STAFF REPORT
Meeting Date:
December 9, 2025
BUSINESS
24 SUBJECT: ARTIST LIVE-WORK UNITS; AMENDMENT TO THE PURCHASE AND SALE AGREEMENT FOR 2307 AND 2535 LAGUNA CANYON ROAD, EXECUTION OF
A LETTER OF INTENT WITH THE LAGUNA BEACH COMMUNITY LAND
TRUST, AND ASSIGNMENT OF CONSULTANT AGREEMENT
RECOMMENDATION: It is recommended that the City Council:
1. Approve the Second Amendment to the Purchase and Sale Agreements for 2535 and 2307 Laguna Canyon Road to update the combined purchase price to eight million dollars and revise the escrow and closing timelines, and authorize the City Manager to execute all documents necessary to effectuate the amendment;
2. Authorize the City Manager to execute the nonbinding Letter of Intent between the City of Laguna Beach and the Laguna Beach Community Land Trust, memorializing the key terms of the anticipated loan agreement and Purchase and Sale Agreement assignment that will return to the City Council for consideration on January 13, 2026;
3. Authorize assignment of the City’s Professional Services Agreement with Harris and Associates to the Laguna Beach Community Land Trust, allowing the consultant to complete the remaining nonprofit formation work directly under the Land Trust’s direction;
4. Approve a one-time payment to the Laguna Beach Community Land Trust in the amount of $41,987, or the remaining balance at the time of payment, under the Harris and Associates contract to support completion of the consultant’s scope and to provide initial operational capacity for the Land Trust;
5. Direct staff to return on January 13, 2026 with the proposed loan agreement and assignment documents for full City Council consideration; and
6. Find that the recommended action is not a project under the California Environmental Quality Act pursuant to Section 15378 because the actions will not result in a direct or reasonably foreseeable indirect physical change in the environment.
SUMMARY OF THE MATTER
This report presents a set of coordinated actions necessary to preserve two of the last artist work and live properties in Laguna Beach. The City has experienced a steady decline in artist workspaces due to private acquisitions and conversion of light industrial buildings for other uses, placing the community’s historic artistic character at risk. When 2535 and 2307 Laguna Canyon Road were listed for sale in late 2024, the City took preliminary steps to prevent the loss of approximately twenty-five (25) artist-oriented units that serve as hub for the local creative economy.
Following Council direction, the City entered into Purchase and Sale Agreements in January 2025, completed extensive due diligence, and worked with the property owners, who supported the goal of preserving the artist uses. At the same time, the City advanced the long-standing community objective of forming a nonprofit land holding entity (a Community Land Trust) to steward affordable artist, senior, ARTIST LIVE/WORK UNITS; RESOLUTION APPROVING A PURCHASE AND SALE AGREEMENT FOR THE ACQUISITION OF 2307 AND 2535 LAGUNA CANYON ROAD,
AUTHORIZING A LETTER OF INTENT FOR ASSIGNMENT TO THE LAGUNA BEACH
COMMUNITY LAND TRUST, AND DETERMINING THE ACTION IS EXEMPT UNDER THE
CALIFORNIA ENVIRONMENTAL QUALITY ACT
December 9, 2025
workforce, and family housing. Under the leadership of multiple Council ad hoc committees, the Laguna Beach Community Land Trust was established, its governance structure adopted, and its founding board appointed.
With due diligence completed and the Land Trust positioned to assume long term ownership, the next step is to align contractual terms and prepare for the January 13, 2026 Council hearing on the assignment of the Purchase and Sale Agreements and the related loan agreement. This report recommends: (1) amending the Purchase and Sale Agreements to update the purchase price and escrow schedule, (2) authorizing a nonbinding Letter of Intent between the City and the Community Land Trust outlining the anticipated structure of the assignment and loan agreements, and (3) assigning the City’s consultant agreement with Harris and Associates to the Land Trust, along with a one-time payment of the remaining contract balance to support completion of the nonprofit formation process and initial operational needs.
These actions advance Council Priority #5, “Pursue Artist Work/Live Affordable Housing Opportunities,” and position the community to preserve vital artist resources in perpetuity.
