sr-032012-3eCity Council Report
City of
Santa Monica
City Council Meeting: March 20, 2012
Agenda Item: �)F_
To: Mayor and City Council
From: Andy Agle, Director of Housing and Economic Development
Subject: Purchase Agreement for property at 2322 Michigan Avenue
Recommended Action
Staff recommends the City Council authorize the City Manager:
1. to negotiate and execute a Purchase and Sale Agreement and other related
documents, to acquire the property located at 2322 Michigan Avenue, owned by
Chris T. Rudd Trust, et al, the owners of the subject property, for $2.2 million plus
associated transaction costs.
2. appropriate the budget increases as outlined in the Financial Impacts and Budget
Actions section of this report.
Executive Summary
The acquisition of a property located at 2322 Michigan Avenue provides an opportunity
for the City to address long -term needs such as the possible reconstruction of the
Corporation Yards. The City Council is asked to authorize the City Manager to negotiate
and execute an agreement for the purchase of this 12,223- square foot property at a
purchase of $2.2 million, of which $700,000 would be financed by the sellers at five
percent interest, fully amortized over a ten -year term.
Background
On January 10, 2012, Council authorized staff to explore the possible purchase of
properties near the City's Corporation Yards. The acquisition of property in this area
would provide an opportunity for the City to address long -term needs, such as
reconstruction of the Corporation Yards.
Discussion
The property, located 2322 Michigan Avenue, is a 12,223- square foot lot with two
structures. A 2,432- square foot, single -story building on the site is occupied by an
architecture firm whose lease expires August 2012, and a second 6,050- square foot,
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master – lessee who sub - leases the property to five tenants who use the space for a
variety of purposes. All tenants are on month -to -month leases.
The negotiated sales price is $2.2 million with the City and seller sharing closing costs.
In order to serve the sellers' financial planning needs, the sellers have asked that the
City finance $700,000 of the purchase price over ten years, at five percent interest. The
property's land value of $180 per square foot has been confirmed by the City's
appraiser as fair market value.
At the opening of a 60 -day escrow, the City would deposit five percent of the negotiated
purchase price and would be provided a 30 -day due diligence period to investigate
environmental and other conditions affecting the property. The City may cancel the
purchase within the escrow period if it discovers conditions which become unacceptable
to the City.
Environmental Analysis
This property acquisition is exempt from CEQA pursuant to CEQA Guideline Section
15061(b) (3). The City is acquiring this property to provide the City with the opportunity
to address long -term needs such as possible reconstruction of the Corporation Yards.
However, no plans for the redevelopment of this site have been developed. As such,
the property will remain it its present condition until such time as plans for the
redevelopment of this site are developed and approved by the City. Any future re -use
or redevelopment of the site will be subject to separate review for compliance with
CEQA.
Financial Impacts & Budget Actions
The cost of the property purchase for 2322 Michigan Avenue is $2,255,000, a purchase
price of $2,200,000, plus an estimated $55,000 in closing costs. Each of five funds —
General Fund, Water Fund, Resource Recovery and Recycling Fund, Wastewater
Fund, and Vehicle Management Fund —will contribute $451,000 toward the total
purchase price. Of the total purchase amount, $700,000 will be financed by the sellers
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at five percent (5 %) interest over a ten -year term. The purchase will require the
following budget actions. Note that the General Fund's share of the purchase will be
funded with monies held as a Real Estate Acquisition Assignment of the General Fund
balance.
Action
Account
e ra, . i
Release of Fund Balance
Assignment
1.380230
$ 451,000
Appropriation
C014076.589000
$ 451,000
Appropriation
0254076.589000
$ 451,000
Appropriation
0274076.589000
$ 451,000
Appropriation
C314076.589000
$ 451,000
Appropriation
C544076.589000
$ 451,000
Total Appropriation $ 2,255,000
Beginning in FY 2013 -14, the General Fund budget will be increased by the annual debt
service payment for principal and interest and each of the four proprietary funds'
operating budgets will be increased by the interest payment due each fiscal year.
Budget authority for subsequent years will be requested in each proposed budget for
the Council approval.
Prepared by: Elana Buegoff, Sr. Development Analyst
Andy Agle, Director
Housing and Econom
Attachments:
Attachment A - 2322 Michigan Site Map
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Forwarded to Council:
Rod Gould
City Manager
Attachment A
2322 Michigan Site Map
2322 Michigan Avenue
City Corporate Yards
Reference Contract No.
9558 (CCS).