SUMMARY REPORT PURSUANT TO
SECTIONS 52200 – 52201
OF THE CALIFORNIA GOVERNMENT CODE
ON
THE DISPOSITION AND DEVELOPMENT AGREEMENT
BY AND BETWEEN THE
CITY OF ANAHEIM
AND
MANCHESTER LINCOLN LLC
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 Disposition and Development Agreement (Agreement) between the City of Anaheim (City) and Manchester Lincoln, LLC (Developer). The site is approximately 2.815 acres located on the west and east corners of the north side of the Manchester Ave. and Lincoln Ave. intersection (Site).
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 Developer 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
City is the owner of a project site (hereinafter the “Site”) located generally at 1501-1563 W. Lincoln Avenue and 255 N. Manchester Avenue, in the City of Anaheim, California., and such other adjacent real property within the abandoned right-of-way commonly known as Manchester Avenue.
The Site is further identified to include Assessor Parcel Numbers 034-070-48, -77, -79, -80, -83, - 84, -85. The Developer proposes to build an automotive dealership building with 159,000 square feet of total building area that includes a showroom, office space, service bays and auto display area on the Site in accordance with the Land Use Approvals (the “Project”). To that end, Porsche Cars North America (“Porsche”) desires to establish a new point of sale, full-service dealership in Orange County and has confirmed to the Parties that the Site is suitable for that purpose.
B. City Responsibilities
The Agreement requires the City to accept the following responsibilities:
1. City agrees to convey to Developer of City’s right, title and interest in and to the Site, together with all rights, privileges, tenements, hereditaments, rights-of-way, easements and appurtenances thereto.
2. The City will sell the property to the Developer for an agreed upon purchase price of $10,400,000.
3. The City will provide the Developer with a credit of $1,231,650 for extraordinary costs required to make the Site developable. Specifically, a portion of the Site includes a vacated public right of way commonly known as “Manchester Avenue” in which, despite the vacation, certain utility improvements and an abandoned jet fuel line remain in place (the “Abandoned Facilities”)
4. Within ten (10) days of the Effective Date, City shall deliver to Developer copies of the existing environmental reports
5. If the Developer’s investigation of the Site discovers hazardous materials remedial work may be required. The City will provide a Remedial Work Expenditure Cap of $200,000 (Remedial Cap) for the removal of such hazardous materials. If the hazardous materials are discovered and the removal costs are less than the Remedial Cap a review by City staff may approve the expenditure as an additional credit against the purchase price. If the hazardous materials removal costs are greater than the Remedial Cap, then City Council approval is required at its sole and absolute discretion for any additional credit. After closing, the remaining balance of the Remedial Cap is available as Holdback Funds. They
will be held in escrow and can be applied to additional hazardous materials remediation.
Upon removal of the Abandoned facilities, the remaining Holdback Funds shall transfer to the City.
C. Buyer Responsibilities
The Agreement imposes the following responsibilities on the Buyer:
1. The Buyer will purchase the Site from the City for $10,400,000.
2. Developer agrees that during the term of this Agreement and after the Closing, Developer will receive no reimbursement for property, sales or transit occupancy taxes received by City unless otherwise agreed to by City.
3. Developer agrees that the City shall not provide any form of financial assistance to the Developer.
4. Developer shall have the right to access the Site during regular business hours and upon reasonable Notice to City for the purpose of obtaining data and conducting surveys and tests necessary to reasonably assess the suitability of the Site for the Project.
5. All of the cost of planning, designing, developing and constructing all of the Developer Improvements in conformance with the approved Basic Concept Drawings and Design Development Drawings shall be borne by Developer.
6. Developer shall submit to City the Preliminary Evidence of Financing evidencing that Developer has (or will have upon the date of Conveyance) sufficient capital and/or has arranged for debt and/or equity financing necessary to undertake the development and construction of the Project in accordance with the Agreement.
7. The Developer covenants that it will use the City’s Job Training Program as a source for the recruiting and hiring of employees for the Project for a period of three (3) years from the date of the Agreement.
8. For a period of twenty (20) years from the Date of this Agreement, Developer covenants and agrees for itself and its successors, assigns, and every successor in interest to the Property or any part thereof that Developer and such successors and assignees, shall use and operate the Project in accordance with the Land Use Approvals.