DISCUSSION
Preservation of Artist Workspace
Laguna Beach’s artistic identity is a defining element of its history, culture, and community character. For decades, the city’s creative economy has depended on a limited number of light industrial and live work spaces that allow artists to produce, exhibit, and sustain their work. These spaces are scarce, tightly concentrated, and vulnerable to displacement as property values increase and market pressures drive owners toward conversion of these buildings to other uses.
The city has witnessed a steady reduction in the number of remaining artist workspaces. Private acquisitions have led to repurposing of buildings that once housed painters, sculptors, fabricators, and other creative trades. Each conversion eliminates a piece of the city’s artistic infrastructure and erodes the community’s long-standing connection to its creative heritage. Without intervention, the city risks losing the essential facilities that allow working artists to remain in Laguna Beach.
This challenge became acute in late 2024, when 2535 and 2307 Laguna Canyon Road were placed on the market. Together, these properties contain approximately twenty-five (25) units of light industrial and live work space. They represent two of the last significant artist-oriented properties remaining in the City. Their potential sale generated immediate concern among artists, community members, and policy makers given the likelihood that a private buyer would redevelop the sites and remove their creative uses.
Recognizing the magnitude of the threat, the City Council identified the preservation of these properties as a priority and directed staff to monitor at risk artist spaces and pursue strategies to protect them. The Council’s direction was grounded in policy commitments to support the arts and to maintain the creative fabric that defines Laguna Beach. Consistent with this direction, the City engaged property owners, ARTIST LIVE/WORK UNITS; RESOLUTION APPROVING A PURCHASE AND SALE AGREEMENT FOR THE ACQUISITION OF 2307 AND 2535 LAGUNA CANYON ROAD,
AUTHORIZING A LETTER OF INTENT FOR ASSIGNMENT TO THE LAGUNA BEACH
COMMUNITY LAND TRUST, AND DETERMINING THE ACTION IS EXEMPT UNDER THE
CALIFORNIA ENVIRONMENTAL QUALITY ACT
December 9, 2025
conducted due diligence, coordinated with the artist community, and initiated steps to secure these properties and prevent the loss of their creative functions.
These efforts form the basis for the proposed amendments to the Purchase and Sale Agreements and the development of a long-term preservation strategy in coordination with the Laguna Beach Community Land Trust.
Due Diligence and Engagement with Property Owners
Although the property owners intended to sell, they expressed a strong desire for the sites to remain dedicated to artist work and live uses. They were concerned that a private market sale would likely eliminate the creative functions that have defined these properties for decades. Prior to the City’s involvement, the owners had not been presented with an opportunity to structure a transaction that would preserve the artistic integrity of the sites.
Once the City became aware that both properties were entering the market, staff-initiated discussions with the owners to explore alternatives to private sale. Those discussions confirmed that the owners were open to working with the City on a preservation focused acquisition. This alignment of interests created a path for the City to intervene and protect these vital community assets.
On January 16, 2025, after completing preliminary analysis, the City entered into Purchase and Sale Agreements for both properties. Over the following year, the City conducted a comprehensive and methodical due diligence process to confirm asset condition, evaluate risk, and ensure that acquisition would preserve long term viability for artistic use. This process included:
• Phase I environmental assessments
• Phase II environmental assessments
• Geotechnical analysis
• ALTA and boundary surveys
• Property condition assessments
• Code and safety evaluations
• Title and encumbrance review
This level of diligence ensured that the City developed a complete understanding of each property’s physical, environmental, and regulatory condition before determining next steps.
Appraisal Summary and Valuation Adjustments
To support negotiations and ensure that the proposed acquisition reflected fair market value, the City commissioned independent appraisals for both properties. When the properties were originally listed in late 2024, 2307 Laguna Canyon Road carried an asking price of $4,500,000, and 2535 Laguna Canyon Road was listed at $4,950,000.
ARTIST LIVE/WORK UNITS; RESOLUTION APPROVING A PURCHASE AND SALE AGREEMENT FOR THE ACQUISITION OF 2307 AND 2535 LAGUNA CANYON ROAD,
AUTHORIZING A LETTER OF INTENT FOR ASSIGNMENT TO THE LAGUNA BEACH
COMMUNITY LAND TRUST, AND DETERMINING THE ACTION IS EXEMPT UNDER THE
CALIFORNIA ENVIRONMENTAL QUALITY ACT
December 9, 2025
On November 13, 2024, the City received formal appraisal reports concluding the following market values:
• 2307 Laguna Canyon Road: $3,400,000
• 2535 Laguna Canyon Road: $5,000,000
Based on these appraisals, and after initial negotiations, the City entered into Purchase and Sale Agreements in January 2025 for:
• $4,950,000 at 2535 Laguna Canyon Road
• $3,700,000 at 2307 Laguna Canyon Road
During the due diligence period, ALTA surveys revealed that the rentable square footage for 2307 Laguna Canyon Road was materially less than advertised, and several necessary site improvements were identified.
