HomeMy WebLinkAbout2005 CON Community Development Commission of the City of National City - Parking Authority and ARE Holdings, LLCC2c 41
SUMMARY REPORT
PERTAINING TO THE SALE OF REAL PROPERTY
(California Community Redevelopment Law Section 33433)
PURSUANT TO A PROPOSED DISPOSITION AND DEVELOPMENT AGREEMENT
Between:
COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF NATIONAL CITY
And
PARKING AUTHORITY OF THE CITY OF NATIONAL CITY
And:
ARE HOLDINGS, LLC
Prepared by:
KEYSER MARSTON ASSOCIATES, INC.
For:
COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF NATIONAL CITY
Date:
July 5, 2005
SUMMARY REPORT
PERTAINING TO THE PROPOSED SALE OF REAL PROPERTY
I. INTRODUCTION
The Community Development Commission of the City of National City (Commission) and
the Parking Authority of the City of National City (collectively) are considering the sale of
real property to ARE Holdings, LLC (Developer) pursuant to a Disposition and
Development Agreement (DDA) under review as of June 27, 2005.
This Summary Report is prepared in accordance with Section 33433 of the California
Community Redevelopment Law. This summary consists of six additional sections, as
follows:
• Section II, Description of the Proposed Project
• Section III, Estimated Costs to be Incurred by the Commission under the Proposed
DDA
• Section IV, Estimated Value of the Site at the Highest and Best Use
• Section V, Estimated Fair Re -Use Value of the Interest to be Conveyed
• Section VI, Purchase Price the Developer will be Required to Pay
• Section VII, Explanation Why the Sale of the Property will Assist in Elimination of
Blight
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II. DESCRIPTION OF THE PROPOSED PROJECT
A. Proposed Transaction
The Developer intends to build a mixed -use project with 209 residential condominiums;
10,000 square feet (SF) of retail space; and 320 parking spaces of which 40 spaces will
be reserved for the public (Project). The Project will be constructed on an approximate
1.43-acre site (Site) bounded by National City Boulevard, Roosevelt Avenue, 11th, and
12th Streets in Downtown National City.
The proposed transaction is detailed in the Disposition and Development Agreement
(DDA) under review as of June 27, 2005. The DDA governs the relationship between
the Commission and the Developer with respect to the proposed development of the
Site, the schedule of performance, and the method of financing. Key terms of the DDA
are summarized below.
B. Commission Responsibilities
• If the Developer has been unsuccessful in acquiring the Remaining Parcels, the
Commission and/or the Parking Authority will initiate the Site Acquisition Program.
Upon acquisition of the Remaining Parcels, the Commission and/or Parking Authority
will convey fee ownership of these parcels to the Developer at a price equal to the
price the Commission and/or the Parking Authority acquired the Remaining Parcels.
• The Commission will provide financial assistance toward acquisition costs in the
maximum amount of either $1,875,000 (Election A) or $1,300,000 (Election B). The
Developer may elect to receive either of the two forms of financial assistance, each
with difference repayment terms.
• The Commission shall provide, at the Developer's request, financial assistance in the
amount of $365,000 to construct "enhanced" National City Boulevard streetscape.
• The Commission will demolish and clear from the Site all existing above -ground and
subsurface improvements located on the Site, as well as arrange for standard utilities
to be brought to the Site.
• The Commission will cause the construction of all off -site improvements needed for
the Project, i.e., sidewalks, streets, and traffic signals.
• The Commission and/or Parking Authority will provide for the relocation of all
occupants of the Remaining Parcels in accordance with the California Relocation
Assistance Act.
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C. Developer Responsibilities
• The Developer will attempt to acquire the parcels that comprise the Site through
private negotiation (Developer Parcels).
• The Developer will be responsible for the costs of the Site Acquisition Program and
the Purchase Price of the Remaining Parcels acquired by the Commission and/or
Parking Authority on behalf of the Developer. These costs include, but are not
limited to, acquisition, costs of eminent domain, goodwill, appraisals, court costs, etc.
• If the Commission provides the "Election A Assistance", the Developer will reimburse
the Commission for such assistance by payment of the following:
Future Resale Proceeds. An amount equal to one percent (1%) of the total
proceeds of: (i).the initial and future sales of the Project's retail space; and (ii)
the sales of all the Project's residential units that occur after the original sale of
each unit. The Commission will be entitled to reimbursement for a period of 30
years following the date of the final certificate of occupancy.
