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SR-11-27-2012-8A'Doom � .City of City Council Report s Santa Montea` City Council Meeting: November 27, 2012 Agenda Item: SA To: Mayor and City Council From: Rod Gould, City Manager Subject: Tri -Party Real Estate Exchange to Create Buffer Area Adjacent to Exposition Light Rail Phase 2 Maintenance Facility Recommended Action Staff recommends that the City Council authorize the City Manager to negotiate and execute real estate and other ancillary agreements with Santa Monica College (SMC) and the Exposition Metro Line Construction Authority (Expo) related to the purchase, lease, and exchange of real estate interests in properties located at 2909 Exposition Boulevard, 2900 Exposition Boulevard and 3400/3500 Airport Avenue, to allow for the creation of the proposed buffer area (Buffer Area) adjacent to the proposed Phase 2 Exposition Light Rail Maintenance Facility (Maintenance Facility). Executive Summary On November 23, 2010, Council authorized real estate agreements with SMC and Expo to secure a site for the proposed Buffer Area. At that time, the exchange envisioned SMC's sale of its Stewart Street/Exposition Boulevard parking lot land to the City, the City's sale of that same land to Expo, Expo's sale of the Buffer Area to the City, and the City's lease of Airport land to SMC with SMC having an option to purchase the Airport land. During continued negotiations, SMC has identified a preferred structure of reciprocal leases between the City and SMC. Under the proposed revised terms, Expo and SMC would exchange ownership of properties on Exposition Boulevard, with Expo owning what is currently SMC's parking lot and with SMC owning the proposed Buffer Area. The City would then lease the Buffer Area on Exposition Boulevard from SMC, and SMC would lease 3400/3500 Airport Avenue from the City. SMC would retain the option to purchase the airport land. The initial lease term would be for 25 years and with the options for lease extensions, the total lease period could be up to no more than 99 years. The lease and any purchase are subject to applicable state and federal law, including any Federal Aviation Administration regulations that may apply. If SMC exercises its purchase option, the City gets ownership of the buffer land. It is the City's intent that this should occur as soon as feasible. Background Council gave direction on November 23, 2010 to finalize the terms of property exchanges among SMC, Expo, and the City that would allow for the creation of the Buffer Area next to the proposed Expo Maintenance Facility. Under those terms, SMC was to sell its 2.35 -acre site at Stewart Street and Exposition Boulevard (SMC Parking Lot) to the City, who would then sell it to Expo. Expo was to sell a comparably sized property along Exposition Boulevard (Buffer Area) to the City, and the City was to long- term lease an equivalently valued property at 3400/3500 Airport Avenue (Airport Non - Aviation Land) to SMC, with an option to purchase. On October 25, 2011, Council voted to support the community's preference for selection of scenario 2 for the Expo Maintenance Facility, which changed the site configuration to provide continuous buffer coverage along Exposition Blvd. and allow for better noise abatement and aesthetic advantages, including at the corner of Expo and Stewart. On January 24 2012, Council approved creation of parkland as the use for the buffer. Mia Lehrer and Associates was approved as the designer for the park by Council on September 11, 2012. Staff has been working with Expo /Metro and the Maintenance Design Group on the design of the Maintenance Facility, its physical layout and the park delineation. Maintenance Facility design will be complete in December, specifically creating an approximately 2.35 -acre site for the buffer area between the Maintenance Facility and residential area on the south side of Exposition Blvd. City staff, Expo, and Metro have made progress on a number of the mitigations and good neighbor provisions. Expo /Metro has conducted four community outreach meetings to engage neighbors in the planning and design process. The design addresses noise, light, traffic and sustainability in response to residents' concerns and Council direction. It is anticipated that the building will earn a LEED gold rating. Both the City and Expo /MTA will