HomeMy WebLinkAbout15 - Negotiating Agreement for Negotiation of Terms of the Sale of the Balboa Theater Property, Located at 707-709 E. Balboa Blvd15-1
NEWPORT BEACH
City Council Staff Report
COUNCIL STAFF REPORT
CITY OF
April 12, 2016
Agenda Item No. 15
ABSTRACT:
The City of Newport Beach issued a request for proposals for offers to purchase the
vacant Balboa Theater property located on the Balboa Peninsula in June 2015. After a
thorough review of the proposals, staff is recommending approval of an exclusive
negotiating agreement (ENA) with Lab Holding, LLC, to allow the City and Lab Holding,
LLC to negotiate the terms of a purchase and sale agreement for disposition of the
Balboa Theater property, located at 707-709 East Balboa Boulevard.
RECOMMENDATION:
a) Find the execution of the Exclusive Negotiating Agreement is not subject to the
California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and
15060(c)(3) of the CEQA Guidelines; and
b) Approve and authorize the Mayor and City Clerk to execute a one-year exclusive
negotiating agreement with Lab Holding, LLC, in substantially the same form as the
attachment to the staff report.
FUNDING REQUIREMENTS:
No funding is required for this item.
TO:HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM:Kimberly Brandt, Community Development Director - 949-644-3232,
kbrandt@newportbeachca.gov
PREPARED BY:Lauren Whitlinger, Real Property Administrator
Seimone Jurjis, Assistant Community Development Director, CBO
PHONE:949-644-3236
TITLE:Approve an Exclusive Negotiating Agreement between the City of
Newport Beach and Lab Holding, LLC, for Negotiation of Terms of
the Sale of the Balboa Theater Property, Located at 707-709 E.
Balboa Boulevard
Approve an Exclusive Negotiating Agreement between the City of Newport Beach and
Lab Holding, LLC, for Negotiation of Terms of the Sale of the Balboa Theater Property,
Located at 707-709 E. Balboa Boulevard
April 12, 2016
Page 2
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DISCUSSION:
Theater History
The Balboa Theater is located near the Balboa Pier between Washington and Main
Streets (see below and Attachment B for location maps). The building was operated as
a theater from the time it was built in the late 1920’s, until the theater closed in 1992.
After the City’s acquisition of the site in 1998, the property was leased to the Balboa
Performing Arts Theatre Foundation (Foundation). After termination of the lease
agreement between the City and Foundation in 2014, the City considered developing
the site as a community center. However, with the opening of the nearby Marina Park
Community Center, City Council directed staff to offer the property for sale, and obtain
offers from private parties to purchase and redevelop the site.
Selection Process
In compliance with California Government Code subsection 54222, the City issued a
Notice of Surplus Land on June 11, 2015; the City received a response from California
State Parks declining to lease or purchase the property; no interest letters were
received from the County of Orange, Newport-Mesa Unified School District, or any other
notified agency.
In June 2015, the City advertised the property for sale soliciting proposals for buyers to
purchase and redevelop the site. The City received five proposals, including The
Balboa Theater
Approve an Exclusive Negotiating Agreement between the City of Newport Beach and
Lab Holding, LLC, for Negotiation of Terms of the Sale of the Balboa Theater Property,
Located at 707-709 E. Balboa Boulevard
April 12, 2016
Page 3
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Cortland Company, Lab Holding, LLC, 801 Balboa, LLC, Save Newport, and Teles
Properties. City representatives interviewed The Cortland Company, Lab Holding, LLC,
801 Balboa, LLC, and Save Newport in March 2016; Teles Properties had declined to
continue in the selection process.
After careful review and consideration of the proposals, staff believes the proposal from
Lab Holding, LLC (The Lab), will best meet the City’s objectives to redevelop the
property, establish a business that will complement the existing Balboa Village business
community, and provide space for a multi-use community event center.
Staff recommends that City Council enter into an Exclusive Negotiating Agreement
(ENA) with The Lab to establish a timeframe for the City and The Lab to cooperatively
work together to refine the scope of the project and to negotiate terms of a purchase
and sale agreement.
Once the terms of a purchase and sale agreement have been negotiated, and specific
details of the project have been determined, staff will return to the City Council for
consideration of the final sale of the property.
Proposed ENA Agreement
Staff has prepared an ENA (Attachment A) to outline a timeframe and conditions under
which the City and The Lab can negotiate a purchase and sale agreement, and outline
the scope of development for the property.
