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
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Reference Agreement
Nos. 9670 (CCS) and
9671 (CCS).