increase $166,728 Rental Income from Condominiums Net Rent 60 units x $2000/month $1,440,000 Debt Service (60 units, 1500 sq. ft. @ $100 = $9,000,000 @ 30 yrs./6%) ( 644,000) Lost Rent (5 1/4 yrs. x $167,000 + 3 yrs, x $733,00 = 3,076,000 @ 6%) ( 185,000) Net Annual $ 611, 0 0 0 Sales Income from Condominiums Sales Price (60 x $350,000) $21,000,000 Construction Costs ($9,000,000 @ 3 yrs @ 6%) (10,800,000) Lost Rent ( 3,076,000) Net Profit $ 7,124,000 Net Annual @ 7% 499, 000- F-24 REVENUE PRODUCING PROPERTY The City owns and manages an extensive and valuable assortment of property including streets, parks, beaches, public buildings and service facilities. The City also owns and operates a yacht basin, a mobile home park, a luxury residential development and various other revenue producing properties. Most of the revenue producing property is tidelands, filled tidelands or waterfront. Unencumbered fee value of revenue producing property is estimated at upwards of one hundred million dollars, and income typically contributes ten percent of all City revenues. As owner of property, the City is the steward of a public trust, and state law requires the City to maximize its returns or be subject to a charge of making a gift of public funds. Nevertheless, the City Council recognizes the importance of this property not only as a revenue generator, but also as a means to provide otherwise infeasible uses and facilities to benefit the community. In managing its property, the City will continually evaluate the potential of all City owned property to produce revenue. This may include leasing unused land, renting vacant space, establishing concessions in recreation areas or other similar techniques. The City Council will evaluate the appropriateness of establishing new revenue producing properties using sound business principals and after receiving input from neighbors and users. The policy of the City Council is that revenue producing property be managed in accordance with the following: 1. Whenever a lease, management contract, concession, sale or similar action regarding a revenue producing property is considered by the City, an analysis shall be conducted to determine the maximum or open market value of the property. This analysis shall be conducted using appraisals or other techniques to determine the highest and best use of the property and the highest value of the property. 2. All negotiations regarding the lease, management contract,_ concession, sale or similar action regarding a revenue producing property shall include review of an appraisal or analysis of the use being considered for the property conducted by a reputable and independent professional appraiser, real estate consultant or business consultant. The City shall seek, whenever practical and financially advantageous, to operate or manage all property and facilities directly with City staff or contractors. 4. In all negotiations regarding the lease, management contract, concession, sale or similar action regarding a non-residential revenue producing property, the City shall seek revenue equivalent to the open market value of the highest and best use; and, whenever possible the City shall conduct an open bid or proposal process to insure the highest financial return. Whenever less than the open market or appraised value is received or when an open bid process is not conducted, the City shall make specific findings setting forth the reasons thereof. CITY OF NEWPORT BEACH INCOME PROPERTIES' 1992 Gross Net Income/ Estimated Lease Lease Income so ft. Fee Value Property Area �8 on g $ 718,400 $ 1.50 $ 000,000 Beacon Bay Approx. 11 acres 7/15/06 72 home sites $ 574,200 $ 3.09 $ 107000,000 Marina Park 4.09 acres 3/15/00 58 mobile homes $ 1.29 $ 2,500,000 American Legion 1.54 acres 3/15/00 Hall, boat storage, slips $ 87,200 $ 250,000 Balboa Angling Club 2880 ft. mil• 1/03/99 Clubhouse, dock $ - 0 - -0- $ $ 40,000 Balboa Yacht Club 4022 sq. ft. 8/28/99 Tidelands $ 2,611 .65 $ 2.14 $ 1,775,000 City -County Dock Prop Approx. 0.9 acres 2018 Slips $ $ 94,772 50,200 $ 5.02 $ 720,000 10,000 sq. ft. 9/30/13 Ferry loading & storage Balboa Ferry 5/14/11 Apts., club, et al $ 795,200 $ .72 $ 12,500,000 Balboa Bay Club 25.27 acres $ 79,000 $64.50 $ 1,200,000 Balboa Pier Approx. 1225 sq. ft. 3/09/97 Ruby's Restaurant $ 1,400,000 12/31/96 Food Concession $ 97,100 -0- CDM Beach __ Approx. 1600 sq. ft. 6/15/12 Fisherman's Restaurant $ 65,000 $40.00 $ 1,500,000 Newport Pier $ _ 0 - -0- $ 350,000 4210 River St 3000 sq. ft. None Vacant $ 11,770 $ 1 $ 0,000 Harbor Island Leases** 7665 sq. ft 3/22/37 Encroachments $110 40 $ 0,000 44th St. House 2550 sq. ft 30 days Duplex $ $ 28,80 2,400 -3 $ 3.70 $ 57,000 38th & Lake Triangle 650 sq. ft. 30 days Parking $ $ 7,000,000 12.75 acres 4/14/00 Park, Boat storage slips $ 7,800 .01 Lido Bayfront $ 1 -0- $ 300,000 Girl Scout House 17,500 sq. ft. 3/15/00 (1 yr. notice) Day Camp $ $ .93 $ 335,000 Nautical Museum 17,500 sq. ft. 6/30/96 Museum 1,905 $ $ Radio Tower 650 sq. ft. 10/30/93 Antenna $ $ 3,800 3,800 -0- -0- 57,000 $ 57,000 4 posts on piers Yearly (30 days) Pa telescopes Y P Telescopes vaned slips & Misc. $1.224.228 $ 2.56 �10.000.000 $108,764,000 Balboa Yacht Basin 7 acres $3,846,857 Excludes oil wells, moorings, and parking lots. ..Proposed.