HomeMy WebLinkAbout60D - PROPERTY DISPOSITION POLICYReal Property Disposition Policy
May 1, 2018
Page 2
The Policy is comprised of seven (7) sections:
• Background: This section includes a guiding policy to optimize sale price or lease rental;
and allows for consideration of the value of special benefits.
• Designation of Custodian of List of Real Properties Available for Disposition: This
section designates the Clerk of the Council to function as the official custodian of the City's
real property list that will be available for disposition and subject to this policy. This list
will be made available to the public.
• Process to Determine Real Property Interests Potentially Available for Disposition:
This section establishes a Real Property Disposition Committee (RPDC), comprised of
City staff, that will guide the process to review and recommend available City property for
inclusion on the disposition list. The properties identified for disposition will need to satisfy
several criteria as outlined in pages 2-3 of the Policy.
• Classification of Real Property Interests for Disposition: During the process, the
RPDC will include its recommendation to City Council a classification of the property into
one or more categories (economic development potential; housing developing potential;
public use potential for parks, recreation and open space; community use/benefit potential;
neighborhood beautification potential; or adjacent owner assemblage). These
classifications will inform preparation of disposition solicitations.
• Provisions Related to Disposition to Non -Profit and Community Organizations and
Entities: This section provides a process for non-profit and community organizations to
formally affirm their interest in acquiring or leasing city property for community use, benefit
or beautification projects. The purpose of this provision is to assist the City in determining
the organizational capacity of these organizations to carry out their desired use of the
property.
• Requirements/Procedures for Sale of Real Property Assets and Interests: This
section provides the disposition procedures and details on any special requirements
before disposition such as the use of brokers, appraisal of the property and soliciting
community input before the sale of the property.
• Leasing of City Real Property: This section provides a process for the leasing of City
owned property.
The above sections outline the City's process for disposition of city -owned property and
establishes the criteria for how the community can be involved in the process. On March 22,
2016, CDA staff met with the Equity for All Coalition, a group of non-profit community
organizations, to review and solicit input on the draft disposition policy. On April 18, 2018, CDA
staff met again to review the draft disposition policy with Equity for All Coalition and local
residents. Upon receiving this input, several modifications were made to the Policy.
This administrative policy will be reviewed by staff on an annual basis.
60D-2
Real Property Disposition Policy
May 1, 2018
Page 3
STRATEGIC PLAN ALIGNMENT
Approval of this item allows the City to meet Goal #3 (Economic Development), Objective 5
(Leverage private investment that results in tax base expansion and job creation citywide),
Strategy A (Identify and market underutilized properties {city and non -city owned} for new
development that will create new jobs and expand the City's tax base).
FISCAL IMPACT
There is no fiscal impact associated with this action
Judson Brown
Acting Executive Director
Community Development Agency
Exhibit: Draft Real Property Disposition Policy
o. 1�
City of Santa Ana
Administrative
` Policies and Procedures
Executive Director,
Community Development
Agency Authorization
Subject
Date
Number
-, Anril 2018
REAL PROPERTY DISPOSITION POLICY
/
Purpose '
The purpose of this policy is to establish procedures whereby remnan Nunneeded, or marginally used
City -owned real property assets and interests are identified and recommended for disposition through
sale, lease, easement, license, or agreement for use to public, private, a4non-profit organizations,
individuals, or other entities for economic development, public use, community use, community
benefit uses, community beautification, -or assemblage;with. adjacent real property:
Intent
The intent of this policy is to provide an orderly, transparent, openl,and fair process for public, private
and non-profit organizations, -individuals,' and other entities to acquire remnant, unneeded, or
marginally used real property assets and interests from the City while assuring that the City receives
the best overall value for the real property interests conveyed.
1. BACKGROUND �•
Acquired for its municipal operations^a'hd ,yano.us improvement projects, the City is an owner of
substantial real property.a'sets and interests: -0 er)time, the need for certain of these assets and
interests can change, thereby'creating an opportunity for their use for other purposes. By allowing
remnant, unneeded, or marginally used City -owned real property assets to be employed for other
purposes, the City and its residents can benefit from private improvements which provide property tax
revenue and economic, development opportunities, support non -City public uses such as schools, or
support uses that provide substantial community benefits or opportunities for neighborhood
beautification improvements., It is important to note that this Real Property Disposition Policy covers
real property assets and interests -of the City of Santa Ana and the Successor Agency to the Santa Ana
Community Redevelopment Agency, but does not cover the real property assets and interests of the
City of Santa Ana Successor Housing Agency, nor those of the City of Santa Ana held for affordable
housing development purposes ("Housing Properties"). Disposition of Housing Properties is instead
covered by the Affordable Housing Funds Policies and Procedures, published by the Housing Division of
the Community Development Agency of the City, approved by the Santa Ana City Council on March 20,
2018.
