SR-06-24-2014-3JCity Council Meeting: June 24, 2014
Agenda Item: 33 ®J
To: Mayor and City Council
From: Andy Agle, Director of Housing and Economic Development
Subject: 401 Broadway Subsurface License Agreement
Recommended Action
Staff recommends that the Council authorize the City Manager to negotiate and execute
a subsurface license agreement with 401 Broadway LLC for a term of 75 years for a
portion of the public right -of -way below grade at 401 Broadway, as required by the
property's Development Review Permit 12 -006.
Executive Summary
On October 8, 2013 Council approved the development of a new five - story, mixed -use
building located at 401 Broadway. The development would include fifty -six apartments
and two levels of subterranean parking. As a condition of development, the developer
was required to negotiate and pay for subsurface rights privileges. The value for the
subsurface rights has been determined to be $465,400 for the 75 -year license term.
Discussion
The new five -story residential and commercial, mixed -use building to be constructed at
401 Broadway will include fifty -six apartments, ground -floor commercial uses, and two
subterranean levels containing fifty parking spaces for the tenants. The developers will
require the use of space (1,432 square feet in total) located underneath the public
right -of -way at Fourth Street and Broadway for the purposes of constructing and
operating the two subterranean levels of parking. Construction is scheduled to begin in
August 2014, with an estimated 18 -month duration and completion anticipated in the
spring of 2016.
1
In determining value for the subsurface rights, staff reviewed the appraisal methodology
utilized for valuing the license agreement for the Travelodge Hotel (now known as
"The Shore Hotel ") located at 1515 -1525 Ocean Avenue and 1530 Second Street.
This agreement, which granted use of a subsurface utility easement in First Court Alley,
was approved by Council on December 8, 2009.
In both cases, the value of the subsurface license is based on the portion of the fair
market value of the property attributed to subsurface rights. For the current
development, staff utilized an appraisal produced for the City of Santa Monica by
Landauer Valuation & Advisory dated April 8, 2014 for the property at 402 Colorado
Avenue which provided a comparable land value of $650 per square foot.
The appraisal's comparable land value was derived from the sale amount of
401 Broadway. The base land value was discounted by fifty percent to reflect the
encumbrances and limited development rights associated with the subsurface rights.
The total value of the 401 Broadway subsurface rights has been valued at $465,400 for
the 75 -year term of the license. In addition to specifying the value, the license
agreement will contain maintenance and insurance requirements and preserve existing
rights of entry for the City. The encroachment rights granted to the Licensee
(401 Broadway, LLC) would commence upon the effective date of the license
agreement and continue for 75 years, unless terminated earlier (e.g. due to demolition
of the building.)
Environmental Analysis
The proposed project is exempt from CEQA pursuant to Section 21559.24.
2
Financial Impacts & Budget Actions
Authorizing the execution of the License Agreement would generate $465,400 in
one -time revenues for the City. Revenues are anticipated to be received in FY 2014 -15
and would be received at account 01274.404170.
Prepared by: Jennifer Taylor, Economic Development Administrator
Approved:
Andy Agle, Director —
Housing and Economic Development
Attachments:
A: 401 Broadway Site Plan
B: 401 Broadway Subterranean Plans
9
Forwarded to Council:
Rod Gould
City Manager
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Reference:
Agreement No. 9922
(CCS)