The proposed terms of the ENA are:
1. The length of the agreement will be for one year, with an extension option that
does not cumulatively exceed three months, unless terminated as provided by
the agreement.
2. The following non-exclusive list of items shall be researched and developed, in
order to negotiate the deal points of a purchase and sale agreement:
a) Scope of development and improvements for a multi-purpose
events/performance venue;
b) Scope of the entitlements required for the project (including, but not limited
to: City of Newport Beach, California Coastal Commission, California
Environmental Quality Act, and California Alcohol Beverage Control);
c) Development schedule for the Proposal;
Approve an Exclusive Negotiating Agreement between the City of Newport Beach and
Lab Holding, LLC, for Negotiation of Terms of the Sale of the Balboa Theater Property,
Located at 707-709 E. Balboa Boulevard
April 12, 2016
Page 4
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d) The fair market purchase price which The Lab will pay for a fee simple
interest in the property, and terms and conditions of the conveyance of the
fee simple interest to Lab Holding, LLC;
e) Deed restrictions to be recorded against the property, by the City,
including but not limited to: a deed restriction on title limiting the use of the
property to any of the following listed uses: theater, cultural center, event
center, or other related performing arts uses. Ancillary commercial use of
the property shall be permitted;
f) City’s first right of repurchase option to repurchase the property from Lab
Holding, LLC, should The Lab elect not to redevelop the property as a
theater use; and
g) Escrow instructions and conditions for the closing of escrow.
3. The Lab to be solely responsible for any costs related to the preparation of
design documents in order to determine the scope of the development.
The City Attorney’s office has reviewed the agreement and approved it as to form.
Contract Summary
Proposed Contract
Vendor Name Lab Holding, LLC
Term 1 year, three-month extension
option
Escalation Clause N/A
Revenue/Year N/A
Cost/Year N/A
Cost/Contract Term (est)N/A
Selection Process
Sole Source or RFP/RFQ RFP
Method (QBS vs. Low Bid)QBS
# of Respondents 5
# of Qualified Respondents 4
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action 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
Approve an Exclusive Negotiating Agreement between the City of Newport Beach and
Lab Holding, LLC, for Negotiation of Terms of the Sale of the Balboa Theater Property,
Located at 707-709 E. Balboa Boulevard
April 12, 2016
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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:
Attachment A – Exclusive Negotiating Agreement
Attachment B – Maps
Attachment A
Exclusive Negotiating Agreement
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EXCLUSIVE NEGOTIATING AGREEMENT
This EXCLUSIVE NEGOTIATING AGREEMENT (“Agreement”) is made and entered
into as of ______________, 2016 (“Effective Date”), by and between the City of Newport
Beach, a California charter city and municipal corporation (“City”), and Lab Holding, LLC, a
California limited liability company (“Lab Holding”). City and Lab Holding are sometimes
hereinafter individually referred to as a “Party” and collectively as the “Parties.”
R E C I T A L S:
The following Recitals are a substantive part of this Agreement and are incorporated
herein:
A. City is a municipal corporation duly organized and validly existing under the laws
of the State of California with the power to carry on its business as it is now being conducted
under the statutes of the State of California and the Charter of the City.
B. Pursuant to the Newport Beach Municipal Code and City Council Policy F-7, the
City conducted an analysis to determine the maximum or open market value of the property that
is the subject of this Agreement, using an appraisal by a reputable and independent professional
appraiser to determine the highest and best use of the property, and the highest value of the
property.
C. In seeking revenue equivalent to the open market value of the highest and best use
of the property, the City conducted an open bid or proposal process to insure the highest
financial return on the property that is the subject of this Agreement.
D. City desires to sell to Lab Holding certain real property in need of design,
redevelopment, and improvements, which property consists of approximately 5,200 square feet
located at 707-709 East Balboa Boulevard in Newport Beach, California 92661 (A.P.N. 048-135-
02), and is depicted on Exhibit “A” attached hereto and incorporated herein (“Site”).
E. Lab Holding is an experienced firm in restoration of historic structures and
operating event/performance venues who has proposed the restoration and operation of the
Balboa Theater as a multi-purpose events/performance venue on the Site (“Proposal”). The
Proposal, which may be subject to refinement and modification as mutually agreed to by the
Parties during negotiations, is generally described in the Proposal Description attached hereto
and incorporated herein as Exhibit “B.”
F. The Parties desire to enter into this Agreement to establish a period during which
they will cooperate to explore the feasibility of developing the Proposal on the Site and during
which time Lab Holding shall have the exclusive right to negotiate with City with respect to the
terms of an agreement or agreements to provide for the Proposal (“Definitive Agreement”).