The City's basic guiding policy is to optimize the sale price or lease rental income from disposition of
City -owned real estate assets and interests. Optimized sales price or lease/rental income shall be based
EXHIBIT 1
upon a current appraisal with a date of valuation not more than one (1) year prior to the date of City
Council approval of any agreement to dispose of the real property. Subject to any limitations which
may derive from the source of funds used to acquire a property, the following factors potentially
influence a disposition decision and will be considered by the City in addition to the basic guiding policy:
1.) the effect of prevailing economic conditions and market trends on the appraisal conclusion
of value, and:
2.) the estimated value of any special benefits that may accrue from a sale, lease, or other
agreement for use.
2. DESIGNATION OF CUSTODIAN OF LIST OF REAL PROPE
Following adoption of this policy, the Clerk of the Council
list of City real properties available for disposition and sub
to the public. As properties are disposed of, or added.t6
will be provided timely updates by the City Agency'dispos
to the portfolio. i- //
3. PROCESS TO DETERMINE REAL PRO
Several City Agencies possess experti
Disposition Policy establishes a Real
Manager (or his or her designee), co
Agency, Parks, Recreation.and Commu
Works Agency. The function•of the RP.
and interests for inclusion on the list
Council. Recommendations from the R
and deliberations -of -the RPDC wilFbe
allow for public comment.
/" '� `.
S'AVAILABLE FOR DISPOSITION
function as the official custodian of the
to,`thi\policy and make the list available
City's real property portfolio, the Clerk
of the �eahproperty, or adding property
PERTY INTERESTS POTENTIALLY AVAILABLE FOR DISPOSITION
se related to valuation and disposition of real property. This
Property Disposition Committee (RPDC) chaired by the City
mpri,sed of representatives�of the Community Development
nity Services Agency P.lanning and Building Agency, and Public
DC is to review and -recommend City -owned real property assets
of properties available for disposition held by the Clerk of the
DPC will be submitted to the City Council for approval. Meetings
noticed and conducted publicly. The agenda of the RPDC will
Real properties may be made,,available for, disposition subject to the below described review criteria.
As part of its charge, the RPDC will review the City's real property inventory to determine which
properties are remnant, surplus,'unneeded, or marginally used and therefore potentially available for
disposition. ~
A City owned property may,be.recommended for disposition by the RPDC if:
• Disposition is required by the terms of the funding used to acquire the property.
• The property is not currently used by a City department or does not support a municipal
function.
• The property is vacant and has no foreseeable use by the City.
• The property is a non -performing or under -performing asset and greater value may be
generated by its sale or lease.
• Significant economic development opportunities may be generated by selling or leasing
the property.
• Disposition facilitates acquisition of real property required for a City project, or acquisition
of other real property required for a City project.
i]
• In the opinion of the Executive Director of Parks, Recreation, and Community Services, the
property does not provide significant park, recreation, or open space use opportunities, or
if it does, no means of financing the development of the real property for park, recreation,
or open space use is reasonably foreseeable.
• Disposition has potential to support development of affordable housing, parks and open
space, community benefit uses, or neighborhood beautification.
Nothing in the foregoing shall preclude the ability of the City to dispose of or exchange real property
acquired in connection with a specific project if the disposal or exchange facilitates acquisition of
another real property or real property interest needed for the same, or a closely related project.
Factors to be considered by the RPDC in determining whether a property should be recommended for
disposition include:
• Will the City be relieved of potential liabilities' and/or'cost of maintaining a property that
does not generate income or provide public benefit?
• Will new property tax be generated ;by the sale?
• Will disposition stimulate the local economy by providing opportunities for private sector
investment? >
• Does the property have greaferpublic benefit potential if retained than if sold or leased?
