HomeMy WebLinkAbout13 - 1499 Monrovia Avenue SaleCITY OF
NEWPORT BEACH
City Council Staff Report
July 22, 2014
Agenda Item No. 13.
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Kimberly Brandt, Community Development Director — (949) 644 -3226,
kbrandt @newportbeachca.gov
PREPARED BY: Lauren Wooding, Real Property Administrator / Seimone Jurjis, Chief Building
Official
PHONE: (949) 644 -3236
TITLE: Sale of 1499 Monrovia Avenue — Approve a Purchase and Sale Agreement and
Enter into Escrow for the Sale of 1499 Monrovia with Kobe, Inc.
ABSTRACT:
Kobe, Inc. has submitted an offer to purchase the City property at 1499 Monrovia Avenue, for
$5,800,000 pursuant to the negotiated terms of a purchase and sale agreement.
RECOMMENDATION:
a) Approve and authorize the Mayor and City Clerk to execute a Purchase and Sale Agreement and
Escrow Instructions (Staff Report Attachment CC 1) with Kobe, Inc. for disposition of the City property
located at 1499 Monrovia Avenue for a sale price of $5.8 million and to enter into escrow;
b) Authorize the City Manager to execute all documents approved as to form by the City Attorney that are
necessary to implement the Purchase and Sale Agreement and complete the sale transaction and transfer
ownership of the property to Kobe, Inc., through escrow; and
c) Approve a waiver of City Council Policy F -7 based on the findings in this staff report, that converting
the property to another use would result in excessive vacancy, which would outweigh the financial benefits.
FUNDING REQUIREMENTS:
The revenue for the property, $5,800,000 (less title, escrow, and broker fees), will be deposited into the
West Newport Capital Projects Fund (416- 9416- 6800).
DISCUSSION:
Background
Located in the West Newport area, the 1.097 -acre property is immediately west of the terminus of West
15th Street. The proposed Newport Banning Ranch project is located to the west of the property, and the
new Coastline College campus is located to the north (Attachment CC 2). The property is improved with a
16,550 square -foot office building.
In 2010, the City rezoned the property from M -1 -A (Industrial zone now classified as IG) to RM (Multiple
Residential). In 2012, the previous owner obtained approval from the City for a ten -year abatement order
allowing use of the parcel under the previous zoning of commercial /office industrial. The abatement order
expires February 1, 2022, at which time the non - residential use of the site must cease. In November 2012,
the City purchased the property for $4,300,000.
In compliance with California Government Code subsection 54222, the City issued a Notice of Surplus
Land on February 21, 2014; no interest letters have been received from the County of Orange or any
housing sponsor for development of low to moderate income housing, the Orange County Park and
Recreation Department, the California Resources Agency, or the Newport-Mesa Unified School District.
On May 22, 2014, the City received an offer from Andrea Fairchild, President of Kobe, Inc. (Buyer) for
acquisition of the property for $5,800,000, with no loan contingencies, and a 30 -day escrow period
(Attachment CC 4). In response to this offer, a Purchase and Sale Agreement (Attachment CC 1) for sale
of the property has been drafted between Kobe, Inc. and the City.
There have been comments expressed that this site may be appropriate for the new West Newport
Community Center. Staff has reviewed it as a potential community center location, but believes that its
small size and triangular shape will limit the type and number of amenities that can be constructed on the
property. If the site were to be a successful community center, property adjacent to it to the west on
Banning Ranch would be needed to support and complement the facility (for parking, fields, a community
garden, pool, etc.). Additionally, a busy City facility adjacent to the Newport Crest community will be well -
received by some, but not by all residents there.
The sale of this property to Kobe, Inc. creates a situation where its current non - conforming use will either
havice to end as of 2022 or be extended past that period by an additional land use action. Staff has
determined that, if a portion of the property is used for the extension of 15th Street, the property will be
non - conforming in terms of parking unless other parking arrangements are made or some type of covenant
is applied to the remaining parcel that could limit full office use of the building. We acknowledge that
neither of these consequences is ideal.
Summary of Purchase and Sale Agreement.
The proposed terms of the Purchase and Sale Agreement are summarized below:
1. Purchase price of $5,800,000. City to pay Buyer's broker fees of 2.5% of the purchase price, $145,000,
and remaining title, escrow, and closing costs to be split between the parties;
2. City to transfer approximately 35,021 square feet of the existing 47,791 square -foot parcel, reserving
ownership of the residual 12,770 square feet for future development and extension of the West 15th Street
right -of -way;
3. Buyer acknowledges the property is zoned RM (Multiple Residential), and an abatement allowing use
of the property under the previous zoning of commercial office /industrial was approved by the City in 2012,
and expires on February 1, 2022, at which time all non - residential use of the property shall cease or the
building be demolished, unless an additional extension of the abatement period is granted, or appropriate
changes in the Zoning District and General Plan Land Use Designation are approved and adopted; or a
change to the Zoning Regulations pertaining to non - conforming uses or their abatement is approved and
adopted prior to that date;
4. Buyer further acknowledges that the 15th Street right -of -way is designated on the Orange County
Master Plan of Arterial Highways and is incorporated into the Circulation Element of the City's General
plan. Therefore, Buyer understands that the City may, as deemed appropriate in its sole and absolute
discretion, improve or require the improvement of the 15th Street right -of -way parcel (Attachment CC 3);
5. Until such time as the 15th Street right -of -way parcel is developed, City shall permit, subject to the
execution of a no -fee license agreement between Buyer and City, Buyer to continue to use the 15th Street
right -of -way parcel for parking and other uses to the benefit of the property as those uses exist as of the
date of this agreement;
6. To the extent parking for the property is nonconforming as a result of the improvement of the 15th
Street right -of -way parcel, replacement parking either on -site or off -site would be required for the existing
use to continue. In the absence of replacement parking, the square footage of the building not supported
by parking will become non - occupiable unless replacement parking is provided on -site or off -site. In the
alternative, other options include modification of the on -site use to conform to the available parking spaces;
an adjustement to the parking requirement under Zoning Code Section 20.14.110 pursuant to approval of a
conditional use permit, or site improvements to facilitate additional on -site parking such as subterranean
parking and /or an at -grade parking structure. Any such improvement shall require all necessary and
required approvals, which include, but are not limited to, discretionary approvals by the City's Planning
Commission and /or City Council, which may be withheld in the City's sole and absolute discretion;
7. Escrow shall be opened within two days of execution of the Agreement, and Buyer shall deposit
$100,000 earnest money which shall be applicable to the purchase price, and refundable upon cancellation
of the Agreement (less $100 consideration to the City);
8. Buyer shall have 30 days from opening of escrow to inspect and evaluate the property, and waive any
contingencies. Buyer shall deposit an additional $100,000 earnest money within five days of waiver of
contingencies, which money shall be applicable to the purchase price, and $50,000 of the additional
earnest money would be refundable upon cancellation of the Agreement, and $50,000 would be paid to the
City in liquidated damages; and
9. Escrow shall close within 30 days from waiver of contingencies.
This agreement has been reviewed by the City Attorney's office and has been approved as to form.
Pursuant to City Council Policy F -7, Income Property (Attachment CC 5), the City conducted an open bid
by listing the property for sale on multiple on -line real estate industry listing services, but did not obtain a
current appraisal. The $5.8 million offer price is the highest bid received and exceeds the City's purchase
price of $4.3 million and the appraised value conducted prior to the City's acquisition of the site in
2012. Staff believes the following findings can be made: 1) converting the property to a residential use
would result in excessive vacancy which would outweigh the financial benefits of the pending offer to
purchase; 2) the current offer price is higher then any proposed offer received for a residential use.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find that the sale of this property is not subject to the California
Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or
reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a
project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14,
Chapter 3, because it has no potential for resulting in physical change to the environment, directly or
indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at
which the City Council considers the item).
ATTACHMENTS:
Description
Attachment CC 1 - Purchase and Sale Agreement and Escrow Instructions
Attachment CC 2 - Maps
Attachment CC 3 - Extension of 15th Street
Attachment CC 4 - Kobe. Inc. Purchase Offer
Attachment CC 5 - City Council Policy F -7, Income Propert y
ATTACHMENT CC1
AGREEMENT FOR PURCHASE AND SALE
OF REAL PROPERTY AND ESCROW INSTRUCTIONS
Escrow No. Date of Opening of Escrow: , 2014
To: Ticor Title
( "Escrow Holder ")
18302 Irvine Blvd., Suite 100
Tustin, CA 92780
Attn: Kim Hernandez
Telephone: 714 -289 -3300
THIS AGREEMENT FOR PURCHASE AND SALE OF REAL PROPERTY AND
ESCROW INSTRUCTIONS (this "Agreement ") is made this day of 2014, by
and between the City of Newport Beach, a Municipal corporation and Charter City ( "City") and
Kobe, Inc. (`Buyer ").
