The City’s certified Housing Element’s 2021 -29 Moreno Valley Housing Sites Inventory demonstrates that the City of Moreno Valley has adequate site capacity that is suitable and available to accommodate the City’s regional housing needs for all income groups, including lower income households without the need for adding any properties that are situated within the Subject Property. In light of HCD’s approval and certification of the City’s Housing Element, the City has ensured that: (a) sites are properly zoned to allow owner-occupied and rental multifamily residential uses “by -right” (only subject to ministerial approval) in which 20 percent or more of the units are affordable to lower income households; (b) the development of at least 16 units per site is permitted; (c) sites permit a minimum of 20 dwelling units per acre; and (d) at least 50 percent of the low- and very low -income regional housing need can be accommodated on sites designated exclusively for residential uses, at appropriate densities. The parcels which constitute the Subject Property were not identified as affordable housing sites and could not effectively be used for accommodating the City’s RHNA allocation since, under the guidance provided by HCD, the subject parcels are located within the City’s Downtown District which is not encompassed by a zoning designation that has a minimum/maximum density per acre.
The City’s HCD-certified Housing Element demonstrates that during the 2021 -29 Planning Period, the City of Moreno Valley has adequate site capacity that is suitable and available t o accommodate the regional housing needs for all income groups, including lower income households without the need for adding any affordable housing development within the Sub ject Property under the Surplus Lands Act. In other words, the City does not have an existing need for affordable housing as defined in the City’s Housing Element or Regional Housing Needs Assessment. This means that if the Surplus Land Act disposition procedures are applied under the specific circumstances, it would conflict (e.g., undermine, defeat and frustrate) with the General Plan’s Housing Element that was recently certified by the California Department of Housing and Community Development (“HCD”) on or about October 11, 2022, pursuant to the applicable State Housing Statutes, and after extensive analysis and public input and a determination by HCD that the parcels which constitute the Subject Property were not identified as affordable housing sites and could not effectively be used for accommodating the City’s RHNA allocation.
Moreover, in light of the certification of the City’s Housing Element by HCD, the City was designated as a Prohousing jurisdiction. The State’s Prohousing Program was established with the aim at increasing the availability of housing statewide, which is critical to improving the quality of life for all Californians and to ending homelessness.
The State’s Prohousing Program provides designated Prohousing jurisdictions with a spectrum of support, incentives, and accountability measures to meet the State’s aggressive housing objectives. It was no easy task for the City to be designated by HCD as a Prohousing jurisdiction. However, there is genuine concern that if the same agency (HCD), that certified the City’s Housing Element and designated the City as a Prohousing jurisdiction, demands that the Surplus Land Act apply to the Town Center Project, its application would conflict with various provisions of statutory law related to F.1
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the basic threshold requirements that the City had to meet in order to comply with not only Housing Element Law, but also other state housing laws pertaining to zoning and land use, housing production, construction and development costs, etc., that were relied upon by HCD when it designated the City of Moreno Valley as a Prohousing jurisdiction.
As such, there is an incredible risk that the application of the Surplus Lands Act under the instant circumstances could result in decertification of the City’s Housing Element and consequently strip the City of Moreno Valley of it designated status as a Prohousing jurisdiction, which clearly would be in conflict with all the statutory law the City relied upon in order to achieve the status of a designated Prohousing jurisdiction.
ALTERNATIVES
The City Council has the following alternatives:
1. Adopt the Resolution approving the Summary Report for the Town Center Project pursuant to Section 52201 of the Government Code for Economic Opportunity and approving the related Purchase and Sale Agreement [STAFF RECOMMENDS THIS ALTERNATIVE]; or
2. Do not approve the Summary Report. [STAFF DOES NOT RECOMMEND THIS ALTERNATIVE.]
FISCAL IMPACT
If the City Council approves the Summary Report for purposes of Economic Opportunity and the PSA, the City would earn $5,600,000 related to the sale of the subject property, receive the financial benefits associated with the development, construction and installation of several civic uses and public infrastructure by the Developer, realize thousands of dollar in the form of development impact fees and gain future revenues associated with the Town Center Project’s projected sales taxes, property taxes and transient occupancy taxes.
NOTIFICATION
This staff report was made available for public review and inspection and posted on the City’s website at least 72 hours prior to the September 19, 2023, Regular City Council meeting, and the public hearing was noticed at least ten days prior to the Public Hearing.
PREPARATION OF STAFF REPORT
Prepared By:
Steven B. Quintanilla
City Attorney
CITY COUNCIL GOALS
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• Community Image
• Positive Environment
• Public Safety
ATTACHMENTS
Resolution Approving Summary Report and PSA
APPROVALS
City Manager Approval ✓ Approved .
City Clerk Approval ✓ Approved .
CITY COUNCIL GOALS
Public Safety. Provide a safe and secure environment for people and property in the community, control the number and severity of fire and hazardous material incidents, and provide protection for citizens who live, work and visit the City of Moreno Valley.
Positive Environment. Create a positive environment for the development of Moreno Valley's future.
Community Image, Neighborhood Pride and Cleanliness . Promote a sense of community pride and foster an excellent image about our City by developing and executing programs which will result in quality development, enhanced neighborhood preservation efforts, including home rehabilitation and neighborhood restoration.
CITY COUNCIL STRATEGIC PRIORITIES
1. Economic Development
2. Public Safety
3. Library
4. Infrastructure
5. Beautification, Community Engagement, and Quality of Life
6. Youth Programs
ATTACHMENTS
To view large attachments, please click your “bookmarks” on the left hand side of this document for the necessary attachment.
1. Economic Opportunity Summary Report Staff Report
2. Resolution - Summary Report
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3. Summary Report (08.01.2023)
4. Attachment A - Copy of PSA
5. Attachment B - Copy of RFP
6. Attachment C - Copy of Appraisal Summary
7. Attachment D - Copy of HDL Economic Analysis
APPROVALS
Budget Officer Approval ✓ Approved . 9/14/23 8:38 AM City Attorney Approval ✓ Approved .
City Manager Approval ✓ Approved . 9/14/23 8:42 AM F.1
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Report to City Council
ID#5633 Page 1
TO: Mayor and City Council
FROM: Steven B. Quintanilla, Interim City Attorney
AGENDA DATE: September 19, 2023
TITLE: PUBLIC HEARING – TOWN CENTER PROJECT
ECONOMIC OPPORTUNITY SUMMARY REPORT
PURSUANT TO GOVERNMENT CODE SECTION 52201
RECOMMENDED ACTION
That the City Council conduct the Public Hearing and adopt the attached Resolution approving the Economic Oppo rtunity Summary Repor t for the Town Center Pro ject pursuant to Government Code Section 52201, and approve of the related Purchase and Sale Agreement.
DISCUSSION AND ANALYSIS
A. Background
(1) City’s Purchase of Subject Property
In 1985, the City purchased approximately 56 .42 acre s of land located at the northwest corner of Ales sandro Boulevard and Nason Street (“Subject Property”) . The City p urchased the Subject Propert y as a pote ntial Civic Center site known as the “Town Center Project.”
(2) Moreno Valley General Plan 2040 Downtown Plan
The Downtown Center Plan Policy (“Downtown Plan”), as set forth in the Moreno Valley “General Plan 2040,” (“General Plan”) specifically provides for the development of the Subject Property , which is located in the heart of the City, as a vi brant new “Downtown Town Center” (the “Town Center”). The Town Ce nter has been pla nned to serve as a fo cal point of the community and destination for people from around the region. Specifically, as described in the Downtown Plan, the plan is to develop the Subject Property with a mix of business, entertainment, residential, cultural, and civic F.1.a
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uses which will create a sy nergy that will provide activities for the public throughout the day and into the evening . The Downtown Pla n also envisions the Town Center as having Nason Street designe d as a grand boulevard and central spine of the Town Center, with the highest intensity of development focused along it, along with a walkable new “main street” envisioned at the core, lined with shops, restaura nts, workplaces, and cultural venues. Currently, the Subject Property is vacant and undeveloped, and owned in fee simple by the City.
(3) RFP/Purchase and Sale Agreement
The City prepared and distributed a Request for Proposals (RFP) for the development of the “Town Center Project” in November 2019. The RFP was distributed to more than 9 ,000 developers . Lewis A cquisition C ompany, LL C (“Developer”) was selected as the “Developer” in March 2020.
In the RFP and a Purchase and Sale Agreement ( “PSA”) with Lewis Acquisition Company, LLC (“Developer”) regarding the Subject Property, the City Council identified economic development as the #1 strategic priority of the City Council for the Tow n Center Project. The purpose of the proposed sale is for the Developer to construct the Town Center Project as described in the General Plan’s Downtown Plan. It will include a mixed use master planned Town Center consisting of commercial, office and public uses that will include entertainment, hospitality, restaurants, shops, office buildin gs and public amenities such as, but not limited to, p ublic parkland, public open space, pu blic sidewalks, public streets, public art display s, a police substation, an Innovation Library/Technology Center and other civic uses, complemented by high density residential housing, as envisioned and planned per the Downtown Plan.
The Developer has agreed to purchase th e Subject Property for $5,600,000, which is c onsistent with the apprais ed value of the Subject Property as determined by Cushman & Wakef ield Western, Inc. in an independent appraisal. It has also been determined that $5,600,000 is a reasonable price for the Subject Property and does not constitute a gift of public funds.
Under the PSA, the Developer will be required to pay: (i) all o f the escrow fees and charges ; (i i) the cost of th e premiu m for the Title Policy; (iii) the co st of all endorsements to the Title Policy; (iv) all costs and charges for the r ecordation of any grant deeds; (v) any documentary or o ther local transfer taxes on the transfer of the Subject Property; and (vi) the Developer’s share of the charges prorated under the PSA.
In addition, the Developer will be required to pay for all applicable filing and processing fees as set forth in the Moreno Valley Municipal Code (“Municipal Code ”) in the amounts set forth in the sche dule of fees in effect at the time such fees are due and payable during the review process related to the land use entitlements for the Town Center Project. The Developer will also be required to pay all applicable Development Impact Fees (“DIF”) as set forth in the Municipal Code and/o r any applicable fee schedule adopted by the City. The Developer, however, will receive credits against such fees if the Developer constructs any public infrastructure contained in the City's capital F.1.a
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improvement DIF Fee program. Such credits will not be extended to include any credits for any DIF fees for the $2,000,000 one-acre public park a menity that the Developer is required to incorporate into the Town Center Project at no cost to the City . Finally, in addition to the above, the Developer will be required to reimburse the City for the actual costs and expenses reasonably incurred by the City for all services provided by the City and its consultants, incl uding legal counsel, for review, preparation and processing of the Land Use Entitlements and other permits, licenses, etc. for the Town Center Project, which are not factor ed in the City's stand ard processing fees. In light of the foregoing, the City will not incur any costs under the PSA.
B. Economic Opportunity
As stated above, in the RFP and the PSA , the City Council identified economic development as the #1 strategic priority of the City Council for the Town Center Project.
Section 52201(a)(1) of the Government Code provides in part that a city may sell property to create an economic opportunity. Section 52201(c) of the Government Code further provides that the provision s of Section 52201 are an alternative to any other authority granted by law to cities to dispose of city-owned property.
Section 52200.2(b) of the Government Code provides in part that “Economic Opportunity” includes sale agreements or other agreements that increase property tax revenues to all property tax collecting entities, in which the legislative body finds that the agreement will result in an increa se of at leas t 15 percent of total property tax resulting from the project at ful l implementation when compared to the year prior to the property being acquired by the government entity.”
There will be three revenue pr oducing components of the Town Center Project:
1) Commercial, 2) Reside ntial, and 3) Hotel . Based on the analysis performed by Hdl EconSolutions, u pon buildout, the Subject Property will provide economic vitality and new opportunities for businesses, resid ents, and visi tors. The Town Center Project will generate new revenue f or the City through property tax , sal es tax and tra nsient occupancy tax (from the hotel) estimated to exceed $2,000,000 annually upon completion of the T own Center Project. This amount is projected to grow to nearly $3.3 million by year 25 (with a 2% compounded annual growth rate) , and o ver a 25 -year period, assuming a 2.0% escalator, the City would collect a projec ted $64,688,974 in tax revenues from the Town Center Project.
(1) Sales Tax Revenue
The co mbined annual sales recei pts for the C ommercial Component are projected to amount to $80,951,600, which will produce annual sales tax revenue for the City in the amount of $809,516 . For residential use, based on SiteSeer demographics, the City averages 3.74 p ersons per househo ld which has a disposable income of F.1.a
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$85,411, which HdL Econ Soluti ons estimates 30% will be used for household spending, with 70% potentially taxable.
The Town Center Project will employ 285 employees, who are projected to spend $2,163,720 per year, with an nual total ta xable spending estimated to be $1,514,604 , which will produce $15,146 in additional sales tax revenue for the City on an annual basis which, together with the additional sales tax revenue to be generated by the Town Center Project’s construction workers an d residents, is estimated to exceed $152,000 annually. The Developer is also committed to coordinating with the City’s Employment Resource Center to conduct periodic job fairs for prospective businesses within the Town Center Project and to promote local hiring for the busi nesses and ten ants within the Town Center Project.
(2) Transient Occupancy Tax Revenue
The Hotel Component , which will include an upscale lodging establishment, is expected to produce a nnual transien t occupancy tax revenue in the amount of $563,326, based on a projected 80% occupancy rate.
(3) Property Tax Revenue
Upon transfer of ownership to the Developer, the Subject Property’s tax rate will be increased fr om $0 to a tax rate of 1.11692 percent of th e $5,600,000 sales price of the Subject Property. The ent ire c ost (total bui lding valuation) of the Town Center Project, not including land is estimated at over $301,000,000, which has the potential of producing more than $494,000 in annual property tax r evenue, compared to $0 s ince the Subject Property is currently exempt from property taxes under City ownership. The Residential, Commercial an d Hotel Components of the Town Center Project are projected to respectively produce a stream of $389,395, $69,703, and $35,192, in annual property tax revenue for the City’s General Fund. In summary, the Town Center Project will generate increased property taxes i n an amount vastly exceeding the 15% threshold identified as a measure of “economic opportunity” in Gove rnment Code 52200.2(b), when compared to t he year p rior to the acquisit ion of the Sub ject Property by the City in 1985.
C. Summary Report
A Summary Report has been prepared pursuant to Section 52201 of the Government Code, with regards to the Purchase and Sale Agreement. Section 52201 of the Government Code provides that a city may sell property to create an economic opportunity. The acquisition, sale, or lease shall first be approved by the legislative body (city council) by res olution after a legall y noticed public hearing . The City is also required to make available a copy of a Summary Report t hat describes and contains F.1.a
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specific elements of the proposed transaction for public inspection prior to the public hearing.
As required, the Summary Report contains the following information:
• A copy of the proposed sale agreement; and
• A summary that describes the following:
o The cost of the agreement to the city, inc luding land acquisition costs, clearance costs, relocation costs, the cos ts of any improveme nts to be provided by th e city, p lus the expected interest on any loans or bonds to finance the agreements;
o The estimated value of the interest to be conveyed , determined at the highest and best uses permitted under the City’s General Plan or zoning; o The estimated value of the interest to be conveyed determined at the use and with the conditions, covenants, and development costs required by the sale; o The purchase price which is not less than the fair market value of the interest to be conveyed, determined at the highest and best use; and o An explanation of why the acquisition, sale, or lease of the subject property will assist in the creation of economic opportunity, w ith reference to all supporting facts and materials relied upon in making this explanation.
The Summary Report is organized into the following sections:
• Summary of the Proposed Sale – This section includes a description of and other relevant information pertaining to the proposed sale of the Subject Property by the City to the Developer pursuant to the terms of the PSA;
• Cost of the Agreement to the City – This section addresses the cost of the PSA to the City, including land acquisition costs, clearance costs, relocation costs, the costs of any improvements to be provided by the City, plus the expected interest on any loans or bonds to finance the agreements;
• Estimated Value of the Interest to be Conveyed Determine d at the Highest and Best Use Permitted Under the General Plan or Zoning – This section estimates the value of t he interest t o be conveyed, determined at the highest and best use permitted under the General Plan and zoning for the Subject Property;
• Estimated Value of the Interest to be Conveyed Determined at the Use and wi th the Conditions, Covenants, and Development Costs Required by the Sale – This section estimates the value of the Subject P roperty interest to be conveyed determined at the use and with the conditions, covenants, and development costs required by the sale of the Subject Property (i.e., the purchase price);
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• Consideration Received and Compariso n with the Established Value – This section addresses that the sales price of the Subject Property is not less than the fair market value for the Subject Property based on its highest and best use; and
• Economic Opportunity – This section includes an explanation of why the sale of the Subject Property will assist in the creation of economic opportunity.
D. Surplus Lands Act
Typically, before a local agency disposes of (sells) any rea l property, it must comply with the Surpl us Lands Act. The Surplus Land Act requires local agencies t o complete certain procedures before disposing of surplus land. "Surplus land" is defined as land owned in fee simple by a local agency for which the loca l agency's governing body declares at a regular public meeting that the land is not necessary for the agency's use [Gov Code Section 54221(b)(1)].
In situations where the Surplus Lands Act is applicable, before disposing of surplus land, the local agency must send a written notice of availability of the property to certain entities, for the purpose of developing low - or moderate -income housing , park and recreation or open space purpo ses, school purposes, or infill development purposes .
Entities desiring to purchase or lease surplus la nd for low - and m oderate-income housing, park and recreation or open space purposes, school purposes, or infill development purposes must notify the local agency within 60 days after receipt of notice from the local agency . If there is any interest expressed by any of the entities which have received notice of availability, the local agency mu st en gage in g ood-faith negotiations with the interested entity for a period of 90 days.
(1) Agency’s Use
As described above, land owned by a city that is necessary for the agency’s use is not “surplus land” or “exempt surplus land.” The Surplus Lands Act d efines "agency's use" as including, but not limited to, land that is being used, is planned to be used unde r a written plan a dopted b y the local agen cy's governing body or is disposed of to support the agency's work. [Gov. Code Section 54221 (c)(1)].
Here, the City purchased the Subject Property as a potential Civic Center site known as the “Town Center” in the Downtown Plan, as set forth in the General Plan. (General Plan 2040, p 2 -16). The General Plan includes several written plans and policies related to the development of the S ubject Property . The Downtown Plan envisions a vibrant mix of business, entertainment, residential, cultural, and civic uses. (General Plan 2040, p 2-10). One of the main purposes for selling the Subject Property is to implement the General Plan ’s Downtown Plan by requiring the Developer to set aside land for o r develop, construct, or install multiple civic “agency uses”, that will include public amenities such as public parkland, p ublic open sp ace, public sidewalks, public streets, public art disp lays, a police substation, and an F.1.a
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Innovation Library/Technology Center, which the Developer will be providing for the benefit of the City at no cost to the City.
In light of the fo regoing agency uses which are integral and necessary for the Town Center Project , and for the other reaso ns described below, the City Council has not taken any action to decla re the Subject Propert y “surplus land or “exempt surplus land.”
(2) Surplus Lands Act Conflicts with Economic Opportunity Statues
AB 1486 ( Ting) a mended Article 8 Surplus Land, as set forth in Government Code sections 54220 -54234. It’s clear that these a mendments were designed to provide opportunities for public land to be used for affordable housing . However, although the goals of the amendments are laudable , they fail to consider the realities of how public agencies use and dispose of real property.
The amendments included Section 54226 which expressly provides that “ No provision of this article [Article 8 Surplus Land] shall be applied when it conflicts with any other provision of statutory law .” (Amended by Stats. 2019, Ch. 664, Sec. 7. (AB 1486) Effective January 1, 2020. )) Statutory Law is commonly defined as a written law or group of laws passed by a legislature or other official governing bodies, as distinguished from the unwritten law or common law.
Some of the statutory laws in question include the economic opportunity statutes – specifically Government Code Section 52201. Section 52201 clearly provides that a city may sell property to create an economic opportunity. Notably, Government Code Section 52200.6 provides that the economic opportunity process is an alternative to any authority of a city to create an economic opportunity to sell property for economic development, found in the Constitution, state law, local ordinance or charter . And, while Section 52200.6 further states that the economic opportunity statutes do not limit or in any way affect the application of any other such laws , the plain reading of AB 1486 , which was adopted after the economic opportunity statues, explicitly provides otherwise under Section 54226, which again states that no provision of Article 8 Surplus Land shall be applied when it conflicts with any other provision of statutory law.
Since AB 1486 does not provide a definition of “conflict,” it is appropriate to apply the plain meaning rule to Section 54226. The plain meaning rule dictates that statutes are to be interpreted using the ordinary meaning of the language of the statute. In other words, a statute is to be read word for word and is to be interpreted according to the ordinary meaning of the language, unless a statute explicitly defines some of its terms otherwise. Under the plain meaning rule, o rdinary words are given their o rdinary meaning and technical terms are given their technical meaning . The plain meaning rule is the mechanism that prevents courts from taking sides in legislative or political issues.
At the very least, the plain language of Section 54226 must be interpreted to mean that a conveyance of property for an economic opportunity as defined in the F.1.a
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Government Code that complies with the procedures set forth in Section 52201 conflicts with Article 8 (Surplus Land) making Article 8 inapplicable under Section 54226.
The economic opportunity statues were adopted in 2014 in the wake of the dissolution of redevelopment agencies . The purpose of the economic opportunity statues was to set forth processes and procedures for cities to create economic opportunity, through increasing jobs and generating tax revenue for all levels of government. The procedures are substantially similar to the procedures previously relied on by redevelopment agencies. In adopting Government Code Sections 52200 et seq., the State Legislature declared: (1) “whenever the creation of economic opportunity in cities . . . cannot be accomplished by private enterprise alone, without public participation and assistance in the acquisition of land, in planning and in the financing of land assembly, in the work of clearance, and in the making of improvements necessary therefor, it is in the public interest to advance or expend public funds for these purposes, and to provide a means by which economic opportunity can be created ;” and (2) “that the creation of economic opportunity and the provisions for appropriate continuing land use and construction policies with respect to property acquired, in whole or in part, for economic opportunity constitute public uses and purposes for which public money may be advanced or expended and private property acquired, and are governmental functions of state concern in the interest of health, safety, and welfare of the people of the state and cities and counties ." Government Code §§ 52200.4(b) a nd (c), emphasis added.
Economic opportunit y under the economic opportunities’ statutes includes agreements that create, retain, or expand new jobs. Economic opportunity also includes increasing property tax revenues to all property tax collecting entities, in which the legislative body finds that the agreement will result in an increase of at least 15% of total property tax resulting from the project at full implementation when compared to the year prior to the property be ing acquired by the local agency. Incidentally, the economic opportunity statues also include the “creation of affordable housing ” as an economic opportunity, provided that a demonstrated affordable housing need exists in the community, as defined in the approved housing element or regional housing needs assessment.
With respect to creating new jobs, the Town Center Project ’s establishment of certain commercial, retail and office uses will provide employment opportunities for the residents of the City and create many local construction job opportunities. In this regard, the Developer will be required to coordinate with the City of Moreno Valley Employment Resource Center to conduct job fairs for the Project's prospective businesses and to make commercially reasonable efforts to encourage local hire for the business’ tenants within the Project.
With respect to increasing property tax revenues , the Town Center Project will have three revenue producing components of the Town Center Project: 1) Commercial, 2) Residential, and 3) Hotel, which upon buildout, the Town Center Project will generate new revenue for the City through property tax, sales tax and transient occupancy tax estimated to exceed $2,000,000 annually upon completion of the Town Center Project.
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Again, t his amount is projected to grow to nearly $3.3 million by year 25 (with 2% compounded annual growth rate), and over a 25 -year period, assuming a 2.0% escalator, the City would collect a projected $64,688,974 in tax revenues from the Town Center Project. In light of these figures, the Town Center Project will clearly generate increased property taxes in an amount vastly exceeding the 15% threshold identified as a measure of “economic opportunity” in Government Code 52200.2(b), when compared to the year prior to the acquisition of the Subject Property by the City in 1985.
Moreover, development of t he Town Center Project’s higher valued residential land with market-rate housing amongst the mix of residential and non-residential uses is essential to the Town Center Project’s economic viability. The residential component must absorb a greate r share of the improvement costs and fees in order to make the non-residential land financially feasible to improve and develop. In other words, without a market-rate residential component, the Town Center Project would not otherwise be economically feasible; thus, depriving the City of the economic opportunity which is the principal objective of the Town Center Project.
The resulting increased revenues from the sale or le ase of the market rate residential units is essential for the Developer to finance t he construction of the necessary public improvements and major public amenities required in the Downtown Plan. An analysis was performed by Hdl EconSolutions to assess the economic benefits of the Subject Property upon buildout. As discussed in the HdL report, construction of affordable housing as a component of the Town Center Project would not eliminate the need for the public improvements and the major public amenities needed for the Town Center Project which are projected to cost in excess of $31.5 million. This cost will be offset by revenues from the for -sale housing which is intended to be sold at market rate prices. In other words, the inclusion of 25% affordable housing will materially reduce the revenues necessary to fund the public improvements and the major public amenities of the Town Center Project which would conflict with the City’s creation of economic opportunity. The inclusion of 25% affordable housing will also reduce the proforma Developer revenues from the residential development by approximately 12% in addition to a reduction of Community Facilities District proceeds by 39%, resulting in an overall 16% reduction in the Town Center Project’s revenues.
Simply put, since an affordable housing developer would not p ay any of the costs of the backbone infrastructure and site improvements required to construct the affordable units, there will not be sufficient revenue for the construction, development or installation of the Town Center Project’s necessary public improvements and public amenities. Moreover, the inclusion of 25% affordable housing will reduce 25% of the projected average annual household incomes essential for spending on goods and services in the Project’s Retail/Commercial component which could cause a 4 0% to 50% decrease in the projected annual revenue generation for the City through sales tax, property tax and TOT revenues. In light of the foregoing, it is unlikely that if the Subject Property is used for affordable housing, it will meet the definition of economic opportunity. A s such, if the provisions of Article 8 (Surplus Lands) are applied, there would be a direct conflict with Government Code section 52201 which permits cities to dispose of properties for economic opportunity.
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In conclusion, at a time when the state has significantly limited cities' ability to address economic development needs, via the demise of redevelopment agencies, a broad-brush application of Article 8 (Surplus Lands) s erves to deprive cities of a very valuable and effective economic development tool. Following the dissolution of redevelopment agencies, this approach leaves many cities with few options for developing balanced communities that address not only the housing needs of the community but also the need for jobs and services for low and very low-income households.
(a) State Housing Statues
Again, AB 1486 ( Ting) a mended Article 8 Surplus Land, as set forth in Government Code sections 54220 -54234, which i ncluded Section 54226 which expressly provides that “ No provision of this article [Article 8 Sur plus Land) shall be applied when it conflicts with any other provision of statutory law .” (Amended by Stats. 2019, Ch. 664, Sec. 7. (AB 1486) Effective January 1, 2020 .) Statutory Law is commonly defined as a written law or group of laws passed by a legislature or other official governing bodies, as distinguished from the unwritten law or common law.
