Title
Introduction of Ordinance Approving a Purchase and Sale Agreement with 1703 Grand LLC, for the Former Fire Station #3, Located at 1703 Grand Street, Alameda, CA for a Total of $800,000. [In accordance with California Environmental Quality Act (CEQA), this project is Categorically Exempt under the CEQA Guidelines Sections 15301(c) - Existing Facilities and 15312 (Surplus Government Property Sales).] [Requires Four Affirmative Votes]; and
Recommendation to Authorize the Use of the Proceeds from the Sale of the Above Property, Net of Prior $450,000 Budget Allocation and Closing Transaction Costs, to Be Used for Partial Repayment of an Equipment Replacement Internal Service Fund Loan. (Community Development 001)
Body
To: Honorable Mayor and Members of the City Council
From: Elizabeth D. Warmerdam, Acting City Manager
Re: Introduction of Ordinance Approving a Purchase and Sale Agreement with 1703 Grand LLC for the Property Formerly Known as Fire Station #3, Located at 1703 Grand Street for a Total of $800,000; and Recommendation to Authorize the Use of the Proceeds from the Sale of the Above Property, Net of Prior $450,000 Budget Allocation and Closing Transaction Costs, to Be Used for Partial Repayment of an Equipment Replacement Internal Service Fund Loan
BACKGROUND
On August 17, 2017, the City Council authorized the sale of a surplus fire station property at 1703 Grand Street (Exhibits 1 and 2). The City’s broker, Cushman & Wakefield listed the property on September 4, 2017. Starting on September 22, 2017, open showings were offered from 10 a.m. to noon, every Friday until November 17, 2017. The building was opened at other times for anyone who could not make the open showings. The brokers were tracking inquiries from over 50 interested parties and fielded nearly 100 phone calls. The property was also advertised on Loopnet and CoStar beginning September 26, 2017.
On October 26, 2017 all of the interested parties were given access to an online dropbox website that contained background information on the facilities. The information included a seismic assessment performed by the City. Parties also were informed that the City would be accepting offers on November 20, 2017.
DISCUSSION
The approved EOC/Fire Station (FS) #3 Project Budget assumed that a portion of the construction cost for the City’s new FS #3 would be funded by the sale of the old FS #3. Accordingly, staff began working on selling the property. After all of the aforementioned marketing and publicity regarding the sale, the City did not receive any offers for purchase on its November 20th deadline and over the 2017 holiday season interest in the property dwindled. As a result, the broker suggested that doing a market appraisal would assist buyers in understanding the actual value of the property, with all of its restrictions. On February 20, 2018, the City appraisal was completed and the estimated value of the property was determined to be $650,000. The brokers updated their marketing materials to include the appraised value and re-contacted the nearly 100 people who expressed interest in the building. The property sign and external websites also were updated to include the appraised value.
The brokers made a second call for bids due Monday, April 2, 2018. The City received seven bids ranging from $675,000 - $750,000 with varied closing conditions. Instead of accepting the offers, the brokers did one final round of counter offers to all seven bidders for $775,000. Two of the seven bidders declined to respond and the five remaining bids ranged from $775,000 - $800,000. The broker investigated the top two bids and recommended the bid for $800,000 from 1703 Grand LLC because the offer was all cash, no financing and the City received a proof of funds statement.
The proposed use of the building is a duplex development. Consultation with the Planning and Building divisions of the Community Development Department confirmed this use is consistent with the General Plan and the Planning Board made the required conformance finding at its May 29, 2018 meeting. Therefore, it is recommended that the City Council introduce an Ordinance approving the purchase and sale agreement (Exhibit 3).
Partial Repayment of Loan
In March 2014, City Council accepted the Capital Financing Plan for the Fire Station (FS) #3. Later in July 2014, City Council approved external and internal financing for the construction of the FS #3, which included an inter-fund loan from the Equipment Replacement Internal Service Fund. The principal balance of the loan from the Equipment Replacement Internal Service Fund is $809,000, which has a repayment term of 20 years at 3% annual interest rate. In addition, the City Council approved the use of the proceeds from the sale of the old Fire Station (FS) #3 property as one of the funding sources for the construction of the new FS #3. At the time, staff estimated proceeds from the sale to be $450,000. Because the proceeds from the sale of the old FS #3 are greater than originally anticipated, staff recommends to use the excess proceeds to partially repay the outstanding balance of the interfund loan from Equipment Replacement Internal Service Fund, which was used for the FS #3 construction costs financing.
FINANCIAL IMPACT
It is staff’s recommendation to deposit the entire amount of the proceeds from the sale of the property in the Emergency Operations Center/Fire Station 3 Capital Projects Fund. Of the total proceeds amount, $450,000 will be allocated to cover construction costs and the remaining balance of the proceeds (approximately $350,000) to be used to partially repay the Equipment Replacement Fund Loan. Because the General Fund is the source for the loan repayment, it will benefit from the pay down of the loan through savings in the interest cost of approximately $159,000 over the life of the loan and the shortening of the loan repayment period to 11 years. The savings costs will be lower if the balance of the proceeds is less due to applied transaction costs. After the close of escrow on the property, staff will return to Council to amend the Fiscal Year 2018-19 Budget to provide for the loan repayment and also to amend the interfund loan Promissory Note to reflect the partial repayment.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action does not affect the Alameda Municipal Code.
ENVIRONMENTAL REVIEW
In accordance with the California Environmental Quality Act (CEQA), reuse of the existing firehouse for two residential units is exempt from CEQA pursuant to CEQA Guidelines Section 15301(c) - Existing Facilities. The sale of the property is exempt from CEQA pursuant to CEQA Guidelines section 15312 (surplus government property sales).
RECOMMENDATION
Introduce an Ordinance Approving a Purchase and Sale Agreement with 1703 Grand LLC for the property formerly known as Fire Station #3, located at 1703 Grand Street for $800,000; and
Authorize the use of the proceeds from the sale of the above property, net of prior $450,000 budget allocation and closing transaction costs, to be used for partial repayment of an Equipment Replacement Internal Service Fund loan.
Respectfully submitted,
Debbie Potter, Community Development Director
By,
Nanette Mocanu, Assistant Community Development Director
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibits:
1. Parcel Map
2. Premises
3. Purchase and Sale Agreement