SUMMARY REPORT PURSUANT TO
SECTIONS 52200 – 52201
OF THE CALIFORNIA GOVERNMENT CODE
ON
THE REAL ESTATE SALE AGREEMENT
BY AND BETWEEN THE
CITY OF ANAHEIM
AND
HHC HA TRS, INC.
The following Summary Report has been prepared pursuant to Section 52200 - 52201 of the California Government Code. The report sets forth certain details of the proposed Real Estate Sale Agreement (Agreement) between the City of Anaheim (City) and HHC HA TRS, Inc. (Purchaser). The subject property consists of an airspace parcel of real estate improved with a five-level, enclosed parking garage (Property) that is attached to the Hilton Anaheim and is located at 777 W. Convention Way.
BACKGROUND STATEMENT
The following Summary Report is based upon information contained within the Agreement, and is organized into the following six sections:
• Salient Points of the Agreement: This section includes a description of the project; and the major responsibilities imposed on the City and the Purchaser by the Agreement.
• Cost of the Agreement to the City: This section details the total cost to the City associated with implementing the Agreement.
• Estimated Value of the Interests to be Conveyed Determined at the Highest Use Permitted Under the Redevelopment Plan: This section estimates the value of the interests to be conveyed determined at the highest use permitted under the existing zoning and the requirements imposed by the Redevelopment Plan.
• Estimated Reuse Value of the Interests to be Conveyed: This section summarizes the valuation estimate for the Site based on the required use, and with the conditions and covenants required by the Agreement.
• Consideration Received and Comparison with the Established Value of the Site: This section describes the compensation to be received by the City, and explains any difference between the compensation to be received and the established value of the Site.
• Creation of Economic Opportunity: This section describes the how the Project will assist in the creation of economic opportunity.
This Summary Report and the Agreement are to be made available for public inspection prior to the approval of the Agreement.
I. SALIENT POINTS OF THE AGREEMENT
A. Project Description
The Property consists of an airspace parcel of real estate improved with a five-story, enclosed parking garage that is attached to the Hilton Anaheim (Hotel) and is located at 777 W. Convention Way. The City’s interest in the Property is 51.07% and the Purchaser’s interest is 48.93%, which is based on the percentage of the airspace parcels that the City and Purchaser own separately that comprise the whole Parking Facility. The City’s ownership interest consists of half of the third floor, floors four and five and the open-air rights above (51.07%) and the Purchaser’s interest consists of the land beneath the structure, the first floor, the second floor and half of the third floor (48.93%). Consistent with the allocation of ownership, the City has a 51.07% interest and the Purchaser has a 48.93% interest in the Property’s revenues and expenses as subject to a Declaration Establishing Easements, Rights, Covenants, Conditions, and Restrictions Regarding Access to and Parking at the Anaheim Convention Center and Hotel Enclosed Parking Facility dated June 22, 1989 (CC&Rs). In early 2023, the Purchaser contacted the City to express its interest in purchasing the Property with the negotiated transaction being the subject of the Agreement.
B. City Responsibilities
The Agreement requires the City to accept the following responsibilities:
1. City shall sell to the Purchaser an airspace parcel of real estate described as Parcel 3 in Parcel Map No. 88-251 (Real Property), together with:
a. All buildings and improvements owned by City and located on the Real Property and any and all of City’s rights, easements, licenses and privileges presently thereon or appertaining thereto;
b. City’s right, title and interest in and to the leases, licenses or other occupancy rights affecting the Property;
c. All fixtures, equipment, tools and other tangible property owned by the City, located on the Real Property;
d. Except as otherwise noted, all right, title and interest of City under any and all of the management, maintenance, service, advertising and other like contracts and agreements with respect to the ownership and operation of the Property; e. City’s right, title and interest in and to all intangible personal property relating to the Real Property and the Improvements.
2. On or prior to the closing date, the City shall deliver to escrow the counterparts to the original of the following:
a. Grant deed;
b. Bill of sale;
c. Assignment of the assumed service contract, unless Purchaser asks City to terminate service contract;
d. Termination and release of CC&Rs.