The Surplus Land Act provisions cannot be segregated from the State Housing Statutes, since the laws that require a city to adopt a general plan for land use development within its boundaries that includes, among other things, a housing element, which AB 1486 ** amended related requirements and procedures.
As required by the State’s Housing Statues, the City submitted the first draft of its Housing Element to HCD for its review and consideration in February of 2021. In response to co mments received from HCD and the public, City staff made various revisions and posted the revisions on the City’s website before submitting the draft revisions to HCD. The City submitted its revised draft of the Housing Element for the 2021-29 Planning Period to HCD for its final review and approval, which HCD ultimately certified on October 11, 2022.
The City’s certified Housing Element includes a 2021 -29 Moreno Valley Housing Sites Inventory, which consists of an inventory of housing opportunity sites and an analysis of the capacity of those sites to accommodate the City’s Regional Housing Needs Assessment (“RHNA”). The City’s RHNA allocation for the 2021 -2029 Planning Period has been determined by SCAG to be 13,595 housing units, including 3,768 units for very low-income households, 2,046 units for low -income households, 2,161 units for moderate income households, and 5,620 units for above moderate-income households.
The analysis of each housing opportunity site was conducted in a manner consistent with the guidance provided by HCD to ensure that the Housing Element is consistent with the applicable State Housing Statutes . The lower income sites were selected based on the certain parameters established by HCD related to the size of sites for lower income units in addition to feasibility considerations.
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In the City’s Housin g Element, Low and Very Low Income RHNA sites include 156 sites in the Low and Very Low-Income category, representing 323 total acres of vacant and non -vacant land. Sites identifie d to accommodate lower income RHNA are designated Corridor Mixed Use (COMU), Center Mixed Use (CEMU) R30 Residential (R30), and R20 Residential (R20) in the City’s General Plan Land Use map. Under these zoning designations, it allows for a maximum residential density between 20 and 30 dwelling units per acre.
The City’s certifie d Housing Element’s 2021 -29 Moreno Valley Housing Sites Inventory demonstrates that the City of Moreno Valley has adequate site capacity that is suitable and available to accommoda te the City’s regional housing needs for all income groups, including lower income households without the need for adding any properties that are situated within the Subject Property. In light of HCD’s approval and certification of the City’s Housing Element, the City has ensured that: (a) sites are properly zoned to allow owner-occupied and rental multifamily residential uses “by -right” (only subject to ministerial approval) in which 20 percent or more of the units are affordable to lower income household s; (b) the development of at least 16 units per site is permitted; (c) sites permit a minimum of 20 dwelling units per acre; and (d) at least 50 percent of the low- and very low -income regional housing need can be accommodated on sites designated exclusively for residential uses, at appropriate densities. The parcels which constitute the Subject Property were not identified as affordable housing sites and could not effectively be used for accommodating the City’s RHNA allocation since, under the guidance provided by HCD, the subject parcels are located within the City’s Downtown District which is not encompassed by a zoning designation that has a minimum/maximum density per acre.
The City’s HCD-certified Housing Element demonstrates that during the 2021-29 Planning Period, the City of Moreno Valley has adequate site capacity that is suitable and available t o accommodate the regional housing need s for all income groups, including lower income households without the need for adding any affordable housing development within the Sub ject Property under the Surplus Lands Act. In other words, the City does not have an existing need for affordable housing as defined in the City’s Housing Element or Regional Housing Needs Assessment. This means that if the Surplus Land Act disposition procedures are applied under the specific circumstances, it would conflict (e.g., undermine, defeat and frustrate) with the General Plan’s Housing Element that was recently certified by the California Department of Housing and Community Development (“HCD”) on or about October 11, 2022 , pursuant to the applicable State Housing Statutes , and after extensive analysis and public input and a determination by HCD that the parcels which constitute the Subject Property were not identified as affordable housing sites and could not effectively be used for accommodating the City’s RHNA allocation.
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Attachment: Economic Opportunity Summary Report Staff Report (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC
Moreover, in light of the certification of the City’s Housing Element by HCD, t he City was designated as a Prohousing jurisdiction. The State’s Prohousing Program was established with the aim at increasing the availability of housing statewide, which is critical to improving the quality of life for all Californians and to ending homelessness.
The Stat e’s Prohousing P rogram provides designated Prohousing jurisdictions with a spectrum of support, incentives, and accountability measures to meet the S tate’s aggressive housing objectives. It was no easy task for the City to be designated by HCD as a Prohousing jurisdiction. However, there is genuine concern that if the same agency (HCD), that certified the City’s Housing Element and designated the City as a Prohousing jurisdiction, demands that the Surplus Land Act apply to the Town Center Project, its application would conflict with various provisions of statutory law related to the basic threshold requirements that the City had to meet in order to comply with not only Housing Element Law, but also other state housing laws pertaining to zoning and land use, housing production, construction and development costs, etc., that were relied upon by HCD when it designated the City of Moreno Valley as a Prohousing jurisdiction.
As such, there is an incredible risk that the application of the Surplus Lands Act under the instant circumstances could result in decertification of the City ’s Housing Element and consequently strip the City of Moreno Valley of it designated status as a Prohousing jurisdiction, which clearly would be in conflict with all the statutory law the City relied upon in order to achieve the status of a designated Prohousing jurisdiction.
ALTERNATIVES
The City Council has the following alternatives:
1. Adopt the Resolution approving the Summary Report for the Town Center Project pursuant to Section 52201 of the Government Code for Economic Opportunity and approving the related Purchase and Sale Agreement [STAFF RECOMMENDS THIS ALTERNATIVE]; or
2. Do not approve the Summary Report. [STAFF DOES NOT RECOMMEND THIS ALTERNATIVE.]
FISCAL IMPACT
If the City Council approves the Summary Report for purposes of Economic Opportunity and the PSA, the City would earn $5,600,000 related to the sale of the subject property, receive the financial benefits associated with the development, construction and installation of several civic uses and public infrastructure by the Developer, realize thousands of dol lar in the for m of development impact fees and gain future revenues associated with the Town Center P roject’s projected sales taxes, property taxes and transient occupancy taxes.
NOTIFICATION
This staff report was made available for public review and inspection and posted on the City’s website at least 72 hours prior to the September 19, 2023, Regular City Council F.1.a
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Attachment: Economic Opportunity Summary Report Staff Report (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC
meeting, and the public hearing was noticed at least ten days prior to the Public Hearing.
PREPARATION OF STAFF REPORT
Prepared By:
Steven B. Quintanilla
City Attorney
CITY COUNCIL GOALS
• Community Image
• Positive Environment
• Public Safety
ATTACHMENTS
Resolution Approving Summary Report and PSA
APPROVALS
City Manager Approval ✓ Approved .
City Clerk Approval ✓ Approved .
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Attachment: Economic Opportunity Summary Report Staff Report (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC 1 RESOLUTION NO. 2023-XX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF MORENO
VALLEY DECLARING THAT THE SALE AND SUBSEQUENT
DEVELOPMENT OF 56.42 ACRES LOCATED AT THE NORTHWEST
CORNER OF ALESSANDRO BOULEVARD AND NASON STREET WILL
CREATE AN ECONOMIC OPPO RTUNITY FOR THE CITY AS
CONTEMPLATED BY GOVERNMENT CODE SECTION 52201 AND
APPROVING RELATED PURCHASE AND SALE AGREEMENT
WHEREAS, Section 52201(a)(1) of the California Government Code provides in part that the City may sell property to create an economic opportunity; and
WHEREAS, Section 52201(c) of the California Government Code provides that the provisions of Section 52201 are an alternative to any other authority granted by law to cities to dispose of city-owned property; and
WHEREAS, in 1985, the City of Moreno Valley (the “City”) purchased approximately 56.42 acres of land located at the northwest corner of Alessandro Boulevard and Nason Street (“Subject Property”) as a potential Civic Center site known as the “Town Center Project” in the Downtown Center Plan Policy, as set forth in the City of Moreno Valley” General Plan 2040” (General Plan 2040, p 2-16); and
WHEREAS, the City of Moreno Valley General Plan 2040 identifies that the large area around the prominent crossroads of Nason and Alessandro that encompasses approximately 1,200 acres near the geographic center of the community, which includes the Subject Property, presents a prime opportunity to foster a Downtown Center for the City of Moreno Valley and the region (General Plan 2040, p 2-16); and
WHEREAS, the Downtown Center Plan Policy, as set forth in the City of Moreno Valley General Plan 2040, provides for the development of a vibrant new Downtown Center at the heart of the City of Moreno Valley to serve as a focal point of the community and destination for people from around the region ( General Plan 2040, p 2 -10), which includes the Subject Property parcel at the northwest corner of Nason and Alessandro where the Town Center Project is proposed (General Plan 2040, p 2-16); and
WHEREAS, the General Plan 2040 Downtown Center Plan policy allows for a vibrant mix of business, entertainment, residential, cultural, and civic uses to activate the Downtown Center, which includes the Subject Property, throughout the day and into the evening, which will integrate existing uses and layers compatible new land uses and public amenities together at various scales a nd intensities to foster a mix of uses that encourages people to live, work, play, and shop within the Downtown Center which includes the Subject Property (General Plan 2040, p 2-10); and
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Attachment: Resolution - Summary Report (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) 2 WHEREAS, the City of Moreno Valley General Plan 2040 envisions the Downtown Center, which includes the Subject Property, as the heart of the community and the City’s premier activity center that will incorporate vibrant mixed use areas that act as major focal points in the community, offering an array of choices for livin g, working, shopping and enjoying free time and serving as a dynamic destination with amenities that draw local residents from Moreno Valley and visitors from the wider region (General Plan 2040, p 2- 8); and
WHEREAS, the City of Moreno Valley General Plan 2040 has identified that having a Downtown Center, which includes the Subject Property, that is a vibrant gathering place that will foster a downtown destination with a full range of choices for shopping, dining, doing business, and having fun is an important objective for the City of Moreno Valley and strongly supported in the community (General Plan 2040, p 2-16); and
WHEREAS, the City of Moreno Valley General Plan 2040 envisions the Downtown Center, which includes the Subject Property, as having Nason Street designed as a grand boulevard and central spine of the Downtown Center, with the highest intensity of development focused along it, along with a walkable new “main street” envisioned at the core, lined with shops, restaurants, workplaces, and cultural venues (General Plan 2040, p 2-16); and
WHEREAS, the City of Moreno Valley General Plan 2040 includes Goal LCC-2, to “[f]oster Vibrant Gathering Places for Moreno Valley Residents and Visitors” and includes the following policies for the Downtown Center, which includes the Subject Property:
LCC.2-1: Create a Downtown Center, which includes the Subject Property, with a vibrant mix of uses that will serve as the primary hub and focal point of Moreno Valley economic and cultural engine in the region.
LCC.2-2: Require that proposed projects in the Downtown Center, which includes the Subject Property, prepare an area plan demonstrating consistency with the applicable land use and urban design, circulation and parks and open space principles outlined in Table LC C-2’s Downtown Center Development Principles and the illustrative development program shown in Table LCC -3’s Downtown Center Illustrative Development Program which includes the net new development for 2020 -2040 consisting of 1,320 units of Residenti al Low Density Residential (less than 10 du/ac) 5,524 units of Medium/High Density Residential (more than 10 du/ac), 400,000 square feet of Employment Retail/Service, 1,450,000 square feet of Office/Research & Development, and 1,500,000 square feet of Other/Commercial.
LCC.2-3: Within the Downtown Center, which includes the Subject Property, ensure the high intensity of development is concentrated so as to create a central core with a mix of uses to activate it throughout the day and evening and to promote strong connectivity b etween new uses and Riverside University Health System Medical Center (RUMC), Aquabella, and the Kaiser hospital campus.
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Attachment: Resolution - Summary Report (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) 3 LCC.2-4: Leverage the presence of the hospitals and large tracts of vacant land to attract new higher -wage employers to the Downtown Center, which includes the Subject Property.
LCC.2-5: Integrate new employment-oriented uses into the fabric of the Downtown Center, which includes the Subject Property, as employment, educational, corporate, and research campuses and/or as part of mixed-use developments.
LCC.2-6: Create a Central Park facility to serve as a defining feature of the Downtown Center, which includes the Subject Property.
LCC.2-7: Recognize recreation and entertainment as key contributors to the vitality of the Downtown Center, which includes the Subject Property, and accommodate a world class sports/recreational facility to provide activities and entertainment for Moreno Valley residents.
LCC.2-8: Transform Nason Street and Alessandro Boulevard into grand boulevards with a distinctive, inviting character that announces arrival in the Downtown Center, which includes the Subject Property.
LCC.2-9: Support the vitality of commercial and retail development downtown with significant new housing in and adjacent to the Downtown Center, which includes the Subject Property.
LCC.2-10: Create an attractive, safe environment for bicycles and pedestrians that promotes “micro -mobility” and connectivity within the Downtown Center, which includes the Subject Property, as well as encourage electric and autonomous vehicles.
LCC.2-11: Allow for the evolution of the Downtown Center, which includes the Subject Property, and encourage site planning that facilitates redevelopment of sites within the core of the area in the future as land values increase and higher development intensities become more financially feasible; and
WHEREAS, the City desires to sell the Subject Property, which the City owns in fee simple, for the development of a mixed use master planned Moreno Valley Town Center consisting of commercial, office and public uses that will include entertainment, hospitality, r estaurants, shops, office buildings and public amenities including but not limited to public parkland, public open space, public sidewalks, public streets, public art displays, a police substation, and an Innovation Library/Technology Center and other civic uses, complemented by high density rental housing, that will be the central feature of the Downtown Center, as envisioned and planned per the Downtown Center Plan Policy, as set forth in the City of Moreno Valley General Plan 2040; and
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Attachment: Resolution - Summary Report (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) 4 WHEREAS, a Summary Report, attached hereto and incorporated herein by this reference as Exhibit “A”, was prepared pursuant to Section 52201 of Government Code in connection with the sale of property by the City Of Moreno Valley (“City”) to Lewis Acquisition Company, LLC (“Developer”); and
WHEREAS, the proposed sale pertains to approximately 56.42 acres of land (APNs 487-470-030 and 487-470-031) located at the northwest corner of Alessandro Boulevard and Nason Street (again, the “Subject Property”); and
WHEREAS, the purpose of the proposed sale is to develop a Civic Center site known as the “Town Center Project” in the Downtown Center as more particularly described in the Downtown Center Plan Policy, as set forth in the City of Moreno Valley” General Plan 2040” (General Plan 2040, p 2-16); and
WHEREAS, the Summary Report, pursuant to section 52201(a)(2)(B), contains the following information:
• A copy of the proposed purchase and sale agreement;
• A summary that describes the following:
o The cost of the agreement to the city, including land acquisition costs, clearance costs, relocation costs, the costs of any improvements to be provided by the city, plus the expected interest on any loans or bonds to finance the agreements.
o The estimated value of the interest to be conveyed , determined at the highest and best uses permitted under the City’s General Plan or zoning.
o The estimated value of the interest to be conveyed determined at the use and with the conditions, covenants, and development costs required by the sale.
o The purchase price which is not is less than the fair market value of the interest to be conveyed, determined at the highest and best use. o An explanation of why the acquisition, sale, or lease of the subject property will assist in the creation of economic opportunity, with reference to all supporting facts and materials relied upon in making this explanation.
WHEREAS, the Summary Report is organized into the following sections:
• Summary of the Proposed Sale – This section includes a description of and other relevant information pertaining to the proposed sale of the Subject Property by the City to the Developer pursuant to the terms of the Purchase and Sale Agreement (the “PSA”);
• Cost of the Agreement to the City – This section addresses the cost of the PSA to the City, including land acquisition costs, clearance costs, F.1.b
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Attachment: Resolution - Summary Report (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) 5 relocation costs, the costs of any improvements to be provided by the City, plus the expected interest on any loans or bonds to finance the agreements;
• Estimated Value of the Interest to be Conveyed Determined at the Highest and Best Use Permitted Under the General Plan or Zoning – This section estimates the value of the interest to be conveyed, determined at the highest and best use permitted under the General Plan and zoning for the Subject Property;
• Estimated Value of the Interest to be Conveyed Determined at the Use and with the Conditions, Covenants, and Development Costs Required by the Sale – This section estimates the value of the Subject Property interest to be conveyed determined at the use and with the conditions, covenants, and development costs required by the sale of the Subject Property (i.e., the purchase price);
• Consideration Received and Comparison with the Established Value – This section addresses that the sales price of the Subject Property is not less than the fair market value for the Subject Property based on its highest and best use; and
• Economic Opportunity – This section includes an explanation of why the sale of the Subject Property will assist in the creation of economic opportunity.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF MORENO VALLEY, CALIFORNIA, DOES HEREBY RESOLVE AS FOLLOWS:
Section 1. Recitals
That the foregoing Recitals are true and correct and are hereby incorporated by this reference.
Section 2. Evidence
That the City Council has considered all of the evidence submitted into the administrative record, including, but not limited to, the following:
(a) Moreno Valley General Plan 2040 Downtown Center Plan policy and all other relevant provisions contained therein;
(b) Title 9 (Planning and Zoning) of the Moreno Valley Municipal Code and all other relevant provisions referenced therein;
(c) California Government Code , including but not limited to sections 37351, 52201, and 54221;
F.1.b
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Attachment: Resolution - Summary Report (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) 6 (d) The PSA, Request for Proposals, Appraisal Summary, and HdL Economic Impact and Benefit Analysis;
(e) Staff Report prepared for the City Council and all documents, records and references related thereto;
(f) Staff’s presentation at the City Council meeting; and (g) Testimony and/or comments from all persons that were provided in written format or correspondence, at, or prior to, the public hearing.
Section 3. Findings Regarding Cost of the PSA to the City
That based on the content of the foregoing Recitals and the Evidence contained in the Administrative Record as set forth above, the City Council makes the following findings regarding the cost of the PSA to the City:
(a) The Developer will be purchasing the Subject Property for a purchase price of Five Million, Six Hundred Thousand Dollars ($5,600,000), which is consistent with the appraisal of the Subject Property by Cushman & Wakefield Western, Inc. (the "Appraisal"), which is a reasonable price for the Subject Property and at such a price, the sale shall not constitute a gift of public funds;
(b) There is no cost estimated to the City as part of the PSA since the Developer shall pay: (i) all of the escrow fees and charges of Escrow Holder; (ii) the cost of the premium for the Title Policy; (iii) the cost of all endorsements to the Title Policy; (iv) all costs and charges for the recordation of any grant deeds; (v) any documentary or other local transfer taxes on the transfer of the Subject Property; and (vi) Buyer's share of the charges prorated under the PSA;
(c) The Developer will be required to pay for all applicable filing and processing fees as set forth in the Moreno Valley Municipal Code in the amounts set forth in the schedule of fees in effect at the time such fees are due and payable during the Land Use Entitlements review process;
(d) The Developer will be required to pay all applicable Development Impact (Mitigation) Fees ("DIF Fees") as set forth in the Moreno Valley Municipal Code and/or fee schedule adopted by the City subject to the Developer’s receipt of credits against such fees for public infrastructure in the City's capital improvement DIF Fee program constructed by the Developer for the Town Center Project , but the Developer shall not receive a credit against DIF fees for the $2,000,000 major one-acre public park amenity that the Developer is required to incorporate into the Town Center Project at no cost to the City;
(e) The Developer will be required to reimburse the City for the actual costs and expenses reasonably incurred by the City for all services provided by the City and its consultants, including legal counsel, for review, preparation and processing of the Land Use Entitlements and oth er permits, licenses, etc. for the Town Center Project, which are not factored in the City's standard processing fees.
F.1.b
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Attachment: Resolution - Summary Report (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) 7 Section 4. Findings Regarding Estimated Value of the Interest to be Conveyed Based on the Highest and Best Use Permitted
Under the General Plan and Zoning
That based on the content of the foregoing Recitals and the Evidence contained in the Administrative Record as set forth above, the City Council makes the following findings regarding the Estimated Value of the Interest to be Conveyed Based on the Highest and Best Use Permitted Under the General Plan and Zoning:
(a) The Subject Property was appraised based on a determination of the reasonably probable use of Subject Property that would result in the highest value;
(b) The zoning regulations in effect at the time of the Appraisal determined the legal permissibility of the potential use of the Subject Property, which is zoned “Public District,” the primary purpose of which is to provide for the conduct of public and institutional activities, including providing protected designated areas for public and institutional facilities, and which is planned to be rezoned to its Highest and Best Use via a Specific Plan that would allow for the development of a mix of commercial, residential and public facilities that is necessary to achieving sustainable long -term economic and community benefits;
(c) The Subject Property is adequate to accommodate a mix of commercial, residential and public facilities in that the Subject Property contains 56.42 acres, or 2,457,654 square feet, is level at street grade, has good frontage and access, with all public utilities available to the Subject Property including public water and sewer, gas, electric and telephone; and
(d) The prospective use of the Subject Property has the potential to provide a sufficient return to attract investment capital over alternative forms of investment in that the Appraisal indicates that the Highest and Best Use of the Subject Property , based in part on its physical characteristics , location and market conditions, is for development with a mixed -use (residential and/or commercial) development built to its maximum feasible building area.
Section 5. Findings Regarding Estimated Value of the Interest to be Conveyed Based on the Use and with the Conditions,
Covenants, and Development Costs Required by the Sale
That based on the content of the foregoing Recitals and the Evidence contained in the Administrative Record as set forth above, the City Council makes the following findings regarding the Estimated Value of the Interest to be Conveyed Based on the Use and with the Conditions, Covenants, and Development Costs Required by the Sale:
F.1.b
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Attachment: Resolution - Summary Report (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) 8 (a) The Appraisal of the Subject Property include s a Value Conclusion Range of $4,700,000 to $5,600,000, based on the assumption that the Subject Property would be rezoned to its Highest and Best Use via a Specific Plan that would be adopted for the Subject Property.
(b) The Request for Proposals (“RFP”) distributed by the City asked for proposals to develop the Subject Property into Destination MoVal Town Center , a vibrant, safe, multi -use destination for its residents, visitor and business owners.
(c) The RFP sought proposals to provide a distinctive opportunity for a Town Center that would include commercial development, entertainment, professional office, research and development, civic uses, public gathering spaces and diverse forms of connectivity w ith potential for a complementary residential component or corporate headquarter(s) campus location.
Section 6. Findings Regarding Consideration Received and Comparison with the Estimated Value of the Interest to be Conveyed at Highest and Best Use
That based on the content of the foregoing Recitals and the Evidence contained in the Administrative Record as set forth above, the City Council makes the following findings regarding the consideration received and comparison with the estimated value of the interest to be conveyed at highest and best use:
(a) The Appraisal of the Subject Property did not include the “As Is Value” under the current Public District zoning; rather, it includes a Value Conclusion Range of $4,700,000 to $5,600,000, since the Subject Property will be rezoned to its Highest and Best Use via a Specific Plan that would be adopted for the Subject Property;
(b) The RFP sought proposals to provide a distinctive opportunity for a Town Center that would include commercial development, entertainment, professional office, research and development, civic uses, public gathering spaces and diverse forms of connectivity with potential for a complementary residential component or corporate headquarter(s) campus location.
(c) The Developer will be purchasing the Subject Property for a purchase price of Five Million, Six Hundred Thousand Dollars ($5,600,000), which is consistent with the appraisal of the Subject Property by Cushman & Wakefield Western, Inc. (again, the "Appraisal") at the top end of the Value Conclusion Range; and
(d) The sale of the Subject Property for $5,600,000 is deemed a reasonable price for the Subject Property and at such a price, the sale shall not constitute a gift of public funds.
F.1.b
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Attachment: Resolution - Summary Report (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) 9 Section 7. Findings Regarding Economic Opportunity
That based on the content of the foregoing Recitals and the Evidence contained in the Administrative Record as set forth above, the City Council makes the following findings regarding Economic Opportunity:
(a) Based on the analysis performed by Hdl EconSolutions, upon buildout, the Subject Property will provide economic vitality and new opportunities for businesses, residents, and visitor;
(b) The Town Center Project will generate new revenue for the City through property tax, sales tax and transient occupancy tax (from the hotel) estimated to exceed $2,000,000 annually upon completion of the Town Center Project, with that number growing to near ly $3.3 million by year 25 (with 2% compounded annual growth rate), and over a 25-year period, assuming a 2.0% escalator, the City would collect a projected $64,688,974 in tax revenues from the Project;
(c) There will be three revenue producing components of the Town Center Project: 1) Commercial, 2) Residential, and 3) Hotel;
(d) The combined annual sales receipts for the Commercial Component are projected to amount to $80,951,600, which will produce annual sales tax revenue for the City in the amount of $809,516;
(e) Based on SiteSeer demographics, the City averages 3.74 persons per household and has disposable income of $85,411 which HdL Econ Solutions estimates 30% will be used for household spending, with 70% potentially taxable;
(f) The Hotel Component, which will include an upscale lodging establishment, is expected to produce annual transient occupancy tax revenue in the amount of $563,326, based on a projected 80% occupancy rate;
(g) The Town Center Project will employ 285 employees, who will spend $ 2,163,7120 per year, with annual total taxable spending estimated to be $1,514,604, which will produce $15,146 in additional sales tax revenue for the City on an annual basis which, together with the additional sales tax revenue to be generated by Project construction workers and Project residents, is estimated to exceed $152,000 annually;
(h) The Developer is committed to coordinating with the City of Moreno Valley Employment Resource Center to conduct periodic job fairs for prospective businesses within the Project and to promote local hiring for the businesses and tenants within the Town Center Project;
F.1.b
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Attachment: Resolution - Summary Report (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) 10 (i) Upon transfer of ownership to the Developer, t he Subject Property’s tax rate will be increased from $0 to a tax rate of 1.11692 percent of the $5,600,000 sales price of the Subject Property;
(j) The entire cost (total building valuation) of the Town Center Project, not including land is estimated at over $301,000,000, which has the potential of producing more than $494,0000 in annual property tax revenue, compared to $0 since the Subject Property is currently exempt from property taxes under City ownership;
(k) The Residential, Commercial and Hotel Components of the Subject Property are projected to respectively produce a stream of $389,395, $69,703 and $35,192, in annual property tax revenue for the City’s General Fund; and
(l) The Town Center Project will generate increased property taxes in an amount vastly exceeding the 15% threshold identified as a measure of “economic opportunity” in Government Code 52200.2(b) when compared to the year prior to the acquisition of the Subject Property by the City in 1985.
