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SR-08-02-1978-6QSanta Monica, California, August 9, 1978 TO: Mayor and City Council AUG 2 2 1978 FROM: City Staff C7/1 /(/CI ;10i SUBJECT: Proposed Agreement on Ocean Towers Cooperative Project Introduction e � �L This report recommends the City Council approve an agreement with the owners of the Ocean Towers buildings whereby they agree to pay the $317,000 which would be due in cooperative conversion taxes in exchange for the City's agreement that they will not be compelled to process an application for conversion to a cooperative project when the procedures are subsequently established. Background In February the City enacted a moratorium on stock cooperatives pending adoption of ordinances establishing standards and pro- cedures for cooperative projects and imposing a one time $1,000 tax per unit on them. The moratorium ended August 7th and while the tax measures have been adopted the standards and procedures will not be effective until September 20th. Prior to the mora- torium the owners of the 317 unit Ocean Towers complex at 201 Ocean Avenue had commenced proceedings to convert the buildings to cooperatives and have all but completed the process, the buildings being sold out with 50% of the present tenants having purchased the apartments in which they reside. The owners, AUG 2 2 1978 Mayor and City Council - 2 - August 9, 1978 seeking to cooperate with the City and avoid possible liti- gation as to the City's power to restrict cooperative activi- ties, have offered to pay the $317,000 in exchange for an agreement that the City will not attempt to compel them to go through the process of being approved by the Planning Commission. The building meets the standards proposed by the Planning Com- mission for conversion and there is little doubt on the staff's part that approval would be granted were an application filed. Advantages to the City include substantial savings in litigation costs, immediate receipt of the $317,000 which would be due in taxes, an annual increase of $39,000 in City property taxes over those now produced, assurance that the $317,000 would not have to be returned in the event that the cooperative tax were ever overturned by the Courts and avoidance of possible misunderstand- ing with the 317 purchasers of the project. Recommendation In view of the immediate and ongoing fiscal benefits to the City, the fact that the process has all but been completed and the ab- sence of any substantial public purpose to be served by compelling compliance with procedures not technically yet in force, it is respectfully recommended that the offer be accepted and the Acting City Manager authorized to execute the agreement. Prepared by: James Lunsford JL:bt Richard Knickerbocker AGREEMENT THIS AGREEMENT made this day of 1978, between the CITY OF SANTA MONICA, a municipal corporation hereinafter referred to as "City," and Ocean Towers Group, a California Partnership, Ocean Towers, Ltd., a California Limited Partnership and Ocean Towers Housing Corporation, a California Corporation (all of which are hereinafter referred to as "Ocean Towers "). Whereas Ocean Towers owns a 317 unit apartment development constructed on Lots 22 through 26 of Block' M in the Palisades Tract all of which is situated within the corporate limits of the City of Santa Monica community being known as the Ocean Towers Apartments, 201 Ocean Avenue, Santa Monica. Whereas the City declared a moratorium on activities leading to the development of stock cooperative apartment projects between the dates of February 14, 1978 and August 7, 1978. Whereas certain of the Ocean Towers parties initiated certain activities leading to the development of the Ocean Towers Apartments as a stock cooperative apartment project prior to the effective date of the City's moratorium and the major portion of all necessary actions have now been completed, a Preliminary Subdivision Public Report was issued by the California Department of Real Estate on May 19, 1978 and pursuant thereto reser- vations have been received on all 317 units in the Ocean Towers Apartment. Whereas the City enacted an ordinance No. 1092, 1093, 1094, 1095 and 1097 establishing a one time tax of One Thousand ($1,000) Dollars per unit on all stock cooperative developments within the corporate limits of the City in June 1978. Whereas the City Council has enacted, on August 22, 1978, an Ordinance No. 1100 (CCS) regulating the creation of stock cooperative projects. Whereas it is the opinion of the Director