• Will sale of the property generate greater economic value than a ground lease, if a ground
lease is a feasible option? ��'" • �-
4. CLASSIFICATION OF REAL PROPERTY INTERESTS FOR DISPOSITION '
In addition to reviewing and recommending City''ownedreal property for disposition, the RPDC will
also include in its recommendation to the City CounciiI a classification of the property into one or more
of the following categories'(A thru F): i
A.) significant economic'de elopmeht,potential}
an,example of -significant economic development potential would be a disposition that
results in a development,providing new employment, municipal income or tax revenue(s).
B.) significant housing development potential
an example of significant housing development potential would be a disposition that
results iria development`which helps the city meet its Regional Housing Needs Assessment
(RHNA) targets.
C.) significant public use potential, including for parks, recreation, or open space
an example of,significant public use potential would be a disposition that results in
development of usable, publicly accessible parks or open space.
D.) significant community use/benefit potential
an example of significant community use/benefit potential would be a disposition that
results in development of a community garden, farmer's market, or other community uses
benefitting residents.
E.) significant neighborhood beautification potential
an example of significant neighborhood beautification potential would be a disposition
that allows a property to be landscaped, resulting in visual enhancement of the location
and neighborhood.
F.) assemblage potential with adjacent owner
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60D-7
an example of assemblage potential with an adjacent owner would be a disposition that
conveys an otherwise unusable remnant property for use by an adjacent owner and back
on the property tax roll.
5. PROVISIONS RELATED TO DISPOSITIONS TO NON-PROFIT AND COMMUNITY ORGANIZATIONS AND
ENTITIES
The City values and supports the many community -based non-profit organizations, entities and
neighborhood groups that work to make Santa Ana a better place. These groups represent potential
City partners for community use, benefit, and beautification projects requiring real property. The
purpose of the provisions described in this section is to identify those organizations, entities, and
groups that may be interested in acquiring or otherwise ob'Eaining use of City real property for
community use, benefit, and beautification projects.
The City will create and maintain a list of interested organizations through a Solicitation of Interest
(SO]) process. The purpose of the SO[ application process -is to determine the organizational capacity
of applying community -based non-profit organizations eentities, ancl•groups to own, lease, maintain,
manage and operate real property for the desired program, project, or.use. The list will be used to
notify organizations, entities, and neighborhood groups of the availability o*f City real property
approved for disposition that has been designated as having significant community,benefit/community
use potential. The City recognizes that"the number of community organizations'Changes overtime so
the SOI solicitation will be conducted as an "open recruitment" so that the list of organizations and
entities may be continuously refreshed overtimeAn application form will be developed. Information
requested may include, but is not limited to the following:
• Property soughtJor;what purpose, and whether for p chase or lease
• Name of organization
• Type of organization\,,
• Age of.organization _
• Organizational financial capacity
• Experience with controlling and'managing red property
• Description of how the o�ganization,will handle property management
• Description.of how property will be operated and maintained (Operations and Maintenance
Plan) �� f
6. REQUIREMENTS/PROCEDURES.FOR SALE OF REAL PROPERTY ASSETS AND INTERESTS
• Conformance with Provisions of the Municipal Code: Sections 2-706, 2-706.1, 2-706.2,
2-707, 2-708, 2-709, and 2-710 of the Santa Ana, CA Code of Ordinances govern sale of
real property by the City (copy attached). Notably, Section 2-706 provides for sale to
the highest bidder unless another method of sale is authorized by the City Council by
not less than a 2/3 vote (See Sec. 2-709). Provisions contained in this Real Estate
Disposition Policy provide additional guidance in the disposition of real property assets,
but in the case of conflict, the Municipal code and its provisions govern.
4
• Conformance with Provisions of Government Code Sections 54220 thru 54233:
California Government Code Sections 54220 thru 54233 requires that a local agency
proposing to dispose of surplus property must first notify all governmental agencies
operating within the City as to the availability of the property. The agencies are given 60
days to respond with an intent to acquire, if not, the property may be deemed cleared
for public sale. (note: Government Code Sections 54220 thru 54233 requirements do
not apply to disposition of real property that has not been used by the City and acquired
or held for purposes of exchange or sale as a remnant in connection with
implementation of a City project).
• Community Comment Required Prior to Issuance+of Solicitation: Prior to the City
Council approving properties for inclusion `on %he list of properties available for
disposition, or authorizing issuance of solicitations -,for disposition (e.g. Requests for
Proposal, listing for sale or lease, etc.),Ihe"City shall conduct a noticed neighborhood
meeting pursuant to Section 2-153,-subsections (b) thru (g) of the Santa Ana Municipal
Code (relevant portions of Ordinance"NS-2838 "Sunshine Ordinance") in order to obtain
neighborhood comment on the proposed disposition and future use(s) of the real
property in question.