RECITALS:
A. City is the owner of that certain real property commonly known as 1499 Monrovia
Avenue, located in the City of Newport Beach, County of Orange, State of California,
and depicted on the map attached hereto as Exhibit "A" and by this reference
incorporated herein. The property depicted in Exhibit "A" includes an office building
and a parking area. The parking area is located in the area historically referred to as
the 60 -foot wide 15th Street right -of -way, which was abandoned pursuant to
Resolution No. 67 -863 of the Board of Supervisors of Orange County, California.
B. Notwithstanding the abandonment, The Master Plan of Arterial Highways as
approved by the Orange County Transportation Authority and the Circulation
Element of the City's General Plan identifies the future development of the 15th Street
right -of -way to serve future traffic circulation needs. The development of the 15th
Street right -of -way is contemplated to be located in that area more particularly
described on Exhibit `B" attached hereto and by this reference incorporated herein
(hereafter, referred to as the "15th Street Right -of -Way Parcel ").
C. The portion of 1499 Monrovia Avenue exclusive of the 15th Street Right -of -Way is
more particularly described on Exhibit "C" attached hereto and by this reference
incorporated herein, together with all improvements now or hereafter constructed
thereon, all easements, licenses and interests appurtenant thereto and all intangible
property owned or held by City in connection with the land, including without
limitation, development rights, governmental approvals and land entitlements
(collectively referred to herein as the "Property ").
D. City desires to sell to Buyer, and Buyer desires to purchase from City, the Property,
all on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
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TERMS AND CONDITIONS
I. PURCHASE AND SALE OF PROPERTY. Buyer hereby agrees to purchase
from City, and City agrees to sell to Buyer the Property, upon the terms and conditions
hereinafter set forth.
2. PAYMENT OF PURCHASE PRICE.
2.1 Amount of Purchase Price. The purchase price for the Property will be
FIVE MILLION EIGHT HUNDRED THOUSAND DOLLARS ($5,800,000.00) ( "Purchase
Price ").
2.2 Payment of Purchase Price.
(a) Not later than two (2) days following the Opening of Escrow,
Buyer shall deposit in Escrow in good funds, the sum of ONE HUNDRED THOUSAND
DOLLARS ($100,000.00) (the "Deposit "), which Deposit shall be applicable to the
Purchase Price upon the closing of escrow. In the event this Agreement is terminated by
Buyer on or before the expiration of the Due Diligence Period or Buyer disapproves of
any of the items requiring approval of Buyer hereunder on or before the expiration of the
Due Diligence Period, the Deposit shall be promptly returned to Buyer. Buyer shall have
the unqualified and unrestricted right to terminate its obligations under this Agreement on
or before the expiration of the Due Diligence Period.
(b) Not later than five (5) days following the expiration of the Due
Diligence Period, Buyer shall deposit ONE HUNDRED THOUSAND DOLLARS
($100,000.00) (the "Second Deposit "), which shall be nonrefundable.
(c) On or before the Closing Date, Buyer shall deposit the balance of
the Purchase Price, subject to any other credits or debits hereunder, with Escrow Holder
in "good funds." "Good funds" shall mean a wire transfer of funds, cashier's or certified
check drawn on or issued by the offices of a financial institution located in the State of
California, or cash.
2.3 Interest Bearing Account. Escrow Holder shall deposit the funds specified
in Section 3.2 above in an interest bearing account. All interest earned on said funds shall be
credited to Buyer.
3. OPENING OF ESCROW. Within five (5) business days after the execution of
this Agreement by City, the parties shall open an escrow ( "Escrow ") with the Escrow Holder by
causing an executed copy of this Agreement to be deposited with Escrow Holder. Escrow shall
be deemed open on the date that City delivers this executed Agreement to Escrow Holder.
4. ADDITIONAL FUNDS AND DOCUMENTS REQUIRED FROM BUYER
AND CITY.
4.1 Buyer. Buyer agrees that on or before 1:00 p.m. on the business day
preceding the Closing Date, Buyer will deposit with Escrow Holder all additional funds and/or
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documents (executed and acknowledged, if appropriate) which are necessary to comply with the
terms of this Agreement, including without limitation, the following:
(a) The Purchase Price;
(b) A Preliminary Change of Ownership Statement completed in the
manner required in Orange County; and
(c) Such funds and other items and instruments as may be necessary in
order for Escrow Holder to comply with this Agreement.
4.2 Cam. City agrees that on or before 1:00 p.m. on the business day
preceding the Closing Date, City will deposit with Escrow Holder such funds and other items
and instruments (executed and acknowledged, if appropriate) as may be necessary in order for
the Escrow Holder to comply with this Agreement, including without limitation, the following:
(a) A grant deed conveying the Property to Buyer on Escrow Holder's
standard form ( "Grant Deed ").
(b) A Non - Foreign Affidavit on Escrow Holder's Standard form or a
form substantially similar thereto ( "Non- Foreign Affidavit ");
(c) Such funds and other items and instruments as may be necessary in
order for Escrow Holder to comply with this Agreement; and
(d) The License (defined in Paragraph 10.2).
Escrow Holder will cause the Grant Deed to be recorded when (but in no event after the
date specified in Section 6.1 below) it can issue the Title Policy in the form described in Section
7 below, and holds for the account of City the items described above to be delivered to City
through Escrow, less costs, expenses and disbursements chargeable to City pursuant to the terms
hereof.
4.3 Due Diligence Period. Commencing upon the Opening of Escrow and
continuing thereafter for thirty (30) days (the, "Due Diligence Period "), Buyer, its agents, and
employees shall:
(a) examine and inspect the Property and will know and be satisfied
with the physical condition, quality, quantity and state of repair of the Property in all
respects and by proceeding to Closing, Buyer shall be deemed to have determined that
the same is satisfactory to Buyer;
(b) review all instruments, records and documents which Buyer deems
appropriate or advisable to review in connection with this transaction, including, but not
by way of limitation, any and all plans, specifications, surveys, environmental
assessments and reports, and Buyer, by proceeding to Closing, shall be deemed to have
determined that the same and the information and data contained therein and evidenced
thereby are satisfactory to Buyer;
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(c) review all applicable laws, ordinances, rules and governmental
regulations (including those relating to building, zoning and land use) affecting the
development, use, occupancy or enjoyment of the Property, and Buyer, by proceeding to
Closing, shall be deemed to have determined that the same are satisfactory to Buyer; and
(d) at its own cost and expense, made its own independent
investigation respecting the Property and all other aspects of this transaction, and shall
have relied thereon and on the advice of its consultants in entering into this Agreement,
and Buyer, by proceeding to Closing, shall be deemed to have determined that the same
are satisfactory to Buyer; and
(e) review the License, a draft of which will be provided by City to
Buyer within 10 days after opening of Escrow, to determine that it is satisfactory to the
Buyer.
If during the Due Diligence Period, Buyer determines that the condition of the Property is
such that Buyer no longer desires to acquire the Property, Buyer shall provide written notice of
its election to terminate this Agreement, which written notice must be received by the City on or
before the expiration of the Due Diligence Period. Should Buyer fail to provide written notice of
its election to terminate this Agreement Buyer shall be conclusively determined to have accepted
the condition of the Property and Buyer shall pay the Second Deposit within five (5) days of the
expiration of the Due Diligence Period.
4.4. Preliminary Title Report. Within ten (10) business days after the Opening,
the City, at the City's expense, shall furnish Buyer with a Preliminary Title Report on the
Property issued by Fidelity National Title Insurance Company (the "Title Company ") and dated
within thirty (30) calendar days of the Opening. The Preliminary Title Report shall be
accompanied by legible copies of all underlying documents for all exceptions ( "Exceptions ") set
forth in the Preliminary Title Report. Buyer shall have thirty (30) business days from receipt of
the Preliminary Title Report within which to give written notice to the City of the Buyer's
approval or disapproval of any of such Exceptions. The Buyer's failure to provide such written
notice of the Preliminary Title Report within such time limit shall be deemed approval of the
Preliminary Title Report. If Buyer notifies the City of its disapproval of any Exceptions in the
Preliminary Title Report, or is deemed to have disapproved the Preliminary Title Report, the City
shall have the right, but not the obligation, to remove any disapproved Exceptions within ten (10)
days after receiving written notice of the Buyer's disapproval or provide assurances satisfactory
to the reviewing party that such Exception(s) will be removed on or before the Closing. If the
City cannot or does not elect to remove any of the disapproved Exceptions within that period, the
Buyer shall have ten (10) days after the expiration of such fifteen (15) day period to either give
the City written notice that the Buyer elects to proceed with the acquisition subject to the
disapproved Exceptions or to give the City written notice that the Buyer elects to terminate this
Agreement. The Buyer shall have the right to approve or disapprove any Exceptions reported by
the Title Company after the City has approved the condition of title for the Property. Neither
party shall voluntarily create any new exceptions to title following the date of this Agreement.