As a result, the City negotiated a revised purchase price for 2307 Laguna Canyon Road, reducing it to $3,050,000. The purchase price for 2535 Laguna Canyon Road remained unchanged.
The second amendment to the Purchase and Sale Agreements memorializes the final negotiated values:
• 2535 Laguna Canyon Road: $4,950,000
• 2307 Laguna Canyon Road: $3,050,000
The combined acquisition value falls below the aggregate of the original appraised values, ensuring that the transaction reflects both market conditions and the physical realities documented during due diligence.
Table 1: Appraisal Summary
Item 2307 LCR 2535 LCR
Original Listing Price $4,500,000 $4,950,000
Appraised Value (Nov. 13, 2024) $3,400,000 $5,000,000
Initial PSA Price (Jan. 2025) $3,700,000 $4,950,000
Due Diligence Findings Reduced square footage; site
improvements required No price change required
Final Negotiated Purchase Price $3,050,000 $4,950,000
Variance from Appraisals Below appraisal by $399,950 Below appraisal by $50,000 Total Combined Purchase Price $8,000,000
Formation of the Laguna Beach Community Land Trust
For many years, residents, artists, housing advocates, and policy makers have recognized the need for a permanent community-based entity capable of acquiring, holding, and stewarding real property in Laguna Beach for long term affordability. The City’s unique geography, limited land supply, and escalating property values have made it increasingly difficult to preserve housing opportunities for artists, seniors, the local workforce, and young families. Community members consistently expressed that a nonprofit land ARTIST LIVE/WORK UNITS; RESOLUTION APPROVING A PURCHASE AND SALE AGREEMENT FOR THE ACQUISITION OF 2307 AND 2535 LAGUNA CANYON ROAD,
AUTHORIZING A LETTER OF INTENT FOR ASSIGNMENT TO THE LAGUNA BEACH
COMMUNITY LAND TRUST, AND DETERMINING THE ACTION IS EXEMPT UNDER THE
CALIFORNIA ENVIRONMENTAL QUALITY ACT
December 9, 2025
holding entity, independent from the City, would be better positioned to acquire property, structure long term affordability, and insulate assets from private market pressures.
In response to this longstanding need, the Affordable Housing Ad Hoc Committee, led by then Councilmember Rounaghi and Councilmember Orgill, studied various models and recommended creation of a Community Land Trust. The City Council unanimously approved the recommendation, and formal work to establish the Laguna Beach Community Land Trust began in September 2024.
The original intent was to create the Land Trust as a forward-looking tool for affordable housing and community benefit, not in direct connection with any particular property acquisition. However, shortly after formation efforts began, the opportunity to preserve 2535 and 2307 Laguna Canyon Road emerged. These properties, containing some of the last remaining artist live work units in the city, represented exactly the type of high value community assets that a Land Trust is designed to protect.
Recognizing the significance of the opportunity, the newly formed Land Trust Ad Hoc Committee, now led by Councilmember Whalen and Councilmember Orgill, spent the following year developing the organizational structure of the Land Trust while simultaneously coordinating with staff on due diligence for the two properties. This included drafting bylaws, establishing governance procedures, securing nonprofit formation documents, and identifying the founding board members who would ultimately assume control of the Land Trust.
The objective throughout this period was to establish a stable, community driven nonprofit that could take ownership of the properties and serve as an ongoing steward of additional affordable housing opportunities.
The work completed by the ad hoc committee and the appointed board ensures that the Land Trust is now positioned to accept these two key properties into its portfolio once the loan and assignment agreements are presented for Council consideration in January 2026.