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C O V E N A N T S:
Based upon the foregoing Recitals, which are incorporated herein by this reference, and
for good and valuable consideration, the receipt and sufficiency of which is acknowledged by
both Parties, City and Lab Holding agree as follows:
1. Good Faith Negotiations. During the entire Negotiation Period (defined in
Section 2), City and Lab Holding shall negotiate in good faith pursuant to the terms set forth
herein to achieve the objectives and accomplish the tasks described in this Agreement. Nothing
herein shall be deemed a covenant, promise, or commitment by either Party to approve or enter
into a Definitive Agreement with the other Party on any particular terms or conditions. The
Parties’ approval and execution of this Agreement is merely an agreement with respect to certain
tasks preliminary to the drafting and execution of the Definitive Agreement and an agreement to
enter into a period of negotiations according to the concepts presented herein, reserving full and
final discretion with City and Lab Holding as to the final terms of the Definitive Agreement as
required by law. If for any reason City and Lab Holding have not each executed a mutually
acceptable Definitive Agreement by the expiration of the Negotiation Period, and provided that
the Parties have not committed a material default hereunder, this Agreement shall automatically
terminate and shall be of no further force or effect.
During the period of exclusive negotiation, the City covenants and agrees to negotiate
exclusively with the Lab Holding and shall not solicit another party for the Site or enter into any
agreement with any other party regarding the development of the Site. The City acknowledges
and agrees that but for this exclusivity, Lab Holding would not have entered into this Agreement.
2. Term of Agreement. The term of this Agreement (“Negotiation Period”) shall be
one (1) year after the Effective Date; provided, however, that the City Manager, on behalf of the
City, and Lab Holding shall have the right to approve an extension of the Negotiation Period for
a cumulative maximum of three (3) months without the requirement of any official action by the
City Council or an amendment of this Agreement, if the City Manager and Lab Holding
determine, in their sole and absolute discretion, that satisfactory progress is being made to
achieve the objectives and complete the tasks set forth herein but such extension is necessary to
finalize discussions or negotiations on mutually satisfactory terms.
3. Certain Parameters for Negotiation. The following nonexclusive list of items
related to the Proposal shall be the subject of negotiations during the Negotiation Period:
(a) Scope of development and improvements for a multi-purpose
events/performance venue of approximately 5,200 square feet;
(b) Scope of the entitlements required for the project (including, but not
limited to, City of Newport Beach, California Coastal Commission, California
Environmental Quality Act, and California Alcohol Beverage Control);
(c) Development schedule for the Proposal;
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(d) The fair market purchase price which Lab Holding will pay for a fee
simple interest in the Site and terms and conditions of the conveyance of the fee simple
interest to Lab Holding;
(e) Deed restrictions to be recorded against the Site by City, including but not
limited to, a deed restriction on title limiting the use of the Site to any of the following
listed uses: theater, cultural center, event center, or other related performing arts uses.
Ancillary commercial use of the property shall be permitted;
(f) City’s first right of repurchase option to repurchase the property from Lab
Holding, should Lab Holding elect not to redevelop property as theater use; and
(g) Escrow instructions and conditions for the closing of escrow.
4. Reserved.
5. Land Use & Environmental Requirements. The development of the Proposal
shall be subject to all rules, regulations, standards, and criteria required by law and as set forth in
the City's General Plan, Coastal Land Use Plan, zoning regulations, this Agreement, and the
Definitive Agreement. Lab Holding shall be responsible for all costs related to the Proposal
incurred after the Effective Date, including, but not limited to, consultant fees and Architectural
Services (“Costs”).
6. Physical Condition of the Site. City and Lab Holding shall cooperate and
exchange such information as may be available to either of them regarding the physical condition
of the Site (or applicable portions thereof).
7. Hazardous Material Assessment. Within ten (10) days of the Effective Date, the
City shall provide Lab Holding without charge, copies of reports, studies, surveys and other data
and information on the physical condition of the Site. The Definitive Agreement may address
applicable clean-up issues, if any. In the event an environmental audit evidences a need for
clean-up of any portion of the Site, the City, by this Agreement, does not agree in any respect to
undertake or complete such clean-up. In the event that during the Negotiating Period Lab
Holding conducts or causes to be conducted any environmental audits and/or testing on any
portion of the Site, Lab Holding shall submit copies of any reports resulting from such tests or
studies to the City. Such environmental audits and/or testing shall be conducted at the sole cost
and expense of Lab Holding. Neither Party makes any representation or warranty as to the
accuracy or completeness of reports prepared by third parties and delivered to the other Party.
