CITY OF COMMERCEAGENDA REPORTCITY OF COMMERCEAGENDA REPORT
CITY OF COMMERCE
AGENDA REPORT
CITY OF COMMERCE
AGENDA REPORT
Item No. Item No.
Item No.
Item No.
TO: Honorable City Council
FROM: City Manager
SUBJECT: Resolution Approving the Second Amendment to the Contingent Agreement to Purchase and Sell Real Estate and Escrow Instructions to Wash-Tel Commerce, LLC and Citadel Holdings Group, LLC, a Delaware limited liability company (“CRC Buyer”), successor-in-interest to Craig Realty Group Citadel, LLC.
Meeting Date: JUNE 14, 2022
RECOMMENDATION:
Approve and adopt the proposed Resolution approving the Second Amendment to the Contingent Agreement to Purchase and Sell Real Estate and Escrow Instructions to Wash-Tel Commerce, LLC and Citadel Holdings Group, LLC, successor-in-interest to Craig Realty Group Citadel, LLC, and assign the number next in order.
BACKGROUND:
Pursuant to ABx1 26 (“AB 26”) enacted in June 2011, the Commerce Community Development Commission (the “Commission”), and all other redevelopment agencies throughout the state, were dissolved as of February 1, 2012. AB 1484 was enacted in June of 2012 and substantially amended AB 26, and was codified in the Health and Safety Code.
Pursuant to subdivision (b) of section 34175 of the Health and Safety Code, on February 1, 2012, the real property and other assets of dissolved redevelopment agencies were transferred to the ownership and control of successor agencies. Section 34173, subdivision (g) of the Health and Safety Code requires successor agencies to dispose of properties previously owned by the redevelopment agencies and to unwind the affairs of the dissolved redevelopment agencies. Pursuant to AB 26, the City elected to accept the duties of the successor agency to the Commission and is responsible for the disposition of the real properties previously owned by the Commission. The successor agency in Commerce is referred to as the Successor Agency to the Commerce Community Development Commission (“the Successor Agency”). By operation of law, the Successor Agency currently owns the land formerly owned by the Commission.
Pursuant to section 34191.5 of the Health and Safety Code, within six months after receiving a Finding of Completion from the Department of Finance (“DOF”), each successor agency was required to submit for approval to its oversight board and the DOF, a Long Range Property Management Plan (“LRPMP”) that addresses the disposition and use of the real properties of the respective former redevelopment agencies. AB 1484 mandates that a LRPMP identify that the agency’s properties will be used or dispersed in one of the following ways: (1) to fulfill an enforceable obligation; (2) retention for future development, including possible sale of the property; or (3) retention of property for governmental use. On May 24, 2013, the Successor Agency received a Finding of Completion from the DOF confirming that the Successor Agency had made specified required payments under AB 1484. On May 19, 2014, the DOF approved the Successor Agency’s LRPMP, thereby approving the Successor Agency’s proposed use or disposition of all the properties listed on the LRPMP.
One property identified in the LRPMP is located at 6233 Telegraph Road in the City of Commerce. It consists of approximately 462,607 square feet of real property (approximately 10.62 acres), with the following APNs 6336-010-909, 6336-010-910, 6336-010-911, 6336-010-912, 6336-010-913, 6336-010-914, 6336-010-915 and 6336-010-916 (the “Land”). The Land is zoned for commercial use.
The Commission purchased and assembled the Land in order to work toward the goal of creating the Telegraph Road Commercial/Entertainment Corridor, which was to be a destination retail / entertainment concept wherein both architecture and uses would be compatible with and complementary to the Citadel Outlets Shopping Center and the Commerce Casino. Though redevelopment no longer exists, the Successor Agency seeks to effectuate the goal of the Commission to develop the area to “solidify the City’s brand as a premier retail and entertainment destination consistent with the vision for the Telegraph Road Corridor.” At the time of the LRPMP, the Commerce Casino had expressed interest in a potential purchase of the Land. Through further communications and negotiations, the Casino expressed an interest in collaborating with the Craig Realty Group to purchase a portion of the Land. They formed a limited liability company named “Wash-Tel Commerce” for purposes of said purchase and operating the uses to be developed on the Land.
On May 16, 2017 the Successor Agency approved a Contingent Agreement to Purchase and Sell Real Estate to Wash-Tel Commerce, LLC and Craig Realty Group Citadel, LLC that would allow for the development of the Project. The “Project” was to include Craig Realty Group to develop a 50,000 square foot industrial building on three (3) acres of property within the Land, which would effectively be the relocation of a building within the Citadel Outlet properties so that the Citadel can address traffic-flow issues on its premises; Wash-Tel was to develop three restaurants (including one sit-down restaurant) on the front, southeastern portion of the Land; other uses agreed to by the Buyers and the City of Commerce. Craig Realty Group was to purchase approximately three (3) acres for purposes of the 50,000 square foot industrial or commercial use, while Wash-Tel Commerce was to purchase the remaining seven and 62/100 (7.62) acres for purposes of developing the three restaurants and other possible uses.