Section 8. Findings Regarding Conflict Between the Surplus Lands Act and Government Code Section 52201
That based on the content of the foregoing recitals and the evidence contained in the administrative record as set forth above, the City Council makes the following findings regarding the conflict between the application of the Surplus Lands Act conflicts with the City’s sale of the Subject Property under Government Code section 52201 to create economic opportunity:
(a) Although proceeding with a sale pursuant to Section 52201 of the California Government for “Economic Opportunity” may be a legally separate and independent basis for the sale of the Subject Property and an alternative to compliance with the land dispositio n procedures of the Surplus Land Act, Government Code Section 54226 provides that the Surplus Land Act disposition procedures shall not be applied when it conflicts with any other provision of statutory law;
(b) If the Surplus Land Act disposition procedures are applied under the specific circumstances, it would conflict (e.g., undermine, defeat and frustrate) with the City’s stated objective to sell the Subject Property for Economic Opportunity pursuant to Government Code Section 52201;
(c) The Project’s higher valued residential land amongst the mix of residential and non-residential uses is essential to the Project’s economic viability because it can absorb a greater share of the improvement costs and fees making the non - residential land financially feasible to improve and develop and without a majority market rate residential component, th e Project would not otherwise be economically feasible;
F.1.b
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Attachment: Resolution - Summary Report (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) 11 (d) The resulting increased revenues from the sales of the market rate residential units are essential for the Developer to finance the construction of the necessary public improvements and major public amenities required in the Downtown Center and to subsidize the Developer’s costs of developing the Retail/Commercial and Hotel components of the Town Center Project in order for the Retail/Commercial and Hotel components to operate profitably;
(e) Construction of affordable housing does not eliminate the need for the public improvements and the major public amenities needed for the Project which are projected to cost in excess of $31.5 million which will be offset by revenues from the for-sale housing which is intended to all be sold at market rate prices;
(f) The inclusion of 25% affordable housing will materially reduce the revenues necessary to fund the public improvements and the major public amenities of the Project which conflicts with the City’s creation of economic opportunity;
(g) The inclusion of 25% affordable housing will reduce the proforma Developer revenues from the residential development by approximately 12% in addition to a reduction of Community Facilities District proceeds by 39%, resulting in an overall 16% reduction in Project revenues since an affordable housing developer would pay no costs of the backbone infrastructure and site improvements required to construct the affordable units;
(h) The i nclusion of 25% affordable housing will also reduce 25% of the projected average annual household incomes essential for spending on goods and services in the Project’s Retail/Commercial component which would cause a 40% to 50% decrease in the projected annual revenue generation for the City through sales tax, property tax and TOT revenues; and
(i) If 25% affordable housing was required, the significant loss of residential revenues would render the entire Project economically infeasible as envisioned, and the City of Moreno Valley would be denied the significant Economic Opportunities from the Residential, Hotel and Commercial components of the Project.
Section 9. Findings Regarding Conflict Between the Surplus Lands Act and State Housing Law and the City’s Housing
Element Certified by HCD
That based on the content of the foregoing recitals and the evidence contained in the administrative record as set forth above, the City Council makes the following findings regarding the conflict between the application of the Surplus Lands Act and the State Housing Law and the City’s Housing Element certified by HCD:
.
(a) If the Surplus Land Act disposition procedures are applied under the specific circumstances, it would conflict (e.g., undermine, defeat and frustrate) with the F.1.b
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Attachment: Resolution - Summary Report (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) 12 City’s MOVAL 2040 General Plan’s Housing Element that was recently certified by the California Department of Housing and Community Development on or about October 11, 2022.
(b) As required by State Housing Law, the City submitted the first draft of the MOVAL 2040 General Plan’s Housing Element to HCD for its review and consideration, and the draft was made available for public comment for requisite number of days and in response to comments received from HCD and the public, City staff made various revisions, posted said revisions on the City’s website before submitting the draft revisions to HCD.
(c) The City submitted its revised draft of its Housing Element to HCD for its final review and approval, which HCD ultimately certified on or about October 11, 2022.
(d) The City’s certified Housing Element, as an essential component and mandatory element of the General Plan, guides planning for housing to meet the current and projected needs of all households in the City of Moreno Valley for the 2021 -29 Planning Period.
(e) The City’s certified Housing Element includes a 2021 -29 Moreno Valley Housing Sites Inventory, which consists of an inventory of housing opportunity sites and an analysis of the capacity of those sites to accommodate the City’s Regional Housing Needs Assessment (R HNA) allocation as determined by the Southern California Association of Governments (SCAG).
(f) The City’s RHNA allocation for the 2021 -2029 Planning Period has been determined by SCAG to be 13,595 housing units, including 3,768 units for very low-income households, 2,046 units for low -income households, 2,161 units for moderate income households, an d 5,620 units for above moderate -income households;
(g) The analysis of each housing opportunity site was conducted in a manner consistent with the guidance provided by HCD, to ensure that the Housing Element is consistent State law that Low and Very Low Income RHNA sites are not located in Federal Emergency Management Agency -designated (FEMA) flood hazard areas or active fault zones and that do not require remediation of contaminated soil or water prior to development.
(h) The lower income sites were selected based on the parameters established by HCD for the size of sites for lower income units in view of feasibility considerations.
(i) In the City’s Housing Element, Low and Very Low Income RHNA sites include 156 sites in the Low and Very Low-Income category, representing 323 total acres of vacant and non-vacant land.
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Attachment: Resolution - Summary Report (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) 13 (j) Sites identified to accommodate lower income RHNA are designated Corridor Mixed Use (COMU), Center Mixed Use (CEMU) R30 Residential (R30), and R20 Residential (R20) on the City’s General Plan Land Use map which allow for a maximum residential density between 20 and 30 dwelling units per acre.
(k) The City’s certified Housing Element’s 2021 -29 Moreno Valley Housing Sites Inventory demonstrates that the City of Moreno Valley has adequate site capacity that is suitable and available to accommodate the regional housing need for all income groups, includ ing lower income households without the need for adding any properties that are part of the Subject Property.
(l) In light of HCD’s approval and certification of the City’s Housing Element, the City has ensured that: (a) sites are properly zoned to allow owner-occupied and rental multifamily residential uses “by-right” (only subject to ministerial approval) in which 20 percent or more of the units are affordable to lower income households; (b) the development of at least 16 units per site is permitted; (c) sites permit a minimum of 20 dwelling units per acre; and (d) at least 50 percent of the low - and very low- income regional housing need can be accommodated on sites designated for exclusively residential uses, at appropriate densities;
(m)If the Subject Property is subjected to the Surplus Lands Act, it will undermine all the efforts and resources the City invested in developing a Housing Element that adequately complies with State Housing Law.
(n) The City’s HCD-certified Housing Element demonstrates that the City of Moreno Valley has adequate site capacity that is suitable and available t o accommodate the regional housing need for all income groups, including lower income households without the need for adding any properties that are part of the Subject Property via the Surplus Land Act.
(o) The parcels which constitute the Subject Property could not effectively be used for accommodating the City’s RHNA allocation since, under the guidance provided by HCD, the subject parcels which are located within the City’s Downtown District (where the Subj ect Property is located) are not encompassed by a zoning designation that has a minimum/maximum density per acre.
(p) If the same agency (HCD), that certified the City’s Housing Element and designated the City as a Prohousing jurisdiction, demands that the Surplus Land Act apply to the Town Center Project, its application would conflict with various provisions of statutory law related to the basic threshold requirements that the City had to meet in order to comply with not only Housing Element Law, but also other state housing laws pertaining to zoning and land use, housing production, construction and development costs, e tc., that were relied upon by HCD when it designated the City of Moreno Valley as a Prohousing jurisdiction.
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Attachment: Resolution - Summary Report (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) 14 (q) There is an incredible risk that the application of the Surplus Lands Act under the instant circumstances could result in decertification of the City’s Housing Element and consequently strip the City of Moreno Valley of it designated status as a Prohousing jurisdiction, which clearly would be in conflict with all the statutory law the City relied upon in order to achieve the status of a designated Prohousing jurisdiction.
Section 10. Determinations and Conclusions
That based on the content of the foregoing recitals, the evidence contained in the administrative record and the findings set forth above, the City Council hereby determines and concludes as follows:
(a) The Purchase and Sale Agreement will not impose any costs for the City; (b) The estimated value of the Subject Property is based on the Highest and Best Use Permitted under the City’s General Plan and Zoning; (c) The Estimated Value of the Subject Property is also based on the use and with the Conditions, Covenants, and Development Costs Required by the sale; (d) The sale of the Subject Property and its subsequent development will create an economic opportunity for the City as contemplated by Government Code section 52201 to create economic opportunity:
(e) The application of the Surplus Lands Act conflicts with the City’s sale of the Subject Property under Government Code section 52201 to create economic opportunity; and
(f) The application of the Surplus Lands Act conflicts with the State Housing Laws that the City relied upon for developing its Housing Element that was Certified by HCD in October 2022, and obtaining the designation as a Prohousing jurisdiction from HCD.
Section 11. Severability
That the City Council declares that, should any provision, section, paragraph, sentence or word of this Resolution be rendered or declared invalid by any final court action in a court of competent jurisdiction or by reason of any preemptive legislation, the remaining provisions, sections, paragraphs, sentences or words of this Resolution as hereby adopted shall remain in full force and effect.
Section 12. Effective Date
That this Resolution shall take effect immediately upon the date of adoption.
Section 13. Certification.
That the City Clerk shall certify to the passage of this Resolution.
PASSED AND ADOPTED THIS ____ day of ____________ 2023.
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Attachment: Resolution - Summary Report (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) 15 ___________________________________
Ulisis Cabrera, Mayor
ATTEST:
__________________________________
Jane Halstead, City Clerk
APPROVED AS TO FORM:
__________________________________
Steven B. Quintanilla, Interim City Attorney
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Attachment: Resolution - Summary Report (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) 16 EXHIBIT “A”
SUMMARY REPORT
[SEE ATTACHED]
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SUMMARY REPORT
PURSUANT TO SECTION 52201 OF CALIFORNIA GOVERNMENT CODE
IN CONNECTION WITH THE SALE OF PROPERTY
BY AND BETWEEN THE CITY OF MORENO VALLEY
AND LEWIS ACQUISITION COMPANY, LLC
I. PURPOSE OF SUMMARY REPORT
This Summary Report has been prepared pursuant to Section 52201 of the California Government Code, with regards to the Purchase and Sale Agreement and Escrow Instructions (“PSA”), by and between Lewis Acquisition Company, LLC, a Delaware limited liability company, or assignee ("Developer") and the City Of Moreno Valley ("City") pertaining to the sale of approximately
56.42 acres of land (APN 487-470-030 and APN 487-470-031) located at the northwest corner of Alessandro Boulevard and Nason Street (“Subject P roperty”) by the City to Developer for the development of a Civic Center site known as the “Town Center Project” in the Downtown Center as more particularly described in the Downtown Center Plan Policy, as set forth in the City of Moreno Valley ”General Plan 2040” (General Plan 2040, p 2-16).
Section 52201 of the California Government Code provides that a city, county, or city and county may sell or lease property to create an economic opportunity. The acquisition, sale, or lease shall first be approved by the legislative body (city council) by resolution after a legally noticed public hearing. The city shall also make available a copy of a Summary Report that describes and contains specific elements of the proposed transaction for public inspection prior to the public hearing.
Pursuant to section 52201(a)(2)(B), the Summary Report must include the following information:
• A copy of the proposed acquisition, sale, or lease agreement.
• A summary that describes and specifies all of the following:
o The cost of the agreement to the city, county, or city and county, including land acquisition costs, clearance costs, relocation costs, the costs of any improvements to be provided by the city, county, or city and county, plus the expected interest on any loans or bonds to finance the agreements.
o For the sale or lease of property, the estimated value of the interest to be conveyed or leased, determined at the highest and best uses permitted under the City’s General Plan or zoning.
o For the sale or lease of property, the estimated value of the interest to be conveyed or leased, determined at the use and with the conditions, covenants, and development costs required by the sale or lease. The purchase price or present value of the leas e payments which the lessor will be required to make during the term of the lease. If the sale price or total rental amount is less than the fair market value of the interest to be conveyed or leased, determined at the highest and best F.1.c
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use, then the city, county, or city and county shall provide as part of the summary an explanation of the reasons for the difference.
o An explanation of why the acquisition, sale, or lease of the property will assist in the creation of economic opportunity, with reference to all supporting facts and materials relied upon in making this explanation.
This Summary Report outlines the primary terms of the proposed sale of the Subject Property from the City to the Developer as outlined in the PSA and addresses the reporting requirements pursuant to Government Code Section 52201.
II. SUMMARY REPORT ORGANIZATION
This Summary Report is based upon information provided in connection with the sale of the Subject Property and is organized into the following sections:
• Summary of the Proposed Sale – This section includes a description of and other relevant information pertaining to the proposed sale of the Subject Property by the City to the Developer pursuant to the terms of the PSA;
• Cost of the Agreement to the City – This section addresses the cost of the PSA to the City, including land acquisition costs, clearance costs, relocation costs, the costs of any improvements to be provided by the City, plus the expected interest on any loans or bonds to finance the agreements;
• Estimated Value of the Interest to be Conveyed Determined at the Highest and Best Use Permitted Under the General Plan or Zoning – This section estimates the value of the interest to be conveyed, determined at the highest and best use permitted under the General Plan and zoning for the Subject Property;
• Estimated Value of the Interest to be Conveyed Determined at the Use and with the Conditions, Covenants, and Development Costs Required by the Sale – This section estimates the value of the Subject Property interest to be conveyed determined at the use and with the conditions, covenants, and development costs required by the sale of the Subject Property (i.e., the purchase price);
• Consideration Received and Comparison with the Established Value – This section addresses that the sales price of the Subject Property is not less than the fair market value for the Subject Property based on its highest and best use;
• Economic Opportunity – This section includes an explanation of why the sale of the Subject Property will assist in the creation of economic opportunity.
This Summary Report sets forth certain details of the sale the Subject Property by the City to the Developer. A copy of the PSA is attached to this Summary Report. (See Attachment “A”.) F.1.c
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III. SUMMARY OF PROPOSED SALE OF THE SUBJECT PROPERTY
The City conducted a Request for Proposals (RFP) for the Town Center Project in November 2019.
A copy of the RFP , which was issued to more than 9000 developers, is attached as Attachment “B”. Developer was selected as the Developer in March, 2020, and the PSA approved by the City Council in October, 2020, with Economic Development identified as the #1 strategic priority of the City Council for this project.
Under the terms of the PSA, the Developer is acquiring the Subject Property "AS IS, WHERE IS" without any representation or warranty of the City , as Seller, express, implied or statutory, as to the nature or condition of or title to the Subject Property or its fitness for the Developer’s intended use. The Developer is familiar with the Subject Property and is relying solely upon its own, independent inspections, investigations and analysis of the Subject Property as it deems necessary or appropriate in so acquiring the Subject Property from the City, including, without limitation, an analysis of any and all matters concerning the condition of the Subject Property and its suitability for the Developer’s intended purposes, and a review of all applicable laws, ordinances, rules and governmental regulations (including, but not limited to, those relative to building, zoning and land use) affecting the development, use, occupancy or enjoyment of the Subject Property.
The Developer is purchasing the Subject Property for a purchase price of Five Million, Six Hundred Thousand Dollars ($5,600,000), which is consistent with the appraisal of the Subject Property by Cushman & Wakefield Western, Inc. (the "Appraisal"). As such, the sale of the Subject Property for $5,600,000 is deemed a reasonable price for the Subject Property and at such a price, the sale shall not constitute a gift of public funds. A copy of the Appraisal Summary is attached as Attachment “C”.
The intended use of the Subject Property is for the development of a Town Center that shall consist of a quality mixed use development with two required and integrated components: (1) a "Non - Residential Component" comprised of between 150,000 sq. ft. and 172,000 sq. ft. (or as otherwise approved in the Land Use Entitlements , as that term is defined in the PSA ) of office, retail and commercial uses, which potentially may include a lodging establishment such as a hotel for transient occupancy use as described in Chapter 3.24 Transient Occupancy Tax of the Moreno Valley Municipal Code, and all ancillary landscaping, parking amenities, and public elements such as but not limited to, parks, open space, paseos and connectivity corridors, plazas, and other public gathering spaces and related public improvements consistent with the zoning in place at the time of issuance of the Land Use Entitlements; and (2 ) a "Residential Component," comprised of between 300-700 market rate residential units (or as otherwise agreed by the City and the Develop and approved in the Land Use Entitlements) with ancillary landscaping, parking amenities, and public elements such as, but not limited to, parks, open space, paseos and connectivity corridors, plazas, and other public gathering spaces and related public improvements consistent with the zoning in place at the time of issuance of the Land Use Entitlements, with the Reside ntial Component occupying approximately 60% of the Subject Property. The Non -Residential Component may include, without limitation, public buildings, entertainment, retail, office, fitness, hospitality and any other similar uses combining to total square f ootage between 150,000 sq. ft. and 172,000 sq. ft. Exhibit B to the PSA identifies in greater detail the overall Town Center Project F.1.c
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which the Developer is required to complete in total; development of just the Residential Component by Developer is not permitted by the terms of the PSA.
The Developer shall also construct all necessary public improvements and amenities and public infrastructure required by the Land Use Entitlements as conditions of approval for the Town Center Project at an estimated total cost in excess of $31,500,000 (excluding land costs). The Developer may petition City to form a Mello Roos Community Facilities District to finance such improvements, which will be at no cost to the City.
IV. COST OF THE PSA TO THE CITY
There is no cost estimated to the City as part of the PSA. Per the terms and conditions of the PSA, the Developer shall pay: (i) all of the escrow fees and charges of Escrow Holder; (ii) the cost of the premium for the Title Policy; (iii) the cost of all endorsements to the Title Policy; (iv) all costs and charges for the recordation of any grant deeds; (v) any documentary or other local transfer taxes on the transfer of the Subject Property; and (vi) Buyer’s share of the charges prorated under the PSA. In addition, if any escrow shall fail to close for a ny reason other than the City’s default, the Developer shall pay any applicable escrow cancellation charges.
The Developer is required to pay for all applicable filing an d processing fees as set forth in the Moreno Valley Municipal Code in the amounts set forth in the schedule of fees in effect at the time such fees are due and payable during the Land Use Entitlements review process. The Developer shall also pay all applicable Development Impact (Mitigation) Fees (“DIF Fees”) as set forth in the Moreno Valley Municipal Code and/or fee schedule adopted by the City subject to the Developer’s receipt of credits agai nst such fees for public infrastructure in the City ’s capital improvement DIF Fee program constructed by the Developer for the Town Center Project.
However, the Developer would not be eligible for a credit against DIF fees for the $2,000,000 major one-acre public park amenity that the Developer is required to incorporate into the Town Center Project at no cost to the City.
The Developer is also required to reimburse the City for the actual costs and expenses reasonably incurred by the City for all services provided by the City and its consultants, including legal counsel, for review, preparation and processing of the Land Use Entitlements and other permits, licenses, etc. for the Town Center Project, which are not factored in the City’s standard processing fees. Furthermore, to the extent that the City, at the request of and on behalf of Developer, attempts to enter into bind ing agreements with other entities in order to assure the availability of certain permits and approvals or services necessary for development of the Subject Property, as described in th e PSA , the Developer shall reimburse the City for all costs and expenses incurred in connection with seeking and entering into any such agreements, subject to Developer’s consent to such costs and expenses, which consent shall not be unreasonably withheld. In addition, any fees, assessments or other amounts payable by the Ci ty pursuant to any such agreements described herein shall be borne by the Developer except where Developer has notified the City in writing, prior to the City entering into any such agreement, that it does not desire for the City to execute said agreement.
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V. ESTIMATED VALUE OF THE INTEREST TO BE CONVEYED DETERMINED
AT THE HIGHEST AND BEST USE PERMITTED UNDER THE GENERAL
PLAN AND ZONING
Since the City wanted to place the highest value on the Subject Property, it was appraised based on a determination of the reasonably probable use of property that would result in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity.
• Legal Permissibility – The zoning regulations in effect at the time of the Appraisal determined the legal permissibility of the potential use of the Subject Property, which is zoned Public District. The primary purpose of the Public District zoning designation is to provide for the conduct of public and institutional activities, including providing protected designated areas for public and institutional facilities. However, the appraisal of the Subject Property was based on the assumption that the Subject Property would be rezoned to its Highest and Best Use via a Specific Plan that would be adopted for the Subject Property in the context of a Public Private Partnership, between the City and the Developer. This was the primary reason why the City’s Request for Proposals to develop the Subject Property indicated a desire to have a m ix of commercial, residential and public facilities as part of the plan and assumed that this type of a plan would be a joint effort with a future developer in the context of a Public Private Partnership that was deemed necessary to achieving sustainable long-term economic and community benefits.
• Physically Possible – The physical possibility of a use is dictated by the size, shape, topography, availability of utilities, and any other physical aspects of the site. The Subject Property contains 56.42 acres, or 2,457,654 square feet. The Subject Property is irregularly shaped and level at street grade. It has good frontage, average access, and good visibility.
The overall utility of the Subject Property is considered to be good. All public utilities are available to the Subject Property including public water and sewer, gas, electric and telephone. Overall, the Subject Property is considered adequate to accommodate most permitted future development possibilities that include a mix of comme rcial, residential and public facilities.
• Financially Feasible and Maximally Productive – The prospective use of the Subject Property must have the potential to provide a sufficient return to attract investment capital over alternative forms of investment. A positive net income or acceptable rate of return would indicate that a use is financially feasible. Financially feasible uses are those uses that can generate a profit over and above the cost of acquiring the site and constructing the improvements. Of the uses that are permitted, possible, and financially feasible, the one that will result in the maximum value for the property is considered the highest and best use. Considering the Subject Property’s physical characteristics and location, as well as the state of the local market in the midst of the COVID -19 pandemic, it has been determined in the Appraisal that the Highest and Best Use of the Subject Property is for development with a mixed -use (residential and/or commercial) development built to its maximum feasible building area, when market conditions allow.
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B. ESTIMATED VALUE OF THE INTEREST TO BE CONVEYED AT THE USE
AND WITH THE CONDITIONS, COVENANTS, AND DEVELOPMENT COSTS
REQUIRED BY THE SALE
The current zoning of the Subject Property is Public District. The primary purpose of the Public District zoning designation is to provide for the conduct of public and institutional activities, including providing protected designated areas for public and institutional facilities. Prohibited uses within the Public District zone include residential and commercial uses.
Although the Appraisal of the Subject Property did not include the “As Is Value” under the current Public District zoning, it did include a Value Conclusion Range of $4,700,000 to $5,600,000, based on the assumption that the Subject Property would be rezoned to its Highest and Best Use via a Specific Plan that would be adopted for the Subject Property. The Request for Proposals (RFP) distributed by the City asked for proposals to develop the Subject Property into Destination MoVal Town Center , a vibrant, sa fe, multi-use destination for its residents, visitor and business owners. The RFP sought proposals to provide a distinctive opportunity for a Town Center that would include commercial development, entertainment, professional office, research and development, civic uses, public gathering spaces and diverse forms of connectivity with potential for a complementary residential component or corporate headquarter(s) campus location.
B. CONSIDERATION RECEIVED AND COMPARISON WITH THE ESTIMATED
VALUE OF THE INTEREST TO BE CONVEYED AT HIGHEST AND BEST USE
The Developer is purchasing the Subject Property for a purchase price of Five Million, Six Hundred Thousand Dollars ($5,600,000), which is consistent with the appraisal of the Subject Property by Cushman & Wakefield Western, Inc. (the “Appraisal”) at the top end of the Value Conclusion Range. As such, the sale of the Subject Property for $5,600,000 is deemed a reasonable price for the Subject Property and at such a price, the sale shall not constitute a gift of public funds.
The Developer will also construct all necessary public improvements and public infrastructure required by the Land Use Entitlements as conditions of approval for the Town Center Project at an estimated cost in excess of $35,400,000. The Developer may petition City to form a Mello Roos Community Facilities District to finance such improvements, which will be at no cost to the City.
VIII. ECONOMIC OPPORTUNITY
Due to the size and nature of the Subject Property and based on its Highest and Best Use, it was determined that the most likely buyer would be a developer that would work in a Public Private Partnership to develop a Specific Plan for future development of the Subject Property into a mix of commercial, residential and public facilities. This Public Private Partnership has been deemed necessary to achieving sustainable long-term economic and community benefits.
An analysis was performed by Hdl EconSolutions to assess the economic benefits of the Subject Property upon buildout. A copy of that analysis is attached as Attachment “D” (the “HdL Report”).
Upon buildout, the Subject Property will p rovide economic vitality and new opportunities for F.1.c
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businesses, residents, and visitors. The Hdl EconSolutions analysis projects that the Town Center Project will generate new revenue for the City through property tax, sales tax and transient occupancy tax (from the hotel) estimated to exceed $2,000,000 annually upon completion of the Town Center P roject, with that number growing to nearly $3.3 million by year 25 (with 2% compounded annual growth rate). Over a 25 -year period, assuming a 2.0% escalator, the City would collect a projected $64,688,974 in tax revenues from the Project.
There will be three revenue producing components of the Town Center Project: 1) Commercial, 2) Residential, and 3) Hotel. The Commercial component includes uses such as a library, office, theater, retail, restaurant, and fitness center. The combined annual sales receipts for the Commercial Component are projected to amount to $80,951,600, which will produce annual sales tax revenue for the City in the amount of $809,516 (see, HdL Report, page 4). Based on SiteSeer demographics, the City of Moreno Valley averages 3.74 persons per household and has disposable income of $85,411 which HdL Econ Solutions estimates 30% will be used for household spending, with 70% potentially taxable. The Hotel Component, which will include an upscale lo dging establishment, is expected to produce annual transient occupancy tax revenue in the amount of $563,326, based on a projected 80% occupancy rate (see, HdL Report, page 4).
Moreover, it is projected by HdL Econ Solutions that the Town Center Project will employ 285 employees, who will spend $ 2,163,7120 per year, with annual total taxable spending estimated to be $1,514,604. That will in turn produce $15,146 in additional sales tax revenue for the City on an annual basis which, together with the additional sales tax revenue to be generated by Project construction workers and Project residents, is estimated by HdL to exceed $152,000 annually (see, HdL Report page 6). The Developer is committed to coordinating with the City of Moreno Valley Employment Resource Center to conduct periodic job fairs for prospective bus inesses within the Project and to promote local hiring for the businesses and tenants within the Town Center Project.
The Subject Property is located in the taxing jurisdiction of the County of Riverside. The assessor’s parcel identification numbers are 487 -470-030 and 487-470-031. Total property taxes for the Subject Property are currently $0 since the Subject Property has been owned in fee by the City of Moreno Valley since 1985. However, the tax rate for the area is 1.11692 percent, which has been utilized in the Appraisal.
Under the provisions of Article XIIIA of the California Tax and Revenue Code (Proposition 13), properties are assessed their market value as of March 1, 1975, the base year lien date, or a later date, such as when a property was last sold, or substantial renovation/construction occurred.
Reassessment due to new construction is usually based on the additional construction costs.
However, upon the sale of the Subject Property, it will be reassessed according to the Assessor’s opinion of market value of the Su bject Property, which will likely be based on the sales price .
Consequently, the tax amount applicable to the Subject Property, upon transfer of ownership to the Developer, will be based on the sales price of the Subject Property ($5,600,000) and the current tax rate (1.11692 %) plus any special assessments.