continue to work with the community and SMC to ensure that any remaining concerns are addressed and that any impacts are mitigated in accordance with CEQA requirements and in accordance with other commitments to the City and the community. The City park project for the Buffer Area is getting underway. Mia Lehrer and Associates are providing design services. Discussion As exchange negotiations have progressed, SMC has indicated its desire that the property exchange be structured as mutually reciprocal long -term leases between the City and SMC, with each having an option to purchase the leased land. SMC would be made "whole" for the exchange of the SMC Parking Lot by owning the Buffer Area and by being able to secure a lease with option to purchase comparable Airport Non - Aviation Land adjacent to SMC's Airport Bundy Campus to be used for educational purposes. Similarly, the City would be made "whole" for the lease of the Airport Non - Aviation Land by its securing a lease with option to purchase the Buffer Area along Exposition Boulevard. The initial lease term would be for 25 years with optional 25 year lease extensions up to a total lease period of no more than 99 years. The lease and any purchase are subject to applicable state and federal law, including any Federal Aviation Administration regulations that may apply. If SMC exercises its purchase option, the City gets ownership of the buffer land. It is the City's intent that this should occur as soon as feasible. In summary, the proposed tri -party agreements would provide for 1) SMC to transfer fee title of the SMC Parking Lot to Expo. 2) Expo to transfer fee title of the Buffer Area to SMC. 3) The City to enter into a lease and option to purchase agreement with SMC for SMC's use of the Airport Non - Aviation Land. 4) SMC to enter into a lease and option to purchase agreement with City for City's use of the Buffer Land. 5) Exercise of the option to purchase by one party would automatically trigger the other party's purchase. 6) If either lease is terminated, both leases would terminate. 7) SMC would have an option to long -term lease an additional small, adjacent, remnant portion of Airport Non - Aviation Land at appraised value. Financial Impacts and Budget Actions The terms of the agreements would commit the City, Santa Monica College and Expo to mutual land lease agreements for comparably valued land. As the leases are of equal value, no cash would be exchanged. Beginning July 1, 2015, the City would no longer collect lease payments from the 38 tenants who would be displaced from Parcel A when SMC begins its lease. These lease payments, which are counted as revenue to the Airport Fund, would have reached an annual amount of $565,651 in FY 2014 -2015. Depending on the circumstances at the time and the law that may then apply, one future option for the City may be that, if the Airport Fund has to be made whole for this loss in revenue, any lost revenue to the Airport Fund may be accounted for and recovered as part of the repayment of the loan from the General Fund to the Airport Fund, which is expected to have reached a total of over $16 million by FY 2014 -15. If Santa Monica College elects to lease parcel B, they would make a lease pre - payment for the term of the lease of $130 per square foot or an equivalent annual lease payment. Prepared by: Kathryn Vernez, Deputy City Manager, Special Projects Andy Agle, Director of Housing and Economic Development Joseph Lawrence, Assistant City Attorney Approved: Forwarded to Council: athryn rnez Ro -dGould Deputy City Manager City Manager Attachment A: Proposed Expo /City /SMC Land Swap Maps Attachment B: Site Plan: Expo Maintenance Facility & Buffer Park •• 2909 Exposition South -2.35 ac Expo CA >>> city LAND SWAP A• Attachment A a0« 3500 Airport Avenue SMC M h "�vw - YOw^+n,u.Wel IYnNF'.IVL'T"'�Y.k -. k � e t y.. 5' r Q {nllA u✓M Ia Lw'.�L'M�M1ins. i?:PlB atwN�:•[. �� 'y �HFkrn g�gi 8� .WUVnwa mx n-au Afaa C. •.+iFap Vl:+'+w!SU ii M.aw. V:.Y LYY9'FWfriu!M1 � :i•l O ftpo SITE, PLAN 0 s2�7Ff�92 a0« 3500 Airport Avenue SMC Attachment B r all z m ftt, KIGI VIS4NIRg� cmraaa<�r��cltl�tt 66 NifII1RA1'. RVrt25 'WMC; VPaE'A�'ib.£ "r{/ILQ(Aa �W IC.INWP�1: 1.$ � 4/ uaumv IHICR�I:AR:A [WJ4E� +IX"'fb � A SITE PLAN Ol wa�emaa� ri ',. 12L w°=.r wm�vavxivcs — i 12L w°=.r Reference Agreement Nos. 9670 (CCS) and 9671 (CCS).