Lab Holding shall indemnify, defend and hold harmless City from and against all claims,
liabilities or damages, and including expert witness fees and reasonable attorneys’ fees and costs,
arising out of any such testing, inspection or investigatory activity on the Site by Lab Holding.
In addition, following any such testing, inspection or investigatory activity, Lab Holding shall
return, and repair if necessary, the Site to the condition it was in prior to the Lab Holding’s
investigatory activities.
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8. Miscellaneous.
8.1 Notices. Any notices, requests or approvals given under this Agreement
from one Party to another may be personally delivered, or deposited with the United States
Postal Service for mailing, postage prepaid, to the address of the other Party as stated in this
paragraph, and shall be deemed to have been given at the time of personal delivery or, if mailed,
on the third day following the date of deposit in the course of transmission with the United States
Postal Service. Notices shall be sent as follows: notices between the Parties shall be delivered in
writing to the following addresses:
To City: Dave Kiff
City Manager
100 Civic Center Drive
Newport Beach, CA 92660
With a copy to: Lauren Wooding Whitlinger
Real Property Administrator
100 Civic Center Drive
Newport Beach, CA 92660
To Lab Holding: Lab Holding, LLC
Attn: Shaheen Sadeghi
709 Randolph Avenue
Costa Mesa, CA 92626
8.2 Termination. Each Party reserves the right to terminate this Agreement,
with or without cause, upon thirty (30) calendar days ’ prior written notice to the other Party,
thereby withdrawing from such negotiations without any liability to the other Party, except that
(i) each Party shall be obligated to promptly return to the other Party all information and
materials which such Party has received from the other Party pursuant to this Agreement, (ii) Lab
Holding shall be responsible for payment of any work Lab Holding contracted to have performed
under this Agreement, and (iii) the rights and obligations of the Parties set forth in Section 8 shall
remain in full force and effect. The Parties, by their respective execution hereof, knowingly
agree, notwithstanding anything herein to the contrary, that, except with respect to the rights and
obligations set forth in Section 8 hereof, neither of them shall have any right to specific
performance of this Agreement, nor any other equitable or damage remedies under the law. Each
Party makes such release with full knowledge of Civil Code Section 1542 and hereby waive any
and all rights thereunder to the extent of this release, if such Section 1542 is applicable. Section
1542 of the Civil Code provides as follows:
“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 the release, which if known by him or her must have
materially affected his or her settlement with the debtor.”
__________ __________
City’s Initials Lab Holding’s Initials
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8.3 Lab Holding Documents. In the event of termination of this Agreement,
for any reason including, but not limited to, expiration, termination or breach of this Agreement,
Lab Holding shall deliver to the City, within ten (10) business days, a copy of all surveys,
soils/environmental reports, site plans, pro formas, and other documents prepared by Lab
Holding or third parties that are associated in any way with this Agreement. Notwithstanding the
foregoing, in no event, however, shall Lab Holding be obligated to make available (or cause to
be made available) any proprietary or confidential documents including reports or studies that
have been superseded by subsequent reports or studies, or any of the following confidential and
proprietary materials: (1) information contained in financial analyses or projections (including
Lab Holding’s budgets, and capital account information); (2) material that is subject to attorney-
client privilege or that is attorney work product; (4) organizational, financial and other
documents relating to Lab Holding or its affiliates (other than evidence of due authorization and
organization, and the financing plan required under this Agreement); or (5) material that Lab
Holding is legally required not to disclose other than by reason of legal requirements voluntarily
assumed by Lab Holding after the Effective Date. Lab Holding makes no representation or
warranty as to the accuracy or completeness of reports prepared by third parties and delivered to
the City.
8.4 Cooperation. The Parties agree to cooperate with each other in promptly
supplying information and analyses relating to the Proposal.
8.5 Assignment. Neither Party shall have the right to assign any of their rights
or obligations set forth in this Agreement without the written consent of the other Party, which
consent may be withheld in such other Party’s sole and absolute discretion. Any assignment
must be in writing and executed by both assignor and assignee to be enforceable and after the
effective date of the assignment the assignor shall be released and discharged from any liability
or responsibility hereunder.