Notwithstanding the above, the entire cost (total building valuation) of the Town Center Project, not including land is estimated at over $301,000,000, which has the potential of producing more than $ 494,0000 in annual property tax revenue, compared to $0 since the Subject Property is F.1.c
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currently exempt from property taxes under City own ership (see, HdL Report page 6) .
Approximately 30 acres of the Subject Property has been designated for multifamily residential use with the remaining 26.42 acres designated for civic, retail, restaurant, fitness, market and office uses which will include an upscale hotel and movie theater. Specifically, t he residential, commercial and hotel components of the Subject Property are projected to respectively produce a stream of $389,395, $69,703 and $35,192, respectively, in annual property tax revenue for the City’s General Fund (see, HdL Report page 6).
In light of the foregoing, the Town Center Project will surely generate increased property taxes in an amount vastly exceeding the 15% threshold identified as a measure of “economic opportunity” in Government Code 52200.2(b) when compared to the year prior to the acquisition of the Subject Property by City in 1985.
IX. THE APPLICATION OF THE SURPLUS LANDS ACT CONFLICTS WITH THE CITY’S SALE OF THE SUBJECT PROPERTY UNDER GOVERNMENT CODE SECTION 52201 TO CREATE ECONOMIC OPPORTUNITY AND WOULD BE IN CONFLICT WITH THE CITY’S HOUSING ELEMENT AS CERTIFIED BY HCD
The sale of the Subject Property pursuant to Section 52201 of the California Government for “Economic Opportunity” is a legally separate and independent basis for the sale of the Subject Property and an alternative to compliance with the land disposition procedures of the Surplus Land Act. In particular, Government Code Section 54226 provides that the Surplus Land Act disposition procedures shall not be applied when it conflicts with any other provision of statutory law. In this particular situation, it is clear that if the Surplus Land Act disposition procedures are applied under the specific circumstances, it would conflict (e.g., undermine, defeat and frustrate) with not only the City’s stated objective to s ell the Subject Property for Economic Opportunity pursuant to Government Code Section 52201, but it would also conflict with the State Housing Law that the City has relied on to prepare and develop the City’s MOVAL 2040 General Plan ’s Housing Element that was recently certified by the California Department of Housing and Community Development on or about October 11, 2022.
A. Economic Opportunity Conflict.
Developments such as the Town Center Project typically have a mix of residential and non - residential uses. The higher valued residential land is essential to the project’s economic viability because it can absorb a greater share of the improvement costs and fees making the non-residential land financially feasible to improve and develop. Without a majority market rate residential component, this Town Center Project would not otherwise be economically feasible.
While the land area of The Town Center Project is split 60 % residential / 40% non-residential, the residential acreage, including CFD proceeds on the for -sale (market rate) units accounts for approximately 80% of projected Developer revenues. With CFD proceeds included, residential land provides a much higher value per improved acre than non -residential land. These resulting increased revenues from the sales of the market rate residential units are essential for the Developer to finance the construction of the necessary public improvements and major public amenities F.1.c
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required in the Downtown Center and to subsidize the Developer’s costs of developing the Retail/Commercial and Hotel components of the Town Center Project in order for the Retail/Commercial and Hotel components to operate profitably Construction of affordable housing does not eliminate the need for the public improvements and the major public amenities needed for the project at a cost in excess of $ 31.5 million. The costs of these multi -million-dollar improvements are still required and are intended to be offset by revenues from the for -sale housing which is intended to all be sold at market rate prices. As discussed below and in the HdL Report , the inclusion of 25% affordable housing will materially reduce the revenues necessary to fund the public improvements and the major public amenities of the Town Center which conflicts with the City’s creation of economic opportunity.
Hdl EconSolutions has confirmed that the following significant financial impacts would result by the inclusion of affordable housing in the Town Center Project. Assuming 25% of the residential portion of the Town Center Project is affordable housing, proforma Developer revenues from the residential development would be reduced by approximately 12%. In addition, available CFD proceeds would be reduced by 39%, resulting in an overall 16% reduction in project revenues to Lewis . In part, this is because the affordable housing developer would pay no costs of the backbone infrastructure and site improveme nts required to construct the affordable units. In the case of the Town Center Project, these costs would need to be funded by the remaining market rate housing, materially reducing funds necessary to construct the public improvements and major public amenities required to develop the entirety of the Town Center.
Inclusion of affordable housing will also reduce 25% of the projected average annual household incomes essential for spending on goods and services in the project’s Retail/Commercial component. The HdL report provided that the 25% reduction in the market-rate residential units to satisfy the affordability requirement could cause a 40% to 50% decrease in the projected annual revenue generation for the City through sales tax, property tax and TOT revenues.
The HdLReport concluded that if 25% affordable housing was required, the significant loss of residential revenues would render the entire Town Center Project economically infeasible as envisioned, and the City of Moreno Valley would be denied the significant Economic Opportunities from the Residential, Hotel and Commercial components of the project. Similar impacts would result if 15% affordable housing is required
B. Housing Element Conflict.
As required by State Housing Law, the City submitted the first draft of the MOVAL 2040 General Plan’s Housing Element to HCD for its review and consideration, and the draft was made available for public comment for requisite number of days. In response to comments received f rom HCD and the public, City staff made various revisions, posted said revisions on the City’s website before submitting the draft revisions to HCD. Finally, the City submitted the revised draft as approved by the City Council to HCD for its final review and approval, which HCD ultimately certified on or about October 11, 2022.
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The City’s recently certified Housing Element for the 2021-2029 Planning Period (Housing Element cycle) is an essential component and mandatory element of the City’s MOVAL 2040 General Plan. The MoVal 2040 General Plan charts the course of Moreno Valley’s future for the next 20 years. The General Plan includes comprehensive information about housing growth, housing development types, and goals for affirmatively furthering fair housing development across the entire City of Moreno Valley. The City’s certified Housing Element, as an essential component and mandatory element of the General Plan, guides planning for housing to meet the current and projected needs of all households in the City of Moreno Valley for the 2021-29 Planning Period.
The Housing Element summarizes the available land, financial, and administrative resources available for the preservation, improvement, and development of housing throughout the Cit y of Moreno Valley. The Housing Element also includes an evaluation of the availability of land resources and other important considerations for future housing development, the City’s ability to satisfy its share of the region’s future housing needs, the financial resources available to support housing activities, and the administrative resources av ailable to assist in implementing the City’s housing programs and policies.
The City’s certified Housing Element includes a 2021-29 Moreno Valley Housing Sites Inventory, which is critical part of the Housing Element. The 2021 -29 Inventory consists of an inventory of housing opportunity sites and an analysis of the capacity of those sites to accommodate the City’s Regional Housing Needs Assessment (RHNA) allocation as determined by the Southern California Association of Governments (SCAG). State Housing Law requires that each jurisdiction establish the number of housing units that will be constructed, rehabilitated, and preserved over the planning period. The RHNA is mandated by State Housing Law as part of the process of updating local housing elements of the General Plan. The RHNA quantifies the need for housing within each jurisdiction during specified planning periods. Communities use the RHNA in land use planning, prioritizing local resource allocation, and in deciding how to address identified existing and future housing needs resulting from population, employment, and household growth. The RHNA allows communities to anticipate growth, so that collectively the region and sub-region can grow in ways that enhance quality of life, improve access to jobs, promote transportation mobility, and addresses social equity and fair share housing needs. The RHNA consists of two measurements of housing need: existing and future needs. The existing needs assessment simply examines key variables from the most recent census to measure ways in which the housing market is not meeting the needs of current residents. These variables include the number of low -income households paying more than 30 percent of their income for housing, as well as severe overcrowding, farmworker needs, and housing preservation needs. The future need for housing is determined primarily by the forecasted growth of housing in a community. For instance, each new household, created by a child moving out of a parent’s home, by a family moving to a community for employment, and so forth, creates the need for a housing unit. The anticipated housing needed for new households is then adjusted to account for an ideal level of vacancy units. In summary, the Quantified Objectives of the RHNA are required to be part of the Housing Element and the City of Moreno Valley is committed to obtaining these objectives.
In light of the foregoing, the City’s Housing Element includes a table that shows the City’s total “Quantified Objectives” for the 2021 -2029 Planning Period. The Quantified Objectives assume F.1.c
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optimum conditions for the production of housing. However, environmental, physical and market conditions influence the timing, type and cost of housing production in a community. Moreover, satisfaction of the City’s regional housing needs will partially depend on the cooperation of private funding sources and resources of the State, Federal and County programs that are used to support the needs of the extremely low-, very low-, low-, and moderate-income households.
The City’s RHNA allocation for the 2021-2029 Planning Period has been determined by SCAG to be 13,595 housing units, including 3,768 units for very low -income households, 2,046 units for low-income households, 2,161 units for moderate income households, an d 5,620 units for above moderate-income households. As such, the City’s Quantified Objectives have been set forth in the City’s Housing Element, for the number of housing units needed, broken down by income category, over the 2021-2029 Planning Period as follows:
• Very Low Income (0-50% of Area Median Income) – Need 3,768 Units which consists of
27.7% of City’s RHNA Allocation
• Low Income (51-80% of A rea Median Income) – Need 2,046 Units which consists of
15.0% of City’s RHNA Allocation
• Moderate Income (81-120% of Area Median Income) – Need 2,161 Units which consists of 15.9% of City’s RHNA Allocation
• Above Moderate Income (more than 120% of Area Median Income) – Need 5,620 Unites which consists of 41.3% of City’s RHNA Allocation
• Total New Construction – Need 13,595 Units to meet 100% of City’s RHNA Allocation As referenced above, the City’s certified Housing Element includes a 2021 -29 Moreno Valley Housing Sites Inventory, which is an inventory of housing opportunity sites and an analysis of the capacity of those sites to accommodate the City’s RHNA allocation as determined by SCAG.
The analysis of each ho using opportunity site was conducted in a manner consistent with the guidance provided by HCD. For instance, consistent with HCD’s guidance and applicable State law, Low and Very Low Income RHNA sites included on the 2021 -29 Moreno Valley Housing Sites Inventory have been screened to ensure they are not located in Federal Emergency Management Agency-designated (FEMA) flood hazard areas or active fault zones and that they do not require remediation of contaminated soil or water prior to development.
In addition, the lower income sites were selected based on the parameters established by HCD for the size of sites for lower income units in view of feasibility considerations. Per HCD’s guidance, parcels less than 0.5 acres in size are generally not considered suitable for lower income housing development as smaller parcels may not allow development of a sufficient number of units for proposed affordable housing projects to compete effectively for l imited funding resources.
Moreover, p arcels larger than 10 acres in size are also not considered suitable by HCD as development of very large projects since it could lead to an over concentration of affordable housing in one location or may render proposed affordable housing projects ineligible for funding.
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2021-29 Moreno Valley Housing Sites Inventory are between 0.5 and 10 acres in size, with an average site size of 2.1 acres
Low and Very Low Income RHNA sites include 156 sites in the Low and Very Low Income category, representing 323 total acres of vacant and non-vacant land. Low and Very Low Income households are those making up to 80 percent of the local area median income. Sites identified to accommodate lower income RHNA are designated Corridor Mixed Use (COMU), Center Mixed Use (CEMU) R30 Residential (R30), and R20 Residential (R20) on the City’s General Plan Land Use map. These designations allow for a maximum residential density between 20 and 30 dwelling units per acre.
In summary, the City’s certified Housing Element ’s 2021-29 Moreno Valley Housing Sites Inventory demonstrates that the City of Moreno Valley has adequate site capacity that is suitable and available to accommodate the regional housing need for all income groups , including lower income households without the need for adding any properties that are part of the Subject Property.
The sites included in the 2021-29 Inventory were specifically selected to facilitate and encourage the development of a variety of types of housing for people at all income levels, including multifamily rental housing, factory -built housing, mobilehomes, emergency shelters, and transitional housing. As such, the 2021 -29 Inventory accommodates 100 percent of the shortfall of sites necessary to accommodate the remaining housing need for housing for very low- and low- income households during the 2021-29 Planning Period. The sites are also appropriately zoned to provide realistic and viable development opportunities for all housing types, including without limitation low- and low-income housing. In light of HCD’s approval and certification of the City’s Housing Element, the City has ensured that: (a) sites are properly zoned to allow owner-occupied and rental multifamily residential uses “by -right” (only subject to ministerial approval) in which 20 percent or more of the units are affordable to lower income households (b) the development of at least 16 units per site is permitted; (c) sites permit a minimum of 20 dwelling units per acre; and (d) at least 50 percent of the low - and very low -income regional housing need can be accommodated on sites designated for exclusively residential uses, at appropriate densities.
In light of the foregoing, if the Subject Property is subjected to the Surplus Lands Act, it will undermine all the efforts and resources the City invested in developing a Housing Element that adequately complies with State Housing Law. The Regional Housing Needs Assessment (RHNA) is a requirement of State Housing Law and is a process that determines projected and existing housing needs for all jurisdictions, including the City of Moreno Valley. As required under State Housing Law, t he process to determine a RHNA allocation is conducted by a council of governments, such as SCAG, every eight (8) years. State Housing Law further mandates that every jurisdiction plan for its RHNA allocation in its housing element of its general plan by ensuring there is enough sites and zoning to accommodate their RHNA allocation. In March 2020, SCAG adopted its 6 th cycle RHNA allocation plan, which covers the Planning Period, commencing October 2021 through October 2029. For the 6th cycle, SCAG received a need of 1,341,827 housing units, which was distributed to all 197 SCAG jurisdictions, including the City of Moreno Valley which through its HCD -certified Housing Element has demonstrated that the City of Moreno Valley has adequate site capacity that is suitable and available t o accommodate the regional housing need for all income groups, including lower income households without the need for adding any properties that are part of the Subject Property via the Surplus Land Act. Finally, it is F.1.c
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important to note that the parcels which constitute the Subject Property could not effectively be used for accommodating the City’s RHNA allocation since, under the guidance provided by HCD, the subject parcels which are located within the City’s Downtown District (where the Subject Property is located) are not encompassed by a zoning designation that has a minimum/maximum density per acre.
ATTACHMENTS
A-COPY OF PSA
B-COPY OF RFP
C-COPY OF APPRAISAL SUMMARY
D-COPY OF HDL ECONOMIC IMPACT & BENEFIT ANALYSIS
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Attachment: Summary Report (08.01.2023) (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) ATTACHMENT “A” TO CITY OF MORENO VALLEY
SUMMARY REPORT (GOV C 52201)
COPY OF PSA
[SEE ATTACHED]
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Attachment: Attachment A - Copy of PSA (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) ATTACHMENT “B” TO CITY OF MORENO VALLEY
SUMMARY REPORT (GOV C 52201)
COPY OF RFP
[SEE ATTACHED]
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) table of contents
City of Moreno Valley
Mike Lee
Economic Development Director
14177 Frederick Street
Moreno Valley, CA 92552-0805
T elephone: 951.413.3460
Email: [email protected]
www.morenovalleybusiness.com
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) table of contents
INTRODUCTION
The Opportunity
The Vision
PROJECT OVERVIEW
The Community
The Region
The Site
TIMELINES
PROPOSAL INSTRUCTIONS
THE LEGAL INFO
Predevelopment Costs
Deposit
Legislative Action
Financing
Available Analysis
General Project Comments
Contractor Indemnification
Additional Indemnity Obligations
Intellectual Property
Public Record
Assignment
RFP Addenda
Civil Rights Compliance / Equal Opportunity Assurance
town center
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) introduction
The City of Moreno Valley invites qualified respondents to submit innovative proposals to develop and transform an approximately 56.42- acre City-owned site into Destination MoVal: T own Center, a vibrant, safe, multi-use destination for its residents, visitors, business owners and community stakeholders. Destination MoVal: T own Center, will be a flexible framework with diverse experiential qualities unlike any other in the region.
Destination MoVal: T own Center marks the debut of an expansive program which will similarly energize other key areas of the City (near the T own Center as well as in other geographic areas) to continue Moreno Valley’s development as Inland Southern California’s premier community.
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) the opportunity
The City of Moreno Valley (“City”) is seeking innovative development proposals (“Proposals”) from qualified firms (“Developers”) for the opportunity to transform approximately
56.42 acres of prime property at the northwest corner of Nason Street and Alessandro Boulevard.
The City Council has identified this property (“Site”) as key in the creation of a destination development (“Destination MoVal:
T own Center”) that will attract employment and visitors from across the City and the surrounding region. The site provides a distinctive opportunity for a T own Center space that may include commercial development, entertainment, professional office, R&D, civic uses, public gathering spaces and diverse forms of connectivity with potential for a complementary residential component or corporate headquarter(s) campus location.
The City desires to enter into a Public Private Partnership in order to achieve sustainable long-term economic and
community benefits. The City would contribute its acreage to a project that would be developed consistent with the Council’s vision at private expense.
the vision
T own centers are the heart of a community. They provide a place for people to gather, to celebrate, to interact, to create memories or to simply enjoy daily life. A T own Center will create a new landmark and identity for Moreno Valley, serving the daily needs of the community and providing a space for generations to enjoy.
Moreno Valley envisions its T own Center Site (“Destination MoVal: T own Center”) as a vibrant downtown scene that
attracts residents, daytime professionals, and visitors to experience a high quality work/shop/stay/play atmosphere.
Destination MoVal: T own Center will create a new landmark for the community, anchored by unique experiences that are connected by public plazas and open spaces, in a walkable environment that is friendly for all ages. Strategically located at the center of the City, this prime real estate asset is surrounded by the City’s expanding medical corridor, which includes:
Riverside University Health System Medical Center, Kaiser Permanente hospitals, and various medical facilities. It is also adjacent to the master planned community of Aquabella, and close proximity to the approved World Logistics Center project, the largest corporate industrial park in California with over 40.6 million square feet.
The City is seeking creative concepts for mixed-use projects that may include the following key components:
COMMERCIAL SPACE
Retail
Entertainment
Food and dining
Hotels and Convention Center
PROFESSIONAL USES
Class A and B Office
Medical/Hospital
Research and development
Corporate headquarter(s)/ Corporate campus
CIVIC USE POTENTIAL
City offices or services
Library (new main Library or satellite branch)
Police sub-station
College/University satellite presence
Performing Arts or cultural component – Indoor and/or Outdoor Active Plaza
HOUSING
Apartments and/or condos
TRANSIT AND PARKING AMENITIES
Parking structure or other transportation amenities
Working with the selected developer, the City of Moreno Valley desires to implement a Master Development Plan of innovative development methods that will achieve sustainable long-term economic and community benefits. Commercial retail and
entertainment experiences for Destination MoVal: T own Center are highly encouraged. Potential retail uses include food/ beverage establishments, general and specialty retail with a mix of anchor or medium/small box tenants. Commercial office uses and/or corporate headquarters/campus would provide daytime vibrancy and increase the customer base for retail.
The City also encourages prospective proposers to include civic uses and/or cultural attractions into its development proposal. A new Public Library or civic building could serve as a prominent anchor to the public open spaces and retail experience. Residential development can provide ancillary benefits to the project.
The City will consider proposals and prioritize them according to types and quality of tenant mix, tax revenue generation, job creation potential, market demand, economic impact and quality of life benefits for the community. Recognizing that all land use changes will require Planning Commission and City Council approval, the City anticipates the need to rezone the Site and will work with the selected developer to bring the project to fruition.
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The City of Moreno Valley is located in Riverside County, California, and is part of the Inland Empire region in Southern California.
Moreno Valley now boasts a thriving population of over 214,000 and 2.3 million in a twenty mile radius. Growing at a 4% annual growth rate, the City is now the second-largest city in Riverside County by population, and twenty-first in the State of California and is considered one of the Inland Empire’s population centers.
Strategically located at the junction of State Route 60 and Interstate 215, Moreno Valley is only an hour away from Los Angeles, Orange and San Diego counties and less than three hours from Nevada, Arizona and Mexico. why morenovalley?
51.3 Fortune 500
4.55%
4500
largest city in
Riverside County
2nd
Moreno Valley
Population 2020
Median
AGE:
32.2 213,914
20-mile
radius population
Home to numerous
2,342,656
largest city in
CALIFORNIA
square
MILES
Inland Empire
businesses
Ontario Airport
21st
ONE OF THE FASTEST
GROWING REGIONS
PRIVATE AIR FLIGHTS FROM MARCH INLAND PORT IN
AND INTERNATIONAL FLIGHTS FROM
AND INTERNATIONAL
COMPANIESIN THE US
STRONG
MORENO VALLEY
annual growth
RATE
SERVED BY
60 INTERSTATE
215
JOBS
created in 6 years
20,000
Average
Household Income
$85,356
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) INDUSTRIAL MARKET:
Moreno Valley led the region with more than 8.4 million square feet of new industrial corporate facilities constructed and absorbed in the past two years. Recent industrial attraction successes include facilities for Aldi Foods, two Amazon facilities, Deckers Outdoor, Fisher Paykel, Floor & Decor, Harbor Freight T ools, Harman Kardon, iHerb, Legrand North America, Lowe’s Home Improvement, Medline, Procter & Gamble, ResMed, Ross Dress For Less, Skechers USA, Serta Simmons Bedding, Sherwin Williams, United Material Handling, United Natural Foods, Walgreens and more.
Advanced manufacturing is emerging as a sub-category of industrial growth. Solaris Paper churns out household goods in their 862,000 sq. ft. re-processing plant while Karma Automotive’s (formerly Fisker) 555,000 sq. ft. facility creates the luxury solar/ hybrid electric vehicle, the Karma Revero.
City Council recently approved the World Logistics Center, which offers another 40.6 million square feet on 2,600 acres – the largest industrial corporate business campus in California. The World Logistics Center is expected to create more than 20,000 new jobs in the City.
HEALTHCARE MARKET:
Riverside County’s hospital headquarters (Riverside University Health System Medical Center - RUHS) is located in Moreno Valley, along with Kaiser Permanente. Both campuses are undergoing rapid expansion to meet strong regional demand. RUHS is adding to its 439-bed hospital footprint with the construction of the first of six 200,000 sq. ft. medical office buildings and Kaiser is in the design stages of a master campus expansion. Several supportive medical facilities are developing to provide post-acute and skilled nursing care. Combined, these projects add more than 2,000,000 sq. ft. to Moreno Valley’s thriving healthcare industry.
Moreno Valley’s two hospitals and various medical related facilities contribute to more than 5,000 full-time jobs.
RETAIL MARKET:
2 regional shopping destinations and 40 shopping plazas provide a plethora of shopping, dining and entertainment options for residents and travelers. Major tenants include Costco, SuperT arget, Home Depot, Lowe’s Home Improvement, Macy’s, Burlington, T J Maxx/HomeGoods, Ulta, BevMo and more. Moreno Valley’s restaurants have documented performance that exceeds their chains’ national average by as much as 25.6%.
RESIDENTIAL MARKET:
Keeping up with employment growth, residential construction is adding new housing with more than 7,000 single and multi-family units under development adding to the inventory of 56,000 housing units.
EDUCATION:
Three colleges – the University of California, Riverside, California Baptist University and Moreno Valley College – attract more than 40,000 students to the community each year. RUHS also serves as a teaching hospital for the UC Riverside School of Medicine.
It is the region’s primary academic medical center for health care professionals – training hundreds of medical residents, nursing students and allied health professionals every year in its own residency programs and in affiliation with several universities and community colleges. Student consumers in town are plentiful, youthful and driven.
With over 51.3 square miles of land and a pro-business environment, Moreno Valley is experiencing a large influx of Fortune 500 and international Companies. The development of more than 25 million square feet of industrial, corporate, office, commercial and hospitality development in the past 6 years has propelled Moreno Valley to becoming an Inland Southern California job center.
More than 20,000 new jobs were created since 2012.
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) MILITARY:
March Air Reserve Base (MARB), previously known as March Air Force Base, is the City’s largest employer with 9,600 full-time employees. MARB is home to the Air Force Reserve Command’s Fourth Air Force Headquarters and houses numerous missions including military airlift, in-flight refueling, worldwide media broadcasting, interdiction coordination for the entire Western Hemisphere, and remotely-piloted aircraft operations. MARB also hosts the March Field AirFest, where 500,000 attendees watch the United States Air Force “Thunder Over The Empire” in its bi-annual air show. Also serving as a private air cargo airport, Amazon Prime Air added March Air Reserve Base to its cargo distribution network in 2018. A general aviation terminal (Million Air) opened recently to serve customers for private charter flights.
TRANSPORTATION:
Air transportation is provided by Moreno Valley’s March Inland Port Airport for air cargo and corporate flights, and passengers can choose from five international airports within an hour’s drive. Rail transport adjacent, the recently-opened Metrolink rail station offers passenger transport. Sea transportation is provided by two major seaports (Port of Los Angeles and Port of Long Beach)..
CITY-OWNED UTILITY:
Moreno Valley’s electric utility, which is 100% underground, has earned the Certificate of Excellence in Reliability from the American Public Power Association for the last 4 years. Moreno Valley Utility, or MVU, provides multiple points of service/redundant service for customers. Plan check review time is streamlined – averaging only 3 weeks. Future capital improvement projects will focus on automating communication and protection in circuits that serve critical customers, and building infrastructure necessary to serve new customers. In addition, MVU provides various incentives and utility rate rebate programs to assist businesses.
Additional rebate for local hire provision.
PRO-BUSINESS PHILOSOPHY:
Companies continue to choose Moreno Valley for providing the best service in Southern California. The City boasts a pro-business and pro-customer culture and has a dedicated award-winning Economic Development Department to serve its customers. The City’s unique business concierge service assists businesses through each step of the development process and fast-tracks business development with unparalleled plan check turnaround times that consistently beat other agencies in the region. The City has invested in an innovative permitting system, SimpliCity, which allows developers and businesses to check their permit status online. The City also operates an award-winning Employment Resource Center to assist businesses with job recruitment needs and to partner with educational institutions for workforce training.
LIFESTYLE:
en it comes to affordable lifestyle with the most amenities, there is no better place than Moreno Valley. The weather is warm. The lakes are cool. There are nearly 200 City-sponsored classes for children and adults and an assortment of entertaining events, including parades, community bike rides, film festivals and volunteer days. There are plenty of other activities for kids and adults, from Round1, a Japanese-themed entertainment center with bowling, arcades and karaoke, to the Hangar Trampoline Park. The Moreno Valley Equestrian Park includes roping chutes and a cattle run. Two community golf courses serve golfing enthusiasts.
The City offers over 352 acres of parks and 32.3 miles of trails. The 8,000 acre Lake Perris State Recreation Area provides opportunities for fishing, swimming, jet skiing, picnicking, camping, rock climbing, concerts, and is the site for the 2028 Summer Olympics rowing competition.
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) the region
Just 60 miles east of the Pacific Ocean, the City of Moreno Valley is strategically located in one of the fastest-growing metropolitan areas in the country. Larger than 25 states, Inland Southern California encompasses Riverside and San Bernardino counties and has a population of 4.5 million. Growth drivers include availability of developable and affordable land and housing, lower lease rates, close proximity to two of the nation’s busiest port complexes (Los Angeles and Long Beach), a diverse transportation system, and a reach of more than 24 million consumers.
