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DISPOSITION OF REAL PROPERTY OWNED BY THE SUCCESSOR AGENCY TO THE FORMER REDEVELOPMENT AGENCY OF THE CITY OF STOCKTON
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RECOMMENDATION
It is recommended that the Stockton Successor Agency Oversight Board adopt a resolution authorizing actions related to the disposition of real property owned by the Successor Agency to the former Redevelopment Agency of the City of Stockton:
1. Deem six (6) Successor Agency-owned properties, included as Exhibit 1 to the Resolution, as excess and authorize the sale of those properties.
2. Authorize the Executive Director to review and approve individual sales transactions within predetermined criteria, execute a Master Sales Listing Agreement with CBRE, INC.(Exhibit 2 to the Resolution), and take all other necessary and appropriate actions to carry out the purpose and intent of the Resolution.
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Summary
Over the past two years, City staff in the Economic Development Department has been actively selling excess City-owned property authorized by the City Council in May 2013. Staff has continued to evaluate the City’s excess real estate assets for potential sale, as well as the assets of the Successor Agency, and to develop a disposition plan for surplus properties. After several months of research, City staff identified twenty-seven (27) City-owned marketable properties and six (6) properties owned or controlled by the Successor Agency as the most viable for sale at this time. For efficiency reasons, staff is requesting that the Oversight Board approve the sale of the Successor Agency properties within specified parameters, subject to approval of the Long Range Property Management Plan, and authorize the executive director to execute a Master Sales Listing Agreement with CBRE, INC. This action will not only reduce staff time and costs, but also has the potential to generate additional revenue for the Successor Agency. These actions were approved by the City Council, for City-owned properties, and Successor Agency for Successor Agency properties, on October 6, 2015.
DISCUSSION
Background
CBRE, INC. conducted a review of all potential properties as identified by City staff which were underutilized and/or surplus and recommended a “best approach” for maximizing return on dispensation of the surplus properties. The evaluation process included the preparation of estimated property values (Broker Opinion of Value or “BOV”), disposition recommendations, and prioritization of disposition with priority given to those with the greatest potential to generate revenue in the shortest period of time.
Administrative Directive HRD-02 (“HRD-02”) established standard procedures for the sale of real property belonging to the City. Specifically, the procedures allow all real property that is surplus to the City’s present and anticipated future needs to be sold and serve a useful purpose, be returned to the active tax rolls, and provide revenue to the City’s General Fund. HRD-02 requires that any department that becomes aware that a city property is no longer necessary for use is to notify the Economic Development Department (EDD), which will investigate the possibility of sale. EDD will initiate the process by circulating a sketch of the property to all City Departments to determine if the property is excess and once the property is deemed excess, EDD submits a map of the property to the City Manager together with a recommendation that the property be declared excess and sold. The City Manager then advises City Council that the property is excess and a sale will be attempted.
The Directive also allows the City Council to pass a resolution allowing the sale of City-owned real estate without using the formal bid process. In order to utilize this alternative, either the bid procedure must have been used and no bids received or the Council must find that such action will be in the best interest of the City.
Additionally, HRD-02 and Government Code section 54220 require that the City send notices offering the property first to public agencies once they have been deemed excess at current market value then, if no purchaser is identified within sixty (60) days following the notification, the property shall then be offered for sale to the general public.
Due to the large number of City and Successor Agency properties at issue, utilizing the formal bid process would be cumbersome and lengthy. On October 6, 2015, Council approved to utilize the alternative process described above and forgo the formal bid process by marketing the properties through other means such as: commercial brokers, website postings, and public notices. Utilizing the alternative procedure significantly reduces the amount of staff time required to issue individual bids for each property, while maintaining the appropriate level of competition. Staff recommends that the Oversight Board approve the same process for the Successor Agency properties.
Present Situation
In May 2013, the City Council authorized the sale of excess property and approved a Master Sales Listing Agreement with CB Richard Ellis (CBRE). This Agreement was for a two-year period from the date of execution and expired on August 14, 2015. Over the past two years, CBRE and Economic Development staff have been actively selling the excess City properties authorized by Council.
City staff has continued research over the past several months of Successor Agency properties, and identified six (6) Successor Agency assets. Some of the properties have been owned by the Agency for many years and include vacant land, existing buildings, and residential structures.
A Request for Proposals (RFP) seeking real estate broker services was issued on July 16, 2015, and a total of five (5) proposals were received: CBRE INC. of Stockton, Carpenter-Robbins Commercial Real Estate of San Ramon, Touchdown Properties of Oakdale, Fisher Auction Company of Florida, and Higgenbotham Auctioneers of Florida. The RFP was listed on Bid Flash and letters of notification were sent to local real estate firms. The proposals were reviewed and evaluated by staff from the Economic Development and Public Works Departments and it was determined that CBRE, INC. was the best qualified to perform the necessary services.
The sale of Successor Agency properties is contingent upon the approval of its Long Range Property Management Plan (LRPMP) that has been submitted to the California Department of Finance (DOF).
