200 S. Anaheim Blvd.
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Anaheim, CA 92805
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CITY COUNCIL AGENDA REPORT
City of Anaheim
CONVENTION, SPORTS & ENTERTAINMENT
DATE: JUNE 11, 2024
FROM: CONVENTION, SPORTS & ENTERTAINMENT
SUBJECT: SALE OF THE CITY’S INTEREST IN THE PROPERTY
LOCATED AT 777 WEST CONVENTION WAY, REFERRED TO
AS “CAR PARK 2”
ATTACHMENT (Y/N): YES ITEM # 16
GOVERNMENT CODE § 84308 APPLIES: YES
RECOMMENDATION:
That the City Council, following a public hearing, by Resolution, approve a Real Estate Sale Agreement with HHC HA TRS, Inc., substantially in the form attached, and authorize the Executive Director of Convention, Sports, & Entertainment to execute and finalize such purchase and sale agreement; authorize the Executive Director of Convention, Sports and Entertainment to implement such Real Estate Sale Agreement; make the determination that the Real Estate Sale Agreement is exempt from CEQA pursuant to CEQA guidelines section 15061(b)(3); and make certain other findings in connection therewith.
BACKGROUND:
In 1989, the City of Anaheim (“City”) obtained title to an airspace parcel (Parcel 3 in Parcel Map No. 88-251) within the parking structure located at 777 W. Convention Way (“Car Park 2”). The enclosed Car Park 2 parking structure is adjacent and attached to the Hilton Anaheim Hotel (“Hilton”), and is immediately south of the city-owned Convention Center Car Park 1 (“Car Park 1”). There are various access points from Car Park 2 to the Hilton. On top of the Car Park 2 roof deck sit multiple hotel room towers, a hotel amenity area, and the hotel pool. The Hilton is a 1,572-room hotel with over 140,000 square feet of meeting space. It is the largest hotel in the City.
The City’s Parcel 3 consists of half of the third floor and the entire fourth and fifth floors of Car Park 2. The first and second floors, and half of the third floor of Car Park 2 (Parcel 2 in Parcel Map No. 88-251), as well as the land beneath Car Park 2 and the Hilton, are owned by HHC HA Investments II, Inc. HHC HA TRS, Inc. is a wholly owned subsidiary of HHC HA Investments II, Inc. (both entities hereinafter referred to as “HHC”). The City has a 51.07% ownership interest and HHC has a 48.93% ownership interest in Car Park 2. The operation of Car Park 2 is governed by the 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 (“Parking Facility Declaration”). The Parking Facility Declaration designates the City as responsible for the managing of the self-park Sale of the City’s Interest in the Property Located at 777 West Convention Way, referred to as “Car Park 2” June 11, 2024
operation of the parking garage, as well as for capital repairs and all associated liabilities. Additionally, the City utilizes the services of a third-party to operate the self- parking operation.
DISCUSSION:
In early 2023, HHC approached the City and expressed an interest in purchasing the City’s ownership percentage. City staff evaluated the request and commissioned an MAI appraisal. In addition, the City commissioned a Property Condition Assessment of Car Park 2 to understand any deferred maintenance or capital requirements needed. A report by the Structural & Civil Engineering firm, Brandow and Johnson was received in April of 2023. On November 28, 2023, City staff brought this potential sale opportunity to Closed Session and obtained authorization to formally enter into negotiations with HHC.
Over the past several months, both parties have negotiated in good faith.
Following months of discussions and negotiations, on January 10, 2024, City staff received a formal offer by HHC for the purchase of the City’s 51.07% ownership interest of Car Park 2.
Outlined below, are the primary deal terms negotiated by City Staff:
Purchase Price: $24,542,314
Capital Repair Credit: At closing, buyer will receive a credit of $1,542,314, which represents the City’s 51.07% share of capital repair costs associated with the Property Condition Assessment.
Restricted Reserve: Balance of Restricted Reserve to be split along ownership percentages. The City’s ownership percentage, as of April 2024, is approximately $19,406,600 and will increase due to the continued operation of Car park 2 until closing.
Closing Costs: Both parties will pay their respective closing costs per industry standards.
Escrow Closing: Fourteen Days (14) after the approval of the governing body (City Council).
Sales Proceeds Calculation: The City will receive $24,542,314 from the purchase of Car Park 2. The buyer will receive a credit of $1,542,314, which will be deducted from the purchase price. The balance of the City’s restricted reserve percentage is approximately $19,406,600 and will be added to the purchase price, which will result in sales proceeds of approximately $43,000,000 to the City’s General Fund.
Staff recommends the proposed sale, as this sale would remove any future liability associated with Car Park 2. The sale would also unencumber Restricted Reserve funds Sale of the City’s Interest in the Property Located at 777 West Convention Way, referred to as “Car Park 2” June 11, 2024
to be used for other purposes. Finally, the Anaheim Convention Center, does not operationally utilize or require use of the subject garage as it currently operates, per the CC&R’s, as a hotel-type garage, with hotel parking requirements. No City employees will be affected by the sale of this property.
SURPLUS LAND ACT:
The City is the owner of airspace Parcel 3 of Parcel Map No. 88-251 consisting of a portion of the third level, and all of the fourth and fifth levels, of a multi-story parking facility at 777 Convention Way. However, pursuant to Government Code Section 54221, subdivision (b)(1), of the Surplus Land Act, “Surplus Land” means any land owned in fee simple that the City declares is surplus and not necessary for the City’s use. Accordingly, the California Department of Housing and Community Development confirmed that because the City does not own the land in fee simple, as defined in the Surplus Land Act, the sale of the City’s airspace Parcel 3 is not subject to the Surplus Land Act.
IMPACT ON BUDGET:
The sales proceeds, including ownership percentage of Restricted Reserve of approximately $43,000,000, will be directed to the City’s General Fund. A portion of the City’s closing costs will be deducted from the sales proceeds.
Respectfully Submitted, Concurred by,
Thomas Morton Sergio M. Ramirez
Executive Director of
Director of Economic Development
Convention, Sports and Entertainment
Attachments:
1. Resolution
2. Purchase and Sale Agreement
3. Summary Report (Gov. Code 52201)
4. Site Map
5. Anaheim Convention Center Car Park 2 – Facility Condition Assessment