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City Council Meeting: November 10,c2~009
Agenda Item: y'^~
To: Mayor and City Council
From: Andy Agle, Director of Housing and Economic Development
Subject: Exchange of City-Owned Property at 1920 Ocean Way with Privately
Owned Property at 1828 Ocean Avenue
Recommended Action
Staff recommends that the City Council authorize staff to proceed with the following
steps associated with the proposed exchange of City-owned property at 1920 Ocean
Way with property located at 1828 Ocean Avenue:
1) Authorize asix-month "Economic Uncertainty Period," through May 31, 2010, for
staff and Neptune Walk LLC/Edward Thomas Companies ("ETC") to negotiate
and finalize the terms of an Exclusive Negotiating Agreement ("ENA"); and
2) If the ENA terms are finalized by the end of the initial six-month period and if ETC
demonstrates that it cannot obtain development financing, allow one six-month
extension of the "Economic Uncertainty Period" at the discretion of the City
Manager. If granted by the City Manager, the extension period would conclude
on October 31, 2010, at which point ETC will be required to sign the ENA or its
exclusive negotiating status will expire.
Executive Summary
In November 2008, City Council directed staff to begin negotiations with ETC regarding
exchanging their property at 1828 Ocean Avenue with City-owned property located at
1920 Ocean Way. The goal of the exchange is for the City to acquire a property with
the greatest potential for affordable housing yield within the closest proximity to 1920
Ocean Way.
A draft ENA is presently being negotiated between ETC and City staff. ETC has
informed staff that, due to the current state of the financial markets and broad economic
uncertainty, it is experiencing difficulty accessing financing for development. This lack
of financing impedes the company's ability to move forward with initial due diligence and
predevelopment activities required by the ENA's proposed Schedule of Performance.
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Acknowledging that the current economic conditions are hindering access to real estate
development financing, staff recommends providing ETC with asix-month "Economic
Uncertainty Period" wherein ETC will be required to complete negotiation of the ENA.
Staff further recommends that if ETC completes negotiations of the ENA by the end of
the initial six-month period, but is still unable to secure development financing, that the
City Manager be authorized to grant one additional six-month extension.
Background
The City's 20-year history with the site and its commitment to utilize it for affordable
housing is provided in the November 11. 2008 Staff Report. At that meeting, City
Council authorized staff to enter into exclusive negotiations with ETC to exchange their
property at 1828 Ocean Avenue with City-owned property at 1920 Ocean Way and to
solicit affordable housing development proposals for the ETC site. Council's
authorization included negotiating terms for the land swap.
Discussion
ETC and staff are presently negotiating a draft ENA. The six-month "Economic
Uncertainty Period" establishes a clear deadline wherein ETC is required to finalize the
terms of the ENA regardless of financing availability. By offering an additional six-
month extension wherein ETC can delay its signature on the finalized ENA, the City
shows its commitment to the project despite the economic downturn while.
simultaneously limiting the risk of protracted negotiations. Once the ENA is executed,
ETC will be required to comply with a schedule of performance related to the land swap.
Alternatives
If the City determines that it wishes to cease negotiations with ETC, there are several
alternatives available. The City could:
1) Re-issue the land exchange RFP; or
2) Sell the 1920 Ocean Way property and use the proceeds for affordable housing
development in another part of the City; or
3) Issue an RFP to build affordable housing at the 1920 Ocean Way property; or
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4) Wait until it determines the real estate market is in better condition to undertake
one of the actions described above.
All of these alternatives will be available to the City at the end of the "Economic
Uncertainty Period."
Financial Impacts & Budget Actions
There is no financial or budget impact as a result of extending the negotiating period.
Prepared by: Lisa Luboff, Senior Administrative Analyst
Forwarded to Council:
Andy Agle, Director
Housing and Econo
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