Amendment to the Purchase and Sale Agreements and Execution of a Letter of Intent with the Laguna Beach Community Land Trust
After fourteen months of coordinated work evaluating both properties and establishing the Laguna Beach Community Land Trust, the City and the Land Trust have reached the point where the transfer of the properties into long term community ownership can move forward. Both entities agree that the appropriate next step is to enter into a nonbinding Letter of Intent that outlines their shared understanding of the future assignment of the Purchase and Sale Agreements and the principal terms of a proposed loan from the City to the Land Trust. This Letter of Intent (LOI) provides transparency to the City Council and the community regarding the structure of the forthcoming transaction while allowing both parties to finalize formal documents for Council consideration.
The Letter of Intent is not a binding contract. It does not authorize transfer of funds, transfer of property rights, or any legal obligation beyond continued negotiations. Instead, it serves as a summary of the ARTIST LIVE/WORK UNITS; RESOLUTION APPROVING A PURCHASE AND SALE AGREEMENT FOR THE ACQUISITION OF 2307 AND 2535 LAGUNA CANYON ROAD,
AUTHORIZING A LETTER OF INTENT FOR ASSIGNMENT TO THE LAGUNA BEACH
COMMUNITY LAND TRUST, AND DETERMINING THE ACTION IS EXEMPT UNDER THE
CALIFORNIA ENVIRONMENTAL QUALITY ACT
December 9, 2025
anticipated terms of the assignment agreement and the loan agreement, which will return to the City Council for approval on January 13, 2026. The Land Trust board will consider the same documents in its own process. A summary of LOI terms is listed below in Table 2 and the letter is included as Attachment 1.
Table 2: Summary of Letter of Interest
Category Key Terms
Purpose
City intends to assign the Purchase and Sale Agreements for 2307 and 2535 Laguna Canyon Road to the Land Trust and provide a loan to support acquisition.
Lender: City of Laguna Beach Parties Borrower: Laguna Beach Community Land Trust Loan Amount Eight million dollars ($8,000,000) secured by a deed of trust on both properties.
Loan Term Five years; full principal due at maturity.
Interest Rate Four percent fixed annually.
Debt Service Quarterly interest only payments during the term.
Use of Loan Proceeds Purchase price for both properties under the Purchase and Sale Agreements.
Closing Date January 30, 2026, concurrent with PSA closing; extended automatically if PSA closing extends.
Financial Reporting Annual financial statements, rent rolls, and compliance documentation required from the Land Trust or its management company.
Code Remediation: Correct identified violations per schedule; City retains cure rights.
Redevelopment Restrictions: No redevelopment without City approval during loan term except remediation.
Rent Covenant: Rents set to ensure net operating income covers debt service and complies with affordability rules.
Covenants
Affordability: Compliance with applicable state and federal affordability requirements; recordation of instruments if required.
Insurance Requirements
Property/Fire, Flood (if applicable), Commercial General Liability, and other coverages as required; City named as additional insured or loss payee.
Indemnification Land Trust must indemnify and defend the City for claims relating to the properties, including environmental matters.
Cost Responsibilities Each party pays its own costs; Land Trust responsible for third party expenses such as escrow, title, recording, and insurance.
Confidentiality City will make reasonable efforts to maintain confidentiality of designated proprietary information consistent with State law.
ARTIST LIVE/WORK UNITS; RESOLUTION APPROVING A PURCHASE AND SALE AGREEMENT FOR THE ACQUISITION OF 2307 AND 2535 LAGUNA CANYON ROAD,
AUTHORIZING A LETTER OF INTENT FOR ASSIGNMENT TO THE LAGUNA BEACH
COMMUNITY LAND TRUST, AND DETERMINING THE ACTION IS EXEMPT UNDER THE
CALIFORNIA ENVIRONMENTAL QUALITY ACT
December 9, 2025
Binding Effect
LOI is nonbinding and expresses preliminary intent only. Binding obligations occur only upon execution of a loan agreement and assignment documents.
Governing Law State of California; compliance with nondiscrimination, fair housing, and equal opportunity laws required.
Until those agreements are approved, the Purchase and Sale Agreements remain solely between the City of Laguna Beach and the property owners. To keep the transaction on track and to reflect updated negotiated terms, the City Council must approve an amendment to the Purchase and Sale Agreements originally executed January 16, 2025. A summary of the second amendment and the Purchase and Sale Agreement is listed in Table 3 below and the Purchase and Sale Agreement with both amendments is included as Attachment 2.