4.5. Miscellaneous Documents. On or before five (5) business days following
the opening of escrow, City shall deliver to Buyer all documents relating to the Property which
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City may have in its possession including but not limited to copies of all copies of a Phase I
Environmental Report, together with engineering reports, soils studies, environmental audits and
reports, environmental impact report, and all other documents relating to the Real Property for
Buyer's review. If Buyer does not acquire the Property, all said documents shall be promptly
returned to City. In addition, City shall deliver to Buyer (or cause Escrow Holder to deliver to
Buyer), natural hazard disclosure reports covering the Property in such form as required by law,
which shall be countersigned and returned to City and Escrow Holder.
4.6 Entry for Investigation. Subject to the conditions hereafter stated and the
rights of tenants in possession, City grants to Buyer, its agents and employees a limited license to
enter upon any portion of the Property for the purpose of conducting engineering surveys, soil
tests, investigations or other studies reasonably necessary to evaluate the condition of the
Property, which studies, surveys, investigations and tests shall be done at Buyer's sole cost and
expense. Buyer shall (a) notify City prior to each entry of the date and purpose of intended entry
and provide to City the names and affiliations of the persons entering the Property; (b) conduct
all studies in a diligent, expeditious and safe manner and not allow any dangerous or hazardous
conditions to occur on the Property during or after such investigation; (c) comply with all
applicable laws and governmental regulations; (d) keep the Property free and clear of all
materialmen's liens, lis pendens and other liens arising out of the entry and work performed
under this paragraph; (e) maintain or assure maintenance of workers' compensation insurance (or
state approved self - insurance) on all persons entering the property in the amounts required by the
State of California; (f) provide to City prior to initial entry a certificate of insurance evidencing
that Buyer has procured and paid premiums for an all -risk public liability insurance policy
written on a per occurrence and not claims made basis in a combined single limit of not less than
TWO MILLION DOLLARS ($2,000,000.00) which insurance names Buyer as additional
insured entitled to not less than thirty (30) days cancellation notice and is primary and non-
contributing with insurance carried by Buyer; and (g) return the Property to its original condition
following Buyer's entry. Buyer agrees to indemnify, defend, protect and hold City and the
Property free and harmless from any and all loss, liability, claims, damages and expenses
(including but not limited to attorneys' fees and costs) arising directly or indirectly from the
exercise of said license, or from Buyer's failure to comply with the conditions to Buyer's entry
onto the Property provided herein. Such undertaking of indemnity shall survive Close of Escrow
or the termination of this Agreement for any reason. The limited license herein granted shall be
co- extensive with the term of this Agreement or any extension thereof.
4.7 Independent Contract Consideration. Contemporaneously with the
execution of this Agreement, Buyer shall deliver to City a check in the amount of $100.00 (One
Hundred Dollars) (the "Independent Contract Consideration "), which amount the parties
bargained for and agreed to as consideration for the City's grant to Buyer of Buyer's right to
purchase the Property pursuant to the terms hereof and for City's execution, delivery and
performance of this Agreement. The Independent Contract Consideration is in addition to and
independent of any other consideration or payment provided in this Agreement, is nonrefundable
under any circumstances, will be retained by City notwithstanding any other provisions of this
Agreement and will be applied against the Purchase Price in the event the Closing occurs
hereunder.
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5. BROKERS.
Buyer represents and warrants to City that it has used Jones Lang LaSalle Brokerage, Inc.
( "Buyer's Broker ") in connection with this transaction, and that Buyer's Broker is entitled to
payment in the amount of One Hundred Forty -Five Thousand Dollars and no /100 ($145,000.00)
in full satisfaction of all brokerage commissions or finder's fees and claims payable to Buyer's
Broker in connection with the acquisition of the Property. The City did not use a broker and no
brokerage fees have been incurred by City.
6. CLOSING DATE.
6.1 Initial Closing Date. Escrow shall close on or before September 15, 2014,
( "Closing Date "). The terms "the Close of Escrow ", and/or the "Closing" are used herein to
mean the time City's Grant Deed is filed for record by the Escrow Holder in the Office of the
County Recorder of Orange County, California. City and Buyer each specifically agrees to
strictly comply and perform its obligations herein in the time and manner specified and waives
any and all rights to claim such compliance by mere substantial compliance with the terms of this
Agreement.
6.2 City and Buyer shall have the right, but not the obligation, to extend the
Closing Date by mutual written agreement.
6.3 Distribution of Documents. Following Close of Escrow, Escrow Holder
shall distribute the documents as follows:
(a) To Buyer:
(i) One certified conformed copy of the Grant Deed, the
original to be mailed to Buyer following recordation thereof;
(ii) One duplicate original of the Non - Foreign Affidavit; and
(iii) One certified copy, conformed if recorded, of any other
document delivered to Escrow Holder by City or Buyer pursuant to the terms
hereof.
(b) To City:
(i) One certified conformed copy of the Grant Deed, the
original to be mailed to Buyer following recordation thereof; and
(ii) One certified copy, conformed if recorded, of any other
document delivered to Escrow Holder by City or Buyer pursuant to the terms
hereof.
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TITLE POLICY.
7.1 Title Policy to be Issued by City. When Escrow Holder holds for City the
Grant Deed in favor of Buyer executed and acknowledged by City covering the Property, Escrow
Holder shall cause to be issued and delivered to City and Buyer as of the Closing a CLTA
standard coverage policy of title insurance ( "Title Policy "), or, upon Buyer's request therefore,
an ALTA standard coverage policy of title insurance, issued by Title Company, with liability in
the amount of the Purchase Price, covering the Property and showing title vested in Buyer free of
encumbrances, except:
(a) All nondelinquent general and special real property taxes and
assessments for the current fiscal year;
(b) Easements, encumbrances, covenants, conditions, restrictions,
reservations, rights -of -way and other matters of record, as approved or deemed approved
by City pursuant to Section 6.1 above;
(c) The standard printed exceptions and exclusions contained in the
CLTA or ALTA form policy; and
(d) Any exceptions created or consented to by Buyer, including
without limitation, any exceptions arising by reason of Buyer's possession of or entry on
the Property.
S. CONDITIONS PRECEDENT TO CLOSE OF ESCROW.
8.1 Conditions to Buyer's Obligations. The obligations of Buyer under this
Agreement shall be subject to the satisfaction or written waiver, in whole or in part, by Buyer of
each of the following conditions precedent:
(a) Title Company will issue the Title Policy as required by Section 7
of this Agreement insuring title to the Property vested in Buyer or other vestee designated
by City for vesting purposes only;
(b) Escrow Holder holds and will deliver to Buyer the instruments and
funds, if any, accruing to Buyer pursuant to this Agreement;
(c) City has delivered all documents required to be delivered under
Section 4.2 above;
(d) All representations and warranties specified in Section 9.1 are true
and correct; and
(e) Buyer's approval of any other conditions specified in this
Agreement.
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8.2 Conditions to City's Obligations. The obligations of City under this
Agreement shall be subject to the satisfaction or written waiver, in whole or in part, by City of
each of the following conditions precedent:
(a) Escrow Holder holds and will deliver to City the instruments and
funds accruing to City pursuant to this Agreement.
9. ESCROW PROVISIONS.
9.1 Escrow Instructions. This Agreement, when signed by City and Buyer,
shall also constitute escrow instructions to Escrow Holder. If required by Escrow Holder, City
and Buyer agree to execute Escrow Holder's standard escrow instructions, provided that the
same are consistent with and do not conflict with the provisions of this Agreement. In the event
of any such conflict, the provisions of this Agreement shall prevail.
9.2 General Escrow Provisions. Escrow Holder shall deliver the Title Policy
to the Buyer and instruct the Orange County Recorder to mail the Grant Deed to Buyer at the
address set forth in Section 15.16 after recordation. All funds received in this Escrow shall be
deposited in one or more general escrow accounts of the Escrow Holder with any bank doing
business in Orange County, California, and may be disbursed to any other general escrow
account or accounts. All disbursements shall be made by Escrow Holder's check. This
Agreement and any modifications, amendments, or supplements thereto may be executed in
counterparts and shall be valid and binding as if all of the parties' signatures were on one
document.
9.3 Proration of Real Property Taxes. All nondelinquent general and special
real property taxes shall be prorated to the Close of Escrow on the basis of a thirty (30) day
month and a three hundred sixty day (360) year. In the event that property taxes are assessed on
a parcel of real property which includes land other than the Property, such proration shall include
only taxes attributable to the Property, calculated in terms of total gross square feet of land
assessed pursuant to the tax statement versus total gross square footage of the Property. Any
supplemental tax bills received after Close of Escrow shall be paid by City to the extent they
relate to a period prior to Close of Escrow, and by Buyer, to the extent they relate to a period
after Close of Escrow. If a supplemental tax bill covers a period commencing before and
continuing after Close of Escrow, the party named in the bill will pay the tax and the other party
shall reimburse the first party its pro rata share within thirty (30) days after receipt of a copy of
the tax bill and evidence of the second party's payment of same. The provisions of this Section
8.3 shall survive Close of Escrow. If either party fails to pay its pro rata share of taxes by the
times herein provided, interest shall accrue on all unpaid amounts from when owing until paid at
five percent (5 %) over the Federal Discount Rate quoted by the Federal Reserve Bank of San
Francisco on the 25th day of the month preceding the date interest commences to accrue.