Southern California boasts more than 50 top colleges and universities in the nation. A recent Forbes study ranked several California schools – namely, Stanford University; California Institute of T echnology, Pomona College; Claremont McKenna; Harvey Mudd College; the University of California, Berkeley; Scripps College; the University of Southern California; and the University of California, Los Angeles - among the top 50 schools in the United States. Nearly 230,000 undergraduates are enrolled in local colleges within an hour of Moreno Valley.
Southern California is home to companies like Google, Disney, Northrop Grumman and Scripps Health. Logistics, construction, healthcare, manufacturing and management/scientific/
professional work are the main sectors driving growth in the region. Professionals and young families are relocating from coastal communities to experience home ownership and to escape the high cost of housing in Los Angeles, Orange and San Diego counties. Employers are experiencing similar trends; industrial and commercial properties in the Inland Southern California offer the lowest lease rates in all of Southern California.
Transportation includes a dynamic system of freeways, roads, rail lines, air travel and sea transport. The Ports of Los Angeles and Long Beach, the busiest container ports in the U.S., span nearly 70 miles of coastline and move more than $450 billion worth of cargo. Freeways, the chief method of travel across Southern California, are anticipated to receive $153 billion in new projects and improvements over the next 10 years.
California hosts more than 270 million tourists a year, who spend $126.3 billion in the state. An array of amusement parks, professional sports complexes, music venues, theaters, outdoor activities, exclusive shopping and dining experiences, art, wineries and national parks draw visitors year-round under the perpetual California sunshine.
Channel your inner movie star and spend a day shopping, enjoying the Film Festival or riding the largest aerial tramway in the world in neighboring Palm Springs. Surfers, joggers, bicyclists, rowers and sailors unite at local world-renowned beaches, while desert regions like the Mojave National Preserve and Anza-Borrego Park offer opportunities for scenic hikes and rock-climbing. Altitude in the local mountains ranges from 6,000 to 9,000 feet, allowing for prime snowboarding, skiing and tubing during the winter months, and hiking and cycling during the summer.
If you’re adventurous, you can skydive in Perris, hang glide or coast in a glider plane. For a beautiful view at a slower pace, soar in a hot-air balloon above T emecula Valley while sipping on local wines. Microbreweries like Woody’s Brewhouse in Moreno Valley, Hangar 24 in Redlands and Brew Rebellion in San Bernardino not only make outstanding beer but offer activities, brewery tours and personality to match.
Coachella, one of the nation’s most famous rock and hip- hop music festivals, and its partner, Stagecoach, a 3-day country music festival, take place in Indio, about an hour from Moreno Valley.
There are theater and musical options, from the Lewis Family Playhouse in Rancho Cucamonga and the Fox Theater in
Riverside, to the Redlands Bowl, which offer free performances to the public throughout the year. Catch a comedian at the Ontario Improv; lounge by the pool, indulge in award-winning buffets, take in a show or test your luck at a local casino like Morongo and Pechanga – both as luxurious and entertaining as those in Las Vegas, Nevada (which, coincidentally, is just a few hours’ drive away).
Southern California residents and visitors enjoy close proximity to Disney parks, Universal Studios, Knott’s Berry Farm and Legoland, while those passionate about sports cheer on
professional and minor league teams in baseball, football, hockey, basketball and soccer.
Destination MoVal: T own Center presents the opportunity to attract not only local residents but also regional residents, visitors and tourists alike. Southern California town centers like Rancho Cucamonga’s Victoria Gardens, Old T own T emecula and Old T own Monrovia include notable features like walkable streets, civic uses and extensive programming of community events. The development of a new “Main Street” district with open spaces, civic uses, retail and professional services, food and beverage establishments and entertainment within a walkable neighborhood in Moreno Valley could help fill the gap for such destinations in the eastern portion of the Inland Southern California.
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) F.1.e
Packet Pg. 292
Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) the site
Purchased in 1985, the City initially identified the 56.42-acre Site for use as a potential Civic Center.
Bordered by Nason Street to the east and Alessandro
Boulevard to the south, the City-owned Site consists of two adjoining lots that offer a combined 56.42 acres. The Site has direct access to two of the City’s major arterial streets.
Alessandro Boulevard is a major east/west thoroughfare
that connects to Interstate 215 (which leads to San
Bernardino to the north and San Diego to the South), and Nason Street is a major North/south thoroughfare connects to State Route 60 (which leads to Los Angeles to the west and Palm Springs/Arizona to the east). The Site sits almost directly in the City’s geographic center and is within easy reach of the region’s residents.
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) T o the west of the Site sits the March Air Reserve Base, and Lake Perris State Recreational Area lies to the south.
Picturesque rock outcroppings fill the surrounding landscape, framed by the ridgelines of Box Springs Mountain to the northwest, which displays the City’s iconic “M” landmark, Mt. Russell to the south, San Jacinto Mountain to the southwest and seasonally snow-capped San Gorgonio Mountain to the northeast.
Nearby, Riverside University Health System Medical Center and Kaiser Permanente Hospital comprise the City’s medical corridor. Riverside University Health System is currently constructing the first of six 200,000 square foot medical office buildings and Kaiser Permanente is expanding to a master campus of 800,000 square feet. Additional medical office buildings and skilled nursing facilities are also under construction within a quarter-mile of the Site. Moreno Valley College is just a few miles away, with a student population of nearly 20,000.
Both the medical corridor and the community college provide significant daytime population and are important contributors to demand for future growth retail, entertainment and services at the Site. Close by, the future 680-acre Aquabella master planned community will drive additional demand in the heart of the City.
The World Logistics Center, which is 40.6 million square feet of planned corporate business park space, is expected to bring approximately 20,000 jobs to Moreno Valley and will create additional demand for services and housing in the area. In addition, the Riverside Transit Authority (RTA) is planning a new transit center along the Nason Street corridor and bus transit along Alessandro Boulevard; both investments will increase access to and from the Site.
The General Plan Land Use designations for the Site include public facilities and residential/office designations. The City of Moreno Valley General Plan articulates a vision for the City by creating a sense of community, providing amenities, and promoting a safe and healthy environment. The General Plan designations are intended to improve the quality of life of residents by creating a ‘sense of place.’ Rezoning of the Site is fully anticipated.
NASON ST
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The information shown on this map was compiled from
the Riverside County GIS and the City of Moreno Valley
GIS. The land base and facility information on this map is for display purposes only and should not be relied upon without independent verification as to its accuracy. Riverside County and City of Moreno Valley will not be held responsible for any claims, losses or damages resulting from the use of this map.
1 Mile Buffer
City-Owned Parcels
Zoning
Commercial
Industrial/Business Park
Public Facilities
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Planned Development
Large Lot Residential
Residential Agriculture 2 DU/AC
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Multi-family
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0 3,000 6,0001,500
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·|}þ60
ALESSANDRO BLVD
NASON ST
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Map Produced by Moreno Valley
Geographic Information System
Geographic Information in:
NAD 1983 StatePlane California VI FIPS 0406 Feet
Printed: October 31, 2019
G:\Divisions\EconDev\2019\MXD
\NasonCorridorDev_103119A_Zoning.mxd
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S BLVD
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SON ST
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S BLVD
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ST
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The information shown on this map was compiled from
the Riverside County GIS and the City of Moreno Valley
GIS. The land base and facility information on this map is for display purposes only and should not be relied upon without independent verification as to its accuracy. Riverside County and City of Moreno Valley will not be held responsible for any claims, losses or damages resulting from the use of this map.
1 Mile Buffer
City-Owned Parcels
Zoning
Commercial
Industrial/Business Park
Public Facilities
Office
Planned Development
Large Lot Residential
Residential Agriculture 2 DU/AC
Residential 2 DU/AC
Suburban Residential
Multi-family
Open Space/Park
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0 3,000 6,0001,500
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·|}þ60
ALESSANDRO BLVD
NASON ST
NASON ST
Map Produced by Moreno Valley
Geographic Information System
Geographic Information in:
NAD 1983 StatePlane California VI FIPS 0406 Feet
Printed: October 31, 2019
G:\Divisions\EconDev\2019\MXD
\NasonCorridorDev_103119A_Zoning.mxd
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) A number of development projects are planned in the surrounding area. A total of 2,237 single family and 1,781 multifamily residential units are planned within a 2 mile radius. Office and medical uses are expected to increase by more than 2,000,000 sq. ft., including six 200,000 sq. ft. Medical Office Buildings at Riverside University Health System Medical Center. Kaiser is developing a new medical campus expansion of over 1,000,000 square feet with a new 460- bed hospital, new Medical Office Buildings and facilities. A 99-bed skilled nursing facility at the adjacent Integrated Care Communities facility and a large assisted living/skilled nursing facility and medical office building across Nason Street are also in development. These planned projects will increase the number of households and jobs near the Site, offering opportunity for support services, civic uses and additional employment uses. o
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2 The information shown on this map was compiled from
the Riverside County GIS and the City of Moreno Valley
GIS. The land base and facility information on this map is for display purposes only and should not be relied upon without independent verification as to its accuracy. Riverside County and City of Moreno Valley will not be held responsible for any claims, losses or damages resulting from the use of this map.
City-Owned Parcels
Buffers
×Ö Single Family Housing
"m Multi-Family Housing
o Office/Medical
^_ Hospitality
Moreno Valley College
Hospitals
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¯
0 5,500 11,0002,750
Feet
Map Produced by Moreno Valley
Geographic Information System
Geographic Information in:
NAD 1983 StatePlane California VI FIPS 0406 Feet
Printed: October 31, 2019
G:\Divisions\EconDev\2019\MXD
\NasonCorridorDev_103119A_FutureProjects.mxd
·|}þ60
·|}þ60SR 60 Business Park Area
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EUCALYPTUS AVE
DAV
IS RD
PERRIS BLVD
COTTONWOOD AVE
KALMIA AVE
CACTUS AVE
EUCALYPTUS AVE
2 The information shown on this map was compiled from
the Riverside County GIS and the City of Moreno Valley
GIS. The land base and facility information on this map is for display purposes only and should not be relied upon without independent verification as to its accuracy. Riverside County and City of Moreno Valley will not be held responsible for any claims, losses or damages resulting from the use of this map.
City-Owned Parcels
Buffers
×Ö Single Family Housing
"m Multi-Family Housing
o Office/Medical
^_ Hospitality
Moreno Valley College
Hospitals
Industrial/Business Park
Aqua Bella
World Logistics Center
¯
0 5,500 11,0002,750
Feet
Map Produced by Moreno Valley
Geographic Information System
Geographic Information in:
NAD 1983 StatePlane California VI FIPS 0406 Feet
Printed: October 31, 2019
G:\Divisions\EconDev\2019\MXD
\NasonCorridorDev_103119A_FutureProjects.mxd
·|}þ60
·|}þ60SR 60 Business Park Area
Moreno Valley
Industrial Area
1 Mile
2Miles
Æc
ID# NAME SQ. FT.
1 Riverside County Regional Medical Center 200,000
2 Integrated Care Communities 44,000
3 Moreno Valley Medical Plaza - East 217,000
4 Renaissance Village of Moreno Valley 98,400
5 Mainstreet Post-Acute Care 57,000
6 Moreno Valley Medical Overlay Area 122,250
7 Kaiser Permanente 8,500
8 Fresenius Medical Care 12,000
OFFICE/MEDICAL BUILDING DEVELOPMENT
MAP ID UNITS
2 39
3 58
5 141
7 220
9 52
8 122
11 135
12 62
1 60
6 426
4 49
10 417
MULTI FAMILY
HOUSING
MAP ID UNITS
1 272
2 12
7 16
6 562
9 80
12 107
13 63
14 32
15 96
17 8
18 6
20 7
21 25
22 45
5 275
8 52
10 54
11 56
16 40
19 159
23 83
3 100
4 87
SINGLE FAMILY
HOUSING
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) F.1.e
Packet Pg. 296
Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) F.1.e
Packet Pg. 297
Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) timelines
Release Request for Proposals November 18, 2019
Deadline for Submittal of Proposals 5:00 p.m., February 18, 2020 Evaluation of Submission by City February/March, 2020
Preliminary presentations to
Economic Development Subcommittee March 10, 2020
City Council Deliberation and Direction possible
Exclusive Right to Negotiation Agreement (ERN) May 5, 2020 F.1.e
Packet Pg. 298
Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) F.1.e
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) proposal instructions
A complete, concise and professional response to this RFP will enable the City to identify the Developer who will provide the highest benefit to the City and will be indicative of the level of the Developer’s experience and commitment to the proposed project. Proposals must demonstrate that the approach, design, and financing plan for the proposed project will allow the project’s successful development and delivery.
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) The following minimum information should be provided in each proposal and will be utilized in evaluating each proposal submitted.
Proposals should include the following items:
n Scope of Development which shall include the following:
• The firm / team’s statement of qualifications.
• A narrative description that expresses the firm / team’s understanding of the project and vision for development. The narrative should reflect the respondent’s development design intent, strategy and implementation expertise, and understanding of the scope of work.
• Resumes with related expertise of the specific Developer and any other consultant or subcontractor resumes with relevant expertise and experience.
• Descriptions of the firm’s / team’s last three completed projects that demonstrate the Developer’s:
n Experience in working with municipalities and/or other public agencies to develop commercial development. n Ability to complete projects of a similar size, scope, and purpose in a timely manner. n Description of any other completed projects (representative examples) of similar types of projects. Include current addresses, telephone numbers, and the names of reference contacts for each project. Similar project descriptions should be submitted for all major subcontractors.
• Proposed civic amenities to be constructed at developer’s cost. • Proposed tenants and tenant mix for the development.
• Analysis of the proposed job creation potential, market demand, and the economic and financial benefits of various potential uses proposed for the Site.
• A proposed approach for undertaking this development, including n Detailed scope of work and
n Schedule for predevelopment analysis, entitlement review, construction, etc. • Standard statements:
n A statement that this RFP shall be incorporated in its entirety as a part of the Developer’s proposal. n A statement that this RFP and the Developer’s proposal will jointly become part of the “Exclusive Right to Negotiate” (“ERN”) agreement for this project when the ERN is fully executed by the Developer and the City Manager of Moreno Valley, n A single and separate section “EXCEPTIONS TO THE CITY’S REQUEST FOR PROPOSAL ” containing a complete and detailed description of any/all of the exceptions to the provisions and conditions of this Request for Proposal upon which the Developer’s proposal is contingent and which shall take precedent over this RFP, n A statement that the Developer will not discriminate against any employee or applicant for employment because of race, color, religion, sex, or national origin.
The City will not be liable for any expenses incurred by Developers responding to this solicitation. All material submitted will be kept by the City.
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) site facing north
site facing west
site facing east
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) the legal info
Following Developer selection and execution of an Exclusive Right to Negotiate agreement, Developer shall proceed with detailed due diligence, pre-development, and entitlement activities while working with City to negotiate a Purchase and Sale Agreement for the property.
As the future viability of the commercial development is critical to the success of the project, the City will require some form of recorded maintenance and security covenant on the property as part of the Purchase and Sales Agreement.
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) The City anticipates that the general scope of the successful Developer team’s responsibilities would include, but not be limited to:
pre-development costs
The selected Developer shall bear all predevelopment costs relating to this project. All fees or expenses of engineers, architects, financial consultants, attorneys, planning or other consultants or contractors retained by Developer for any study, analysis, evaluation, report, schedule, estimate, environmental review, surveys, planning and/or design activities, drawings, specifications or other activity or matter relating to the Project shall be the sole responsibility of and undertaken at the sole cost and expense of Developer and no such activity or matter shall be deemed to be undertaken for the benefit of, at the expense of, or in reliance upon the City.
deposit
The selected Developer shall reimburse the City for the actual out-of-pocket costs and expenses incurred (consultants’ fees, title reports, and appraisal costs) in negotiating and preparing the Purchase and Sale Agreement and fulfilling its obligations under this Agreement (“Reimbursable Costs”). Developer shall deposit with the City the sum of Two Hundred Fifty Thousand Dollars ($250,000.00) (“Deposit Funds”). The Deposit Funds shall be used and applied from time to time by the City to pay itself for the Reimbursable Costs.
legislative action
City and Developer acknowledge that the City must exercise its independent legislative authority in making any and all findings and determinations required of it by law concerning the City Parcels. Developer selection does not restrict the legislative authority of the City in any manner whatsoever and does not obligate the City to enter into the Exclusive Right to Negotiate Agreement or to take any course of action with respect to the Project. financing
The Developer shall be responsible for providing funding for the Project, whether it be in the form of debt financing, equity, tax credits or a combination of these methods. If debt financing is used, no financial risk or credit risk shall be imposed upon or borne by the City.
construction
The Developer shall be responsible for demolition, construction and commissioning of the Project including obtaining all permits, fees, and approvals necessary for construction of the Project. available analysis
The City completed substantial technical analysis of the Site. The information is provided as reference only. The City does not warrant or represent the accuracy or relevance of these studies to the Developer’s proposed project. The selected Developer may need to amend and/or pursue new studies to support the Developer’s proposed project.
The site analysis information listed below is available on the Economic Development Department’s website at https://www.morenovalleybusiness.com/opportunities/:
n Economic Development Map
n Demographics (City and 20 mile trade area)
n Commercial Development Marketing Sheet
n Preliminary Title Report
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) general project comments
The intended outcome of this Request for Proposals (“RFP”) process is the development of an Exclusive Right to Negotiate agreement (“ERN”) that will establish terms and conditions, and further define the scope, design, overall use and development of the Project upon which the selected Developer can purchase and develop the preferred project on the City Parcels.
During the RFP period, Developers and their employees, agents or representatives, shall have the right of reasonable access to the City Parcels during normal business hours for the purposes of inspecting the City Parcels, undertaking any necessary soils tests and otherwise conducting due diligence to ensure that the City Parcels are suitable for Developer’s intended use.
Notwithstanding anything else in this Request for Proposals, Developer shall defend, indemnify and hold the City, its employees, officers and agents, harmless from any injury, property damage or liability arising out of the exercise by Developer of this right of access, other than injury, property damage or liability relating to the gross negligence or willful misconduct of the City or its officers, agents or employees.
The City has the sole authority to select a Developer for this project and reserves the right to reject any and all proposals and to waive any informality or minor defects in proposals received.
The City reserves the right to retain all proposals submitted and to use any ideas in a proposal, regardless of whether that proposal is selected. Submission of a proposal indicates acceptance by the proposing Developer of the conditions contained in this Request for Proposals, unless clearly and specifically noted.
The City will not pay for any information requested, nor is it liable for any costs incurred by the Developers in preparing and submitting proposals.
CONTRACTOR INDEMNIFICATION
Developer shall indemnify, defend and hold the City, the Moreno Valley Housing Authority, and the Moreno Valley Community Services District (CSD), their officers, agents and employees harmless from any and all claims, damages, losses, causes of action and demands, including, without limitation, the payment of all consequential damages, expert witness fees, reasonable attorney’s fees and other related costs and expenses, incurred in connection with or in any manner arising out of Developer’s performance of the work contemplated by this RFP . Submitting a response to this RFP signifies that the Developer is not covered under the City’s general liability insurance, employee benefits, or worker’s compensation.
It further establishes that the Developer shall be fully responsible for such coverage. Developer’s obligation to indemnify shall survive expiration or termination of this RFP and shall not be restricted to insurance proceeds, if any, received by the City, the Moreno Valley Housing Authority, and the CSD, and their officers, agents and employees.
ADDITIONAL INDEMNITY OBLIGATIONS
Developer shall defend, with counsel of City’s choosing and at Developer’s own cost, expense and risk, any and all claims, suits, actions or other proceedings of every kind that may be brought or instituted against City, the Moreno Valley Housing Authority, and the CSD, and their officers, agents and employees as a result of this RFP . Developer shall pay and satisfy any judgment, award or decree that may be rendered against City, the Moreno Valley Housing Authority, and the CSD, and their officers, agents and employees as part of any such claim, suit, action or other proceeding. Developer shall also reimburse City for the cost of any settlement paid by City, the Moreno Valley Housing Authority, and the CSD, and their officers, agents and employees as part of any such claim, suit, action or other proceeding. Such reimbursement shall include payment for City’s attorney’s fees and costs, including expert witness fees.
Developer shall reimburse City, the Moreno Valley Housing Authority, and the CSD, and their officers, agents and employees for any and all legal expenses and costs incurred by each of them in connection therewith or in enforcing the indemnity herein provided.
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY)
INTELLECTUAL PROPERTY
Any system or documents developed, produced or provided in response to this RFP, including any intellectual property discovered or developed by Developer in the course of performing or otherwise as a result of its work, shall become the sole property of the City unless explicitly stated otherwise in the RFP response. The Developer may retain copies of any and all material, including drawings, documents, and specifications, produced by the Developer in performance of this proposal. The City and the Developer agree that to the extent permitted by law, until final approval by the City, all data shall be treated as confidential and will not be released to third parties without the prior written consent of both parties.
PUBLIC RECORD
Proposals received will become the property of the City. All proposals, evaluation documents, and any subsequent contracts will be subject to public disclosure per the “California Public Records Act,” California Government Code, sections 6250 – 6270. All documents related to this solicitation will become public records once discussions and negotiations with proposers have been fully completed and an award has been announced.
Appropriately identified trade secrets will be kept confidential to the extent permitted by law. Any proposal section alleged to contain proprietary information will be identified by the proposer in boldface text at the top and bottom as “PROPRIETARY .” Designating the entire proposal as proprietary is not acceptable and will not be honored. Submission of a proposal will constitute an agreement to this provision for public records. Pricing information is not considered proprietary information.
ASSIGNMENT
Developer selection includes consideration of the merits of the firm / team. Assignment of the proposal is discouraged and the City reserves the right to cancel the contract if the contract is assigned without City’s written consent.
RFP ADDENDA
The City may determine it is necessary to revise any part of this solicitation. Revisions will be made by written addenda and it is the Developer’s responsibility to understand and comply with any addenda to this solicitation. Addenda may be posted on the City’s website, https://www.morenovalleybusiness.com/opportunities/, under Destination MoVal:
T own Center RFP and may contact the Economic Development Department:
City of Moreno Valley
Attn: Mike Lee, Economic Development Director
14177 Frederick Street
Moreno Valley, CA 92552-0805
T elephone: 951.413.3460
Email: [email protected]
CIVIL RIGHTS COMPLIANCE/EQUAL OPPORTUNITY ASSURANCE
Developer will be in compliance with the applicable provisions of the Americans with Disabilities Act of 1990, and will be an equal opportunity employer as defined by Title VII of the Civil Rights Act of 1964, including the California Fair Employment and Housing Act of 1980. As such, Developer will not discriminate against any person on the basis of race, religious creed, color, national origin, ancestry, disability, medical condition, marital status, age or sex with respect to hiring, application for employment, tenure or terms and conditions of employment. In addition, the City of Moreno Valley, as defined in Resolution NS-20,137 and Ordinance 92-11, further prohibits discrimination on the basis of sexual orientation, height, weight and physical characteristics. Developer agrees to abide by all of the foregoing statutes, regulations, ordinances and resolutions.
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) City of Moreno Valley
14177 Frederick Street
Moreno Valley, CA 92552-0805
T elephone: 951.413.3460
www.morenovalleybusiness.com
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Attachment: Attachment B - Copy of RFP (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) ATTACHMENT “C” TO CITY OF MORENO VALLEY
SUMMARY REPORT (GOV C 52201)
COPY OF APPRAISAL SUMMARY
[SEE ATTACHED]
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Attachment: Attachment C - Copy of Appraisal Summary (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY)
APPRAISAL OF REAL PROPERTY
City Owned Land
NWC Alessandro Blvd. & Nason St.
Moreno Valley, Riverside County, CA 92555
IN AN APPRAISAL REPORT
As of March 27, 2020
Prepared For:
City of Moreno Valley
14177 Frederick Street
Moreno Valley, CA 92553
Prepared By:
Cushman & Wakefield Western, Inc.
Valuation & Advisory
901 N. Via Piemonte, Suite 200
Ontario, CA 91764
Cushman & Wakefield File ID: 20-38017-900034-001
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CUSHMAN & WAKEFIELD WESTERN, INC.
901 N. VIA PIEMONTE, SUITE 200
ONTARIO, CA 91764
CUSHMAN & WAKEFIELD
City Owned Land
NWC Alessandro Blvd. & Nason St.
Moreno Valley, Riverside County, CA 92555
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Attachment: Attachment C - Copy of Appraisal Summary (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY)
901 N. Via Piemonte, Suite 200
Ontario, CA 91764
Tel +1 909-980-7788
cushmanwakefield.com
April 23, 2020
Ms. Michele Patterson
Economic Development Manager
City of Moreno Valley
14177 Frederick Street
Moreno Valley, CA 92553
Re: Appraisal Report
City Owned Land
NWC Alessandro Blvd. & Nason St.
Moreno Valley, Riverside County, CA 92555
Cushman & Wakefield File ID: 20-38017-900034-001
Dear Ms. Patterson:
In fulfillment of our agreement as outlined in the Letter of Engagement copied in the Addenda, we are pleased to transmit our appraisal of the above referenced property in the following Appraisal Report.
The subject property consists of 2,457,654 square feet (56.42 a cres), which is currently zoned for public facilities and is owned by the city of Moreno Valley. The subject features two non-contiguous legal parcels with an 80-foot wide right-of-way dividing the property (Bay Avenue, yet to be improved). The subject property is located in the eastern section of the city in an area known as Rancho Belago. The property consists entirely of raw land with no on-site improvements. Off-site improvements include curb, gutter and sidewalks along Nason Street and curb and gutter along Cottonwood Avenue. There are no curb and gutter improvements along Alessandro Blvd.
Per review of the Moreno Valley RFP provided, the City Council asked for proposals on November 18, 2019 to develop the site into Destination MoVal Town Center, a vibrant, safe, multi-use destination for its residents, visitor and business owners. The request from the city was for the pro posals to provide a distinctive opportunity for a center that would include commercial development, entertainment, professional office, R&D, civic uses, public gathering spaces and diverse forms of connectivity with potenti al for a complementary re sidential; component or corporate headquarter(s) campus location.
The city desires to enter into a Public Private Partnership in order to achieve sustainable long-term economic and community benefits. The City would contribute its acreage to a project that would be developed consistent the City Council’s vision at private expense.
The city has requested an appraisal report reflecting the Highe st & Best Use of the site (alternative zoning designation permitted). The Sales Comparison Analysis and a Land Residual Analysis were utilized to determine the Market Value As-Is of the vacant site. Per discussions wit h city officials, an industrial use would not be a permitted use.
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Attachment: Attachment C - Copy of Appraisal Summary (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) Ms. Michele Patterson
City of Moreno Valley
April 23, 2020
Cushman & Wakefield Western, Inc.
This Appraisal Report has been prepared in accordance with Uniform Standards of Professional Appraisal Practice (USPAP).