II. COST OF THE AGREEMENT TO THE CITY
As identified in the City’s Long Range Property Management Plan, the value of the property at acquisition was $2,431,520. Since obtaining ownership, the City’s estimated property management costs for the Site are $256,232. Therefore, the total costs to the City are estimated at $2,687,752.
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 valuation must be based on the assumption that near-term development is required.
The City retained Mr. Stephen G. White, MAI, to estimate the fair market value of the Site. Mr.
White, in an appraisal dated February 21, 2025 (Appraisal) concluded the Site has a market value of $10,400,000. However, the Appraisal noted that development of the site will require extraordinary costs and that the market value does not reflect a deduction for these extraordinary costs. Specifically, a portion of the Site includes a vacated public right of way commonly known as “Manchester Court” in which, despite the vacation, certain utility improvements and an abandoned jet fuel line remain in place (the “Abandoned Facilities”). Due to the unusual circumstance of having a previously vacated street transect the middle of the Site, the City cannot deliver a developable site to the Developer consistent the purchase price without either: (i) removing the Abandoned Facilities prior to the Closing; or (ii) providing the Developer with a credit for the extraordinary costs that will be incurred by the Developer for removing the Abandoned Facilities.
The City and Developer have determined that efficient construction practices would provide for the Abandoned Facilities Removal during the course of future constructions rather than separate removal by the City before the Closing.
The City will also provide the Remedial Cap of $200,000 for the removal of hazardous materials from the Site. If hazardous materials are discovered on the Site during the Developer’s environmental investigation and the removal costs are less than the Remedial Cap a review by City staff may approve the expenditure as an additional credit against the purchase price. If the hazardous materials removal costs are greater than the Remedial Cap, then City Council approval is required at its sole and absolute discretion for any additional credit. After closing, the remaining balance of the Remedial Cap is available as Holdback Funds. They will be held in escrow and can be applied to additional hazardous materials remediation. Upon removal of the Abandoned facilities, the remaining Holdback Funds shall transfer to the City.
The City and Developer agree that the reasonable, lump sum cost of the Abandoned Facilities Removal is $1,231,650 (based on cost estimates prepared by the City’s Public Works Department) which shall be applied as a credit (Extraordinary Cost Credit) to the Purchase Price at Closing, resulting in net proceeds to the City of $9,168,350. If the entire Remedial Cap of $200,000 is
required for the remediation of hazardous materials on the Site, the net proceeds to the City would be $8,968,350. Therefore, the net proceeds to the City will range from $8,968,350 to $9,168,350.
IV. ESTIMATED REUSE VALUE OF THE INTERESTS TO BE CONVEYED
As discussed above, the City is conveying the Site to the Developer for $10,400,000, the market value of the Site. The City and Developer agree that an Extraordinary Cost Credit of $1,231,650 shall be applied to the Purchase Price to provide the Developer with a developable site, resulting in net proceeds to the City of $9,168,350. If the entire Remedial Cap of $200,000 is required for the remediation of hazardous materials on the Site, the net proceeds to the City would be $8,968,350.
Therefore, the net proceeds to the City will range from $8,968,350 to $9,168,350. Payment for the Site will be made at the close of escrow.
V. CONSIDERATION RECEIVED AND COMPARISON WITH THE ESTABLISHED FAIR
MARKET VALUE OF THE SITE
Under the agreement, the City is conveying the Site to the Developer for $10,400,000, the market value of the Site. The City and Developer agree that an Extraordinary Cost Credit of $1,231,650 shall be applied to the Purchase Price to provide the Developer with a developable site, resulting in net proceeds to the City of $9,168,350. If the entire Remedial Cap of $200,000 is required for the remediation of hazardous materials on the Site, the net proceeds to the City would be $8,968,350.
Therefore, the net proceeds to the City will range from $8,968,350 to $9,168,350.
VI. CREATION OF ECONOMIC OPPORTUNITY
The Developer proposes to construct an automotive dealership building with 159,000 square feet of total building area that includes a showroom, office space, service bays and auto display area.
Further, Porsche desires to establish a new point of sale, full-service dealership in Orange County and has confirmed that the Site is suitable for that purpose. By selling this Site for development of the dealership, the project would fulfill goals and objectives defined in the City’s adopted Economic Development Element, including:
1. Retain, expand and diversify the economic base of the City – The new dealership will add another point of automotive sales to the City, introducing a high end auto manufacturer to the market. Significant revenues are anticipated to be generated by the Dealership through the sale and lease of new and used cars in addition to the ongoing provision of service and maintenance on the Site. In Orange County the average franchised new car and truck dealership generates average annual revenues of $121 million. 1 Based on the current
projections for units sold, the dealership could generate sales exceeding $150 million.