9.4 Payment of Costs. City shall pay one -half (1/2) of the Escrow fee, title
insurance premiums for that portion of the Title Policy premium which would be incurred for a
CLTA form policy, and the charge for drawing the Grant Deed. Buyer shall pay the one -half
(1/2) of the Escrow fee, charges for recording the Grant Deed, and that portion of the Title Policy
premium which is attributable to the additional cost of obtaining any additional coverage
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requested by City, including the difference between CLTA and ALTA coverage. City shall pay
$145,000.00 towards satisfaction of the Buyer's Broker fees identified in this Section 5. All
other costs of Escrow not otherwise specifically allocated by this Agreement shall be
apportioned between the parties in a manner consistent with the custom and usage of Escrow
Holder. This transaction is exempt from payment of documentary transfer taxes.
9.5 Termination and Cancellation of Escrow. Time is of the essence of this
Agreement. Unless otherwise agreed to as provided by Paragraph 6.2, if Escrow fails to close by
November 14, 2014, as provided above, Escrow shall terminate automatically without further
action by Escrow Holder or any party, and Escrow Holder is instructed to return all funds and
documents then in Escrow to the respective depositor of the same with Escrow Holder.
Cancellation of Escrow, as provided herein, shall be without prejudice to whatever legal rights
City or City may have against each other arising from the Escrow or this Agreement.
10. REPRESENTATIONS AND WARRANTIES.
10.1 Representations and Warranties. City hereby makes the following
representations and warranties to Buyer, each of which (i) is material and relied upon by Buyer
in making its determination to enter into this Agreement; (ii) is true in all respects as of the date
hereof and shall be true in all respects on the date of Close of Escrow on the Property; and (iii)
shall survive the Close of Escrow of the purchase and sale of the Property as well as any future
transfer of the Property to Buyer or any transferee, successor or assignee of Buyer:
(a) City has received no notice or has no actual knowledge that any
governmental authority or any employee or agent thereof considers any construction of
the proposed improvements on the Property or the present or proposed operation, use or
ownership of the Property to violate or have violated any ordinance, rule, law, regulation
or order of any government or agency, body or subdivision thereof, or that any
investigation has been commenced or is contemplated respecting such possible
violations.
(b) There are no pending or threatened litigation, allegations, lawsuits
or claims, whether for personal injury, property damage, landlord- tenant disputes,
property taxes, contractual disputes or otherwise, which do or may affect the Property or
the operation or value thereof, and there are no actions or proceedings pending or, to the
best of City's knowledge, threatened against City before any court or administrative
agency in any way connected with the Property and neither the entering into of this
Agreement nor the consummation of the transactions contemplated hereby will constitute
or result in a violation or breach by City of any judgment, order, writ, injunction or
decree issued against or imposed upon it. There is no action, suit, proceeding or
investigation pending or threatened against City which would become a cloud on City's
title to and have a material adverse impact upon the Property or any portion thereof or
which questions the validity or enforceability of the transaction contemplated by this
Agreement or any action taken pursuant hereto in any court or before or by any federal,
district, county, or municipal department, commission, board, bureau, agency or other
governmental instrumentality.
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(c) There are no contracts, leases, claims or rights affecting the
Property and no agreements entered into by or under City shall survive the Close of
Escrow that would adversely affect Buyer's rights with respect to the Property except as
heretofore disclosed in writing by City to Buyer.
(d) City has the unimpeded power and authority to execute, deliver
and perform City's obligations under this Agreement and the documents executed and
delivered by City pursuant hereto.
(e) City is not a "foreign person" within the meaning of Section 1445
of the Internal Revenue Code of 1986, as amended.
All representations and warranties made hereunder are in addition to any representations
and warranties implied by law and in no event shall this Section 10.1 be construed to limit,
diminish or reduce any obligation of disclosure implied upon City by law. The representations
and warranties of City set forth in Section 9.1 hereof shall survive Closing for a period of one year.
City shall have no liability to Buyer for a breach of any representation or warranty unless written
notice (the "Breach Notice ") containing a description of the specific nature of such breach shall
have been given by Buyer to City prior to the expiration of said one year period and an action shall
have been commenced by Buyer against City within sixty (60) days following the expiration of such
one year period (the "Outside Date ").
10.2 Disclaimer of Representations and Warranties. Buyer acknowledges that
as of Close of Escrow it will have had an adequate opportunity to inspect the Property and to
investigate its physical characteristics and conditions. Upon the Close of Escrow, Buyer shall be
deemed to have waived any and all objections to the physical characteristics and conditions of
the Property which would be disclosed by a reasonable and diligent inspection. Buyer
acknowledges that, except as specifically provided herein, neither City nor any of its employees,
agents, or representatives has made any representations, warranties or agreements to or with
Buyer on behalf of City as to any matters concerning the Property, the present use thereof, or the
suitability of Buyer's intended use of the Property.
The foregoing disclaimer includes, without limitation, topography, climate, air, water
rights, utilities, present and future zoning, soil, subsoil, the acreage of the Property or square
footage of buildings located thereon, the purpose to which the Property is suited, drainage, and
access to public roads. Buyer further acknowledges and agrees that the Property is to be
purchased, conveyed, and accepted by Buyer in its present condition, "AS -IS," and that no patent
or latent physical condition of the Property, whether or not known or discovered, shall affect the
rights of either party hereto. Buyer has investigated and has knowledge of operative or imposed
governmental laws and regulations (including, but not limited to, zoning, environmental,
including specifically the regulations of the Environmental Protection Agency, and land use laws
and regulations) to which the Property may be subject, and is acquiring the Property on the basis
of its review and determination of the application and effect of such laws and regulations. Buyer
has neither received nor relied upon any representations concerning such laws and regulations
made by City, City's employees, agents, or any other person acting on behalf of City. Any
agreements, warranties or representations not expressly contained in this Agreement shall in no
way bind City.
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IN ADDITION TO BUYER'S ACCEPTANCE OF THE PROPERTY IN AN "AS IS"
CONDITION, BUYER EXPRESSLY ACKNOWLEDGES AND AGREES TO THE
FOLLOWING CONDITIONS UNDER WHICH THE PROPERTY IS BEING TRANSFERRED
TO BUYER:
BUYER ACKNOWLEDGES AND AGREES THAT THE PURCHASE IS FOR PROPERTY
THAT CONSISTS OF A NON - CONFORMING USE AND NON - CONFORMING
STRUCTURE THAT IS DEFICIENT AS TO PARKING.
BUYER ACKNOWLEDGES THAT THE PROPERTY IS CURRENTLY ZONED MULTIPLE
RESIDENTIAL (RM) UNDER THE CITY'S CURRENT ZONING CODE. AN ABATEMENT
ORDER WAS APPROVED ON FEBRUARY 12012, ALLOWING USE OF THE PROPERTY
UNDER THE PREVIOUS ZONING OF COMMERICAL OFFICE /INDUSTRIAL TO
CONTINUE UNTIL FEBRUARY 1, 2022, AT WHICH TIME ALL NONRESIDENTIAL USE
OF THE PROPERTY SHALL CEASE UNLESS AN ADDITIONAL ABATEMENT PERIOD
IS GRANTED; OR AN APPROPRIATE CHANGE IN THE ZONING DISTRICT AND
GENERAL PLAN LAND USE DESIGNATION ARE APPROVED AND ADOPTED; OR A
CHANGE TO THE ZONING REGULATIONS PERTAINING TO NONCONFORMING USES
OR THEIR ABATEMENT ARE APPROVED AND ADOPTED PRIOR TO THAT DATE.
BUYER FURTHER ACKNOWLEDGES THAT THE 15TH STREET RIGHT -OF -WAY IS
EXPRESSLY DESIGNATED ON THE ORANGE COUNTY MASTER PLAN OF ARTERIAL
HIGHWAYS AND IS INCORPORATED INTO THE CIRCULATION ELEMENT OF THE
CITY'S GENERAL PLAN. THERFORE, BUYER UNDERSTANDS THAT THE CITY MAY,
AS DEEMED APPROPRIATE IN CITY'S SOLE AND ABSOLUTE DISCRETION,
IMPROVE OR REQUIRE THE IMPROVEMENT OF THE 15TH STREET RIGHT -OF -WAY
PARCEL. BUYER UNDERSTANDS THAT THE CITY HAS ALREADY IDENTIFIED THE
DEVELOPMENT OF THE 15TH STREET RIGHT -OF -WAY CONCURRENT WITH THE
DEVELOPMENT OF THE NEWPORT BANNING RANCH PROPERTY, WHICH IS
CURRENTLY UNDERGOING REVIEW BY THE CALIFORNIA COASTAL COMMISSION.