In recent times, the CRE market has been driven by investor demand and strong liquidity. Asset values can fall significantly in short periods of time if either of these two f actors, often in conjunction with many others, change significantly. While Cushman & Wakefield is closely monitoring the latest developments resulting from the COVID- 19 pandemic, and will continue to provide updates as events unfold, the reader is cautioned to consider that values and incomes are likely to change more rapidly and significantly than during standard market conditions.
Furthermore, the reader should be cautioned and reminded that any conclusions presented in this appraisal report apply only as of the effective date(s) indicated. The appraiser makes no representation as to the effect on the subject property(ies) of this event, or any event, subsequent to the effective date of the appraisal.
Based on the agreed-to Scope of Work, and as outlined in the report, we developed the following opinion:
Extraordinary Assumptions
For a definition of Extraordinary Assumptions please see the Gl ossary of Terms & Definitions. The use of extraordinary assumptions, if any, might have affected the assignment results.
It is an Extraordinary Assumption of this report that the city of Moreno Valley will work with a prospective buyer to develop a Specific Plan for the development of the subject site and we are assuming there is no entitlement risk associated with the site as this will be a Public Private Partnership.
Hypothetical Conditions
For a definition of Hypothetical Conditions please see the Glossary of Terms & Definitions. The use of hypothetical conditions, if any, might have affected the assignment results.
This appraisal does not employ any hypothetical conditions.
This letter is invalid as an opinion of value if detached from the report, which contains the text, exhibits, and Addenda.
Value Conclusion
Appraisal Premise Real Property Interest
Market Value As-Is Fee Simple
Compiled by Cushman & Wakefield Western, Inc.
Date of Value Value Conclusion Range
March 27, 2020 $4,700,000 to $5,600,000
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Attachment: Attachment C - Copy of Appraisal Summary (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) Ms. Michele Patterson
City of Moreno Valley
April 23, 2020
Cushman & Wakefield Western, Inc.
Respectfully submitted,
CUSHMAN & WAKEFIELD WESTERN, INC.
Jennifer A. Hafner, MAI
Director
CA Certified General Appraiser
License No. AG039874
[email protected]
(909) 942-4676 Office Direct
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CITY OWNED LAND CLIENT SATISFACTION SURVEY
CUSHMAN & WAKEFIELD 6
Client Satisfaction Survey
V&A National Quality Control Group values your feedback! What are we doing right?
Are there areas where we could improve?
Did our report meet your requirements?
As part of our quality monitoring campaign, your comments are critical to our efforts to continuously improve our service.
We’d appreciate your help in completing a short survey pertaining to this report and the level of service you received. Rest assured, any feedback will be treated with proper discretion and is not shared with executive management. If you prefer to limit who receives the survey response, the distribution can be altered at your request.
Simply click https://www.surveymonkey.com/r/LQKCGLF?c=20-38017-900034-001 to respond or print out the survey in the Addenda to submit a hard copy.
Contact our Quality Control Committee with any questions or comments:
Clarke Lewis, MAI
Senior Managing Director
Appraisal Management
Valuation & Advisory
T +1 631 234 5140
F +1 716 852 0890
[email protected]
Sid Womack, MAI, AI-GRS, FRICS
Senior Managing Director
Regional Leader
Valuation & Advisory
T +1 972 663 9659
F +1 716 852 0890
[email protected]
Rick Zbranek, MAI
Senior Managing Director
National Quality Control
Valuation & Advisory
T +1 713 963 2863
F +1 716 852 0890
[email protected]
Steve Henry, MAI
Managing Director
Client Relations and Quality
Assurance
Valuation & Advisory
T +1 949 930 9211
F +1 716 852 0890
[email protected]
Steve Saunders, MAI, AI-GRS, FRICS
Executive Managing Director
Florida Valuation & Advisory Market
Leader
Valuation & Advisory
T +1 407 541 4384
F +1 716 852 0890
[email protected]
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CITY OWNED LAND TABLE OF CONTENTS
CUSHMAN & WAKEFIELD 7
Table of Contents
Summary of Salient Facts and Conclusions .............................................................................................................. 8 Property Photographs .............................................................................................................................................. 10 Scope of Work .......................................................................................................................................................... 13 Overview .............................................................................................................................................................. 13 Report Option Description .................................................................................................................................... 14 Identification of Property ...................................................................................................................................... 14 Property Ownership and Recent History .............................................................................................................. 14 Dates of Inspection and Valuation ....................................................................................................................... 15 Inland Empire Regional Analysis ............................................................................................................................. 16 Local Area Analysis .................................................................................................................................................. 23 Access .................................................................................................................................................................. 23 Nearby and Adjacent Uses .................................................................................................................................. 24 Local Area Characteristics ................................................................................................................................... 24 Moreno Valley Development ................................................................................................................................ 26 Conclusion............................................................................................................................................................ 27 Property Analysis ..................................................................................................................................................... 29 Site Description .................................................................................................................................................... 29 Real Property Taxes and Assessments ............................................................................................................... 32 Zoning .................................................................................................................................................................. 33 Valuation .................................................................................................................................................................. 35 Highest and Best Use .......................................................................................................................................... 35 Investment Considerations ................................................................................................................................... 37 Valuation Process ................................................................................................................................................ 44 Land Valuation ..................................................................................................................................................... 46 Reconciliation and Final Value Opinion ............................................................................................................... 59 Extraordinary Assumptions .................................................................................................................................. 59 Hypothetical Conditions ....................................................................................................................................... 59 Assumptions and Limiting Conditions .................................................................................................................. 61 Certification .......................................................................................................................................................... 63 Addenda Contents ................................................................................................................................................... 64
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CITY OWNED LAND SUMMARY OF SALIENT FACTS AND CONCLUSIONS
CUSHMAN & WAKEFIELD 8
Summary of Salient Facts and Conclusions
BASIC INFORMATION
Common Property Name:
Address:
County:
Property Ownership Entity:
SITE INFORMATION
Land Area: 2,457,654 Square Feet 56.42 Acres
APN:
487-470-030 1,501,949 Square Feet 34.48 Acres
487-470-031 955,706 Square Feet 21.94 Acres
Site Shape:
Site Topography:
Frontage:
Site Utility:
City Owned Land
NWC Alessandro Blvd. & Nason St.
Moreno Valley, California 92555
Riverside
City of Moreno Valley, California
Irregularly shaped
Level at street grade
Good
Good
MUNICIPAL INFORMATION
Assessment Information:
Assessing Authority:
Assessor's Parcel Identification:
Current Tax Year:
Taxable Assessment:
Current Tax Liability:
Zoning Information:
Municipality Governing Zoning:
Current Zoning:
Is current use permitted?
Current Use Compliance:
Zoning Change:
HIGHEST & BEST USE
As Vacant:
A mixed-use (residential and/or commercial) development built to its maximum feasible building area, when market conditions allow.
Riverside County
487-470-030 and 031
2019/2020
$0 (Tax Exempt)
$0 (Tax Exempt)
City of Moreno Valley
Public District
Yes
Complying use
The city of Moreno Valley is entertaining
alternative uses for the site and likely a
Specific Plan will be developed for the
subject site.
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CITY OWNED LAND SUMMARY OF SALIENT FACTS AND CONCLUSIONS
CUSHMAN & WAKEFIELD 9
Extraordinary Assumptions
For a definition of Extraordinary Assumptions please see the Gl ossary of Terms & Definitions. The use of extraordinary assumptions, if any, might have affected the assignment results.
It is an Extraordinary Assumption of this report that the city of Moreno Valley will work with a prospective buyer to develop a Specific Plan for the development of the subject site and we are assuming there is no entitlement risk associated with the site as this will be a Public Private Partnership.
Hypothetical Conditions
For a definition of Hypothetical Conditions please see the Glossary of Terms & Definitions. The use of hypothetical conditions, if any, might have affected the assignment results.
This appraisal does not employ any hypothetical conditions.
VALUATION INDICES Market Value
As-Is
VALUE DATE March 27, 2020
Land Value
Indicated Value (Low-End): $4,700,000
Indicated Value (Mid-Point): $5,100,000
Indicated Value (High-End): $5,600,000
FINAL VALUE CONCLUSION
Real Property Interest: Fee Simple
Concluded Value: $4,700,000 to $5,600,000
Per Square Foot: $1.91 to $2.28
EXPOSURE AND MARKETING TIMES
Exposure Time: 12+ Months
Marketing Time: 12+ Months
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CITY OWNED LAND PROPERTY PHOTOGRAPHS
CUSHMAN & WAKEFIELD 10
Property Photographs
AERIAL PHOTOGRAPH
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CITY OWNED LAND PROPERTY PHOTOGRAPHS
CUSHMAN & WAKEFIELD 11
Page one
VIEW LOOKING NORTH FROM ALESSANDRO
BOULEVARD
VIEW LOOKING NORTHEAST FROM
ALESSANDRO BOULEVARD
VIEW LOOKING SOUTHWEST FROM NASON
STREET
VIEW LOOKING SOUTH FROM THE
NORTHERN PROPERTY LINE
VIEW LOOKING EAST FROM THE WESTERN
PROPERTY LINE
VIEW LOOKING WEST FROM THE EASTERN
PROPERTY LINE
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CITY OWNED LAND PROPERTY PHOTOGRAPHS
CUSHMAN & WAKEFIELD 12
age two
VIEW LOOKING EAST ALONG ALESSANDRO
BOULEVARD
VIEW LOOKING WEST ALONG ALESSANDRO
BOULEVARD
VIEW LOOKING NORTH ALONG NASON
STREET
VIEW LOOKING SOUTH ALONG NASON
STREET
VIEW LOOKING WEST ALONG COTTONWOOD
AVENUE
VIEW LOOKING EAST ALONG COTTONWOOD
AVENUE
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CITY OWNED LAND SCOPE OF WORK
CUSHMAN & WAKEFIELD 13
Scope of Work
Overview
Scope of work is the type and extent of research and analyses i nvolved in an assignment. To determine the appropriate scope of work for the assignment, we considered the intended use of the appraisal, the needs of the user, the relevant characteristics of the subject property, and other pertinent factors. Our concluded scope of work is summarized below, and in some instances, additional scope details are included in the appropriate sections of the report:
Research
We inspected the property and its environs. Physical information on the subject was obtained from the property owner’s representative, public records, and/or third-party sources. Regional economic and demographic trends, as well as the specif ics of the subject’s local area were investigated. Data on the local and regional property market (supply and demand trends, rent levels, etc.) was also obtained. This process was based on interviews with regio nal and/or local market participants, primary research, available published data, and other various resources. Other relevant data was collected, verified, and analyzed. Comparable property data was obtained from various sources (public records, third-party data-reporting services, etc.) and confirmed with a party to the transaction (buyer, seller, broker, owner, tenant, etc.) wherever possible. It is, however, sometime s necessary to rely on other sources deemed reliable, such as data reporting services.
Analysis
Based upon the subject property c haracteristics, prevailing market dynamics, and other information, we developed an opinion of the property’s Highest and Best Use. The subject site is currently zoned for public use. Providing a As Is Value under the current zoning was not p art of the scope of this assignment. It is an Extraordinary Assumption of this report that the city of Moreno Valley will work with a prospective buyer to develop a Specific Plan for the development of the subject site and we are assuming there is no entitlement risk associated with the site as this will be a Public Private Partnership. We analyzed the data gathered using generally accepted appraisal methodology to arrive at a probable value indication via each applicable approach to value. We utilized b oth the Sales Comparison and Land Residual Approaches to determine the unentitled land value of the site, as though being zoned under a new Specific Plan.
The results of each valuation approach are considered and reconciled into a reasonable value estimate.
This Appraisal Report has been prepared in accordance with Uniform Standards of Professional Appraisal Practice (USPAP).
Cushman & Wakefield Western, Inc. has an internal Quality Control Oversight Program. This Program mandates a “second read” of all appraisals. Assignments prepared and signed solely by designated members (MAIs) are read by another MAI who is not participating in the assignment. Assi gnments prepared, in whole or in part, by non- designated appraisers require MAI participation, Quality Contro l Oversight, and signature. For this assignment, Quality Control Oversight was provided by Eric Garfield, MAI.
This appraisal employs the Sales Comparison and Land Residual A pproaches. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that this approach would be considered necessary and applicable for market participants. Typical purchasers do not generally rely on the Cost or Income Capitalization Approaches when purchasing a property such as the subject of this report. Therefore, we F.1.f
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CITY OWNED LAND SCOPE OF WORK
CUSHMAN & WAKEFIELD 14
have not employed the Cost Approach or the Income Capitalizatio n Approach to develop an opinion of market value. The exclusion of these approaches to value does not reduce the credibility of the assignment results.
Report Option Description
USPAP identifies two written repo rt options: Appraisal Report a nd Restricted Appraisal Report. This document is prepared as an Appraisal Report in accordance with USPAP guidel ines. The terms “describe,” summarize,” and “state” connote different levels of detail, with “describe” as the most comprehensive approach and “state” as the least detailed. As such, the following provides specific descriptions about the level of detail and explanation included within the report:
Describes the real estate and/or personal property that is the subject of the appraisal, including physical, economic, and other characteristics that are relevant
States the type and definition of value and its source Describes the Scope of Work used to develop the appraisal Describes the information analyzed, the appraisal methods used, and the reasoning supporting the analyses and opinions; explains the exclusion of any valuation approaches States the use of the property as of the valuation date Describes the rationale for the Highest and Best Use opinion Identification of Property
Common Property Name: City Owned Land
Address: NWC Alessandro Blvd. & Nason St., Moreno Valley, Riverside County, California 92555
Location: The subject property is located in the eastern section of the city in an area known as Rancho Belago.
Assessor's Parcel Numbers: 487-470-030 and 031
Legal Description: The legal description is presented in the Addenda of the report (Preliminary Title Report, prepared by Chicago Title Company and dated November 8, 2019) Property Ownership and Recent History
Current Ownership: City of M oreno Valley, California
Sale History: To our knowledge, the property has not otherwise sold or transferred within three years of the effective date of the appraisal.
Current Disposition: To the best of our knowledge, the subject property is not under contract for sale; however, per review of the provided Moreno Valley RFP, the Cit y Council has asked for proposals to develop t he site into Destination MoVal Town Center, a vibrant, safe, multi-use destination for its residents, visitor and business owners.
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Dates of Inspection and Valuation
Effective Date of Valuation:
As Is: March 27, 2020
Date of Report: April 23, 2020
Date of Inspection: March 27, 2020
Property Inspected by: Jennifer A. Hafner, MAI did an exterior inspection only.
Client, Intended Use and Users of the Appraisal
Client: City of Moreno Valley
Intended Use: This appraisal is intended to provide an opinion of the Market Value of the Fee Simple interest in the property for the use of the client for i nternal decision making purposes. This report is not intended for any other use.
Intended User: This appraisal report was prepared for the exclusive use of Cit y of Moreno Valley. Use of this report by others is not intended by the app raiser.
Please see the Engagement Letter in the addenda.
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Inland Empire Regional Analysis
REGIONAL MAP
Introduction
The Riverside-San Bernardino-Ontario Core Based Statistical Are a (CBSA), known as the Inland Empire, encompasses Riverside and San Bernardino counties in Southern California. Although the Inland Empire covers a large geographic region of approx imately 27,298 square miles, t he majority of land is desert. The metro area’s population is concentrated in the west, in proximity to the pop ulation centers of Los Angeles County and Orange County. San Bernardino County is the largest in terms of total land area in California, a nd Riverside County is ranked the fourth largest. According Experian Marketing Solutio ns Inc., 2.4 million residents reside in Riverside County and roughly 2.2 million residents live in San Bernardino County, nearly dividing the 4.6 million residents of the metro area evenly. The principal city of the metro area is Riverside, with an estimated population of 324,120 residents, representing approximately 7.1% of the total Inland Empire metro population. The primary driving factor of growth in the Inland Empire historically has been the region’s proximity to the coastal regions of Los Angeles and Orange County. Relative to these regions, the rather inexpensive land prices combined with large supply of vacant land has allowed the Inland Empire to develop into a key distribution and manufacturing epicenter abundant with industrial space.
Map
The following map displays the Inland Empire within California:
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Current Trends
Riverside-San Bernardino-Ontario’s expansion is maintaining mor e than average momentum at the beginning of 2020, mostly thanks to a solid housing market and strong net mi gration before the recent COVID-19 pandemic.
Employment had leveled at the beginning of 2020 and it is too soon to tell what the impact on employment will be in the region due to the pandemic. Despite the slowing in employment, wages in the Inland Empire had been continuing to increase, although at a more modest pace than in the state and again, too soon to tell the longer term impact due to COVID-19. As a resu lt of strong population growth in 2018, Inland Empire led the state in job and payroll growth in 2019. According to UCR Center for Forecasting , Inland Empire payroll grew 2% from 2018 to 2019. In 2019, the region also experienced a 2% boost in job gr owth, adding roughly 1.6 million jobs, which outpaced both the national and state employment rate. The logistics sector remains the primary economic driver in the Inland Empire, which is recognized for being one of the nat ion’s top warehousing hubs by both employment share and warehouse space, which should bode well for the regio n as warehousing and di stribution will continue to be an essential segment for continued economic driver during the aftermath of COVID-19. The region’s heavy reliance on the sector, however, will limit the area from further external developments and economic diversification long-term. Nevertheless, the metro area continues to serve as an affordable alternative to the neighboring coastal regions of Los Angeles and Orange County for housing and business operations, while benefiting from its position as a secondary shipping center of the Twin Ports of Los Angeles and Long Beach. Overall, the outlook of the Inland Empire is uncertain at this point in time due to the changing landscape of the COVID-19 pandemic.
Further considerations are as follows:
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In August 2018, the Ontario International Airport Authority (OIAA) marked the completion of the airport’s eight dining concessions. In 2017, ONT went under a $6 million makeov er for the complete rebranding and refurbishment of the airport’s food and dining concessions. The airport formed an agreement with Delaware North to help deliver a high-quality dining experience. The par tnership with Delaware North will help generate over $13 million over the next decade for the OIAA. Additionally, the Federal Aviation Administration has awarded the authority a $11.8 million grant through the agency’ s Airport Improvement Program. The Airport Improvement Program supports U.S airports in improving and modernizing their infrastructure. The Federal Aviation Administration grant includes: $8.7 million to repair ramp aprons, $2.6 million to build a taxiway, $314,000 for taxiway repairs, and $204,000 to install runway lighting. The explosive growth of e-commerce has increased investment in the Inland Empire industrial market, which is the fifth-largest in the nation by inventory and serves as the inland gateway for the largest U.S. shipping ports in Los Angeles and Long Beach. Investment and absorption by major online retailers in the region’s warehouse and fulfillment centers have created significant economic impact, translating into increased consumer spending and low-wage employment in the region’s trade, transportation & utilities and construction sectors. Inland Empire will be the home to three of the ten bigge st industrial developments built in the country. In late 2018, Nordstrom signed one of the largest property sales in the Inlan d Empire history, over one million-square-foot logistic hub in Columbia Business Park for approximately $123.8 million and moved-in February 2019. In 2017, Amazon opened a new a one million square foot fulfillment center at the Goodman Commerce Center facility in Eastvale. In June 2019, Amazon announced that they plan to hire an additional 2,000 full-time employees in the Inland Empire’s fulfillment centers.
A combination of space, amenities, and affordability has helped drive continued home price gains in the Inland Empire. In 2019, the median price for an existing single-family home is $380,000, almost a 5.6% boost year- over-year. However, the region’s gains still fall behind rates from 2016 to 2018 when prices experienced an 8% increase annually. The Inland Empire’s median home price remain s 3.4% below its pre-recession peak of $393,400.
Steady gains in passenger and cargo volumes continued in January at Ontario International Airport (ONT), putting the Inland Empire airport on pace to welcome nearly 5.6 million air travelers in 2019, the highest number in a decade and 9.1% more than the previous year. For two consecutive years, Ontario was ranked the fastest growing airport in the United States, according to the Global Traveler. Arriving and departing passengers totaled more than 454,539 in January 2020, a 14.7% increase from January a year ago. The number included 423,643 domestic passengers, 14.7% higher than January 2019. The number of international travelers also jumped
14.7% from 26,929 last January to 30,896 passengers.
Economic Trends
The November 2019 Moody’s Analytics Précis report for the Inland Empire Region is as follows:
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Local Area Analysis
LOCAL AREA MAP
Location Overview
The property is located in Riverside County within the City of Moreno Valley, CA. The subject property is located in the southeastern section of the city in an area known as Ran cho Belago. The area was created in 2007 and is considered an upscale part of Moreno Valley, with new stores, shopping centers and higher-end homes.
Access
Local area accessibility is generally average, relying on the following transportation arteries:
Local: Access to the subject neighborhood is via Nason Street, which is a north/south arterial running through the city and connects to S tate Highway
60. SH-60 is the main east/west route that is one-mile north o f the subject property, which connect with the 215 Freeway approximately five and one- half miles west. State Highway 60 connects with Interstate 15, approximately 20 miles west.
Regional: Interstate 215 and the 60 freeway provide regional ingress and egress to the City of Moreno Valley from Orange County, Los Angeles County, and nearby San Bernardino County. The local area is also served by several regional rail lines.
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Nearby and Adjacent Uses
The subject's immediate neighborhood consists predominantly residential and vacant land uses. The uses immediately surrounding the subject property are as follows:
North: North of the subject is a residential neighborhood and an el ementary school (Moreno Elementary School) and a public park (Morrison Park). One block north along Dracaea Avenue, is a public high school (Valley View High School) and a middle school (Mountain View Middle School). State Highway 60 is located approximately one mile north. Adjacent to the freeway are major retail credit tenants including Target, Costco and Walmart within the Stoneridge Towne Center and Moreno Beach Plaza. Further north are the cities of Redlands and Loma Linda.
South: Across Alessandro Boulevard to the south is a vacant land par cel and a private school (Valley Christian Academy). Riverside County Regional Medical Center ( 415 bed) is located one block south.
There is residential land (Aquabella Residential site) located south of the hospital. Aquabella is a Specific Plan with over 645 acres site that allows for 2,922 dwelling units for a gated active-adult resort community, which was adopted in 2005. Kaiser Permanente is also expanding their campus, which is located adjacent and to the south of the Aquabella site. Kaiser’s proposed expan sion is a multi-phased, state-of-the-art medical center campus, with approximately 460-bed hospital, support buildings, outpatient office buildings, energy center, and parking. This proposed site is located one and one-half miles to the south of the subject property. There is a Stater Bros. anchored center under two miles southwest at the intersection of Lasselle Street and Iris Avenue. Moving south, across Iris Avenue, are residential neighborhoods and the Moreno Valley Community College (estimated 9,000 students). Within three and three -quarter miles south is Lake Perris State Recreation Area. This 8,800-acre park allows for fishing, water sports, camping, rock climbing and horseback riding.
East: East of the subject, across Nason Street are residential and commercial uses followed by vacant land. Further east are neighborhoods within the Rancho Belago community and a Stater Bros. anchored center within the Moreno Marketplace shopping center. The location for the planned World Logistics Center is within two miles east of the subject, which is a master-plan ned development encompassing up to 40.6 million square feet of building area specifically designed to s upport large-scale logistics operations in a quality business environment. Within three miles of the subject, the land use turns to mountain terrains. West: A d j a c e n t t o t h e e a s t o f t h e s u b j e c t i s a v a c a n t land parcel zoned for office along Alessandro Boulevard. Adjacent to this parcel is single-family residential neighborhood. Moving west, the land use is primarily residential with scattered retail uses along the primary arteries. The land use turns to industrial use as it passes Heacock Street, which is approximately three miles to the west. March Air Reserve Base is located approximately three and one-half miles west of the s ubject. The Escondido (215) freeway is located just west of the base. The city of Riverside is adjacent west of the city of Moreno Valley.
Local Area Characteristics
Incorporated in 1984, Moreno Valley had been one of the fastest -growing communities in the nation prior to the recession. Moreno Valley is centrally located in the Inland Empire region of Southern California, a region containing vast amounts of land and a rapidly growing population. Although, growth has slowed considerably since the recent recession, Moreno Valley has grown from a largely undeveloped and unpopulated area of Riverside County to a diverse community with a large work force and surplus of comparatively inexpensive residential housing. The City limits encompass 50 square miles of land bordering the cities of Riverside and Perris, the Lake Perris Recreational Area, and the March Global Port.
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The rapid population growth is largely attributed to Moreno Val ley’s large range of affordable housing options and its huge surplus of developable land. The City is made up mostly of young families, with an average family consisting of two parents and two young children.
Moreno Valley is home to over 32 public parks and 6,000 acres of open space at the Lake Perris Recreational Area.
Recently, the City was voted “Number One in Riverside County fo r Family Recreation” by the Press Enterprise newspaper. The City has two public school districts and is home to the Riverside Community College (Moreno Valley campus). Moreno Valley is a lso in close proximity to Cal State San Bernardino, Loma Linda Medical University, the University of Redlands, and the University of C alifornia, Riverside, the Inland Empire’s largest institution of higher education.
Moreno Valley experienced a rapid growth rate over the past fiv e years as the area’s industrial base increased dramatically along the I-215 Industrial Corridor. This region is currently home to the following warehouse/distribution centers: Amazon, Skechers, Whirlpool, Hanes, Minka Lighting, Philips Electronics, a Post Office Distribution Center, Ross Distribution Center, Serta Mattress Manufacturing & Distri bution Center, United Natural Foods, Inc., and Walgreen’s Distribution Center. The commercial sector of the City grew rapidly with the addition of the following businesses: Ayres Suites, Best Buy, Costco’s expansion, Hampton Inn & Suites, Kohl’s, Super Target, Wal-Mart Super Center and several nationally recognized restaurants.
Demographics
The accompanying chart “Demographic Profile” provides an overview of the demographic characteristics of the 1, 3 and 5-mile radius, the City of Moreno Valley, along with Riverside County, and the State of California. (Source:
Experian Market Services 2019)
The approximate population within a three-mile radius of the subject is 119,801 as of 2019 and is expected to grow at an annual compounded growth of 0.64 percent for the next five years, however this is lower than the growth rate of 0.92 percent for Riverside County. Within a three-mile radi us, the number of households was 31,432 and the average household size was 3.81 persons.
The median home price for the city of Moreno Valley was $360,00 0, below the County of Riverside average of $400,000 (Source: CoreLogic February 2020).
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Moreno Valley Development
Based on the February 2020 Development Projects available on the City’s website and below is a general summary of the land uses and development projects with the City:
Retail concentration has been at the northwestern edge of the city at the junction of the 60 and 215 Freeways (brown in map below).
Industrial development has been primarily located surrounding the March A ir Force Base and to the east along the 60 Freeway (blue in map below). The new proposed World Logistic Center will predominantly be for industrial use as well (yellow in the map below).
Hospitality development has primarily been along the 60 Corridor and the Moreno Valley Mall (stars on the map below) in the northwestern portion of the city.