• Enhanced Participation. An amount equal to 25% of the total gross sales
proceeds from the original sale of all the Project's residential units that
cumulatively exceed 20% of the Developer projected gross sales proceeds of
$85,000,000.
• If the Commission provides the "Election B Assistance", the Developer will reimburse
the Commission for such assistance by payment of Future Resale Proceeds, as
described above.
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III. ESTIMATED COST TO BE INCURRED BY THE COMMISSION UNDER THE
PROPOSED AGREEMENT
Costs to the Commission related directly to development of the Site are itemized below.
They consist of the following: (1)
Commission Costs
Commission Financial Assistance toward Acquisition Costs $1,875,000
Commission Contribution for Enhanced Streetscape Improvements $365,000
Off -Site Improvements (2) $300,000
Demolition of Existing Improvements (3) $310,000
Legal, Economic, and Environmental Consultants (4) $50,000
Total Commission Costs $2,900,000
(1) All figures provided by the Community Development Commission of National City, except as noted.
(2) Gross estimate, based on standard allowances.
(3) Gross estimate, based on allowance of $5 per SF of Site area.
(4) Gross estimate.
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IV. ESTIMATED VALUE OF THE SITE AT THE HIGHEST AND BEST USE
This section presents an analysis of the fair market value of the Site at the highest and
best use of the properties. In appraisal terminology, the highest and best use is that use
of the property, which generates the highest property value and is physically possible,
financially feasible, and legally permitted. Therefore, value at the highest and best use
is based solely on the value created and not on whether or not that use carries out the
redevelopment goals of the City of National City.
The Downtown Specific Plan governs the Site and, regulates the zoning and land uses
for the Site. The Site is zoned for higher -density mid -rise multi -family residential, hotel,
or professional office development, with ground floor pedestrian -oriented retail, and a
maximum Floor Area Ratio (FAR) of 6.0. The Project as proposed does not achieve the
maximum allowable FAR due to a combination of factors such as the market risk
associated with pioneering projects, design constraints imposed by the Downtown
Specific Plan, and the cost impact associated with more than one level of subterranean
parking. On this basis, then, KMA concludes that the Project represents the highest and
best use of the Site.
Therefore, KMA concludes that the fair market value of the Site at its highest and best
use is equal to the fair re -use value, $4,991,000.
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V. ESTIMATED FAIR RE -USE VALUE OF THE INTEREST TO BE CONVEYED
This section presents an analysis of the fair re -use value of the interest to be conveyed
to the Developer subject to conditions, covenants, and restrictions contained in the
proposed DDA. In estimating the fair re -use value of the Site, KMA has reviewed the
requirements that set specific conditions with respect to scope of development, the
schedule of performance, and method of financing.
It is the KMA conclusion that analysis of comparable transactions does not provide a
useful or valid approach for valuating this development opportunity due to extensive
adjustments that would be required in respect to the strength of the development
opportunity, location and configuration, and other factors. Therefore, reliance has been
placed upon the income, or the residual land value approach, which is a recognized
method for valuing real property.
Analysis of the development economics of the Project, reported separately to the
Commission by KMA, indicates that pursuant to the terms and conditions under which
the Site will be conveyed, the fair re -use value of the Site is estimated to be $4,991,000.
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VI. PURCHASE PRICE WHICH THE DEVELOPER WILL BE REQUIRED TO PAY
Under California Community Redevelopment Law, the Commission is obligated to
publicly disclose information sufficient for a comparison of the purchase price contained
in the proposed DDA with the estimated fair re -use value as described below.
• Land Payment. The Developer is responsible for a minimum of $80 per SF, for a
total of $4,991,000.
• Future Resale Proceeds. Table 1 depicts KMA's estimate of additional
compensation to the Commission from its participation in future sales of the
condominiums and retail space. KMA conservatively assumed market value
escalation of 3% per year; that each unit resells every seven years; and that the
retail space is resold every 10 years. These assumptions result in cumulative
payments to the Commission with a total net present value of $1,307,000, based
on a discount rate of 10.0%.
• Enhanced Participation. KMA conservatively estimates zero revenue from the gross
sales participation provision.
• Enhanced Streetscape Improvements. The Developer may elect to receive financial
assistance to construct streetscape improvements along National City Boulevard.
