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APPROVE OPTION AGREEMENT WITH 1501 S. AIRPORT WAY LLC
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RECOMMENDATION
It is recommended that the City Council adopt a resolution:
1. Authorizing an Option Agreement with 1501 S. Airport Way LLC for City-owned property at 1501 S. Airport Way and 1670 Union Street; and
2. Authorize the City Manager to take necessary and appropriate actions to carry out the purpose and intent of the resolution.
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Summary
In October 2016, the City Council authorized an Exclusive Negotiating Rights Agreement (ENRA) between the City and 1501 S. Airport Way LLC, to allow staff to negotiate specific terms associated with a purchase Option Agreement for City-owned properties located at 1501 South Airport Way and 1670 Union Street (Attachment A and B - Vicinity and Aerial Maps). The developer, 1501 S. Airport Way LLC, intends to construct a commercial/retail shopping center consisting of approximately 20,000-40,000 s.f. of available space.
The terms of an eighteen-month Option Agreement have been agreed upon, including a market-rate purchase price of $2.49 per s.f. for a total purchase price of $327,953 for the two subject parcels. The City is also agreeable to abandoning excess public right-of-way of approximately 0.52 acres, which the developer will pay the same market-rate purchase price of $2.49 per s.f. for a total of $56,092. The combined total of the parcels and right-of-way is $384,045. The Option Agreement also includes an environmental allowance of up to $100,000 to assess the property and remediate any potential contamination. Any such expenses will be deducted from the purchase price after documentation that such costs occurred.
DISCUSSION
Background
Through the dissolution of Redevelopment in 2012, the former Redevelopment Agency was required to implement a Long-Range Property Management Plan, with a detailed description of each property that is owned, and the plan to develop the existing properties for disposition or how they would be held for future development. The plan was approved by the State of California in December 2015.
In addition, the 2015 Council adopted City of Stockton Economic Development Strategic Plan calls out a Neighborhood Revitalization Program as part of the implementation plan. It focuses on utilizing existing City resources (e.g., publicly-owned development sites) as one way to bring much-needed revitalization to the South Stockton neighborhood.
In May 2016, a Request for Interest seeking proposals from parties interested in developing City-owned properties located at 1501 South Airport Way (APN 169-020-11) and 1670 Union Street (APN 169-030-13) was issued by the City. After review by a selection committee and recommendation of City staff, the City Council approved an ENRA between the City and 1501 S. Airport Way LLC on October 18, 2016, to allow staff to negotiate specific terms associated with a purchase Option Agreement for the above-mentioned parcels. During the term of the ENRA, the City is required to refrain from consideration of proposals from other developers for the subject parcels and agrees not to solicit proposals from others regarding acquisition and/or development of the subject properties. The term of the ENRA was for 180 days, with an option to extend an additional 180 days, from the date of execution which was on November 7, 2016.
Present Situation
The developer, 1501 S. Airport Way LLC, is proposing to construct a commercial/retail shopping center consisting of approximately 20,000-40,000 s.f. of available space. The proposed project would include additional retailers that are not currently available in the immediate neighborhood. The general managers of 1501 S. Airport Way, LLC own the existing Rancho San Miguel property across the street from the subject site.
The terms of an Option Agreement for the purchase of City-owned property located at 1501 South Airport Way and 1670 Union Street have been negotiated and agreed upon by 1501 S. Airport Way LLC, subject to City Council approval. The Fair Market Value listed below was determined using recent sale prices of comparable properties in the general area. The developer will pay a $10,000 option fee upon execution of the Agreement. Below are the major deal points of the Option Agreement, which is attached as Exhibit 1 to the Resolution:
• Fair Market Value Determination $2.49 per s.f.
• Lot Size (both parcels) 3.02 acres or 131,708 s.f.
• Purchase Price for both parcels $327,953
• Public Right-of-Way Abandonment 0.52 acres or 22,527 s.f.
• Purchase Price for Right-of-Way $56,092
• Total purchase price $384,045
• Purchase Option Term 18 Months
• Environmental Allowance $100,000
The proposed abandonment of approximately 0.52 acres of public right-of-way entails excess property that is no longer needed that was originally intended for the widening of Airport Way. An easement will be maintained for public utilities, including the City’s sanitary sewer line. The buyer, 1501 S. Airport Way LLC, will cover any engineering costs associated with the abandonment process, including preparation of maps and legal descriptions for recordation. As part of the negotiation process with the buyer, the City agreed to waive the application and recording fees for the abandonment, which totals approximately $3,000. The abandonment request will be brought forward for Council consideration at a future date.
In addition, the environmental allowance of up to $100,000 will be deducted from the purchase price and will apply towards eligible expenses such as the preparation of Phase I and II environmental studies and any contamination remediation necessary to develop the site for retail use. This allowance it not intended to cover additional consulting or attorney fees, nor permits or other fees associated with environmental issues.
Notification
As required, a “Notice of Intent to Grant or Sell Real Property Interest” in accordance with the provisions of Article V, Section 510, of the Charter of the City of Stockton, was advertised in the legal notice section of The Record on February 14, 2018.
Environmental Clearance
The Community Development Department has determined that the action/project is exempt from the requirements of the California Environmental Quality Act (CEQA) as the project has been granted a “Statutory Exemption” under Article 19, specifically 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 conforms to the City’s General Plan designation for the site and with the General Plan Policy Document, as amended.
FINANCIAL SUMMARY
Proceeds from the sale of the subject City-owned parcels, less normal closing costs, will be deposited into the Sale of Fixed Assets General Fund Account No. 010-0000-461, and approximately $500 will be allocated from 010-0000-461 for advertising expenses. The net proceeds will be remitted to the San Joaquin County Auditor-Controller for disbursement to the taxing entities, in accordance with the Long Range Property Management Plan, from the Sale of Fixed Assets General Fund Account No. 010-0000-461.
Attachment A - Vicinity Map
Attachment B - Aerial Map