Single Family developments either under const ruction, in process, approved or in plan check total 2,228 units. There are a total of 674 units currently under construct ion and 690 units that have been approved, the remaining 864 units are either in plan check or in process with the city. (yellow house in map below) There are two primary development clusters of single family residential development at the northern portion of the city and to the southeast of the subject along the foothills of Lake Perris. Multi-family developments either under construction, in process, approved or in plan check total 2,465 units.
There are a total of 266 units currently under construction and 1,285 units that have been approved, the
DEMOGRAPHIC SUMMARY
1.0-Mile 3.0-Mile 5.0-Mile City of Riverside State of
Radius Radius Radius Moreno Valley County California
POPULATION STATISTICS
2000 2,891 74,018 132,724 142,529 1,545,383 33,859,654
2019 8,451 119,801 195,815 208,285 2,416,944 39,612,413 2024 9,006 123,663 201,020 213,565 2,530,618 40,846,261 Compound Annual Change
2000 - 2019 5.81% 2.57% 2.07% 2.02% 2.38% 0.83%
2019 - 2024 1.28% 0.64% 0.53% 0.50% 0.92% 0.62%
HOUSEHOLD STATISTICS
2000 769 19,723 36,397 39,257 506,221 11,498,168
2019 2,060 31,432 52,495 56,016 770,508 13,593,621
2024 2,212 32,580 54,078 57,614 808,687 14,077,777
Compound Annual Change
2000 - 2019 5.32% 2.48% 1.95% 1.89% 2.24% 0.89%
2019 - 2024 1.43% 0.72% 0.60% 0.56% 0.97% 0.70%
AVERAGE HOUSEHOLD INCOME
2000 $51,085 $52,916 $53,304 $54,066 $56,061 $65,671
2019 $80,897 $74,305 $73,811 $75,208 $86,589 $106,762
2024 $90,555 $83,125 $82,683 $84,184 $98,100 $122,842
Compound Annual Change
2000 - 2019 2.45% 1.80% 1.73% 1.75% 2.31% 2.59%
2019 - 2024 2.28% 2.27% 2.30% 2.28% 2.53% 2.85%
OCCUPANCY
Owner Occupied 59.05% 62.10% 58.89% 59.53% 64.78% 54.18% Renter Occupied 40.95% 37.90% 41.11% 40.47% 35.22% 45.82% SOURCE: © 2019 Experian Marketing Solutions, Inc. •All rights reserved F.1.f
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remaining 914 units are either in plan check or in process with the city. (orange square in map below) The primary multi-family clusters of proposed developments are located to the northwest along the 60 Freeway and to the west of the Riverside University Heath Systems and p roposed Aquabella site (brown in map below).
o As discussed previously, the Aquabella Specific Plan is a 645.24 acre site that is for 2,922 dwelling units for a gated active-adult resort community. This specific plan was adopted in 2005, before the housing crisis of 2008, and over the past 15 years has yet to be developed as the demand for housing of this type of high-end senior housing was changed since the last market cycle.
MORENO VALLEY DEVELOPMENT PROJECTS
Conclusion
Moreno Valley grew rapidly over the past several decades as res idents from surrounding cities sought more affordable housing alternatives. As a result, the job base and supporting retail expanded. A plethora of new retail projects were built in the area. The economic downturn in 2007 had an effect on Riverside County and in particular, Moreno Valley with a significant increase in foreclosures, higher vacancies in retail centers, and industrial properties sitting vacant for months. Over the past decade, the industria l and retail markets have improved as much of the stagnant inventory has been absorbed, with the industrial marke t expanding and faring well. There have been numerous housing developments constructed in the past decade which has bode well as the area offers a diverse labor pool and an affordable option to other cities in the western portion of the Inland Empire, however it is uncertain how the long-term outlook will be in the aftermath of COVID-19.
The specific location of the subject property is in the approxi mate geographic center of the city (red arrow in map above) and is approximately five and one-half miles from the 215 Freeway and one mile south of the 60 Freeway at F.1.f
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the eastern edge of where the primary residential development h ad taken place in the past market cycle. The subject’s specific location is not located at the economic cent er of the city, which is more concentrated at the northwestern portion of the city where the 60 and 215 Freeways meet. The area is surrounded by older residential and commercial uses within this pocket of the city. There is not a clear path of development for new commercial projects within the city immediately surrounding the subject property.
Below are some analytics for retail space according to Costar Analytics for the Moreno Valley/Perris Submarket (April 9, 2020)
Vacancy: Average vacancy rate for all retail spaces is 10.6 percent within 13 million square feet of inventory, which is up 1.37 percent from a year ago.
Demand: Net 12 month absorption is negative by approx.137,000 square feet Under Construction: Total square footage under construction: approx. 113,000 square feet Therefore, based on the above information, our local area analysis conclusions for the subject is one of caution for future development growth potential since in light of the uncertainty in the market during the current COVID-19 pandemic. There are over 4,693 housing units in the pipeline within the city, there is negative absorption within the retail sector over the past 12 months, which this sector is forecasted to be one of the hardest hit sectors in the aftermath of the COVID-19 crisis and there are currently 113,00 0 square feet of new retail space that will hit the submarket in the coming few years. The subject property does no t appear to be in the direct path of growth with most new developments being closer to the 60 Freeway or further southeast along the foothills of Lake Perris.
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Property Analysis
Site Description
GENERAL
Location: NWC Alessandro Blvd. & Nason St.
Moreno Valley, Riverside County, California 92555
The subject property is located in the eastern section of the city in an area known as Rancho Belago. This area was created in 2007 and is considered an upscale part of Moreno Valley, with new stores, shopping centers and higher-end homes.
Assessor Parcel Nos. 487-470-030 and 031
Shape: Irregularly shaped
Topography: Level at street grade
Land Area: 56.42 acres / 2,457,654 gross square feet (Source: Riverside County Assessor’s records) APN: 487-470-030 - 1,501,948 sf (34.48 acres)
APN: 487-470-031 - 955,706 sf (21.94 acres)
Access, Visibility and
Frontage:
The subject property has average access and good visibility. The frontage is rated as good.
The frontage dimensions are listed below:
Utilities: All public utilities are available and deemed adequate. Utility providers for the subject property are as follows:
Site Improvements: Unimproved, vacant land
SITE CONDITIONS
Soil Conditions: We were not given a soil report to review. However, we assume t hat the soil's load-bearing capacity is sufficient to support existing and/or proposed structure(s). We did not observe any evidence to the contrary during our physical inspection of the property. Drainage appears to be adequate.
Alessandro Blvd.: 1,087 feet
Nason Street: 1,741 feet
Cottonwood Avenue: 580 feet
Water Eastern Municipal Water District
Sewer Eastern Municipal Water District
Electricity Southern California Edison/Moreno Va
Gas The Gas Company
Telephone Various Providers
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Land Use Restrictions: We reviewed a title report prepared by Chicago Title Company, d ated November 8, 2019, Order # 00120929-987-OC1-K27. A copy is included in the Addenda of this report. It is assumed that this report sets out the descriptions, and all con ditions of title which encumber the subject property, and that these easements and conditions of title do not affect the highest and best use of the subject property. The appraiser assumes no liability, nor is aware of any easement or encroachments that m ay have occurred or been establ ished during or after issuance of the title report provided.
Wetlands: We were not given a wetlands survey to review. If subsequent en gineering data reveal the presence of regulated wetlands, it could materially affect prop erty value. We recommend a wetlands survey by a professional engineer with expertise in this field.
Hazardous
Substances:
We observed no evidence of toxic or hazardous substances during our inspection of the site.
However, we are not trained to perform technical environmental inspections and recommend the hiring of a professional engineer with expertise in this field.
Flood Zone
Description:
The subject property is located in flood zone X (
Areas determined to be outside the 500 year
flood plain) as indicated by FEMA Map 06065C0765G, dated August 28, 2008.
The flood zone determination and other related data are provide d by a third party vendor deemed to be reliable. If further details are required, additi onal research is required that is beyond the scope of this analysis.
Earthquake
Zone/Seismic Hazard:
According to maps on the Californi a Department of Conservation’s website, the site is not located in a Special Study Zone as established by California’s Alquist-Priolo Geological Hazards Act. However, all areas of Southern California are subject to seismic activity.
CONCLUSIONS
Overall Site Utility: Average
Location Rating: Average
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ASSESSOR’S PARCEL MAP
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Real Property Taxes and Assessments
Current Property Taxes
The subject property is located in the taxing jurisdiction of Riverside County. The assessor’s parcel identification numbers are 487-470-030 and 031. The subject is located in the City of Moreno and is tax exempt; however, the tax rate for the area is 1.11692 percent which has been utilized in our analysis herein.
Total taxes for the property are currently $0 as the subject is owned by the City of Moreno Valley and the city is tax exempt.
Under the provisions of Article XIIIA of the California Tax and Revenue Code (Proposition 13), properties are assessed their market value as of March 1, 1975, the base year lien date, or a later date, such as when a property was last sold or substantial reno vation/construction occurred. Under Proposition 13 the base tax rate is limited to
1.0 percent plus any additional i ncrease subject to a two-thirds voter approval (55% approval in the case of educational districts). Because of the required voter approval ratio, the tax rate is usually stable.
The assessed value may be increased for inflation a maximum of 2.0 percent per year until the property is again sold, substantial new construction occurs, or the property’s use changes significantly. In no event should a property be assessed above its current market value.
Reassessment due to new construction is usually based on the ad ditional construction costs. Should the property sell, it would be reassessed acco rding to the Assessor’s opinio n of market value. Generally, market value for reassessment after transfer of ownership is based on the sale price.
Thus, assessed value typically only relates to market value as of a particular sale date. As a result, comparison of assessed value with other properties in the market is not material to this analysis. Therefore, tax comparables are not pertinent and not included herein.
This analysis assumes taxes are current to the date of value. The tax amount used in the analysis assumes taxes based on a market sale as of the appraisal date (assessed at the estimated market value of the property and based on the current tax rate) plus any special assessments
Assessor's Parcel Number: 487-470-030 and 031
Assessing Authority: Riverside County
Current Tax Year: 2019/2020
ASSESSMENT INFORMATION
2019/2020
Assessed Value
Total (Tax Exempt): $0
Tax Rate 1.11692%
Compiled by Cushman & Wakefield Western, Inc.
CALIFORNIA ASSESSMENT AND TAX ANALYSIS
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Zoning
General Information
The property is currently zoned P ublic District by the City of Moreno Valley. It is an Extraordinary Assumption of this report that the city of Moreno Valley will work with a pro spective buyer to develop a Specific Plan for the development of the subject site and we are assuming there is no entitlement risk associated with the site as this will be a Public Private Partnership. Providing an As Is Land V alue under the current zoning was not part of the scope of this assignment, however a Public District use is a more restricted use than as if developed under a new Specific Plan.
A summary of the subject’s current zoning is provided in the following table:
Zoning Compliance
Property value is affected by whether or not an existing or proposed improvement complies with zoning regulations, as discussed below.
Complying Uses
An existing or proposed use that complies with zoning regulatio ns implies that there is no legal risk and that the existing improvements could be replaced “as-of-right.”
Pre-Existing, Non-Complying Uses
In many areas, existing buildings pre-date the current zoning r egulations. When this is the case, it is possible for an existing building that represents a non-complying use to still be considered a legal use of the property. Whether or not the rights of continued use of the building exist depend s on local laws. Local laws will also determine if the existing building may be replicated in the event of loss or damage.
ZONING
Municipality Governing Zoning: City of Moreno Valley
Current Zoning: Public District
Permitted Uses:
Prohibited Uses:
ZONING REQUIREMENTS CODE SUBJECT COMPLIANCE
Minimum Lot Area: 1 acre Not Applicable
Minimum Site Width: 160 feet Not Applicable
Minimum Site Depth: 160 feet Not Applicable
Maximum Building Height: 35 feet Not Applicable
Maximum Lot Coverage (% of Lot Area): 45.0% Not Applicable Minimum Yard Setbacks:
Front (Feet): 30 feet Not Applicable
Rear (Feet): 25 feet Not Applicable
Side (Feet): 25 feet (interior), 30 feet (side) Not Applicable Compiled by Cushman & Wakefield Western, Inc.
The primary purpose of the public district is to provide for the conduct of public and institutional activities, including provi ding protected designated areas for public and institutional facilit ies Prohibited uses within this district include residential and community facility uses
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Non-Complying Uses
A proposed non-complying use to an existing building might remain legal via variance or special use permit. When appraising a property that has such a non-complying use, it is important to understand the local laws governing this use.
Other Restrictions
We know of no deed restrictions, private or public, that further limit the subject property's use. The research required to determine whether or not such restrictions exist is beyond t he scope of this appraisal assignment. Deed restrictions are a legal matter and only a title examination by an attorney or title company can usually uncover such restrictive covenants. We recommend a title examination to determine if any such restrictions exist.
Zoning Conclusions
We analyzed the zoning requirements in relation to the subject property, and considered the compliance of the existing or proposed use. We are not experts in the interpretation of complex zoning ordinances but based on our review of public information, the subject property appears to b e a complying use, though the site is vacant undeveloped land currently. We have assumed the property will be rezoned to its highest and best use and per discussions with city officials, it is likely a specific plan will be adopted for the subject site as a Public Private Partnership with a future developer. The City did indicate that industrial use would not be approved for the subject site, leaving the primary available uses for a future plan to be residential and commercial in nature.
Detailed zoning studies are typically performed by a zoning or land use expert, including attorneys, land use planners, or architects. The depth of our study correlates directly with the scope of this assignment, and it considers all pertinent issues that have been discovered through our due diligence.
We note that this appraisal is not intended to be a detailed de termination of compliance, as that determination is beyond the scope of this real estate appraisal assignment.
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Valuation
Highest and Best Use
Highest and Best Use Definition
The Dictionary of Real Estate Appraisal , Sixth Edition (2015), a publication of the Appraisal Institute, defines the highest and best use as:
The reasonably probable use of property that results in the highest value. The four criteria that the highest and best use must m eet are legal permissibility, ph ysical possibility, financial feasibility, and maximum productivity.
To determine the highest and best use we typically evaluate the subject site under two scenarios: as though vacant land and as presently improved. In both cases, the property’s h ighest and best use must meet the four criteria described above.
Highest and Best Use of Site as though Vacant
Legally Permissible
The zoning regulations in effect at the time of the appraisal d etermine the legal permissibility of a potential use of the subject site. As described in the Zoning section, the subje ct site is zoned Public District by the City of Moreno Valley. The primary purpose of the public district is to provid e for the conduct of public and institutional activities, including providing protected designated areas for public and institutional facilities. However, we have assumed the property will be rezoned to its highest and best use and per discussions with city officials, it is likely a specific plan will be adopted for the subject site in a Public Private Partne rship. Also, the City had indicated, industrial zoning was not a consideration for the site and is not consistent with the surrounding uses. The City’s RFP proposal indicated a desire to have a mix of commercial, residential and public facilities as part of the plan and have assumed that this type of a plan will be a joint effort with a future developer.
Physically Possible
The physical possibility of a use is dictated by the size, shape, topography, availability of utilities, and any other physical aspects of the site. The subject site contains 56.42 acres, or 2,457,654 square feet. The site is irregularly shaped and level at street grade. It has good frontage, average access, and good visibility. The overall utility of the site is considered to be good. All public utilities are availab le to the site including public water and sewer, gas, electric and telephone. Overall, the site is considered adequat e to accommodate most permitted future development possibilities.
Financially Feasible and Maximally Productive
In order to be seriously considered, a use must have the potential to provide a sufficient return to attract investment capital over alternative forms of investment. A positive net in come or acceptable rate of return would indicate that a use is financially feasible. Financially feasible uses are those uses that can generate a profit over and above the cost of acquiring the site and co nstructing the improvements. O f the uses that are permitted, possible, and financially feasible, the one that will result in the maximum value for the property is considered the highest and best use.
A full-scale feasibility study was not part of the Scope of thi s assignment. However, based on the City’s desire to have a mixed-use property with both commercial and residential uses, this would support and be consistent with the surrounding uses of the site.
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Conclusion
We considered the legal issues related to zoning and legal rest rictions. We also analyzed the physical characteristics of the site to determine what legal uses would be possible and considered the financial feasibility of these uses to determine the use that is maximally productive. Considering the subject site’s physical characteristics and location, as well as the state of the local market in the m idst of the COVID-19 pandemic, it is our opinion that the Highest and Best Use of the subject site as though vacant is for development with a mixed-use (residential and/or commercial) development built to its maximum feasible building area, when market conditions allow.
However, any new construction would warrant a timely review of the marketplace to determine when that timing for development would be feasible. Due to the COVID-19 crisis, the availability of financing a proposed development is increasingly compromised via traditional financing channels. We have spoken with bankers and developers, who have postponed or cancelled financing projects of proposed proj ects due to the inherent risk associated with new development.
Most Likely Buyer
Due to the size and nature of this site, being owned by the City of Moreno Valley, the most likely buyer would be a developer that would work in a Public Private Partnership to develop a Specific Plan for future development of the site.
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Investment Considerations
Before determining an appropriate capitalization rate to apply to the subject’s net operating income, a review of recent market conditions, particularly in the financial markets , is warranted. The following subsection(s) provide a review of these trends, ending with a summary of the investment considerations impacting the subject property, based upon the appraiser’s market research, discussions with pa rticipants in the market, and the relative position of the subject property within its market.
Overview
Prior to the current market disruption brought on by the Covid-19 pandemic, the U.S. economy had officially begun its eleventh consecutive year of growth in the second half of 2019; a new record for the longest economic expansion in history. Economic growth beat market expectations during the fourth quarter of 2019, and the unemployment rate hit a 50-year low as it sits at 3.5%. As the economy moved closer to full employment in what many viewed as late-cycle growth, the uncertainty of the global economy had ra ised the fears of a recession. During the year, American consumers continued to profit from the expansion, despite the threat of possible recession. The Federal Reserve cut interests rates for the third time in 2019 as a means of shielding the U.S. economy from global slowing.
Additionally, payroll employment rose by 2.1 million in 2019, f alling short of payroll employment gains in 2018, at
2.7 million, according to the Bureau of Labor Statistics. The trade war between the U.S. and China took a step in the right direction, as phase one of the deal was signed by President Donald Trump and senior Chinese leaders on January 15. Further considerations include:
Throughout the holiday season there were concerns by consumers over business conditions and job prospects.
Despite confidence levels being high, there was an expectation that holiday spending would drop. During fourth quarter 2019, the Consumer Confidence Index came in at 125.9 in October, 126.8 in November and 126.5 in December. Momentum looked to further growth in early-2020 as th e economy had not shown signs of weakening.
Consumer spending growth estimates for the fourth quarter curre ntly sit around 2.5%. Retail sales rose each month during the fourth quarter and in December retail sales increased 0.3%. Despite major big-box retailers reporting a decline in sales during the holiday period, coupled with a lack of mall foot traffic, retail sales improved in December.
All major U.S. Indices rose during the fourth quarter, with the S&P 500, Dow Jones and Nasdaq improving by
0.3%. Materials and energy were the best-performing sectors in the S&P 500, while IBM, Cisco Systems and Apple led the Dow Jones. For the year, the S&P 500, Nasdaq and the Dow rose 28.9%, 35.2% and 22.3%, respectively.
U.S. commercial real estate investment activity was generally down during 2019, as transaction volume sat 2% below 2018’s year-end total. For the fourth quarter, transactio n volume was down 7% in a year-over-year comparison, ending the quarter with $162.1 billion in activity, according to Real Capital Analytics. With Boris Johnson as the new United Kingdom Prime Minister, th e United Kingdom left the European Union (EU) on January 31, 2020. The Brexit deal has been passed through the House of Commons and is now in the House of Lords and is expected to pass. During the United Kingdom’s transition period, the UK will follow all of the EU’s rules and the trading relationship will remain the sam e. The transition period will last until December 31, 2020 or until the two sides agree upon a United Kingdom-EU free trade deal.
Entering 2020 on a stable, if not strong economic footing, the novel coronavirus has clearly had a severe impact on the economy. Keeping in mind that a majority of the information in this report contains the latest concrete data F.1.f
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available (typically as of 4Q 2019), events have been changing rapidly, and the latest statistical information available has been provided, as available. Some further thoughts on recent events:
The commercial real estate sect or is not the stock market. It i s often slower moving and the leasing fundamentals do not swing wildly from day-to-day. If the virus has a sustained and material impact on the broader economy, it will have feed through impacts on property as well. The outbreak has prompted a flight to quality, driving investor s into the bond markets, where lower rates are creating more attractive debt/refinance options.
If past outbreaks are a useful guide, then COVID-19 should largely be contained by the first half of 2020. Most anticipate a strong rebound in markets in the second half of the year.
Economic Conditions
Leading up to the current economic turbulence, the current U.S. economic expansion cycle was over a decade old and was, by general consent, a strong economy and getting stron ger. Despite this, interest rates, which help determine the cost of borrowing money for investments, had lingered near historic lows since the 2008 recession.
Interest rates went unchanged through December 2015, when the Federal Reserve increased the rate for the first time in almost a decade. Following more tariffs being implement ed on trade and inventories, the Federal Reserve Chairman Jerome Powell had shown an openness to cutting rates based on how the economy responded to the new trade deals made during the past year. In turn, the Federal Reserve reduced interest rates for a third time in 2019 to combat the trade war and boost the economy. The benchmark interest rate was reduced to a range of 1.5% to 1.75%. As of Q4, the central bank did not see a recession coming in the near-term and the reduced rate looked to offer additional protection from global slowdown and uncerta inty. The Federal Reserve spent much of 2019 providing the American economy with insurance through interest rate cuts.
In addition, the U.S.-China trade war appears to have come to halt, as the two sides reached agreement on a deal that will see the U.S. reduce tariffs on $120 billion in Chines e products from 15% to 7.5%. China has agreed to purchase $200 billion worth of U.S. products over the next two years as part of the deal. The deal is a huge win for the U.S. as total exports to China would increase to approximat ely $260 billion 2020 and almost $310 billion in 2021.
On March 11, 2020, the World Health Organization (WHO) declared the novel coronavirus (COVID-19) outbreak a global pandemic. Economies around the world face significant he adwinds as seen by the severe drop in demand for some services (such as travel, hospitality and entertainmen t). Further reduced economic activity has resulted from increasing social distance measures, including quarantines or lockdowns, throughout Europe and North America, as governments have taken unprecedented actions to sto p the spread of the virus. As the stock market remains extremely volatile and financial markets struggle to quantify events that are still unfolding, there remains a lack of comparable transactions and market data. This leaves ma ny CRE participants reporting that they are not yet able to accurately assess risk. Proceeding through these uncertain times, the reader is asked to consider some key events that have transpired:
In early March 2020, the disintegration of an alliance between OPEC and Russia caused crude oil prices to dip to their lowest level since 2016. By April 20th, demand dropped so much that oil prices fell below 0$ a barrel as producers are forced to pay to dispose of excess.
On Thursday March 12, 2020, the Federal Reserve announced that it would inject up to $5 trillion into short- term markets to offset economic impacts brought on by the novel coronavirus. T he Federal Reserve will be providing up to $2.3 trillion in additional funding to support the economy, as of April 9, 2020.
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On Sunday, March 15, 2020, the Federal Open Market Committee cu t interest rates to near zero for the first time since the 2008 recession. Since then, it has announced dol lar swap lines with various foreign central banks, as well as various credit facilities aimed at backstopping and providing liquidity to key parts of financial markets.
On Tuesday, March 17, 2020, Amazon announced the hiring of 100, 000 new distribution workers to keep up with the online shopping surge caused by the coronavirus. Amazo n has stated that the coronavirus outbreak has caused a surge of online shopping in the United States to keep with the demand. The company will also invest more than $355 million to raise pay for hourly employees in warehouse and distribution roles through April. Amazon is prioritizing medical supplies, household staples and other high-demand products through its warehouses until April 5, 2020. On April 13, Amazon announced t hey had filled the 100, 000 jobs pledge and with increased demand the eCommerce retailer would be hiring an additional 75,000 workers to help serve customers during this unprecedented time.
On Thursday, March 19, California Governor Gavin Newsom put int o effect a shelter-in-place order to extend to all 40-million Californians. Then, on Friday March 20, New York Governor Andrew Cuomo ordered residents to shelter in their homes, which was subsequently followed by Illinois Governor J.B. Pritzker. Many other states increased precautions throughout the week as well.
Also on Thursday March 19, The Labor Department reported a 30% increase in unemployment claims. On Friday March 20, President Trump announced that he had invoked the Defense Production Act, a law that gives executive powers that can require and/or incentivize businesses to produce goods tied to national security.
On Wednesday March 25, the White House and Congress agreed to d eliver $2 trillion in government relief.
This is the largest stimulus in history and more than double the $800 billion bill that was passed in 2008 during the financial crisis.
On Friday March 27, the President signed the "Coronavirus Aid, Relief, and Economic Security Act," or “CARES Act” into law. The unparalleled $2.2 trillion economic rescue package provides measures that include $1,200 in direct payments to eligible Americans, and $500 to children. The Treasury Department received $500 billion that will support programs direct loans to airlines, cargo, and companies deemed important to national security.
Additionally, the Treasury can provide loans or loan guarantees for other companies as well as provide funds to backstop lending programs to the Fed. Other funds will be divided as such: $377 billion will go to loans and other forms of aid to small businesses; $250 billion will help provide relief for unemployed workers; and $100 billion has been assigned to boost healthcare. The bill finances a response with a price tag that amounts to 10% of 2019 nominal GDP.
22 million Americans filed for unemployment benefits in the four weeks through April 10 th, increasing the nation’s
estimated unemployment rate from 3.5% to as high as 18%. Deadlines around the country are being extended into May and June in response to the ongoing pandemic and attempts to slow the spread of the virus. Guidelines vary depending on state and local government interpretation of CDC guidelines.
As of April 16, 2020, the administration and a number of governors have begun to introduce possible scenarios for how the U.S. economy could re-open and get back to work, le ading to some optimism, along with further speculation as to how long the impacts of the virus will last.
In recent times, the CRE market has been driven by investor demand and strong liquidity. Asset values can fall significantly in short periods of time if either of these two f actors, often in conjunction with many others, change significantly. While Cushman & Wakefield is closely monitoring the latest developments resulting from the COVID- 19 pandemic, and will continue to provide updates as events unfold, the reader is cautioned to consider that values F.1.f
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and incomes are likely to change more rapidly and significantly than during standard market conditions.
Furthermore, the reader should be cautioned and reminded that any conclusions presented in this appraisal report apply only as of the effective date(s) indicated. The appraiser makes no representation as to the effect on the subject property(ies) of this event, or any event, subsequent to the effective date of the appraisal.