BUYER ALSO UNDERSTANDS THAT, EVEN IF THE COASTAL COMMISSION DOES
NOT APPROVE DEVELOPMENT ON THE NEWPORT BANNING RANCH PROPERTY
THE CITY'S GENERAL PLAN CONTEMPLATES THE EXTENSION OF 15' STREET
AND THE IMPROVEMENT OF THE 15TH STREET RIGHT -OF -WAY. BUYER ALSO
UNDERSTANDS THAT THE ADJACENT NEWPORT BANNING RANCH PROPERTY
MAY NOT BE AVAILABLE FOR OFF -SITE PARKING. THIS AGREEMENT IS
THEREFORE EXPRESSLY CONDITIONED UPON BUYERS AGREEMENT TO THE
DEVELOPMENT OF THE 15`x' STREET RIGHT -OF -WAY PARCEL.
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UNTIL SUCH TIME AS THE 15TH STREET RIGHT -OF -WAY PARCEL IS DEVELOPED,
CITY SHALL PERMIT, SUBJECT TO THE EXECUTION OF A NO -FEE LICENSE
AGREEMENT (THE, "LICENSE ") BETWEEN BUYER AND CITY, BUYER TO
CONTINUE TO USE THE 15' STREET RIGHT -OF -WAY PARCEL FOR PARKING AND
OTHER USES TO THE BENEFIT OF THE PROPERTY AS THOSE USES EXIST AS OF
THE DATE OF THIS AGREEMENT. NO EXPANSION OR CHANGE OF USES OF 15"
STREET RIGHT -OF -WAY PARCEL FROM THAT EXISTING AS OF THE DATE OF THIS
AGREEMENT WILL BE PERMITTED. THE LICENSE SHALL EXPIRE IF THE
PROPERTY IS SOLD AND ALL SUCCESSORS -IN- INTEREST SHALL BE REQUIRED TO
OBTAIN A NEW LICENSE TO USE THE 15TH STREET RIGHT -OF -WAY. THE CITY IS
UNDER NO OBLIGATION TO GRANT A NEW LICENSE TO THE SUCCESSORS -IN-
INTEREST AND APPROVAL OF A NEW LICENSE MAY BE WITHHELD IN CITY'S
SOLE AND ABSOLUTE DISCRETION.
BUYER FURTHER ACKNOWLEDGES THAT BUYER'S USE OF 15`h STREET RIGHT -OF-
WAY PARCEL SHALL BE FREELY REVOCABLE BY CITY UPON SUCH TIME AS CITY
DEEMS IN ITS SOLE AND ABSOLUTE DISCRETION TO BE NECESSARY FOR THE
DEVELOPMENT OF THE 15' STREET RIGHT -OF -WAY. THERFORE, IN ADDITION TO
THE FOREGOING, BUYER HEREBY EXPRESSLY ACKNOWLEDGES, UNDERSTANDS,
AND AGREES THAT AT THE TIME THAT CITY TERMINATES BUYER'S USE OF 15"'
STREET RIGHT -OF -WAY PARCEL, BUYER WILL NO LONGER HAVE ANY RIGHTS TO
USE THE 15`x' STREET RIGHT -OF -WAY PARCEL FOR ANY PURPOSE AND
APPROXIMATELY 21 PARKING SPACES WILL BE ELIMINATED. UPON THIS EVENT,
BUYER'S OPERATIONS ON THE PROPERTY WILL BE SUBJECT TO COMPLIANCE
WITH ALL PARKING REGULATIONS IN EXISTENCE AT THAT TIME: THE CURRENT
PARKING REQUIREMENT FOR THE GENERAL OFFICE USE ON THE PROPERTY IS
ONE PARKING SPACE PER 250 SQUARE FEET OF NET FLOOR AREA. SHOULD
BUYER NOT BE ABLE TO SATISFY THE PARKING REQUIREMENTS FOR ALL USES
ON THE PROPERTY ON SITE, BUYER ACKNOWLEDGES THAT THE PROPERTY WILL
REMAIN NON - CONFORMING, IF NOT ABATED, AND SUBJECT TO ALL PROVISIONS
OF THE ABATEMENT ORDER AND THE NEWPORT BEACH MUNICIPAL CODE
INCLUDING BUT NOT LIMITED TO CHAPTER 20.64, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME.TO THE EXTENT PARKING FOR THE PROPERTY IS
NONCONFORMING AS A RESULT OF THE IMPROVEMENT THE 15TH STREET RIGHT -
OF -WAY PARCEL, REPLACEMENT PARKING EITHER ON -SITE OR OFF -SITE WOULD
BE REQUIRED FOR THE EXISTING USE TO CONTINUE. IN THE ABSENCE OF
REPLACEMENT PARKING, THE SQUARE FOOTAGE OF THE BUILDING NOT
SUPPORTED BY PARKING WILL BECOME NON - OCCUPIABLE UNLESS
REPLACEMENT PARKING IS PROVIDED ON -SITE OR OFF -SITE. IN THE
ALTERNATIVE, OTHER OPTIONS INCLUDE MODIFICATION OF THE ON -SITE USE
CONFORMING TO THE AVAILABLE PARKING SPACES; AN ADJUSTMENT TO THE
PARKING REQUIREMENT UNDER ZONING CODE SECTION 20.14.110 PURSUANT TO
APPROVAL OF A CONDITIONAL USE PERMIT, OR SITE IMPROVEMENTS TO
FACILITATE ADDITIONAL ON -SITE PARKING SUCH AS SUBTERRANEAN PARKING
AND /OR AN AT -GRADE PARKING STRUCTURE. ANY SUCH IMPROVEMENT SHALL
REQUIRE ALL NECESSARY AND REQUIRED APPROVALS, WHICH INCLUDE, BUT
ARE NOT LIMITED TO, DISCRETIONARY APPROVALS BY THE CITY'S PLANNING
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COMMISSION AND /OR CITY COUNCIL, WHICH MAY BE WITHHELD IN THE CITY'S
SOLE AND ABSOLUTE DISCRETION.
BUYER FURTHER ACKNOWLEDGES THAT THE PROPERTY IS IMPROVED WITH
STRUCTURES THAT DO NOT COMPLY WITH CURRENT BUILDING STANDARDS
REQUIRED UNDER THE AMERCANS WITH DISABILITIES ACT OF 1990 OR ITS
IMPLEMENTING REGULATIONS AND CITY'S ENERGY CODE. ALL FUTURE
DEVELOPMENT OF THE PROPERTY WILL REQUIRE COMPLIANCE WITH ALL
FEDERAL, STATE AND LOCAL BUILDING STANDARDS AND CODES APPLICABLE
TO THE IMPROVEMENTS.
BUYER REPRESENTS AND WARRANTS THAT BUYER IS A KNOWLEDGABLE,
EXPERIENCED, AND SOPHISTICATED BUYER OF REAL ESTATE AND THAT,
EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, BUYER
HAS RELIED AND SHALL RELY SOLELY ON (A) BUYER'S OWN EXPERTISE AND
THAT OF BUYER'S CONSULTANTS PERTAINING TO DUE DILIGENCE AND
OTHERWISE RELATING TO EVALUATING THE PURCHASE OF THE PROPERTY AND
ITS OPERATIONS, AND (B) BUYER'S OWN KNOWLEDGE OF THE PROPERTY BASED
ON BUYER'S INVESTIGATIONS AND INSPECTIONS OF AND DUE DILIGENCE
REGARDING THE PROPERTY AND ITS OPERATIONS.
CITY AND BUYER ACKNOWLEDGE AND AGREE THAT THE FOREGOING
PROVISIONS OF THIS SECTION 10 HAVE BEEN FREELY BARGAINED FOR BY THE
PARTIES AND CONSTITUTES A MATERIAL CONSIDERATION TO CITY FOR THE
SALE OF THE PROPERTY AND BUT FOR THIS PROVISION CITY WOULD NOT SELL
THE PROPERTY TO BUYER.
CITY'S INITIALS BUYER'S INITIALS
10.3 Changed Circumstances. If City becomes aware of any fact or
circumstance which would change or render incorrect, in whole or in part, any representation or
warranty made by City under this Agreement, whether as of the date given or any time thereafter
through the Close of Escrow and whether or not such representation or warranty was based upon
City's knowledge and /or belief as of a certain date, City will give immediate written notice of
such changed fact or circumstance to Buyer, but such notice shall not release City of its liabilities
or obligations with respect thereto. City shall issue a certificate as of the Close of Escrow stating
that all the representations and warranties contained in Section 10.1 are true and correct as of
said date, or setting forth in detail which of such matters are not true and correct.