The properties for the Successor Agency that are recommended for sale at this time are included in Exhibit 1 to the Resolution and are further described below (Attachment A- Vicinity Maps and Photos of Successor Agency-owned Properties).
Successor Agency Parcels
1814 South Union Street and 1805 South Airport Way (APN 169-040-09 & 169-020-02)
This site contains two parcels located at the corner of South Airport Way and Folsom Street. At the back of the site there is a cell tower with a long-term lease. The two parcels together are approximately .47 of an acre in size.
2110 S. Airport Way - This is a Purchase Option Only
This property is not owned by the Successor Agency. The Agency only has an option to purchase the property for a set price. The site currently consists of a mini market; however, in previous years it was a gas station. Should the option become available and a party is interested in purchasing the property, the price to purchase the parcel is set at $750,000. The option term expires July 1, 2018. The site is approximately 1.12 acres in size.
2319 & 2333 Airport Way (APN 169-090-49, 50)
This site was previously a self-service car wash and contains two contiguous vacant parcels and is located on Airport Way, south of East Ninth Street. The two parcels together contain .30 of an acre.
Lincoln Street & Horton Avenue - (APN 175-260-34 & 175-070-08)
This site contains two contiguous parcels which are vacant and have varying grade separations. They are located at the end of Lincoln Street and Horton Avenue. One of the parcels borders Walker Slough to the east and once served as a chemical injection site to the Municipal Utilities Department. This parcel contains approximately 7,800 square feet. The second parcel which is a portion of Walker Slough contains approximately 2.73 acres.
119 S. Sutter Street - (APN 149-120-10)
This site contains the Henery Apartments, which was used as a single room occupancy hotel that closed prior to 1993. The site is a six-story building comprising a total area of approximately 36,000 square feet.
Waterfront Office Towers Parking Lot Site (APN 137-260-15)
This site contains parcels that are part of a planned office tower project with a portion of the parcels representing the parking area at the Waterfront Towers Office Condominiums on Weber Avenue. Parcel 137-260-15 is an undivided 50% interest with the Waterfront Office Towers Owners’ Association holding the remaining undivided 50% interest.
So as to not undermine the City’s negotiating position, BOVs for each parcel have not been disclosed.
City staff is recommending that the Oversight Board deem the above properties as excess and authorize the individual sale of those properties subject to any applicable limitations detailed above. In order to streamline the disposition process and to expedite the close of escrow, staff is also requesting that the Oversight Board authorize the Executive Director to review and accept offers from potential buyers that meet the following criteria without going through the formal bid process:
• The offer to purchase Successor Agency property must not fall more than 15% below the likely sales price indicated in the BOV in order to be accepted.
• Should the offer fall more than 15% below the likely sales price indicated in the BOV, the offer will either be rejected or brought forward to the Oversight Board for consideration. This determination will be made by the Executive Director or his designee.
• Individual sales transactions exceeding $500,000 will be brought before the Oversight Board for approval.
If the Oversight Board approves staff’s recommendation, the authorization would remain in place for two (2) years to allow sufficient time to market and sell the properties.
The scope of work outlined in the request for real estate advisory services included representation during the sale or lease transactions of surplus properties. Therefore, CBRE, INC. will handle sales and lease transactions for the six (6) Successor Agency surplus properties (contingent upon DOFs approval of the LRPMP) under a Master Sales Listing Agreement attached as Exhibit 2 to Resolution.
Public Notification
Per the Health and Safety Code section 34181(f), at least ten (10) days public notice to the public of the specific proposed actions will be provided prior to the acceptance of an offer to purchase Successor Agency property.
ENVIRONMENTAL CLEARANCE
It has been determined by the Community Development Department that the action/project of both the City and of the Successor Agency are exempt from the requirements of the California Environmental Quality Act (CEQA) as the project has been granted a “Statutory Exemption” under article 19 and, specifically by Section 15312, Class 12 of the State CEQA Guidelines. In accordance with Section 65402 of the Government Code, the Community Development Department further determined that the project or actions of the City and the Successor Agency conforms to the City’s General Plan designation for the site and with the General Plan Policy Document, as amended.
FINANCIAL SUMMARY
While the exact amount that the Agency will receive from the sale of the properties is unknown, there is a potential to generate between $1 million to $1.5 million for Agency-owned property in one-time revenue. The Agency may be required to pay normal closing costs typical of real estate transactions, such as broker commission, title fees, and other related costs. CBRE will receive commission ranging from 2% to 5% depending on the gross sale price of Agency property.
The proceeds from the sale of Successor Agency-owned property will be deposited to South - 635-0000-375.01-01 Sale of Miscellaneous Property / Real Property or Waterfront - 637-0000-461.00-00 Disposition /Fixed Assets / Sale of Fixed Assets based on the location of the property. It’s important to note that these proceeds are restricted and will be accounted for in the Recognized Obligation Payment Schedule.
As the properties listed in the recommended resolution are sold, Economic Development Department, Administrative Services Department, and City Manager’s Office will coordinate disposition of proceeds and provide further information to the Oversight Board, specifically for sales over $500,000.
Attachment A- Vicinity Maps and Photos of Successor Agency-owned Properties