3. City shall also deliver as of closing other relevant documents as identified and detailed in the Agreement including, but not limited to, originals of the Assumed Service Contract, pertinent records concerning occupancy of the Property, copies of any permits/licenses/plans, etc. for the Property.
C. Purchaser Responsibilities
The Agreement imposes the following responsibilities on the Purchaser:
1. The total consideration to be paid by Purchaser for the Property is $24,542,314 (Purchase Price) for the Property.
2. At closing, Purchaser shall receive a credit against the Purchase Price in the amount of $1,542,314 (Capital Repair Credit), which represents City’s 51.07% share of the capital repair costs for the Project it owes pursuant to the Property Condition Assessment, dated January 2023, prepared by Michael Kreuzer, IDDS (the “PCA”).
3. At closing, Purchaser shall receive a credit against the Purchase Price of its 48.93% share of the restricted reserve for future operational costs and capital improvement costs at the Parking Facility held by City for the joint benefit of the parties pursuant to the CC&Rs.
4. On or before the closing date, the Purchaser shall deliver the following:
a. Current federal funds equal to the Purchase Price minus the Capital Repair Credit and Restricted Reserve Credit;
b. Counterpart to assignment of contracts, unless Purchaser asks City to terminate service contract;
c. Counterpart original of the termination CC&Rs;
d. Counterpart original of the closing statement;
e. Other relevant documents required for closing as detailed in the Agreement.
II. COST OF THE AGREEMENT TO THE CITY
The City has not incurred any development costs under this agreement.
III. ESTIMATED VALUE OF THE INTERESTS TO BE CONVEYED DETERMINED AT
THE HIGHEST USE PERMITTED UNDER THE REDEVELOPMENT PLAN
Section 52201 of the California Government Code requires the City to identify the value of the interests being conveyed at the highest use allowed by the Site’s zoning and the requirements imposed by the Redevelopment Plan and the General Plan. The City retained Mr. Stephen G.
White, MAI, to estimate the fair market value of the Property. Mr. White, in an appraisal dated February 1, 2023 concluded the Site’s fair market value ranges from $48,000,000 to $53,250,000 for a 100% interest in the property. On March 20, 2024, Mr. White submitted a supplement to his appraisal which indicated the current value would be lower than concluded in the February 2023 report but would still range from under to over $48,000,000. The City and Purchaser share ownership of the Property, with the City owning 51.07% of the Property and the Purchaser 48.93%; consequently, the City’s share of the Property is valued at $24,513,600 (51.07% of $48,000,000). The City is receiving $24,542,314 as the Purchase Price, consistent with Mr. White’s fair market value findings for the Property.
IV. ESTIMATED REUSE VALUE OF THE INTERESTS TO BE CONVEYED
As discussed above the City is conveying the Property to the Purchaser for $24,542,314, the fair market value at the use and with the conditions, covenants, and development costs required by the sale of the Property. Payment for the Property will be made at the close of escrow.
V. CONSIDERATION RECEIVED AND COMPARISON WITH THE ESTABLISHED FAIR
MARKET VALUE OF THE SITE
Per the Agreement, the City is conveying the Property for a Purchase Price of $24,542,314, the fair market value of the Site. At closing, the Purchaser shall receive the Capital Repair Credit; therefore, the net revenue to the City is $23,000,000.
VI. CREATION OF ECONOMIC OPPORTUNITY
The Agreement will provide an economic opportunity in the following ways:
1. After the Capital Repair Credit, the City will net $23,000,000 from the sale of the Property. In addition, the sale will release the City’s share (51.07%) of the restricted reserve, which has a total balance of $37,639,013 (March 2024), for operational costs and capital improvement costs for the Property. The final amount will be calculated upon closing and these funds can be directed to the City’s General Fund.
2. The purchase will remove future liability associated with the maintenance and operations of the Property from the City.
3. Due to its location and scale, the Hilton Hotel is an important component to the continued success of the Anaheim Convention Center and the City. The Agreement provides the Purchaser with the opportunity to fully maximize the management, utilization and pricing of the spaces in the Project in support of the Hotel, which is the largest property in the City at 1,572 rooms.