10.4 Indemnity by Buyer. Buyer shall bold harmless, indemnify and defend
City, and the Property from and against (i) except for obligations, liabilities, claims, liens and
encumbrances disclosed herein or which Buyer specifically agrees by the terms of this
Agreement to assume or take subject, any and all obligations, liabilities, claims, liens or
encumbrances, whether direct, contingent or consequential and no matter how arising, in any
way related to the Property and arising or accruing on or before the date first above written, or in
any way related to or arising from any negligent act, conduct, or omission by Buyer in any way
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related to the Property or Buyer's breach or default under this Agreement at any time or times on
or before the date of the Close of Escrow for the purchase and sale of the Property, including
without limitation, any damage to the Property or injury to or death of any person, employees or
agents of Buyer; (ii) all costs and expenses, including attorneys' fees, relating to any actions,
suits or judgments incident to any of the foregoing; provided that in no event shall any of the
indemnities described above in this Section 10.4 arise from any obligations, liabilities, claims,
liens or encumbrances that arise from City's gross negligence, willful misconduct or breach or
default under this Agreement. Should Buyer fail to discharge or undertake to defend City or the
Property pursuant to the indemnities set forth in this Section 10.4 within thirty (30) days after
having received written notice from City, then City may settle such liability and Buyer's liability
to City shall be conclusively established by such settlement, the amount of such liability to
include both the settlement consideration and the reasonable expenses, including attorney's fees,
incurred by City in effecting such settlement.
11. SETTLEMENT OF CLAIMS.
11.1 Release of Claims buyer. In exchange for the promises contained in
this Agreement, and except as to City's obligations set forth in this Agreement or arising from
City's gross negligence or willful misconduct, Buyer hereby waives, releases and forever
discharges, and agrees to the extent permitted by law that he will not in any manner institute,
prosecute or pursue, any and all complaints, charges, claims for relief, demands, damages, suits,
actions or causes of action, of any kind, whether in law or in equity, which he asserts or could
assert, at common law or under any statute, rule, regulation, order or law, whether federal, state
or local, or on any grounds whatsoever, against the City and/or any of its current or former
officers, councilmen, agents, representatives, employees, successors and assigns with respect to
any event, matter, claim, damage or injury, of any kind related to the Property or the claims
made thereunder or in connection therewith as of the date of this Agreement .
11.2 Waiver of Unknown Claims. With respect to the release of claims by
Buyer set forth in Section 11.1it is agreed and understood that the releases being provided by
each of the Parties above apply to all injuries and damages, whether now known or unknown,
and whether now existing or which may result in the future due to the actions or omissions of the
Parties on or before the Effective Date. With respect to the subject matter of this Agreement, the
Parties acknowledge that they have each been fully advised of and understand the provisions of
Section 1542 of the California Civil Code which reads:
"A general release does not extend to claims which the creditor does not know
or suspect to exist in his or her favor at the time of executing this release, which
if known by him or her must have materially affected his or her settlement with
the debtor. "
In further consideration of the promises and payments pursuant to this Agreement, each Party
agrees to, and does hereby, waive and relinquish all rights afforded to him, her or it under
California Civil Code Section 1542, or any similar law of any State or territory of the United
States or other jurisdiction with respect to the matters of this Agreement. Notwithstanding the
above, nothing in this Agreement shall be deemed to waive or release any Party as to any of its
obligations or rights under this Agreement.
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deed.
The foregoing provisions shall survive the Closing hereunder and the recordation of the
12. DAMAGE, DESTRUCTION AND CONDEMNATION.
12.1 Risk of Physical Loss. Risk of physical loss to the Property shall be borne
by City prior to the Close of Escrow and by Buyer thereafter. In the event that the Property shall
be damaged by fire, flood, earthquake or other casualty and the estimated cost to repair same
exceeds FIVE HUNDRED THOUSAND DOLLARS ($500,000), Buyer may, at its option, elect
not to acquire the Property. If Buyer does not so elect or the estimated cost to repair the damage
is less than FIVE HUNDRED THOUSAND DOLLARS ($500,000), Buyer shall complete the
acquisition of the Property, in which case City shall assign to Buyer the interest of City in all
insurance proceeds relating to such damage. In the event that such damage shall occur and
Buyer elects not to purchase the Property as above provided, then this Agreement shall be
terminated and Buyer shall be entitled to the return of all funds and documents deposited
hereunder.
12.2 Condemnation. In the event that, prior to the Close of Escrow, any
governmental entity shall commence any actions of eminent domain or similar type proceedings
to take any portion of the Property, Buyer shall have the option either to (i) elect not to acquire
the Property, or (ii) complete the acquisition of the Property, in which case Buyer shall be
entitled to all the proceeds of such taking.
13. POSSESSION. Possession of the Property shall be delivered to Buyer as of Close
of Escrow. In the event any personal property remains on the Property following the Close of
Escrow, it shall automatically become the property of City.
14. LIQUIDATED DAMAGES. IF BUYER SHOULD DEFAULT FOR ANY
REASON WHATSOEVER UNDER THIS AGREEMENT (EXCEPTING ONLY MATERIAL
DEFAULT BY CITY HEREUNDER), THEN AND IN SUCH EVENT,
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, CITY AND BUYER
AGREE THAT CITY WILL INCUR DAMAGES BY REASON OF SUCH DEFAULT BY
BUYER, WHICH DAMAGES SHALL BE IMPRACTICAL AND EXTREMELY DIFFICULT,
IF NOT IMPOSSIBLE, TO ASCERTAIN. CITY AND BUYER, IN A REASONABLE
EFFORT TO ASCERTAIN WHAT CITY'S DAMAGES WOULD BE IN THE EVENT OF
SUCH DEFAULT BY BUYER HAVE AGREED BY PLACING THEIR INITIALS BELOW
THAT THE SUM OF FIFTY THOUSAND DOLLARS ($50,000) SHALL BE DEEMED TO
CONSTITUTE A REASONABLE ESTIMATE OF CITY'S DAMAGES UNDER THE
PROVISIONS OF SECTION 1671 OF THE CALIFORNIA CIVIL CODE. IN THE EVENT
OF AND FOR SUCH DEFAULT BY BUYER, BUYER SHALL DELIVER SAID SUM IN
GOOD FUNDS TO CITY WITHIN FIVE (5) DAYS AFTER CITY'S WRITTEN DEMAND
THEREFOR AS CITY'S SOLE MONETARY REMEDY THEREFOR, UNLESS BUYER
WRONGFULLY REFUSES TO CAUSE ESCROW HOLDER TO CANCEL THE ESCROW
OR TO RELEASE THE DEPOSIT TO CITY, IN WHICH INSTANCE CITY SHALL ALSO
BE ENTITLED TO ALL COSTS AND EXPENSES, INCLUDING ACTUAL ATTORNEYS'
FEES INCURRED BY CITY WITH RESPECT TO THOSE CONSEQUENTIAL DAMAGES,
IF ANY, WHICH MAY BE INCURRED BY CITY, AFTER THE CLOSING DATE BY
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REASON OF THE CLOUD ON TITLE TO THE PROPERTY WHICH MAY RESULT FROM
BUYER WRONGFUL FAILURE TO CANCEL THE ESCROW AND THIS AGREEMENT.
CITY'S INITIALS BUYER'S INITIALS
15. MISCELLANEOUS.
15.1 City Authorization. The City Manager of the City of Newport Beach is
hereby authorized, on behalf of the City, to sign all documents necessary and appropriate to carry
out and implement this Agreement and to administer the City's obligations, responsibilities and
duties to be performed under the Lease.
15.2 Assignment. Buyer shall not have the right to assign this Agreement or
any interest or right hereunder or under the Escrow or to nominate another party to take title to
the Property without the prior written consent of City, which City may withhold in City's sole
discretion. In no event shall Buyer be released of liability in the event of an assignment or
nomination.
15.3 Affixation of Revenue Stamps. Escrow Holder is hereby specifically
instructed to attach documentary transfer and/or revenue stamps to the Grant Deed only after
recordation of the Grant Deed.
15.4 Cooperation. City and Buyer agree to cooperate with one another, at no
cost or expense to the cooperating party, in satisfying the conditions to Close of Escrow. City
shall be responsible for proceeding with diligence and in good faith to satisfy the conditions, if
any, to City's performance set forth in Section 8.1 and Buyer shall be responsible for proceeding
with diligence and in good faith to satisfy the conditions, if any, to City's performance set forth
in Section 8.2.
15.5 Oualification; Authority. Each party represents and warrants that it is duly
formed, is authorized to do business in the state in which the Property is located and that it has
been duly authorized to enter into and perform this Agreement.
15.6 Attorneys' Fees. In any action between the parties hereto seeking
enforcement of any of the terms and provisions of this Agreement or the Escrow, or in
connection with the Property, the prevailing party in such action shall not be entitled to recover
from the other party its attorneys' fees.
15.7 Interpretation; Governing Law. This Agreement shall be construed
according to its fair meaning and as if prepared by both parties hereto. This Agreement shall be
construed in accordance with the laws of the State of California in effect at the time of the
execution of this Agreement. Titles and captions are for convenience only and shall not
constitute a portion of this Agreement. As used in this Agreement, masculine, feminine or
neuter gender and the singular or plural number shall each be deemed to include the others
wherever and whenever the context so dictates.
