1 STAFF REPORT
DATE: October 3, 2023
TO: Justin Hess, City Manager
FROM: Patrick Prescott, Community Development Department Director V IA: Simone McFarland, Asst. Director Community Development BY: David Conrad, Real Estate & Project Manager
SUBJECT: Approval of Purchase and Sale Agreement and Environmental Determination to Facilitate the Purchase of Property at 904-906 N. Lake Street
RECOMMENDATION
1. Find that the purchase of the real property located at 904-906 N. Lake Street (Property) and continued use of the P roperty for warehousing and storage uses does not constitute the approval of a “ project” under the California Environmental Quality Act (CEQA) because the activity has no potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. Furthermore, the activity is exe mpt from CEQA under the common sense exemption as it can be seen with certainty that there is no possibility that this activity will have a significant effect on the environment. (Pub. Res. Code § 21065, CEQA Guidelines §§ 15060(c)(2) -(3), 15061(b)(3), 15378). As such, no additional environmental analysis is required at this time;
2. Approve the City’s purchase of the Property for $8,200,000;
3. Approve the form of the Purchase and Sale Agreement and Escrow Instructions (Agreement) and authorize staff to continue negotiating the final form as long as no changes are made to increase the purchase price or modify the description of property being purchased, which final Agreement shall be approved as to form by the City Attorney’s Office (Attachment 1);
4. Authorize the City Manager or his designee to execute the final Agreement and undertake all actions necessary to complete the purchase in accordance with the final Agreement; and
COMMUNITY
DEVELOPMENT
2 5. Amend the Fiscal Year (FY) 2023-24 Budget by appropriating the balance of the purchase, totaling $7,800,000, from account number
494.ND000.33000.1004.000000.00000 (Water Reclamation and Sewer Fund, Non-Departmental Hyperion Plant) to expenditure account number 494.PW23A.15001.0000.000000.00000 (Water Reclamation and Sewer Fund, Sewer Engineering and Design, Land-Clearing).
BACKGROUND
The Property located at 904- 906 N. Lake Street is currently listed for sale at a price of $8,699,000 (Attachments 2 and 3). The City is interested in acquiring this Property due to its strategic proximity to the Burbank Water Reclamation Plant (BWRP). This location holds immense potential for the future expansion of the BWRP, enabling the expansion of increased sewer capacity to accommodate the future growth and development within the City.
The City Council discussed the price and terms of a proposed purchase with the City’s real property negotiator in closed session on July 25, 2023. The City presented an offer to purchase the Property, which the seller accepted, for a negotiated purchase price of $8,200,000, subject to the City’s completion of due diligence and approval of a final Purchase and Sale Agreement. On August 8, 2023, the City Council amended the Fiscal Year 2023-2024 Budget to appropriate funds to conduct due diligence activities and make a good faith deposit upon opening of escrow.
Property Description
The Property is located adjacent to the BWRP and is currently an unoccupied warehouse that most recently was used to store steel blanks for making vehicle wheels. The Property description details are listed below:
• List Price: $8,699,000 ($400/sq ft)
• Built: 1969
• 21,735 square feet (building size)
• 22,500 square feet (lot size)
• 50 parking spaces (rooftop)
• Loading docks (2) - 12x14
• Power: 400A/600A, 240V, 3 phase, 3 wire
• Zoning: M-2 General Industrial
• Owner: Gento 2 LLC
DISCUSSION
The City’s purchase of the Property involves a previously developed site that is approximately a 22,500 square foot lot and includes a 21,735 square foot warehouse building with rooftop parking. The Property is currently zoned M-2 (General Industrial) and has a Burbank2035 General Plan Land Use Designation of North Victory 3 Commercial/Industrial, both of which allow for a mix of commercial and light industrial uses.
Due to the Property’s adjacency to the BWRP, purchasing the Property presents a rare opportunity to pre- plan the expansion of the City’s wastewater treatment infrastructure and satisfy Burbank’s future sewer needs, in furtherance of Mitigation Measure/Condition of Approval UTIL-3d (“Expansion and Upgrades to BWRP Treatment Facilities”) identified in the Environmental Impact Report for the City’s 6th Cycle (2021-2029) Housing Element.