• Special Requirements Related'to,Disposition of, Park Land: Real property designated
as park land often have special restrictions related to the source of funds used for the
original acquisition or site 'development. -,Such restrictions can arise from covenants
restricting use to 'park purposes and the source of funds used to acquire the real
property.
• Appraisal and Authorization of sale by City Council: Upon approval by the City Council
.that -a property may be.sold, "the City Manager is authorized to sell the property for a
f price equal'to or greater than a.minimum'price established by a current (less than one
(1) year old) appraisal.
• 'Method of Sale: Properties may be sold by any method allowed by the Municipal Code
and this Policy. This 'include s"direct negotiation, request for proposal, listing with a
broker,, sealed bid, 'auction or other appropriate method as recommended by the City
Manager and approved by the City Council. As appropriate, disposition agreements
shall include reasonable "clawback" provisions that provide the City the ability to regain
ownership of a property as one remedy for non-performance by purchaser or lessee
under a disposition agreement or lease.
• Marketing: Properties offered for sale shall receive the widest possible exposure to the
market. This may be accomplished through direct marketing techniques, such as
requests for proposals (RFPs), advertising, exposure through the real estate media,
posting the property on the multiple listing service or any other appropriate method.
• Use of Proceeds: For transactions where the City retains disposition proceeds, the City
Manager may recommend use of proceeds; however, the City Council retains approval
5
Z�. 1 •
discretion on use. Application of disposition proceeds toward "one time" expenditures,
such as deferred maintenance in parks and community centers, and other possible one
time uses, should be prioritized.
Use of Real Estate Brokers: Real estate brokers may be used to represent the City in
the sale of its properties. Brokers will be selected for individual assignments through
Requests for Proposals (RFP) or Requests for Qualifications (RFQ) and a subsequent bid
or other methods that result in the City receiving the services of a qualified broker at
the best value to the City. If the property is listed with a broker, the City reserves the
right to exclude from the listing agreement potential buyers whose interest in
purchasing a property has been made a part of.the. ecord prior to the execution of the
listing agreement. All brokerage arrangements shall conform to Section 2-707 of the
Municipal Code.
Easements: The City will receive currentfair market value for the removal of restrictive
easements or access rights previoiisly.p'aid for by the City'or dthergovernmental agency
or reserved in a sale of City property.
Negotiated Sales: Negotiated sales are p�rmitte'd as provided in' the Municipal Code
and this Disposition Policy, a*nd'may be approved under one of the following conditions:
o When a parcel is landlackedr-
o When the sale to a contiguous, owner would `correct a site deficiency.
o Whe an fee interest in aNpipeline or ether righter f-way is no longer required, it
may,.b sold,to a contiguous owner. A'rest?fictive pipeline easement of adequate
width or other required easements will be reserved from said sale.
-- -- art
LEASING OF,CITY REAL
There may be opj
to the City. City
apply:
ities forthe
rty shall be
ernmental, public and quasi -public agencies submit acquisition
ysale is authorized by a two-thirds (2/3) vote of the City Council
iublic'heanng per. Municipal Code Section 2-709.
to lease rather than sell its real propertythat results in a benefit
sidered for leasing when one or more of the following criteria
The property is not'required for current municipal use, but is to be held for possible future use
and can be leased as anlnterrim measure.
The City requires substantial control over development, use and reuse of the property.
The property has the immediate potential of a high return to the City because of its high
demand and type of use, such as commercial and industrial land.
• The property can be efficiently utilized by a provider of services needed by the City.
• The property can be leased to promote a substantial economic development opportunity.
• The property can only be leased because of legal restraints. For example, property acquired
with Land and Water Conservation funds or held as dedicated park land.
Lessee Selection: Competitive offers for lease of City property shall be solicited in the open market.
This may be accomplished through a number of marketing techniques, such as Request for Proposals
60D-10
(RFPs), a marketing subscription system, direct advertising, use of a Multiple Listing Service (MLS),
listing with a broker, posting the property and any other appropriate means.