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15.8 No Waiver. No delay or omission by either party hereto in exercising any
right or power accruing upon the compliance or failure of performance by the other party hereto
under the provisions of this Agreement shall impair any such right or power or be construed to
be a waiver thereof. A waiver by either party hereto of a breach of any of the covenants,
conditions or agreements hereof to be performed by the other party shall not be construed as a
waiver of any succeeding breach of the same or other covenants, agreements, restrictions or
conditions hereof.
15.9 Modifications. Any alteration, change or modification of or to this
Agreement, in order to become effective, shall be made by written instrument or endorsement
thereon and in each such instance executed on behalf of each party hereto.
15.10 Severability. If any term, provision, condition or covenant of this
Agreement or the application thereof to any party or circumstances shall, to any extent, be held
invalid or unenforceable, the remainder of this instrument, or the application of such term,
provision, condition or covenant to persons or circumstances other than those as to whom or
which it is held invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
15.11 Mercer of Prior Agreements and Understandings. This Agreement and
other documents incorporated herein by reference contain the entire understanding between the
parties relating to the transaction contemplated hereby and all prior or contemporaneous
agreements, understandings, representations and statements, oral or written, are merged herein
and shall be of no further force or effect.
15.12 Covenants to Survive Escrow. The covenants and agreements contained
herein shall survive the Close of Escrow and, subject to the limitations on assignment contained
in Section 15.2 above, shall be binding upon and inure to the benefit of the parties hereto and
their representatives, heirs, successors and assigns.
15.13 No Withholding Because Non - Foreign City. City represents and warrants
to Buyer that City is not, and as of the Close of Escrow will not be, a foreign person within the
meaning of Internal Revenue Code Section 1445 and that it will deliver to Buyer on or before the
Close of Escrow the Non - Foreign Affidavit as described hereinabove, pursuant to Internal
Revenue Code Section 1445(b)(2) and the Regulations promulgated thereunder.
15.14 Time is of the Essence. Time is hereby expressly made of the essence of
this Agreement.
15.15 Execution in Counterpart. This Agreement may be executed in several
counterparts, and all so executed shall constitute one agreement binding on all parties hereto,
notwithstanding that all parties are not signatories to the original or the same counterpart.
15.16 Notices. Any notice which either party may desire to give to the other
party or to the Escrow Holder must be in writing and shall be effective upon delivery if sent via
overnight mail with tracking; upon delivery, if delivered by confirmed facsimile or email (with a
back up sent by first class mail); when personally delivered, if sent postage prepaid by registered
or certified mail, return receipt requested; three (3) business days after deposit in the United
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States mail, registered, certified, postage fully prepaid and addressed to the respective parties as
set forth below or to such other address and to such other persons as the parties may hereafter
designate by written notice to the other parties hereto:
To City: Dave Kiff, City Manager
City of Newport Beach
100 Civic Center Drive
PO Box 1768
Newport Beach, CA 92658
(949) 644 -3309
dkiff @newportbeachca.gov
Copy to: City of Newport Beach
100 Civic Center Drive
PO Box 1768
Newport Beach, CA 92658
Attn: Aaron Harp, City Attorney
(949) 644 -3131
(949) 644 -3139 (fax)
aharp@newportbeachca.gov
To Buyer: Andrea Fairchild, President
Kobe, Inc.
341 Bayside Dr, Suite 4
Newport Beach, CA 92660
(708) 203 -5433 (mobile)
andrea. fairchildgkobeinc. com
Copy to: Andrea Fairchild, President
Kobe, Inc.
341 Bayside Dr, Suite 4
Newport Beach, CA 92660
(708) 203 -5433 (mobile)
andrea.fairchild(a kobeinc.com
[SIGNATURES ON FOLLOWING PAGE]
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4403119.3 a07/I6/14 -1 �-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of Purchase
and Sale of Real Property and Escrow Instructions as of the date set forth above.
"BUYER"
"CITY"
CITY OF NEWPORT BEACH
a Municipal corporation and Charter City
0
ATTEST:
Leilani I. Brown, City Clerk
APPROVED AS TO FORM:
Aaron C. Harp, City Attorney
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4403119.3 a07116/14 -19-
Rush N. Hill, Mayor
Exhibit A
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Imagery: 2009 -2013 photos provided by Eagle
Imaging www.eagleaerial.com
Exhibit 6
Coast Surveying, Inc.
July 14, 2014
EXHIBIT "B -1"
LEGAL DESCRIPTION
THE NORTHERLY 60.00 FEET OF PARCEL 2 OF LOT LINE ADJUSTMENT NO. LA
2007 -002, IN THE CITY OF NEWPORT BEACH, COUNTY OF ORANGE, STATE OF
CALIFORNIA, AS PER DOCUMENT RECORDED OCTOBER 4, 2007 AS
INSTRUMENT NO. 2007000598931 OF OFFICIAL RECORDS, IN THE OFFICE OF
THE COUNTY RECORDER OF SAID COUNTY, BEING MORE PARTICULARLY
DESCRIBED AS 15TH STREET (60.00 FEET WIDE) AS SAID 15TH STREET WAS
VACATED AND ABANDONED BY RESOLUTION NO. 67 -863 OF THE BOARD OF
SUPERVISORS OF ORANGE COUNTY, CALIFORNIA, A CERTIFIED COPY OF
WHICH WAS RECORDED AUGUST 11, 1967 IN BOOK 8339, PAGE 801 OF
OFFICIAL RECORDS OF SAID ORANGE COUNTY.
CONTAINING 12,770 SQUARE FEET, MORE OR LESS.
ALL AS MORE PARTICULARLY SHOWN ON EXHIBIT "B -2" ATTACHED HERETO
AND MADE A PART HEREOF.
DATED THIS 14TH DAY OF JULY, 2014.
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WHICH WAS RECORDED AUGUST 11, 1967 IN
BOOK 8339, PAGE 801 OF OFFICIAL RECORDS
OF SAID ORANGE COUNTY.
DATE: 7 14 14 E X H I B I T B- 2" COA ST SURVEYING, INC.
SCALE: 1 =100 1so31 PARKWAY LOOP, SUITE B
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WHICH WAS RECORDED AUGUST 11, 1967 IN
BOOK 8339, PAGE 801 OF OFFICIAL RECORDS
OF SAID ORANGE COUNTY.
DATE: 7 14 14 E X H I B I T B- 2" COA ST SURVEYING, INC.
SCALE: 1 =100 1so31 PARKWAY LOOP, SUITE B
SHEET 1 OF 1 TUSTIN CA 92780 -6527 (716) 918 -6266
Exhibit C
Coast Surveying, Inc.
July 10.2014
EXHIBIT "C -1"
LEGAL DESCRIPTION
PARCEL 2 OF LOT LINE ADJUSTMENT NO. LA 2007 -002, IN THE CITY OF
NEWPORT BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER
DOCUMENT RECORDED OCTOBER 4, 2007 AS INSTRUMENT NO. 2007000598931
OF OFFICIAL RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY.
EXCEPT THEREFROM THE NORTHERLY 60.00 FEET, BEING MORE
PARTICULARLY DESCRIBED AS 15TH STREET (60.00 FEET WIDE) AS SAID 15TH
STREET WAS VACATED AND ABANDONED BY RESOLUTION NO. 67 -863 OF THE
BOARD OF SUPERVISORS OF ORANGE COUNTY, CALIFORNIA, A CERTIFIED
COPY OF WHICH WAS RECORDED AUGUST 11, 1967 IN BOOK 8339, PAGE 801
OF OFFICIAL RECORDS OF SAID ORANGE COUNTY.
CONTAINING 35,021 SQUARE FEET, MORE OR LESS.
ALL AS MORE PARTICULARLY SHOWN ON EXHIBIT "C -2" ATTACHED HERETO
AND MADE A PART HEREOF.
DATED THIS 14TH DAY OF JULY, 2014.
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Newport Beach and its employees and agents
disclaim any and all responsibility from or relating to
any results obtained in its use.
Imagery: 2009 -2013 photos provided by Eagle
Imaging www.eagieaerial.com
ATTACHMENT CC3
1 5th Street Off -Site Improvements
Newport Banning Ranch EIR
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Source: Fuscoe 2011
Exhibit 3-11
C O N S V L T I N G
(082511 JCD) R:\Projects \Newpoft\J015\Gmphics\EIR\Ex3.11_l5StOS.pdt
ATTACHMENT CC4
CITY OF NEWPORT BEACH
COMMUNITY DEVELOPMENT
Fp
May 22, 2014
TRANSMITIED VIA E -MAIL
TO: Lauren Wooding
Real Property Administrator
CA License No. 01943711
C/O The City of Newport Beach
100 Civic Center Dr
Newport Beach, CA 92660
Cc: Seimone Jurjis
FROM: Andrea Fairchild
Kobe, Inc.
C/O Jones Lang LaSalle Brokerage, Inc.