Table 3: Summary of Purchase and Sale Agreement Amendment Category Term
Properties 2535 Laguna Canyon Road and 2307 Laguna Canyon Road $4,950,000 dollars (2535 LCR)
Purchase Price $3,050,000 dollars (2307 LCR)
$8,000,000 dollars total
Buyer (Current) City of Laguna Beach
Seller Property Owners (Names per PSA)
PSA Execution Date January 16, 2025
First Amendment February 28, 2025
Deposit Fifty thousand dollars per property ($100,000 total) Due Diligence Period Ends January 20, 2026 (deposit becomes nonrefundable upon expiration) Closing Date January 30, 2026
Assignment Provision PSA may be assigned to Laguna Beach Community Land Trust subject to City approval and execution of a formal assignment instrument Conditions to Closing Standard title, escrow, and document delivery requirements, plus any conditions added by amendment
Intended Action Amend PSA to reflect updated total purchase price, timeline, and assignment pathway
Approval of the amended Purchase and Sale Agreements will align the contractual terms with current understanding and will allow the City and the Land Trust to complete their respective due diligence and finalize the loan and assignment documents. These documents will be presented to the City Council in January for full consideration and potential ratification.
ARTIST LIVE/WORK UNITS; RESOLUTION APPROVING A PURCHASE AND SALE AGREEMENT FOR THE ACQUISITION OF 2307 AND 2535 LAGUNA CANYON ROAD,
AUTHORIZING A LETTER OF INTENT FOR ASSIGNMENT TO THE LAGUNA BEACH
COMMUNITY LAND TRUST, AND DETERMINING THE ACTION IS EXEMPT UNDER THE
CALIFORNIA ENVIRONMENTAL QUALITY ACT
December 9, 2025
Assignment of the Harris and Associates Professional Services Agreement to the Laguna Beach Community Land Trust
On March 11, 2025, the City Council approved a professional services agreement with Harris and Associates to serve as the Land Trust Specialist responsible for guiding the formation of the Laguna Beach Community Land Trust. The consultant’s scope of work included supporting the incorporating board in preparing, finalizing, and filing all organizational documents with the State of California and the Internal Revenue Service to establish the Land Trust as a nonprofit public benefit corporation and to secure federal 501(c)(3) tax exempt status.
The consultant was also originally tasked with assisting in the financial evaluation of the potential acquisition of 2535 and 2307 Laguna Canyon Road. That portion of the scope was later discontinued, and staff assumed responsibility for preparing the financial pro forma and related acquisition analysis. Harris and Associates continued to focus on nonprofit formation, governance structure, and compliance with State and federal requirements.
Now that the City has completed the formation process, appointed the founding board, and transitioned governance of the Land Trust to the community, the consultant’s remaining work relates solely to advancing and completing the federal nonprofit determination, which remains under review by the Internal Revenue Service (IRS). Because this work is specific to the Land Trust and no longer under the jurisdiction of the City, it is more appropriate for the Land Trust to assume direct control of the contract going forward.
The total contract amount approved in March 2025 was $94,671. Approximately $41,000 remains unspent.
Staff estimates that roughly $20,000 of consultant work remains necessary to complete the formation process, leaving an approximate balance of $21,000 that would otherwise remain unused under the City’s contract.
To support the Land Trust during its early operational phase and reduce the administrative burden of securing immediate fundraising, staff recommends that the City Council authorize two actions:
1. Assign the City’s professional services agreement with Harris and Associates to the Laguna Beach Community Land Trust, allowing the consultant to complete the nonprofit formation work directly under the Land Trust’s direction.
2. Authorize a one-time payment of the remaining contract balance of $41,987, or the remaining at the time of the payment, to the Land Trust, enabling the Land Trust to fully fund the completion of the consultant’s scope and to use the remaining funds to support early operational needs, including insurance, administrative overhead, or potential closing costs associated with acquisition.