In certain limited situations, the City may exclusively consider a single proposal for lease of City
property. Potential lessees wishing to exclusively negotiate with the City must submit for City staff
review a business case with sufficient justification as to how it is capable of optimizing the use of the
property and return to the City, thereby negating the need for a competitive process. This information
will be included when the lease transaction is presented for City Council approval.
Leasehold proposals shall be evaluated in terms of:
• the amount of consideration offered in the form of rent.
• the financial feasibility of the proposal. f.
• the capability, expertise and experience of the potential'lessee with respect to the proposed
leasehold development and operation. �°
• if new development is proposed, a development plan'that\includes a description of the
development team and its qualifications. .% .�
• the identity of each person or entity that will have an interest in the proposed lease.
• special public benefits to be derived (if any)..\\
Rate of Return: The City shall obtain fair market rents W'i s leases commensurate with the highest
and best use of the property. The fair `market Irent shall be based on an appraisal that complies with
the definition of Market Rent found in the Uniform Stanclwds�f Professional Appraisal Practice
(USPAP) published by the Appraisal Foundation. The•appraisal shall be, no more than six months old at
the time the lease transaction is presented for City Council approval. If the cost of an appraisal is not
justified by the anticipated -rents, the City may choose an alte nr ative method to establish rent. City
leases shall contain terms and conditions which will s u'tain a fair rate of return throughout the duration
ofthelease. I_
Rental Terrr sy Rental terms may be negotiated .on .the basis of fixed rates (flat rent leases) or
percentages of the lessee's gross income derived from business conducted on the property, with a
provision fora'minimum rental (percentagelleases).
Flat Rate Leases:
• Market Rate Adjustments: 'Flat rate leases shall provide for upward adjustment of rent at least
every ten (10) years.to current fair market rent. In no event shall the adjusted rent be lower
than the rent in existence immediately preceding the adjustment.
• Consumer Price Index Adjustments: Flat rate leases shall provide for upward adjustment of rent
in the interval term between market rate adjustments by changes in the consumer price index.
In no event shall the adjusted rent be lower than the rent in existence immediately preceding
the adjustment. The index used for consumer price index adjustments will be the All Urban
Consumers index for Los Angeles - Riverside - Orange County, California with a base year of
1982-84. If the U.S. Department of Labor indices are no longer published, another substitute
index generally recognized as authoritative will be used. Flat rate leases may include pre-
determined periodic increases to rent instead of consumer price index adjustments. These
periodic increases would occur at least every five (5) years.
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60D-11
Percentage Leases:
• Minimum Rent: The minimum rent component for a new percentage lease shall be set at no
less than eighty percent (80%) of the fair market rent as defined above. In certain cases, a
portion of the minimum rent may be abated for new construction or redevelopment on the
leasehold. The minimum rent shall be adjusted upward throughout the duration of the lease at
intervals of not more than everyfive (5) years to reflect no less than eighty percent (80%) of the
average annual rent actually paid or accrued during the three (3) years preceding the
adjustment. In no event shall the adjusted minimum rent be less than the minimum rent in
existence immediately preceding the adjustment.
• Percentage Rates: Percentage leases shall provide for adjustment of percentages rates every
ten (10) years to current fair market rates. For the purposes of determining fair market rent
percentage rates, the City shall adopt and publish a 'schedule of benchmark percentage rates
that will be updated to current market rates on a periodic basis by appraisal. The appraisal will
be guided by prevailing market percentage rates -for similar operations primarily within the
Southern California area.
Rent Arbitration: Leases shall provide for binding arbitration when the City and lessee cannot agree
on the new rent for a rental period under review. The City and lesee shall each select a professional
independent real estate appraiser who 'in -turn will select a third'/independent real,estate appraiser to
determine the fair market rent. If the two�el"ected appraisers1fail to mutually select a third appraiser,
then the third appraiser shall be determined in accordance witl'the rules of the American Arbitration
Association. The City and lessee shall pay the=.cost of ifs own selected appraiser and equally share the
cost of the third appraiser.,
Appraisal Assumptions':, City` leases shall include a definition of the fair market value to be used to set
rent and identify the premisd`for that value. In establishing the fair market value of leased property,
any appraisal shall -consider the propert as'a,fee simple absolute estate and as vacant and available
for lease orsale-fortheuthorized purposes of the lease at the commencement of the rental period
under review. Rates established for purposes of.periodic percentage rental adjustments shall not
consider any abatement as maybe appropriate in a "new" development of vacant land. It shall also be
assumed that all'required regulatory approvals to permit the use authorized in the lease have been
obtained.