Attn: Scott Wetzel
4 Park Plaza, Suite 900
Irvine, CA 92614
s c ott. wetz e l CoD a m .ill . c o m
Re: Counter Offer & Proposed Terms
Purchase offer for City of Newport Beach owned property at 1499 Monrovia Avenue, Newport
Beach, CA
Dear Lauren,
Thank you for your Counter Offer received May 14, 2014. We are in receipt of your Standard
Offer, Agreement and Escrow Instructions for Purchase of Real Estate ('Offer') dated April 30, 2014
wherein Kobe, Inc., or Assignee ('Buyer') submitted proposed terms to the City of Newport Beach ('City'
or'Seller') for purchase of the City owned property located at 1499 Monrovia Avenue, Newport Beach,
CA [A.P.N. 424 - 401 -141.
In consideration of this request the City has undertaken a review of the terms of the proposed
purchase and summarily proposes to modify the following sections:
1. Agreement for Purchase and Sale of Real
Buyer and Seller agree to negotiate an agreement with
Property. AGREED
materially the same terms as the Offer, using the City's
standard template.
2. Section 2 - Property. AGREED
• City to transfer approximately 35,021 square feet of
the existing 47,791 square foot parcel.
• Appropriate subdivision instrument or irrevocable
offer to dedicate shall be prepared by Buyer or
included in agreement.
• Buyer understands that the residual 12,770 square
100 Civic Center Drive • Post Office Box 1768 • Newport Beach, California 92658 -8915
Telephone: (949) 644 -3200 • Fax: (949) 644 -3229 • www.newportbeachca.gov
100 Civic Center Drive • Post Office Box 1768 • Newport Beach, California 92658 -8915
Telephone: (949) 644 -3200 • Fax: (949) 644 -3229 • www.newportbeachca.gov
foot parcel ('Remainder Parcel') created by the
subdivision or dedication will be retained and
developed by the City as right -of -way, extending
15`h Street from its current terminus along the
border of the Property, at the intersection of 15`"
Street & Monrovia Avenue to connect to future
right -of -way as part of the Newport Banning Ranch
project required Environmental Impact Report
mitigation measures.
3. Section 3.1 (a) - Purchase Price. AGREED
$5,800,000.00
4. Section 9.1 (e) - Governmental Approvals.
Buyer acknowledges the Property is currently zoned
AGREED
Multiple Residential (RM) under the City's zoning code.
An abatement allowing use of the Property under the
previous zoning of commercial office /industrial was
approved by the City February 1, 2012, and expires on
February 1, 2022 ('Expiration Date'), at which time all
nonresidential use of the property shall cease or the
building be demolished, unless an additional extension
of the abatement period is granted; or an appropriate
change in the Zoning District and General Plan Land
Use Designation are approved and adopted; or a
change to the Zoning Regulations pertaining to
nonconforming uses or their abatement are approved
and adopted prior to that date.
5. Section 16 - Attorney's Fees. AGREED
Attorney's fees to be paid by each party.
6. Section 22 - Arbitration of Disputes. AGREED
City will agree to mediation, if required by Buyer.
7. Section 27.2 - Acceptance. AGREED
Seller agrees to pay Buyer's Broker a real estate
Brokerage Fee in a sum equal to 2.5% of the Purchase
Price.
8. Exhibits. AGREED
City proposes to add Exhibit showing photographic
depiction of premises, specifically parcel lines and
future right -of -way improvements/ easements
discussed in the terms.
9. City Council. AGREED
This counter offer is subject to and contingent upon
the following:
• Buyer understands that Seller is a public agency,
and as such all terms and conditions and materials
related to this deal are a matter of public record.
• The agreement and its terms and conditions and
are subject to approval by the City of Newport
Beach City Council.
10. Expiration.
This counter offer shall expire 7 days from the date of
this offer, if not accepted in writing.
100 Civic Center Drive • Post Office Box 1768 • Newport Beach, California 92658 -8915
Telephone: (949) 644 -3200 • Fax: (949) 644 -3229 • www.newportbeachca.gov
We look forward to receiving the formal Purchase & Sale Agreement.
Andrew White
Senior Vice President
+1949 885 2994
andy.white @am.ill.com
Lic. N° 01304645
AGREED AND ACCEPTED:
Buyer: KOBE, INC., OR ASSIGNEE
ffi""Wlb�
Scott Wetzel
Associate
+1949 885 2994
scott.wetzel@am.ill.com
Lic. N2 01902630
100 Civic Center Drive • Post Office Box 1768 • Newport Beach, California 92658 -8915
Telephone: (949) 644 -3200 • Fax: (949) 644 -3229 • www.newportbeachca.gov
Q0) J L L
May 23, 2014
Mr. Simon Jurjis
Ms. Lauren Wooding
City of Newport Beach
Community Development Department — Building Division
100 Civic Center Dr
Newport Beach, CA 92660
RE: SUPPLEMENT TO PURCHASE OFFER LOI
KOBE, INC.
Simon & Lauren:
Jones Lang LaSalle
4 Park Plaza, Suite 900
Irvine, CA 92614
tel +1949 885 2900
On behalf of our Kobe, Inc., or Assignee ( "Buyer'), please see the following supplement to the Purchase Offer dated May 23,
2014 to the City of Newport Beach ( "Seller ") for the Property located at 1499 Monrovia Ave, Newport Beach, CA 92663.
1. Purchase Price / Financial $5,800,000.00 all -cash offer with no financial contingencies.
Contingency:
2. Escrow / Closing: Buyer hereby offers to purchase the real property from Seller with a thirty (30) day
escrow period ( "Escrow"). The Escrow Period shall open upon the full- execution of the
Purchase & Sale Agreement ( "PSA ").
Sincerely,
Andrew White
Scott Wetzel
Senior Vice President
Associate
+1949 B85 2948
+1949 885 2994
andy.white @am.ill.com
scott.wetzel@am.ill.com
License No 01304645
License No 01902360
Buyer:
By:
Name:
Title:
Date:
ATTACHMENT CC5
F -7
INCOME 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 income properties. Most of the income property is tidelands, filled
tidelands or waterfront. Unencumbered fee value of income property is estimated at
upwards of one hundred million dollars, and income typically contributes ten percent
of all City revenues.
As owner /manager of property, the City is the steward of a public trust, and state law
requires the City to maximize its returns on state - managed property 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 unfeasible 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, and establishing concessions in recreation areas or other similar
techniques. The City Council will evaluate the appropriateness of establishing new
income properties using sound business principles and after receiving input from
neighbors and users.
The policy of the City Council is that income property be managed in accordance with
the following:
A. Whenever a lease, management contract, concession, sale or similar action
regarding income 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.
B. All negotiations regarding the lease, management contract, concession, sale or
similar action regarding income 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.
C. The City shall seek, whenever practical and financially advantageous, to operate
or manage all property and facilities directly with City staff or contractors.
D. In all negotiations regarding the lease, management contract, concession, sale or
similar action regarding a non - residential income property, the City shall seek
1
ION
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.
E. 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.
Such findings may include but need not be limited to the following:
1. The City is prevented by tideland grants, Coastal Commission guidelines or
other restrictions from selling the property or converting it to another use.
2. Redevelopment of the property would require excessive time, resources and
costs which would outweigh other financial benefits.
3. Converting the property to another use or changing the manager,
concessionaire or lessee of the property would result in excessive vacancy,
relocation or severance costs, which would outweigh other financial benefits.
4. Converting residential property to another use or opening residential leases
to competitive bid would create recompensable liabilities and other inequities
for long -term residents.
5. The property provides an essential or unique service to the community that
might not otherwise be provided were full market value of the property be
required.
6. The property serves to promote other goals of the City such as affordable
housing, preservation of open space or marine related services.
F. Generally, lengths of leases, management contracts, concessions or similar
agreements will be limited to the minimum necessary to meet market standards
and will contain appropriate reappraisal and inflation protection provisions.
Also, all agreements shall contain provisions to assure complete audits
periodically through their terms.
G. All negotiations regarding the lease, management contract, concession, sale or
similar action regarding income property shall be conducted by the City
Manager or his /her designee under the direction of any appropriate City
committees.
H. To provide an accurate accounting of actual net revenues generated by the City's
income property, all costs and charges directly attributable to the management of
2
100
a specific income property shall be debited against the gross revenues collected
on that property in the fiscal year the costs are incurred. Costs and charges
include property repairs and maintenance, property appraisals, and consultant
fees, as authorized by the City Council, City Manager or by this Income Property
Policy.
I. The City Manager or his /her designee is authorized to sign a lease, management
contract, concession or similar agreement or any amendment thereto, on behalf
of the City. Notwithstanding the foregoing, the City Manager or his /her
designee, or a City Council member, may refer any lease, management contract,
concession or similar agreement or any amendment thereto, to the City Council
for its consideration and /or action.
Adopted - July 27,1992
Amended - January 24,1994
Amended - February 27,1995
Amended - February 24,1997
Amended - May 26,1998
Amended - August 11, 2009
Amended - May 14, 2013
Formerly F -24
3