On this basis, then, KMA concludes that the effective compensation to the Commission
is $5,933,000, as summarized below:
Land Payment (1) $4,991,000
Add: NPV of Future Resale Proceeds $1,307,000
Add: Enhanced Participation �0
Total Compensation to the Commission $6,298,000
(Less) Enhanced Streetscape Improvements Contribution ($365,000)
Net Compensation to the Commission $5,933,000
(1) Assumed minimum $80 per SF, after Commission financial assistance.
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TABLE 1
ESTIMATE OF PROCEEDS FROM PARTICIPATION IN FUTURE RESALES
THE COVE AT SAN DIEGO BAY
COMMUNITY DEVELOPMENT COMMISSION OF NATIONAL CITY
Average
Resale Number of
Price (1)(2) Resales (3)
Year 1 $430,080 0.00
Year 2 $443,000 0.00
Year 3 $456,000 0.00
Year 4 $470,000 29.86
Year 5 $484,000 29.86
Year 6 $499,000 29.86
Year 7 $514,000 29.86
Year 8 $529,000 29.86
Year 9 $545,000 29.86
Year 10 $561,000 29.86
Year 11 $578,000 29.86
Year 12 $595,000 29.86
Year 13 $613,000 29.86
Year 14 $631,000 29.86
Year 15 $650,000 29.86
Year 16 $670,000 29.86
Year 17 $690,000 29.86
Year 18 $711,000 29.86
Year 19 $732,000 29.86
Year 20 $754,000 29.86
Year 21 $777,000 29.86
Year 22 $800,000 29.86
Year 23 $824,000 29.86
Year 24 $849,000 29.86
Year 25 $874,000 29.86
Year 26 $900,000 29.86
Year 27 $927,000 29.86
Year 28 $955,000 29.86
Year 29 $984,000 29.86
Year 30 $1,014,000 29.86
Retail Space
Sale (3)(4)
$3,091,000
$4,033,000
$5,420,000
$7,284,000
Total.
Resales
$3,091,000
$0
$0
$14,032,857
$14,450,857
$14,898,714
$15,346,571
$15,794,429
$16,272,143
$20,782,857
$17,257,429
$17,765,000
$18,302,429
$18,839,857
$19,407,143
$20,004,286
$20,601,429
$21,228,429
$21,855,429
$27,932,286
$23,199,000
$23,885,714
$24,602,286
$25,348,714
$26,095,143
$26,871,429
$27,677,571
$28,513,571
$29,379,429
$37,559,143
Portion to
Agency @
1_/0
$31,000
$0
$0
$140,000
$145,000
$149,000
$153,000
$158,000
$163,000
$208,000
$173,000
$178,000
$183,000
$188,000
$194,000
$200,000
$206,000
$212,000
$219,000
$279,000
$232,000
$239,000
$246,000
$253,000
$261,000
$269,000
$277,000
$285,000
$294,000
$376,000
NPV of CDC 1% of Resale Proceeds Over 30 Years
Discount Rate
$1,307,000
10.0%
(1) Average unit sales price.
(2) Based on assumed market escalation of 3.0% per year.
(3) Assumes resale of each unit every seven years.
(4) Assumes sale of retail space at years 1, 10, 20, and 30 at 8.5% cap rate.
Prepared by: Keyser Marston Associates, Inc.
Filename is National City\Las Terrazas_Re-use;7/5/2005;rks Page 9
VII. EXPLANATION WHY SALE OF THE PROPERTY WILL ASSIST IN THE
ELIMINATION OF BLIGHT
The Project Area is characterized by an array of blighting factors, including:
• The age, obsolescence, deterioration, mixed character, or shifting uses of existing
buildings within the Project Area.
• The subdividing and sale of lots of irregular form and shape, and inadequate size, for
proper usefulness and development.
• A prevalence of depreciated values and impaired investments, and social and
economic maladjustment.
• The defective design in character or physical condition of existing buildings.
Not all of these conditions are present throughout the Project Area. The Commission's
redevelopment efforts have successfully alleviated blighting conditions in some portions
of the Project Area. However, many of these conditions are still apparent in the area
surrounding the subject Site. Implementation of the proposed development can be
expected to assist in the alleviation of blighting conditions through the following:
• Improve the City's housing stock.
• Consolidation of irregular parcels into a site appropriate for development.
• Elimination of conditions of economic dislocation such as fragmented ownership
patterns.
• Expansion, renovation, and relocation of businesses within the Project Area.
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