Lease Term:
I
• Short -Term Lease: •Thetity Manager shall have the authority, without advertising, notice, or
competitive bidding, and'upon such terms as he or she may deem proper, to lease any City
property for a term of up to three (3) years (short-term lease). The City Council will be notified
of a short-term lease not later than fifteen (15) days following its execution. A short-term lease
may not be renewed without approval of the City Council. The City Manager may also execute
rental agreements covering month -to -month tenant occupancy of City -owned residential
housing.
• Long -Term Lease _A lease in excess of three (3) years requires a resolution passed by a majority
vote of all members of the City Council. The length of lease term shall be based on the level of
capital improvements to be made by the lessee and the economic life expectancy of the
development. These factors can be determined utilizing cost estimating and economic life
A'
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60D-12
expectancy resources such as tables provided by Marshall Valuation Service. The City may
consider other relevant information in determining if a longer lease term is warranted, such as
if the proposed leasehold development is expected to generate above average returns to the
City or significantly improve the quality of the property.
Lease Amendments: Amendments to long-term leases require City Council approval. The City's
agreement to an amendment may be contingent upon updating sections of the lease to incorporate
current City standard lease provisions and an adjustment to fair market rent.
Subleases: A lessee may sublease all or part of the leased property to a qualified sub -lessee subject to
approval by the City. No sublease shall be approved which would,be detrimental to the City's rights
under the master lease or for a use that is not consistent with uses allowed by the master lease. The
City Manager may authorize subleases which meet these/conditions and which do not require
amendment of the master lease. Unless special circumstances exist,. leases shall provide for the City to
receive a minimum of fifty percent (50%) of the incremental gross rental revenues due to the lessee
from subleases.
Leasehold Financing The City will not subordinate its fee interest to encumbrances placed against any
leasehold by a lessee. The City Manager,may approve, appropriate financial encumbrances of the
leasehold interest, which provide that`all,l ao n proceeds are used for authorized improvement of the
property until the leasehold is fully developed in,accordance\with the lease. City staff shall take
appropriate steps to review the proposed financing and insure that loan proceeds go into the leasehold.
Maximum loan proceeds shall not be in excess of seventy-five percent (75%) loan -to -value, where
"value" refers to the leaseholdimprovements; as determined by a lender's appraisal which has been
reviewed and approved by City staff: The loan term shall not exceed the term of the lease.
Loans or refinancing in the form of encumbrances against the lease for the purpose of reducing equity
or financing the sale of leasehold.interestt will not be allowed until the property is fully developed for
uses authorised in-the,lease. After the property is*veloped, such financing maybe permitted so long
as there -is also substantial benefit to,be gained by the City. This may take the form of either a
percentage share of the loan proceeds ot,an upward adjustment to the rent, either of which shall be
based on commercially reasonable comparables found in the market.
Leasehold Improvements: Leaseh'old improvements installed by lessees shall be removed at the lease
termination without cost'to the City, or will revert to the City, at the City's option. All leasehold
improvements and alterations require prior written approval of the City Manager.
Maintenance and Utilities Responsibility; City leases shall require the lessee to maintain all
improvements on the property at its own expense and be responsible for the cost of all utilities. Leases
for multi -tenanted space shall include specific requirements delineating appropriate responsibilities.
Lease Audits: All percentage leases shall be subject to audit in the first year of operation to establish
proper reporting procedures and at least once every three (3) years thereafter. More frequent audits
may be made if appropriate. The City shall reserve the right to audit all other leases and agreements
subject to this Policy.
60D-13
Leasehold Assignments: Requests for assignment of leasehold interest shall be evaluated on the same
basis as the criteria used in evaluating a leasehold proposal. The City Manager may authorize
assignments which do not require amendment of the master lease. Consent may be contingent on the
payment of additional consideration to the City, either as a percentage share of the purchase price of
the leasehold interest or an upward adjustment to the rent. Either of which shall be based on
commercially reasonable comparables found in the market. If new financing is involved in the sale, the
requirements of'Leasehold Financing' shall apply.
Lease Extensions & Renewals: Requests from existing lessees for lease extensions or renewals may be
considered if such proposals promote capital investment and redevelopment of City property.