A Purchase and Sale Agreement and Escrow Instructions has been negotiated. Key terms include:
• Agreed upon Purchase Price: $8.2 million, all cash
• Escrow Close Date: October 27, 2023
• City’s Due Diligence Period: Until October 14, 2023
• Deposit: $400,000 ( 4.88% of Agreed upon Purchase Price deposited at opening of escrow upon City Council approval and full execution of Purchase and Sale Agreement/Escrow Instructions)
• Condition of Property: to be sold in “as is” condition • Condition of Title: Seller will convey by Grant Deed fee simple title to the Property • Closing Costs:
o Buyer: legal fees, inspections, 50% escrow fees
o Seller: legal fees, owners title insurance policy, documentary trans fer tax, and real estate commission. Current expenses, taxes and assessments shall be prorated as of the date of closing.
Based on due diligence completed to- date, staff believes the Property is suitable for purchase for its intended purposes in accordance with the agreed upon terms . The Property was appraised by R.P. Laurain & Associates, Inc. with an effective date of August 17, 2023, and was judged to have a fair market value of $8,375,000.001 using both the sales comparison and income capitalization approaches with a capitalization rate of 5.75%. This valuation supports the negotiated purchase price of $8,200,000.
The Owner of the Property has also delivered both Phase I and Phase II Environmental Site Assessments (ESA) for staff and consultant review. The Phase II ESA indicates that no remedial environmental action is required or recommended for the Property. The City hired an independent consultant, Conservation Consulting International (CCI), to review the findings in the Phase II ESA and provide an independent peer review. After review, CCI affirmed the general findings and conclusion in the Phase II ESA that no work is immediately required at the Property and provided recommendations for future improvements depending on future use. In a related matter, lead paint and asbestos
1 This figure is based on primary weight being given to the sales comparison approach. 4 investigations, prepared by consultant A-Tech Consulting, Inc., were recently completed.
The asbestos report identified some areas within the existing building where minor asbestos remediation activity would be required if all, or a portion of the building, is demolished and material containing asbestos is disturbed. All tests for lead paint in concentrations that would require remediation were negative. Both reports indicate there are no conditions that require immediate remedial activity.
Staff anticipates that condition of title will be suitable for transfer to the City of Burbank prior to the Closing Date.
ENVIRONMENTAL REVIEW
The Agreement and associated transfer of the Property will not, itself, result in any direct physical change or reasonably foreseeable indirect physical change to the environment, nor is there a possibility that this activity will have a significant effect on the environment.
The acquisition of the subject P roperty by the City does not approve any development project, nor does it change the physical environment as the building will continue to be immediately used by the City as a warehouse/storage facility. The approval of the Agreement and transfer of the P roperty, therefore, does not constitute the approval of a “project” under CEQA because the activity has no potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. The activity is also exempt from CEQA under the common sense exemption as it can be seen with certainty that the sale and continued use of the Property for warehousing and storage uses has no possibility to have a significant effect on the on the environment. (Pub. Res. Code § 21065, CEQA Guidelines §§ 15060(c)(2) -(3), 15061(b)(3), 15378.) Should a development project be proposed at the Property site in the future, such development project would have to undergo CEQA review.
Furthermore, t he purchase of the Property is consistent with the final Environmental Impact Report (EIR) adopted for the City’s 6
th Cycle (2021-2029) Housing Element and
no additional environmental documentation is required at this time. The City identified several mitigation measures/conditions of approval in the EIR, including "UTIL- 3d Expansion and Upgrades to BWRP Treatment Facilities.” Purchasing the Property is in furtherance of satisfying this mitigation measure/condition of approval. As previously noted above, any future expansion project for the BWRP on or in conjunction with the Property will be subject to any required additional environmental assessment prior to approval of such project.
FISCAL IMPACT
If the purchase is approved, then the City Council is being asked to amend the FY 2023- 24 Budget by appropriating $7,800,000 from revenue account number 494.ND000.33000.1004.000000.00000 (Water Reclamation and Sewer Fund, Non - Departmental Hyperion Plant) to expenditure account number 5 494.PW23A.15001.0000.000000.00000 ( Water Reclamation and Sewer Fund, Sewer Engineering and Design, Land-Clearing). This purchase will not impact the General Fund, as the cost of this purchase is fully covered by the Sewer Fund.
CONCLUSION
The opportunity to purchase land adjacent to City owned utilities does not present itself often. This is a unique opportunity for the City to assemble land for existing and future Burbank Water Reclamation Plant needs. The purchase lays the foundation for infrastructure expansion that is critical to supporting responsible and strategic growth citywide, which are consistent with the land development and housing goals envisioned in the Burbank2035 General Plan Land Use and Housing Elements.
ATTACHMENT
Attachment 1 – Purchase and Sale Agreement and Escrow Instructions Attachment 2 – Property Map
Attachment 3 – Property Description