The Land Trust has expressed confidence in its long-term fundraising ability, but early-stage operational support will provide stability as the organization completes the final steps required for nonprofit status and ARTIST LIVE/WORK UNITS; RESOLUTION APPROVING A PURCHASE AND SALE AGREEMENT FOR THE ACQUISITION OF 2307 AND 2535 LAGUNA CANYON ROAD,
AUTHORIZING A LETTER OF INTENT FOR ASSIGNMENT TO THE LAGUNA BEACH
COMMUNITY LAND TRUST, AND DETERMINING THE ACTION IS EXEMPT UNDER THE
CALIFORNIA ENVIRONMENTAL QUALITY ACT
December 9, 2025
prepares to assume ownership of the properties once the loan and assignment agreements are approved in January.
FINANCIAL ANALYSIS
Use of the Vehicle Replacement Fund for the Future Loan Although no loan is being approved this evening, staff intends to return to the City Council on January 13, 2026 with a proposed loan agreement that would provide eight million dollars ($8,000,000) to the Laguna Beach Community Land Trust to acquire 2535 and 2307 Laguna Canyon Road. The anticipated funding source for that loan is the City’s Vehicle Replacement Fund.
The Vehicle Replacement Fund maintains a balance of approximately seventeen million dollars ($17,000,000). This balance exceeds the projected fleet replacement needs over the next five (5) years and provides sufficient capacity to extend an interim loan without impairing the City’s ability to procure essential vehicles or equipment. Use of the fund for this purpose allows the City to leverage existing funds in a manner that preserves liquidity, safeguards fleet replacement schedules, and avoids reliance on General Fund appropriations.
Loan Terms. Under the terms that will be presented in January, the loan would accrue interest at a fixed four percent (4.0%) rate (generally the same growth rate expected if it were to remain invested in the Local Agency Investment Fund or “LAIF” – which on 12/4/2025 is at 4.07% but headed downwards in this rate environment) with a five year balloon payment at maturity.
Interest earnings would flow back into the Vehicle Replacement Fund and would maintain the Fund’s financial stability during the loan period. This structure ensures that the City continues to earn a rate of return comparable to LAIF while supporting the preservation of critical artist live work spaces. A complete financial analysis of the vehicle replacement schedule and that loan from the Vehicle Replacement fund will be included in the January staff report.
If the Land Trust is unable to refinance or repay the balloon payment at the end of the term, the City would retain the ability to sell the properties to recover the loan principal. This mechanism protects the Vehicle Replacement Fund and ensures responsible stewardship of fleet replacement.
ALIGNMENT WITH CITY COUNCIL GOALS AND PRIORITIES
This report is based on City Council Priority #5: 'Pursue Artist Work/Live Affordable Housing Opportunities, established during the City Council's Annual Planning Retreat on January 19, 2024.
ENVIRONMENTAL ANALYSIS
Staff recommends that the City Council find that the actions before the Council do not constitute a project under the California Environmental Quality Act pursuant to Section 15378. The amendments to the Purchase and Sale Agreements, execution of a nonbinding Letter of Intent, and assignment of the Harris ARTIST LIVE/WORK UNITS; RESOLUTION APPROVING A PURCHASE AND SALE AGREEMENT FOR THE ACQUISITION OF 2307 AND 2535 LAGUNA CANYON ROAD,
AUTHORIZING A LETTER OF INTENT FOR ASSIGNMENT TO THE LAGUNA BEACH
COMMUNITY LAND TRUST, AND DETERMINING THE ACTION IS EXEMPT UNDER THE
CALIFORNIA ENVIRONMENTAL QUALITY ACT
December 9, 2025
and Associates professional services agreement involve administrative, financial, and organizational steps that do not authorize, approve, or commit the City to any physical development or activity that may cause a direct or reasonably foreseeable indirect physical change in the environment.
These actions do not grant development rights, do not modify land use entitlements, and do not approve construction, alteration, or redevelopment of the properties. Any future actions that may result in a physical environmental effect will require separate review and compliance with CEQA before consideration by the City Council.
Based on this analysis, the recommended action is not a project under CEQA and no further environmental review is required at this time.
ATTACHMENTS
1. Letter of Intent with the Laguna Beach Community Land Trust (Pgs. 11-15)
2. Purchase and Sale Agreement with Proposed Second Amendment (Pgs. 16-211)
3. Harris and Associates Assignment (Pgs. 212-234)
Submitted By:
.
Approved: .David A Kiff
Jeremy Frimond, Assistant City
Manager
Dave Kiff, City Manager
Report Prepared By: Coordinated With:
Jeremy Frimond, Assistant City Manager