Whenever an existing lessee is seeking renewal of an expiring long-term lease, the City Manager will
bring the issue before the applicable City Council Committeelwith an appropriate recommendation. In
addition to the criteria used to assess new lease proposals; City'staff•also will review the lessee's history
with respect to: maintenance of the property; compliance with-, zisting lease terms; prompt rent
payments; and a rental return consistent with maximizing the property's'full potential. The lessee must
propose capital investment that: will increase the value or the useful life of the leasehold
improvements by an amount more than can be reasonably amortized over the remaining lease term;
is not recurring in nature; and is at least ten perceM,(10%)'or>more of the, value of the existing
improvements. It specifically should: exclude expenditures toycorrect deferred,,maintenance and
expenditures for repairs to keep the''existingJrnprove rrients in good condition. The length of any
extended lease term shall be calculated`by�he-same method used for calculating the length of new
leases. ,
City's Interest in Leasehold Improvements: City"lease agre'emerits provide the City the right to assume
ownership of the leasehold improvements at the end of the lease The value of the City's interest in
the leasehold improvements can be appraised using widely accepted appraisal methods. In the event
the City grants.a lessee a lease extension -the City shall be compensated by an amount equal to the
change in present value attributable to the deferral of its interest in the leasehold improvements. This
amount e'ithercan be paid as'an upfront,paymerit at the beginning of the extended term or amortized
over time with,appropriate interest applied. The City shall offset from the value of its interest in the
leasehold improvements any increased economic benefit derived from an extended lease. The City
shall not receive any compensation for its interest in the leasehold improvements on leases extended
prior to the last twenty percent (20%) of the existing term.
, I
Security Deposits: The standard security deposit for a new lease agreement shall be equivalent to
three (3) month's rent. The •security deposit may take the form of cash, an instrument of credit or a
faithful performance bond. For a lessee making a substantial investment in improvements, the security
deposit will be refunded upon completion of the improvements.
Transaction Processing Fees: The City may charge a transaction processing fee in accordance with the
schedule of adopted fees. The fee may be waived for transactions that provide benefit to the City.
Nothing in this section shall preclude the City from negotiating terms or conditions that may vary from
these requirements should that be necessary or required under the particular circumstances of the
proposed lease transaction.
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60D-14
Attachment A- Municipal Code on Sale of Real Property
Sec. 2-706. - Sale of real property —Procedure.
After authorization by the council of the sale of a parcel of real property, a sale shall be
scheduled and conducted by the director of public works or by his designated deputy. All sales
shall be made to the highest bidder subject to final confirmation by the council. Notice that such
sale is to be conducted shall be given by publication at least once in a newspaper of general
circulation printed, published, and circulated in the city and by sending written notice to all
persons who had requested notice and to all persons suggested by department heads as
prospective bidders, such notice to be published and mailed'at least ten (10) days prior to the
date of sale.
Sealed bids may be required or oral bids may be provided for. Sealed bids or written offers
to purchase must be accompanied by a deposit of,.one (1)'percent of the amount of the
minimum bid in the form of cash, or by cashier's or.:certified check. If oral bids are permitted,
after any sealed bids are opened and any written,bias are announ`ced;,any person present may
submit an oral bid provided that any bid maybe disregarded which does not exceed the highest
bid theretofore made by at least one (1) percent,of•.such highest bid.
The successful bidder must deliver immediately following the declaration',of sale, a written
statement of his bid signed by the bidder, -together with ari initial deposit of ten (10) percent of
the amount of his bid. The deposit may be in the form of a personal check provided such check
is replaced before the close of business on the following business day by cash or by cashier's
or certified check. Failure to deposit such\written statement'oebid or said ten (10) percent of
the bid price in the mariner. -stated may be considered`a'withdrawal of the bid. If a personal
check is not replaced'as required, 6-forfeit of one (1) percent of the sales price, as stated in the
written statement of the bid, shall be required. -The purchase of the property may then be
offered to the second hidhest bidder'of record.
(Code 1952; § 2613 Ord?No. NS-128, § 1, 8-15.55;,Oi•d!No. NS-1265, § 1, 8-4-75)
Sec. 2-706.1. -,'Same—Sale only to owne s of adjoining property.
