SR-10-08-2013-3ECity of City Council Report
Santa Monied
City Council Meeting: October 8, 2013
Agenda Item: 3-L
To: Mayor and City Council
From: Andy Agle, Director of Housing and Economic Development
Subject: Disposition of City -Owned Property at 1122 22nd Street
Recommended Action
Staff recommends that the City Council:
1. Authorize the City Manager to proceed with sequential negotiations with the two
highest and best bidders for the sale of City -owned property located at 1122 22 "d
Street, as follows, with the contingency, escrow, and closing cost terms listed in
Table 1 of this report:
a. Authorize the City Manager to negotiate and execute a Purchase and Sale
Agreement with Pezhman Firoozfam in the amount of $1.067 million.
b. In the event of unsuccessful negotiations with Pezhman Firoozfam,
authorize the City Manager to negotiate and execute a Purchase and Sale
Agreement with Maryland Estates, Inc. in the amount of $1.025 million.
2. Direct staff to set aside sale proceeds for affordable housing production and
preservation.
Executive Summary
On March 12, 2013, Council authorized staff to solicit bids for the sale of 1122 22nd
Street (Property) at no less than market value. Staff received and reviewed several bids
based on purchase price, capacity to purchase, and contingencies to be met prior to
completing the sale. Staff recommends authorization to proceed with sequential
negotiations with the two highest and best bidders, Pezhman Firoozfam followed by
Maryland Estates, Inc. Both bids exceed market value based on a recent appraisal.
Background
The Property is a residential parcel with an existing single - family home. The Property is
approximately 5,920 square feet and the existing home is 1,107 square feet.
The zoning designation is R -2, which allows for a low- density, multi - family development
and a new development of approximately four residential units. The history of the
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Property is discussed in a March 12 2013 staff report. At that time, Council authorized
staff to solicit bids for the sale of the Property, after making a determination that the
Property was no longer needed for City purposes and was deemed to be surplus
property. Pursuant to CAL. GOV. CODE § 54222, public agencies were offered the
opportunity to purchase this Property prior to the Property being presented for sale to
the general public. No interest was expressed by any public agencies. On June 13,
2013, staff issued a Request for Sealed Bids (RSB) seeking bids to purchase the
Property.
Discussion
Pursuant to the RSB, the City received 28 offers. One offer was submitted after the
June 27th submission deadline and returned to the bidder. The remaining 27 qualified
offers included purchase prices ranging from $260,000 to $1.067 million, contingency
requirements varying from none to the ability to hold for resale, an assortment of
contingency and escrow periods and allocation of closing costs, and offer expiration
dates ranging from none to three days after the submission deadline.
In July, staff contacted all qualified purchasers to ensure that all received bids could be
extended through September. No bids were retracted. In August, after thoroughly
reviewing all bids, staff notified the two highest and best bidders, Pezhman Firoozfam
and Maryland Estates, Inc., that they were progressing to the next stage in the process,
and confirmed that their bids were valid through October.
The qualified offers propose a wide range of contingency requirements, escrow periods,
and allocation of costs. In the effort to limit protracted and unsuccessful negotiations,
staff requests authorization to proceed with contingency requirements, escrow period,
and allocation of costs as based on standard residential sale parameters listed below.
Table 1: Staff Recommended Negotiating Parameters
Buyer removes all contingencies 17 days after acceptance of the Agreement
Close of Escrow shall occur 30 days after acceptance of the Agreement
Buyer / Seller each to pay own escrow fees
Buyer pays for all inspections, reports, transfer taxes or fees, insurance policies, and
warranties
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Staff evaluated the purchase offers in terms of price, good faith deposit, evidence of
funds, due diligence period, contingencies, and escrow period. A summary of the
highest and best offers is below:
Staff recommends proceeding with sequential negotiations and execution of a purchase
and sale agreement (Agreement) based on deal terms in Table 1 with the strongest
prospective purchasers, Pezhman Firoozfam followed by Maryland Estates, Inc.
Both offers exceed the market value established by a recently City- commissioned
appraisal.
Mr. Firoozfam's offer represents the highest price, minimal contingencies and
demonstrated proof of funds. The key terms of the offer include a $1.067 million
purchase price, $32,010 good faith deposit within three days of Agreement acceptance,
financing contingency, and a 35 -day or less escrow period.