Assuming sales ranging from $150 million to $180 million, the annual City sales tax would be $900,000- $1.1 million and $24 million- $29 million over 20 years (Table 1).
1 Orange County Automobile Dealers Association – 2023 Economic Impact Report
2. Continue to develop a highly-skilled labor workforce connected to a strong, local employment base - The City is designated as a “Service Delivery Area” pursuant to the United States’ Job Training Partnership Act (the "Act"). The Agreement requires the Developer to use the program as a source for the recruiting and hiring of employees for the Project. Dealership employees will include managers, sales staff, finance managers, service technicians and others. Specifically, the Dealership will employ 70 - 75 employees, with 65 – 70 being full-time.2 In addition, 30 – 35 of the employees will be highly skilled service technicians.
3. Revitalize Anaheim’s major corridors to provide an attractive setting for the business community – The Project is located on Lincoln Avenue a major commercial corridor in the City. With high visibility along the Corridor and Interstate 5, the development will replace a currently vacant property with a Project generating healthy taxable sales and employment.
2 Ibid.
TABLE 1
POTENTIAL SALES TAX
PORSCHE DEALERSHIP
ANAHEIM, CALIFORNIA
Year 1
Total Sales1 Taxable Sales2 City Sales Tax3 Total Sales1 Taxable Sales2 City Sales Tax3 Year 1 $150,000,000 $90,000,000 $900, 000 $180,000,000 $108, 000,000 $1,080,000 Year 2 $154,500,000 $92,700,000 $927, 000 $185,400,000 $111, 240,000 $1,112,400 Year 3 $159,135,000 $95,481,000 $954, 800 $190,962,000 $114, 577,200 $1,145,800 Year 4 $163,909,000 $98,345,400 $983, 500 $196,691,000 $118, 014,600 $1,180,100 Year 5 $168,826,000 $101,295,600 $1, 013,000 $202,592,000 $121, 555,200 $1,215,600 Year 6 $173,891,000 $104,334,600 $1, 043,300 $208,670,000 $125, 202,000 $1,252,000 Year 7 $179,108,000 $107,464,800 $1, 074,600 $214,930,000 $128, 958,000 $1,289,600 Year 8 $184,481,000 $110,688,600 $1, 106,900 $221,378,000 $132, 826,800 $1,328,300 Year 9 $190,015,000 $114,009,000 $1, 140,100 $228,019,000 $136, 811,400 $1,368,100 Year 10 $195,715,000 $117,429,000 $1, 174,300 $234,860,000 $140, 916,000 $1,409,200 Year 11 $201,586,000 $120,951,600 $1, 209,500 $241,906,000 $145, 143,600 $1,451,400 Year 12 $207,634,000 $124,580,400 $1, 245,800 $249,163,000 $149, 497,800 $1,495,000 Year 13 $213,863,000 $128,317,800 $1, 283,200 $256,638,000 $153, 982,800 $1,539,800 Year 14 $220,279,000 $132,167,400 $1, 321,700 $264,337,000 $158, 602,200 $1,586,000 Year 15 $226,887,000 $136,132,200 $1, 361,300 $272,267,000 $163, 360,200 $1,633,600 Year 16 $233,694,000 $140,216,400 $1, 402,200 $280,435,000 $168, 261,000 $1,682,600 Year 17 $240,705,000 $144,423,000 $1, 444,200 $288,848,000 $173, 308,800 $1,733,100 Year 18 $247,926,000 $148,755,600 $1, 487,600 $297,513,000 $178, 507,800 $1,785,100 Year 19 $255,364,000 $153,218,400 $1, 532,200 $306,438,000 $183, 862,800 $1,838,600 Year 20 $263,025,000 $157,815,000 $1,578,200 $315,631,000 $189,378, 600 $1,893,800 Project Total $24,183,400 $29,020,100
1 Assumes sales increase 3% annually for CPI.
2 Total sales include new and used car sales/leases, parts and services. Assumes 60% of total sales are taxable. 3 Assumes City share of sales tax is 1% of annual taxable sales.
Potential Sales - Low Potential Sales - High