\ ,
Upon the written recommendation of the city manager, the council may determine that the
property being offered for sale can have real value only to a certain owner or owners of
adjoining property and could be used by other persons only for the purpose of nuisance value
to such owners of adjoining or abutting property. After such determination has been made as
next hereinabove provided for,.the council may by direct negotiation, provide for the sale of the
real property covered thereby, without compliance with the auction, public sale, or method of
payment requirements in this article provided for.
(Ord. No. NS-1265, § 2, 8-4-75)
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Sec. 2-706.2. - Same —Method of payment.
Sales of real property shall be on an all cash basis with the following exception: Upon
written recommendation of the city manager and approval by the council, a parcel of surplus
real property may be sold on such credit terms as are deemed to be necessary in each case.
After the required down payment has been made, the balance of the purchase price shall be
secured by a note and deed of trust. The credit payment period shall not exceed fifteen (15)
years from the date of execution of the trust deed. Interest shall be at the prevailing rate in the
community allowed by the Federal Housing Administration (FHA) as of the date of the public
sale, but shall not include any FHA mortgage insurance premium.
(Ord. No. NS-1265, § 2, 8-4-75)
Sec. 2-707. - Same —Broker listing; maximum commission; nonliability of city agent.
The city council, when it determines that anyyreal property owned by the city be disposed
of, may authorize the director of public works fo execute a written listing contract to find bidders
with a licensed real estate agent or broker, .anc -may specify that said'property be placed in
multiple listing. Said listing contract shall specify the maximum commission to be paid if the
property is sold, which said commission shall in no case"exceed six (6) percent of the sale price
on property improved with a habitable building and shall in no case exceed ten (10) percent on
unimproved property. No personal liability,sliall attach to any agent of the city who signs any
such contract on behalf of the city.
(Code 1952, § 2615; Ord: No.NS-256, § 1, 64'357; Ord. No. `NS-1082,-§ 1, 6-21-71; Ord. No. NS-
1265, § 11, 8-4-75) j
Sec. 2-708. - Same —Payment of.cominission; division of commission.
In the event an agent covered by the contract, as set out in section 2-707, procures a bidder
who submits the highe`st,b'id,and to whom th6-sale is made and completed in due course, the
commission provided in said contract shall be paid to said agent. In event an agent covered by
the contract submits the highestt'writteh�bid�which conforms in all respects to the city's invitation
to bid and the provisions of section 2-706, and an oral bid conforming to said requirements is
made by a different bidder and'results in the sale being made and completed to said different
oral bidder, then one-half,(%) of the commission originally fixed shall be paid to the listing agent
who procured the original`highest written conforming bid. If the successful oral bidder was
procured and is represented by a licensed real estate agent or broker and the sale is made
and completed, then the other one-half (%2) of said commission shall be paid to such agent or
broker.
In cases where no listing contract exists and the successful bidder is represented by a
licensed real estate broker, upon approval by the council, a full commission will be paid to such
broker under the following conditions:
(1) The buyer's written or oral bid must be submitted by the broker,
(2) The broker must be designated as such in the buyer's purchase offer or in the written
statement of his bid, and
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(3) The sale to the buyer must be consummated.
(Code 1952, § 2616; Ord. No. NS-256, § 1, 6-3-57; Ord. No. NS-1265, § 5, 8-4-75)
Sec. 2-709. - Exceptions.
The provisions in this article regulating the sale of surplus city personal property or the sale
of city real property shall not apply to any sale of such property made to any city, county, city
and county, state or federal government, or any political subdivision of any of them, or to any
nonprofit public benefit corporation formed or controlled by the city, or to any sale which is
exempted from such provisions by two-thirds ( 2/3 ) vote of,ttiejcity council after a duly noticed
public hearing, and such sales may be made upon a basis of direct negotiations without the
necessity for public auction or competitive bidding, wheri the•authority to so negotiate has been
granted by the city council. ✓ '' .
(Code 1952, § 2614; Ord. No. NS-128, § 2, 8-15-55;
Sec. 2-710. - Exchange of real property.
Upon written recommendation of'the city
of any parcel of city -owned real property wt
needs for any other real property, whether p
public need. Upon such authorization,%an. e
without compliance with the-auctiio
(Ord. No. NS-1265, § 6, 8-, 75)
elf)
or
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Ord: No. NS-1006, §,27, 4-6-85)
iage ;,the council may authorize the exchange
has'been'declared to be surplus to the city's
:ly or privately owned, for which the city has a
Inge may`bWconcluded by direct negotiation
e requirements in this article provided for.
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