of Planning that the Ocean Towers Apartments meet or exceed the technical specifications and proposed standards set forth for development of a stock cooperative project in Ordinance No. 1100 (CCS) in all respects and he would recommend approval under Ordinance No. 1100 (CCS). -2- Whereas, because of the facts, and the opposing positions of the City and Ocean Towers, there is a bona fide dispute between the City and Ocean Towers as to the City's authority and power to enact said ordinances regulating and taxing the development of stock cooperatives and declaring the moratorium between February 14, 1978 and August 7, 1978 and the applicability of any and all such legislation to the activities of Ocean Towers up to the date hereof and continuing hereafter to the com- pletion of Ocean Towers Apartments as a Stock Cooperative Project. Whereas both parties desire to resolve this dispute without the necessity of litigation in an amicable and cooperative manner acceptable to all and in the best interests of the City, Ocean Towers and the future stock- holders of Ocean Towers Cooperative Housing Corporation and all future owners of the Ocean Towers Apartments real property. IT IS THEREFORE RESOLVED AND AGREED between the City of Santa Monica and each and everyone of the parties constituting Ocean Towers, that in consideration of (i) the payment to the City of Santa Monica in behalf of all such parties of Three Hundred and Seventeen Thousand ($317,000) Dollars, (ii) and the agreement of all such parties to abide by all other present or future applicable -3- c c city ordinances whose subject matter does not include the creation and initial taxation (as opposed to regular annual taxation uniformly applied to all condominium stock cooperative corporations) of stock cooperative corporations, the City hereby covenants and agrees that it will not at any time hereafter, commence, maintain or prosecute any action at law or otherwise, or assert any claim against Ocean Towers (as defined herein) or their officers, directors or partners based upon an alleged violation of City Ordinances Nos. 933, 1007, 1077, 1091, 1092, 1093, 1094, 1095, 1097, 1100, or any ordinances subsequently enacted covering substantially the same subject matter, in substitution or replacement thereof. Time of Performance and Default Ocean Towers shall pay said sum of Three Hundred and Seventeen Thousand ($317,000) Dollars to the City of Santa Monica within ten (10) days of execution of this agreement by all parties. If_ Ocean Towers shall fail to pay said sum in full to the City by the expiration of said ten (10) day period, this Agreement shall become null and void. Assiqnment and Transfer Ocean Towers shall not, without the City's written consent which shall not be unreasonably witheld or delayed, assign or transfer its rights under this Agreement. Independent Investigation Each of the parties hereto has independently in- vestigated the facts and the law, and in entering into the Agreement is relying solely on such investigation and is not relying on any statement or representation of the other party. Entire Contract This instrument contains the entire Agreement between the parties relating to the rights herein granted and the obligations herein assumed. Any oral represen- tations or modifications concerning this instrument shall be of no force or effect except a subsequent modification in writing, signed by the party to be charged. Governing Law. The validity of this Agreement and any of its terms or provisions, as well as the rights and duties, shall be interpreted and construed pursuant to the laws of the State of California. -5- Interpretation The terms and conditions of this Agreement shall be construed pursuant to their plain and ordinary meaning and shall not be interpreted against the maker. Parties, Officers, Directors and Partners This Agreement is for the benefit of the parties hereto, and their officers, directors and partners and is also for the benefit of the future stockholders of the Ocean Towers Housing Corporation. Entered into this day of -- 1978. CITY OF SANTA MONICA A Municipal Corporation By: DAVID P. DOLTER, Acting City Manager ATTEST; CITY CLERK APPROVED AS TO FORM: RICHARD L. KNICKERBOCKER, City Attorney - -6- OCEAN TOWERS GROUP A California Partnership OCEAN TOWERS, LTD., A California Limited Partnership By L and S Operating Company, Its General Partner By: DAVID A. PETERS, Vice President OCEAN TOWERS HOUSING CORPORATION, A California Corporation Vice- President Reference: Contract No. 3078 (CCS)