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AUTHORIZE THE ACQUISITION OF REAL PROPERTY LOCATED AT 260 WEST FREMONT STREET
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution:
1. Authorizing the acquisition of real property located at 260 West Fremont Street, Stockton California, APN 137-410-15 (Property) from Marina Towers LLC, a California limited liability company (Seller) in the amount up to $1,700,000;
2. Authorizing the filing of a Notice of Exemption under Section 15061(B)(3) under the California Environmental Quality Act (CEQA) for the acquisition of real property located at 260 West Fremont Street, Stockton California, APN 137-410-15;
3. Authorizing a budget amendment to appropriate additional funds from the Redevelopment fund balance to support acquisition transactions;
4. Authorizing the City Manager to execute a purchase and sale agreement substantially similar in form to Exhibit 1 of the attached, as well as any due diligence costs associated with the purchase of the Property, and to take actions necessary and appropriate to carry out the purpose and intent of this resolution.
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Summary
City Council adopted the Economic Development Strategic Action Plan on January 25, 2022. A key strategy identified as part of the plan was investment and revitalization of downtown Stockton, recognizing the need for infrastructure. The City’s Envision Stockton 2040 General Plan, adopted in December 2018, relies on strategic infill development. The Economic Development Department (EDD) has been positioning and successful in capturing grant funds for environmental clean-up, setting a precedent for future success with redevelopment projects. Through Motion 2023-02-07-1210, the City was also able to de-obligate $1.94 million from the Open Windows project, which will now be used for a critical step in downtown land development.
Earlier this year, City Council also authorized the creation of a redevelopment fund and the acquisition of a property at 303 N. El Dorado Street, which allows the City to have site control of two full City blocks that are optimal for future redevelopment.
As the City continues to evaluate strategic acquisitions for the larger revitalization of the downtown core, EDD identified the opportunity to acquire the subject Property, located at 260 West Fremont Street. The Property’s proximity to the Waterfront aligns with three key strategies of the Economic Development Strategic Action Plan, which together will support a more vibrant community and resilient economy for Stocktonians.
DISCUSSION
Background
A City department may initiate the acquisition of real property according to Administrative Directive HRD-01, Acquisition of Real Property, by submitting a written request to the City Manager.
In July of 2024, EDD requested approval to start the acquisition process for the Property (Attachment A - Vicinity Map and Attachment B - Aerial Map). The proximity of this parcel to the waterfront, Adventist Health Arena, and Banner Island Ballpark will create opportunities for the City to further activate this area and/or contemplate opportunities for future redevelopment of the waterfront.
City staff identified comparable properties in CoStar, a third-party database that provides commercial real estate information, to use as a basis for a purchase price. The comparable properties are all currently on the market and are land only in the downtown area. The average for sale price per square foot of land identified is $26.51 per square foot. The Property is approximately three acres (130,680 square feet) so the proposed purchase price of $1,700,000 is reflective of the known history of the site. As such, a Certificate of Just Compensation (“Certificate”) was approved by the City Manager based on his review of the comparable properties for staff to initiate a written offer not to exceed the amount stated in the Certificate.
Present Situation
With City Manager approval, EDD staff presented an offer to the Property owner and subsequently negotiated a Purchase and Sale Agreement (“PSA”) with transaction support from their real estate and property services consultant, propertyworx LLC, who will also provide oversight of the due diligence process.
The PSA provides the City with a 150 day due diligence period. Due diligence allows City staff to research, verify and investigate relevant information about the Property. Within the first 30 days, the City will review a title report, which will be prepared by Chicago Title Company, to determine the Property’s title condition and to review any recorded documents referenced in the report. In parallel, the documents provided by the Seller as per Exhibit D of the PSA will be reviewed and validated and the City will commission any additional studies it deems necessary to proceed with the acquisition.
During the due diligence period, the City will also commission an independent appraisal to confirm the purchase price is appropriate and contemplate any costly issues identified during due diligence. As such, the City reserves the right to request an adjustment to the purchase price based on its findings.
Following the completion of the due diligence, the parties will have 60 days to close the transaction. It is important to note that the City is not required to close and reserves the right to terminate the transaction should staff determine that the Property is not suitable after reviewing the findings identified during the due diligence period.
Funding for the purchase is provided by reprogramming the Downtown Infill Infrastructure Reimbursement Program Funds that were de-obligated from the Open Windows Project and from the General Fund allocation of $1.5 million, authorized in the 2024-25 Budget. The funding seeded a revolving Redevelopment fund that will allow the Economic Development Department to further the goals of the Economic Development Strategic Action Plan including acquisition, blight abatement, demolition, and necessary actions that support downtown development. The initial primary focus of the fund will be on strategic acquisition, as land assembly is a key factor in the City’s economic development strategy.
FINANCIAL SUMMARY
Under the PSA, earnest money in the amount of $170,000 must be provided by the City to Chicago Title Company within 15 business days after the PSA is effective. These funds are available from the recently formed redevelopment fund and will be held in escrow and applied toward the purchase price at the close of escrow. Should the City terminate the transaction, these funds are refundable. The remaining $1,530,000 of the $1,700,000 purchase price are also available in the Redevelopment fund but would not be transferred into escrow until after the completion of the due diligence period.
An additional appropriation from the Redevelopment fund balance is needed to complete this transaction. With the close of the previously approved Wells Fargo site and this current site, the estimated additional budget authority needed in FY 2024-25 is $565,000. Funds will be appropriated in a redevelopment sub-fund, asset management division account. The remaining funds in the Redevelopment fund balance, after transactions are completed, will be $1.34 million Remaining funds will provide demolition of the Wells Fargo site and ancillary reports such as environmental that may be needed.
Attachment A - Vicinity Map
Attachment B - Aerial Map