8.6 Entire Agreement, Amendments, and Waivers. This Agreement sets forth
the entire agreement between the Parties with respect to the subject matter set forth herein and
supersedes all prior discussions and negotiations between the Parties with respect thereto. No
amendment to this Agreement shall be effective unless set forth in a writing signed by an
authorized signator of each Party. No waiver of any provision of this Agreement shall be
enforceable against a Party unless it is set forth in a writing executed by such Party. For purposes
of amendments, the City Manager is an authorized signatory on behalf of the City.
8.7 Administrative Costs and Expenses; Lab Holding Deposit. Lab Holding
shall be responsible for all costs and expenses incurred by the City and/or Lab Holding related to
this Agreement including, but not limited to, architectural and consultant fees, costs of City staff
time related to any applications, other fees and permits, and attorney fees.
8.8 Assurances to Act in Good Faith. The City and Lab Holding each agree to
take all actions contemplated by this Agreement, and shall use their respective best efforts to
negotiate a Definitive Agreement in accordance with the provisions of this Agreement.
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8.9 Attorney’s Fees. In the event of any litigation or legal action between the
Parties arising out of or concerning this Agreement, the prevailing Party shall not be entitled to
recover from the other Party its attorney’s fees and costs.
8.10 Interpretation. This Agreement shall be interpreted as a whole and in
accordance with its fair meaning and as if each Party participated equally in its drafting. Captions
are for reference only and are not to be used in construing meaning.
8.11 Governing Law. This Agreement shall be governed by the laws of the
State of California. Any legal action brought under this Agreement must be instituted in the
Superior Court of Orange County, State of California, in an appropriate court in that county, or
in the Federal District Court in the Central District of California.
8.12 Purpose of Agreement. It is expressly understood and agreed by the
Parties that this is an Agreement regarding the conduct of exclusive good faith contract
negotiations only and does not convey any interest in the Site whatsoever. This Agreement is not
intended to constitute a binding agreement by the City to sell the Site or commit the City to
develop all or any portion of Site, to financially participate with Lab Holding in the development
of the Proposal, nor is it intended to constitute a binding agreement to enter into a Definitive
Agreement or any other contract. No Party shall be legally bound to consummate construction of
the Proposal unless and until a Definitive Agreement or other contract has been executed and
delivered by the Parties. Notwithstanding any other provision hereof, neither Lab Holding nor
the City shall be under any obligation to approve or execute any Definitive Agreement during or
upon conclusion of the Negotiating Period. Any Party may refuse to approve and execute any
Definitive Agreement at its sole and absolute discretion, with or without cause. In the event that
a Definitive Agreement is approved and executed by the Parties, this Agreement shall be
superseded by such Definitive Agreement. It is expressly understood that notwithstanding this
Agreement, the Proposal may be modified or not implemented at all depending on a number of
factors including but not limited to compliance with the California Environmental Quality Act.
8.13 No Commissions. The City shall not be liable for any real estate
commission or any broker's fees which may arise in relation to the Proposal. The City represents
that it has engaged no broker, agent, or finder in connection with this transaction, and Lab
Holding agrees to hold the City harmless from any claim by any broker, agent, or finder retained
by Lab Holding.
8.14 Time of Essence. Time is of the essence of each provision set forth in this
Agreement.
[SIGNATURES ON FOLLOWING PAGE]
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EXHIBIT A
DEPICTION OF THE PROPERTY
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EXHIBIT B
PROPOSAL DESCRIPTION
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Attachment B
Maps
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Feet
Imagery:2009-2013 photos provided by Eagle
Imaging www.eagleaerial.com
Every reasonable effort has been made to assure the
accuracy of the data provided, however, The City of
Newport Beach and its employees and agents
disclaim any and all responsibility from or relating to
any results obtained in its use.
Disclaimer:
3/30/2016
0 2,0001,000
Newport
Beach
GIS
15-28
Feet
Imagery:2009-2013 photos provided by Eagle
Imaging www.eagleaerial.com
Every reasonable effort has been made to assure the
accuracy of the data provided, however, The City of
Newport Beach and its employees and agents
disclaim any and all responsibility from or relating to
any results obtained in its use.
Disclaimer:
3/30/2016
0 400200
Newport
Beach
GIS
15-29
Feet
Imagery:2009-2013 photos provided by Eagle
Imaging www.eagleaerial.com
Every reasonable effort has been made to assure the
accuracy of the data provided, however, The City of
Newport Beach and its employees and agents
disclaim any and all responsibility from or relating to
any results obtained in its use.
Disclaimer:
3/30/2016
0 8040
Newport
Beach
GIS
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