Based on appraisals obtained by the City, the Land had a market value of $10,025,000.00. The Buyers had offered to pay the full appraised value for the Land, with Craig Realty Group paying $2,831,921.00 for three (3) acres in the northeast portion of the Land and Wash-Tel Commerce paying $7,193,079.00 for the remaining seven and 62/100 (7.62) acres.
The following is a brief synopsis, reflecting relevant actions that have transpired since:
On March 28, 2018, the Oversight Board approved the aforementioned Contingent Agreement.
On May 23, 2018, the City and the Successor Agency approved the Agreement of Purchase and Sale and Joint Escrow Instructions whereby the City purchases 10.62 acres of land from the Successor Agency in accordance with the First Amendment to the Contingent Agreement for Purchase and Sell between the Successor Agency, Wash-Tel, and Craig Realty. The “Amended Project” included the following:
Approximately 1.8 acres of the Property was contemplated by Seller, Buyers and the City of Commerce for development as a City Public Safety Facility that would house the city’s law enforcement personnel.
The Original Purchase Agreement purchase price was reduced by the approximate amount of $1,699,152.54 (representing approximately 1.8 acres at $943,973.603 per acre).
The City Public Safety Facility Land Allocable Purchase Price reduced the Wash-Tel Purchase Price from $7,193,079.00 to $5,493,926.50, with the Craig Realty Group payment amount remaining at $2,831,921.
This agreement also bound the purchaser or the City to the terms outlined in the Seller’s agreement (Successor Agency) with Craig Realty Group Citadel LLC, and Wash-Tel Commerce, LLC. Further, it incorporated a reference to the City assuming the terms outlined in the First Amendment to the Successor Agency’s Contingent Agreement to Purchase and Sell Real Estate to Wash-Tel Commerce, LLC and Craig Realty Group Citadel, LLC.
On May 30, 2018, the Oversight Board approved the Contingent Agreement between the City and the Successor Agency.
On August 6, 2018 the Successor Agency approved the First Amendment to the Contingent Agreement to Purchase and Sell Real Estate to Wash-Tel Commerce, LLC and Craig Realty Group Citadel, LLC approving the “Amended Project” highlighted above ANALYSIS:
The City has completed the negotiation of the Second Amendment to the Contingent Agreement to Purchase and Sell Real Estate with Wash-Tel Commerce, LLC and Citadel Holdings Group, LLC, successor-in-interest to Craig Realty Group Citadel, LLC.
City of Commerce Portion of Land Area
Parcel 5 -- Approximately 4.423 acres (inclusive of the original 1.8 acres) of the Property will be contemplated by Seller, Buyers and the City of Commerce for development as a City Public Safety Facility that would house the city’s law enforcement personnel.
Lot B -- Approximately 0.303 acres of Common Area (Pathways / Landscaping) (City’s share of the 0.848 total acreage) Wash-Tel LLC / Citadel Holdings LLC Portion of Land Area Parcel 1 – Approximately 0.640 acres
Parcel 2 – Approximately 1.091 acres
Parcel 3 – Approximately 1.090 acres
Parcel 4 – Approximately 0.661 acres
Lot B – Approximately 0.545 acres of Common Area (Pathways / Landscaping) (City’s share of the 0.848 acre total) Lot C – Approximately 1.045 acres of Common Area (Pathways / Landscaping) Lot A – 0.834 acres is anticipated to be set-aside as the interior road which shall be deeded back to the City when completed.
The Purchase Price for the Wash-Tel Use Land shall be $4,787,834.25.
In addition, the City of Commerce and Wash-Tel LLC / Citadel Holdings LLC will also enter into an Infrastructure and Maintenance Agreement, delineating the cost sharing responsibilities of those components of development of the overall property. The Agreement shall also provide for maintenance and operation cost sharing obligations of Lots B and C.
ALTERNATIVES:
Approve staff recommendation
Decline staff recommendation and provide further direction FISCAL IMPACT:
The proceeds of the sale will be one component of the financing mechanism that will allow for the City Council to achieve their goal in overcoming any barriers towards the construction a public safety facility. Staff continues to pursue additional funding sources, including a contribution from the sheriff’s department via rent or direct funding for the development.
RELATIONSHIP TO STRATEGIC GOALS:
This report before the Successor Agency is not applicable to any specific 2016 Strategic Plan Guiding Principle; however, it is related to the following Strategic Focus Area: Create and pursue opportunities for collaboration and regional partnerships to maximize resources and address regional issues.
Recommended by: Edgar P. Cisneros, City Manager
Approved/Reviewed by: Vilko Domic, Assistant City Manager Approved as to form: Noel Tapia, City Attorney
Respectfully submitted: Edgar P. Cisneros, City Manager ATTACHMENTS:
Resolution
Second Amendment to the Contingent Agreement for the Purchase and Sale of the Properties