Maryland Estate's offer represents the second highest price. This is an all -cash offer,
although financial capacity has not been demonstrated. The key terms of the offer
include a $1.025 million purchase price, $30,000 good faith deposit within three days of
Agreement acceptance, execution of Agreement within five days after acceptance; and
contingency period of 14 days following inspections.
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Best Offer
Second Best Offer
Pezhman Firoozfam
Maryland Estates, Inc.
Offer Amount
$1.067 million
$1.025 million
Deposit
$32,010
$30,000
$650,000 cash or
Sources of Funds ..
equivalent and $417,000
Cash
financed; evidence of funds
provided
Escrow Period
35 days or sooner
14 days after
contingencies
Contingencies
Financing
Inspections, due diligence
Staff recommends proceeding with sequential negotiations and execution of a purchase
and sale agreement (Agreement) based on deal terms in Table 1 with the strongest
prospective purchasers, Pezhman Firoozfam followed by Maryland Estates, Inc.
Both offers exceed the market value established by a recently City- commissioned
appraisal.
Mr. Firoozfam's offer represents the highest price, minimal contingencies and
demonstrated proof of funds. The key terms of the offer include a $1.067 million
purchase price, $32,010 good faith deposit within three days of Agreement acceptance,
financing contingency, and a 35 -day or less escrow period.
Maryland Estate's offer represents the second highest price. This is an all -cash offer,
although financial capacity has not been demonstrated. The key terms of the offer
include a $1.025 million purchase price, $30,000 good faith deposit within three days of
Agreement acceptance, execution of Agreement within five days after acceptance; and
contingency period of 14 days following inspections.
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Environmental Analysis
Sale of the subject property is categorically exempt from environmental review pursuant
to CEQA Guideline 15312, as it involves the sale of surplus governmental property for
which the use of the property and adjacent property has not changed since it was
bequeathed to the City. Should the successful purchaser of the property pursue
development of the site, such development would be subject to CEQA review.
Next Steps
With Council authorization on the recommendations discussed in this report, the
Housing Division would proceed to negotiate an Agreement with the parties for
execution by the City Manager
Financial Impacts & Budget Actions
Staff estimates that the sale of the Property will generate approximately $1.067 million
in revenues in FY 2013 -14; the actual amount will vary depending on final negotiations
and closing costs. Proceeds from the sale will be deposited into account at
04264.401801. These funds will be used for affordable housing production and
preservation. Budget changes associated with this transaction will be included in the
Midyear report to City Council, once the sale has been completed and the final
purchase amount has been determined. At this time, there are no budget changes
being requested.
Prepared by: Ava Lee, Acting Housing Administrator
Approved:
Andy Agle, Director
Housing and Eco o 'c Development
Attachments:
Attachment A: Resolution
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Forwarded to Council:
Rod Gould
City Manager
Attachment A
City Council Meeting: October 8, 2013 Santa Monica, California
RESOLUTION NUMBER (CCS)
(City Council Series)
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF SANTA MONICA FOR THE SALE OF CITY -OWNED REAL
PROPERTY AT 1122 22ND STREET
WHEREAS, the property located at 1122 22 "d Street ('Property ") was
bequeathed to the City of Santa Monica in or about 1994 by the Estate of Anna
Blackburn, with possessory interest to her caretaker, who has passed away; and
WHEREAS, by Resolution Number 10742 (CCS), the City Council determined
that the Property was no longer needed for any public purpose and authorized the
commencement inviting bids for the sale of the Property in accordance with SMMC
Section 2.24.110 and California Government Code Section 54222, and
WHEREAS, on June 12, 2013 and June 19, 2013, the City advertised the sale in
the official newspaper in accordance with SMMC Section 2.24.110(b). In response to
the request for proposals, the City received 27 proposals.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA
DOES RESOLVE AS FOLLOWS:
SECTION 1. The City Manager is authorized to negotiate with two of the highest
and best bidders, Perzhman Firoozfam and Maryland Estates, Inc., and is authorized to
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enter into a sales agreement and related documents for the sale of the Property with the
best proposer after the conclusion of the negotiations.
SECTION 2. The City Clerk shall certify to the adoption of this Resolution, and
thenceforth and thereafter the same shall be in full force and effect.
APPROVED AS TO FORM:
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Reference:
Agreement No. 9808
(CCS)