While the consensus generally sug gests that the U.S. is falling into recession, with GDP expected to decline significantly in Q2 2020, the market may be anticipating a second-half snap-back following the initial impacts of the Covid-19 pandemic. Although it is too soon to know how the econ omy will respond once the challenges pass, the world appears to be watching markets such as China to see how fast (or slow) the recovery may be. At this writing, there are a myriad of potential scenarios, some that include a sharp “V”-shaped recovery in the latter-part of 2020, and others that show a more moderate trend line for improvement. As an example, some forecasts show U.S. GDP declining as much as 10% (or more) during Q2 2020, while some r ecovery forecasts show GDP expanding by as much as 15% in Q4. Again, it is too soon to know.
The following graph displays historical and projected U.S. real GDP percentage change (annualized on a quarterly basis) from first quarter 2013 through fourth quarter 2021:
Further points regarding current economic conditions are as follows:
Moody’s baseline forecasts a 2.5% drop in GDP for 1Q 2020, followed by a drop of 18.3% in the second quarter.
By 3Q 2020, Moody’s is expecting a strong rebound at 11.0% as w e move out of the bottleneck and then maintain healthy growth rates through the end of 2021.
Gross domestic product grew by an annualized rate of 2.1% in th e fourth quarter 2019, according to the “advance” estimate released by the Bureau of Economic Analysis. And prior to the current disruption, economists had forecast continued economic expansion through 20 21. The National Association for Business Economics had forecast 1.8% GDP growth in 2020, while the Urban Land Institute’s annual forecast survey expected the economy to grow 1.9% in 2021. GDP correlates stron gly with the commercial real estate sector, so a strong economy indicates strong support for our business going forward.
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Commercial and multifamily mort gage loan originations increased 7% in third quarter 2019 (latest data available) when compared to the end of 2018, according to the M ortgage Bankers Association's Quarterly Survey of Commercial/Multifamily Mortgage Banker. Low interest rates are the cause for increased commercial and multifamily borrowing and lending and should lead to continued support into 2020. Commercial mortgage-backed securities (CMBS) have been spurred by measured investment sales activity and stable credit spreads. Commercial Mortgage Alert data indicates that U.S. CMBS issuance in first quarter 2020, at $22.9 billion, was 38.5% higher when compared to CMBS issuance during the same period in 2019.
U.S. Real Estate Market Implications
The commercial real estate market’s sales volume totaled roughly $64.8 billion during the first quarter of 2020 and increased by 11.5% from the first quarter 2019. In a year-over-year comparison, four out of the five property sectors saw a decrease in sales volume in the first quarter, according to Real Capital Analytics, a nd the industrial sector was the only property sector to increase sales volume over this time frame. Additionally, in first quarter 2020 pricing for commercial real estate sits at $194 per square foot.
The industrial sector saw an increase in transaction volume in first quarter 2020 over first quarter 2019, rising by
61.1%. Retail transaction activity was down 14.3% through first quarter 2020, according to Real Capital Analytics.
The apartment sector remained the largest investment market through the first quarter of 2020, with sales of almost $40 billion, while the office sector totaled $25.8 billion in a ctivity over the same time period. Through first quarter 2020, hotel sector sales volume fell by 51.6% in a year-over-year comparison and totaled roughly $3.9 billion during the first quarter.
The following graph compares national transaction volume by property from 2010 through first quarter 2020:
According to PricewaterhouseCoopers (PwC) Real Estate Investor Survey average cap rates for all property types decreased in 17 survey markets, increased in nine, and held steady in eight over fourth quarter 2019, according to the PwC Real Estate Investor Survey for first quarter 2020. For the year, more than half of the market averages are lower today than they were a year ago. Given current market conditions, we expect that cap rates may move upward in certain markets and for certain property types during second quarter.
The following chart displays overall cap rate analysis of five distinct property classes during first quarter 2019:
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Notable points for the U.S. real estate market include:
Annual price growth in the six major metro areas rose 13.1% in first quarter of 2020, while annual price growth in the non-major metros rose by 18.6% in a year-over-year comparison. Most participants in the PwC Real Estate Investor Survey believe that current market conditions favor sellers in the national net lease market (100%).
The national warehouse market climbed 15 basis points, while the national CBD office market fell by three basis points in a year-over-year compa rison. The national net lease a nd national suburban office markets declined over the same period. At 7.7%, the Chicago office market improved by 20 basis points from the previous quarter and is still the highest, while Manhattan office market, at 4.8 %, remains as the lowest cap rate but improved from first quarter 2019. Over the next six months, most surveye d investors foresee overall cap rates holding steady in 31 markets.
Conclusion
The U.S. economy entered 2020 in solid shape, although the pace of growth appeared to be slowing. However, as the first quarter has evolved, the emergence of the coronavirus global pandemic has clouded the outlook. As a result, economists have been steadily reducing their GDP growth forecasts. Oxford Economics has steadily reduced its global GDP growth forecast f rom 2.5% at the beginning of th e year, to 2.3% at the end of January, to 2.0% as of early March. For the U.S., the 2020 GDP growth forecast has been reduced from 1.7% in early January to 1.3% in early March; for the eurozone, the GDP forecast has been rev ised down from 1.1% in 2020 to 0.6%. Given the aggressive actions being taken to restrict spread of the virus, it would not be surprising to see these figures revised down further. Other forecasting services are making similar downward adjustments.
Below are notes regarding the outlook for the U.S. national real estate market in 2020 and beyond:
Investment activity is slowing across the globe. Many investors have “pushed the pause button” waiting for more clarity on economic conditions before determining their strategy. Investors are still flush with cash and will look for opportunity as the environment evolves.
Monetary policy has been aggressively loosened across the board as global central banks lower interest rates and announce plans to purchase securities and take other actions to increase liquidity. The consumer confidence index dropped sharply, hitting 120 in M arch 2020, which is its lowest rating since June 2017. While consumer confidence remains strong on a histor ical level it is expected to decline as the full impact of the coronavirus pandemic are felt. At the moment, all signs point to a recover in the second half of the year as the pandemic is played out.
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Overall, the outlook for the U.S. economy is clouded with uncertainty, but due to the high unemployment rate projected GDP declines, and other high frequency data trends wh ich are similarly bleak, it is widely believed that the U.S. has entered a rece ssion. As of now, the expectati on is that in the second half of the year, the tailwinds of the stimulus and pent-up demand will likely lead to healthy rebound.
After considering the above, the factors listed in the followin g table have been considered in the valuation of the subject property and have an impact on the selection of all investor rates.
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Valuation Process
Methodology
There are three generally accepted approaches to developing an opinion of value: Cost, Sales Comparison and Income Capitalization. We considered each in this appraisal to develop an opinion of the market value of the subject property. In appraisal practice, an approach to value is includ ed or eliminated based on its applicability to the property type being valued and the quality of information available. The reliability of each approach depends on the availability and comparability of market data as well as the motivation and thinking of purchasers.
The valuation process is concluded by analyzing each approach to value used in the appraisal. When more than one approach is used, each approach is judged based on its applicability, reliability, and the quantity and quality of its data. A final value opinion is chosen that either corresponds to one of the approaches to value, or is a correlation of all the approaches used in the appraisal.
We considered each approach in developing our opinion of the ma rket value of the subject property. We discuss each approach below and conclude with a summary of their applicability to the subject property.
Cost Approach
The Cost Approach is based on the proposition that an informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements w hich represent the Highest and Best Use of the land; or when relatively unique or specialized improvements are located on the site for which there are few improved sales or leases of comparable properties.
In the Cost Approach, the appraiser forms an opinion of the cos t of all improvements, depreciating them to reflect any value loss from physical, functional and external causes. L and value, entrepreneurial profit and depreciated improvement costs are then added, resulting in an opinion of value for the subject property.
Sales Comparison Approach
In the Sales Comparison Approach, sales of comparable properties are adjusted for differences to estimate a value for the subject property. A unit of comparison such as price per square foot of building area or effective gross income multiplier is typically used to value the property. When developing an opinion of land value the analysis is based on recent sales of sites of comparable zoning and utility, and the typical units of comparison are price per square foot of land, price per acre, price per unit, or price per square foot of potential building area. In both cases, adjustments are applied to the unit of comparison from an analy sis of comparable sales, and the adjusted unit of comparison is then used to derive an opinion of value for the subject property.
Income Capitalization Approach
In the Income Capitalization Approach the income-producing capacity of a property is estimated by using contract rents on existing leases and by estimating market rent from ren tal activity at competing properties for the vacant space. Deductions are then made for vacancy and collection loss and operating expenses. The resulting net operating income is divided by an overall capitalization rate to derive an opinion of value for the subject property.
The capitalization rate represents the relationship between net operating income and value. This method is referred to as Direct Capitalization.
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to a present value using an internal rate of return that is determined by analyzing current investor yield requirements for similar investments.
Summary
This appraisal employs the Sales Comparison and Land Residual A pproaches. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that this approach would be considered necessary and applicable for market participants. Typical purchasers do not generally rely on the Cost or Income Capitalization Approaches when purchasing a property such as the subject of this report. Therefore, we have not employed the Cost Approach or the Income Capitalizatio n Approach to develop an opinion of market value. The exclusion of these approaches to value does not reduce the credibility of the assignment results.
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Land Valuation
We used the Sales Comparison Approach to develop an opinion of land value. We examined current offerings and analyzed prices buyers have recently paid for comparable sites. If the comparable was superior to the subject, a downward adjustment was made to the comparable sale. If inferior, an upward adjustment was made.
The most widely used and market-oriented unit of comparison for properties with characteristics similar to those of the subject is on a price per square foot of land. All transac tions used in this analysis are based on the most appropriate method used in the local market.
The major elements of comparison used to value the subject site include the property rights conveyed, the financial terms incorporated into the transaction, the conditions or moti vations surrounding the sale, changes in market conditions since the sale, the location of the real estate, its utility and the physical characteristics of the property.
For the purposes of this comparison, we have concluded to a Hyp othetical Land Value as if the site were fully entitled for a mixed-use project. At the conclusion of this app roach we have utilized a Land Residual technique to conclude to the As Is value of the site, which will be discussed later in this report.
The ideal comparable would be a fully entitled mixed-use project. As there were few sales of this type of fully entitled large mixed-use projects in the Inland Empire, we considered similar secondary market locations within the Southern California region. We also considered fully entitled commercial and residential developments that have sold in the past five years and concentrated our search for these types of properties in Moreno Valley and locations within close proximity to the subject. The comparables and our analysis are presented on the following pages.
Comparable land sale data sheets are presented in the Addenda of this report.
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SUMMARY OF LAND SALES
PROPERTY INFORMATION TRANSACTION INFORMATION
No. Location Size (SF)
Size
(Acres) Proposed Use Zoning Site Utility Conditon
Public
Utilities Grantor Grantee Sale Date Sale Price $/SF Land $/Acre S Subject Property 2,457,654 56.42 Mixed-Use
(assumed)
Specific Plan
(assumed)
Good Entitled
(assumed)
All available
1 Guasti Plaza Specific Plan
2703 E Guasti Rd
Ontario, CA
2,439,360 56.00 Mixed Use Guasti Plaza SP Good Unentitled All Availa ble Guasti Mansion Development LLC
Ontario Airport
Venture, LLC
8/19 $29,175,000 $11.96 $520,982
2 Ontario Center - Piemonte
4th Street and Haven Avenue
Ontario, CA
1,953,230 44.84 Mixed Use Ontario Center
Piemonte Overlay
SP
Average Entitled All Available Wells Fargo & City of
Ontario RDA
Lewis Properties &
Lincoln Properties
9/17 $16,175,461 $8.28 $360,737
3 Sand Canyon Plaza
Sand Canyon Road
Santa Clarita, CA
3,811,500 87.50 Mixed Use MX-N Mixed Use-
Neighborhood
Average Entitled All Available Sand Canyon Plaza
LLC
N/Av In Escrow $28,000,000 $7.35 $320,000
4 Calimesa I Land (Entitled SP)
SEC Interstate 10 and Cherry Valley Boulevard
Calimesa, CA
764,042 17.54 Retail-
Commercial
SP/TC-7 Good Entitled All Available Northlight Trust Lewis Commercia l 5/19 $7,000,000 $9.16 $399,088 5 Unentitled R-10 Zoned Land
14631 Perris Blvd
Moreno Valley, CA
683,019 15.68 Residential-
Single-Family
R10, 10 DU/AC Good Unentitled All Available Perris-Cactus Development LLC
Century
Communities Of
California, LLC
2/20 $2,850,000 $4.17 $181,761
6 Unentitled R-3 Land
SEC Alessandro Blvd & Nason St
Moreno Valley, CA
1,520,679 34.91 N/A R3 Good Unentitled All Available Alessandro and Na son Hamner Properties LLC
East Valley Plaza
LLC
9/19 $6,155,900 $4.05 $176,336
STATISTICS
Low 683,019 15.68 9/17 $2,850,000 $4.05 $176,336
High 3,811,500 87.50 2/20 $29,175,000 $11.96 $520,982
Average 1,861,972 42.74 4/19 $14,892,727 $7.50 $326,484 Compiled by Cushman & Wakefield Western, Inc.
Mixed-Use Development
Commercial Development
Residential Development
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LAND SALE ADJUSTMENT GRID
Economic Adjustments (Cumulative) Property Characteristic Adjustments (Additive) No.
Price PSF Land
& Date
Property
Rights
Conveyed
Conditions
of Sale Financing
Market(1)
Conditions
PSF Land
Subtotal Location Size
Public
Utilities Zoning Utility (2) Other
Adj.
Price
PSF Land
Adj. Price Per
Acre
1 $11.96 Fee Simple Arm's-Length None Inferior $12.18 Superior Similar Similar Similar Superior Inferior $6.70 $291,698 8/19 0.0% 0.0% 0.0% 1.8% 1.8% -30.0% 0.0% 0.0% 0.0% -25.0% 10.0% -45.0% -45.0% 2 $8.28 Fee Simple Arm's-Length None Inferior $9.48 Superior Smaller Similar Similar Superior Similar $5.97 $260,137 9/17 0.0% 6.2% 0.0% 7.8% 14.5% -30.0% -2.0% 0.0% 0.0% -5.0% 0.0% -37.0% -37.0% 3 $7.35 Fee Simple Arm's-Length None Similar $7.35 Superior Larger Similar Similar Similar Similar $5.00 $217,600 In Escrow 0.0% 0.0% 0.0% 0.0% 0.0% -35.0% 3.0% 0.0% 0.0% 0.0% 0.0% -32.0% -32.0% 4 $9.16 Fee Simple Arm's-Length None Inferior $9.41 Superior Smaller Similar Inferior Superior Similar $6.12 $266,411 5/19 0.0% 0.0% 0.0% 2.7% 2.7% -10.0% -10.0% 0.0% 5.0% -20.0% 0.0% -35.0% -35 .0% 5 $4.17 Fee Simple Arm's-Length None Inferior $4.19 Similar Smaller Similar Inferior Similar Inferior $6.28 $273,732 2/20 0.0% 0.0% 0.0% 0.4% 0.4% 0.0% -10.0% 0.0% 5.0% 0.0% 55.0% 50.0% 50.0% 6 $4.05 Fee Simple Arm's-Length None Inferior $4.11 Similar Smaller Similar Inferior Similar Inferior $5.63 $245,446 9/19 0.0% 0.0% 0.0% 1.6% 1.6% 0.0% -4.0% 0.0% 5.0% 0.0% 36.0% 37.0% 37.0%
STATISTICS
$4.05 - Low Low - $5.00 $217,600
$11.96 - High High - $6.70 $291,698
$7.50 - Average Average - $5.95 $259,171
Compiled by Cushman & Wakefield Western, Inc.
(1) Market Conditions Adjustment Footnote (2) Utility Footnote Utility includes shape, access, frontage and visibility.Compound annual change in market conditions: 3.00% Date of Value (for adjustment calculations): 3/27/20
Variable Growth Rate Assumptions
Starting Growth Rate:
Inflection Point 1 (IP1):
Change After IP1:
3.0%
3/1/2020
0.0%
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LAND SALE LOCATION MAP
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Discussion of Adjustments
Property Rights Conveyed
The property rights conveyed in a transaction typically have an impact on the sale price of a property. Acquiring the fee simple interest implies that the buyer is acquiring the full bundle of rights. Acquiring a leased fee interest typically means that the property being acquired is encumbered by at leas t one lease, which is a binding agreement transferring rights of use and occupancy to the tenant. A leasehold interest involves the acquisition of a lease, which conveys the rights to use and occupy the property to the buyer for a finite period of time. At the end of the lease term, there is typically no reversionary value to the leasehold interest. Since we are valuing the fee simple interest as reflected by each of the comparables, an adjustment for property rights is not required.
Conditions of Sale
Adjustments for conditions of sale usually reflect the motivations of the buyer and the seller. In many situations the conditions of sale may significantly affect transaction prices. However, all sales used in this analysis are considered to be "arms-length" market transactions between both knowledgea ble buyers and sellers on the open market. As discussed in the data sheet for Land Sale 2 in the Addenda, the buyer spent an additional $1 million getting the land entitled after they entered into contract. Therefore, we added that cost as a percentage of the sale price to the adjustment grid. It should be noted that Land Sale 3 is currently in escrow. Based on our conversation with the listing broker, the specific sale price could not be disclosed, however indicated that the pricing was in the high $20 million dollar price range. Therefore, we made an assumption th at the pending sale price was $28 million for the purposes of this analysis.
Financial Terms
The financial terms of a transaction can have an impact on the sale price of a property. A buyer who purchases an asset with favorable financing mi ght pay a higher price, as the reduced cost of debt creates a favorable debt coverage ratio. A transaction involving above-market debt will typically involve a lower purchase price tied to the lower equity returns after debt service. We analyzed all of the transactions to account for atypical financing terms.
To the best of our knowledge, all of the sales used in this analysis were accomplished with cash or market-oriented financing. Therefore, no adjustments were required.
Market Conditions
The sales that are included in this analysis occurred between September 2017 and February 2020. As the market has improved over this time period, we applied a 3 percent upwa rd adjustment through March 1, 2020 and a 0 percent adjustment thereafter to reflect the uncertainty in the market due to the COVID-19 pandemic.
Location
An adjustment for location is required when the locational characteristics of a comparable property differ from those of the subject property. The subject property is located in the southeastern section of the city in an area known as Rancho Belago. This neighborhood was created in 2007 and is considered an upscale part of Moreno Valley, with new stores, shopping centers and higher-end homes. The specifi c location of the subject property is in the approximate geographic center of the city and is approximately five and one-half miles from the 215 Freeway and one mile south of the 60 Freeway at the eastern edge of where the primary residential development has taken place in the past market cycle. The subject’s specific location is no t located at the economic center of the city, which is more concentrated at the northwestern portion of the city where the 60 and 215 Freeways meet. The area is surrounded by older residential and commercial uses within this pocket of the city. There is not a clear path of development for new commercial projects within the city immedia tely surrounding the subject property. We also F.1.f
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reviewed demographic information from the subject locale as wel l as the locations of the comparable land sales.
This information is provided in the following table:
We made a downward adjustment to those comparables considered superior in location compared to the subject.
Conversely, upward adjustments were made to those comparables considered inferior and taking into consideration the percentage differences between the median home prices with the subject and the average household income.
Land Sale 1 is located in the Inland Empire West in the city of Ontario. The average household income within a 3- mile radius of this comparable was $122,601 (2019 data) and the average home price $473,000. Due to the superior demographics of this comparable a downward adjustment was applied. Land Sale 2 is located at the northern portion of the city of Ontario with the city of Rancho Cucamonga across the street from the comparable.
The average household income within a 3-mile radius of this comparable was $83,260 and the average home price $473,000 within the city. This comparable is located one-half m ile north of the 15 Freeway. The overall demographics of the area, specific location and superior surrou nding uses warranted a substantial downward adjustment. This comparable is located along a primary commercial artery and is adjacent to a Target anchored shopping center. Land Sale 3 is located in Los Angeles County within the city of Santa Clarita. The demographics of the area are found superior in relation to the subject’s locale ($119,958 HH Income and $515,000 median home price). This comparable is located in the eastern end of the city with the more desirable locations found to the west side of Interstate 5. However, the location is superior in rel ation to the subject and a downward adjustment was applied. Land Sale 4 is located in the Inland Empire East in the city of Calimesa. The demographics are slightly superior and a downward adjustment was applied ($84,719 HH Income and $391,250 median home price). Land Sales 5 and 6 are located in the city of Moreno Valley and within close proximity to the subject; hence, adjustments for location were not needed.
Size
The adjustment for size generally reflects the inverse relationship between unit price and lot size. Smaller lots tend to sell for higher unit prices than larger lots, and vice versa . Therefore, upward adjustments were made to larger land parcels, and downward adjustments were made to smaller lan d parcels. The subject features 2,457,654 or
56.42 acres. The comparables ranged from 683,019 to 3,811,500 square feet (15.68 to 87.50 acres). Land Sale 1 features a similar site size as compared to the subject and an adjustment was not needed. Land Sales 2, 4, 5 and 6 feature smaller site sizes and varying downward adjustments were a p p l i e d . C o n v e r s e l y , Land Sale 3 features a larger size and an upward adjustment was applied. A ll adjustments were based on a 5 percent adjustment per doubling in site size.
Sale City / Zip Code
Subject Moreno Valley / 92555
1 Ontario / 91761
2 Ontario / 91764
3 Santa Clarita / 91387
4 Calimesa / 92320
5 Moreno Valley / 92553
6 Moreno Valley / 92555
$122,601 $473,000
Characterstics of Improved Sales Locations
Average Household Income
(3-mile radius)
(Experian 2019)
Median Home Price
(CoreLogic - Feb. 2020)
$75,208 $360,000
$68,465 $360,000
$75,208 $360,000
$83,260 $473,000
$119,958 $515,000
$84,719 $391,250
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Public Utilities
The availability of public utilities has a significant impact on the value of a property. Municipal utility providers often, but not always, provide utilities such as gas, water, electric, sewer, and telephone. It is therefore important to understand any differences that may exist in the availability o f public utilities to the subject property and its comparables. All of the sales, like the subject, had full acces s to public utilities at the time of sale. Therefore, no adjustments were required.
Zoning
We have assumed the city of Moreno Valley will work with a pros pective buyer to develop a Specific Plan for the development of the subject site which will feature a mixed-use configuration (commercial and/or residential uses).
Land Sales 1, 2 and 3 feature a zoning that allows for mixed use developments; therefore, an adjustment for zoning was not needed. Land Sales 4, 5 and 6 feature a more restrictive zoning (either commercial use or re sidential use) and an upward adjustment was applied to these three comparables.
Utility
The subject parcel is adequately shaped to accommodate a typical building. It has average access, good frontage and good visibility. Overall, it has been determined that the s ite has good utility. Adjustments were made where a comparable was considered to have superior or inferior utility. The subject features a slightly irregular shape; however, said irregularity will likely not impact the developme nt of the site. The subject benefits from a corner location and frontage along three arterials in a predominantly residential area, with the closest freeway access one mile north. Land Sale 1 features a slightly irregular shape; however, this property be nefits from direct freeway frontage along Interstate 10. For this reason, a substantial d ownward adjustment was applied. L a n d S a l e 2 includes some non-contiguous parcels, though within the same block, however there is a loss in economies due to the configuration, which is inferior, however this was considered somewhat offsetting to its frontage along several primary commercial arteries within the city and at the center of the retail shopping district of Ontario and Rancho Cucamonga along 4
th Street, which is far superior to the subject’s specific location outside of the primary commercial and shopping districts. Therefore, we made a small net downward adjustment. Land Sales 3, 5 and 6 feature similar corner locales with similar street frontage/visibility (no freeway frontage) and adjustments were not needed.
Land Sale 4 features freeway visibility (easement between subject and freeway) and warranted a downward adjustment.
Other
In some cases, other variables will have an impact on the price of a land transaction. Examples include soil or slope conditions, restrictive zoning, easements, wetlands or external influences. As stated, we have assumed the property will be rezoned to its highest and best use and per discussions with city officials, it is likely a specific plan will be adopted for the subject site as a Public Private Partnership with a future developer. The City did indicate that an industrial use would not be approved for the subject site, leaving the primary available uses for a future plan to be residential and commercial in nature. In our analysis, we have assumed the property is entitled with a Specific Plan (General Plan Amendment and Rezoning of the site), all environmental and geotechnical studies completed and EIR in place (all CEQA issues addressed). We spoke with local builders who provided an estimate on entitlements (includes rezoning and environmental and geotechnical studies) for the subject and a range of $1,500,000 to $2,500,000 was indicated. We have assumed a cost of $2,000,000 or $35,488 per acre (based on subject site size of 56.42 acres). Also, the co st of CEQA needs to be addressed and will vary by location. Per discussions with developers, the cost for CEQA i ssues could be in the $1,000,000 range (used by developers as an estimate).
Therefore, we have estimated overall entitlements costs of $3,000,000 for the subject site. Land Sales 2, 3 and 4 represented fully entitled sites and adjustments were not needed. Land Sale 1 features a similar site size and we have assumed that entitlements costs would be similar to the su bject and therefore, we have provided an F.1.f
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adjustment based on entitlement costs of $3,000,000 or 10% of t he sale price. Land Sales 5 and 6 are smaller site sizes and we have based entitlements costs on the site siz e. We have assumed the entitlement costs (with the exception of CEQA) of $35,488 per acre plus $1,000,000 to a ddress CEQA issues. Therefore, the cost for entitlements for Land Sale 5 is estimated at $1,556,452 ($556,452 plus $1,000,000) or appro ximately 55 percent of the sale price. The cost for entitlements for Land Sale 6 is estimated at $2,238,886 ($1,238,886 plus $1,000,000) or approximately 36 percent of the sale price.
Conclusion of Site Value (Hypothetical Land Value, As If Entitled) The adjustments applied to the comparable sales in the Land Sale Adjustment Chart reflect what we determined is appropriate in the marketplace. D espite the subjectivity, the a djustments were considered reasonable and were applied consistently.
After a thorough analysis, the comparable land sales reflect ad justed unit values ranging from $5.00 per square foot to $6.70 per square foot, with an average of $5.95 per square foot. The low end of the range is represented by Land Sale 3, which is a larger site. The high end of the adjusted range is represented by Land Sale 1, which is a fully entitled mixed-use site in a far superior locale. The most similar comparable is Land Sales 2 and 3, which are both a fully entitled, large mixed-use sites and we placed significant weight on both of these comparables. Our concluded value of $5.65 per square foot for the Hypothetical Land Value, As If Entitled, also falls to the low end of the range of the adjusted values for Land Sales 5 and 6, which are both Moreno Valley comparables and closest geographically.
Therefore, after discussions with brokers and local developers, we concluded that the indicated land value by the Sales Comparison Approach was:
Land Residual
In order to derive the As Is Land Value as of March 27, 2020, w e have utilized a land residual technique, which is used to capitalize the income allocated to an investment component of an unknown value (As Is Land Value) after all investment components of known values have been satisfied. (Source: The Dictionary of Real Estate Appraisal, Fifth Edition).
We have made the following assumptions for this analysis:
We have concluded to the above land value based on a fully developed site and then have deducted the holding costs, entitlement costs, and the cost of sale. We have estimated a total of 12 quarters or 3 years for the si te to be fully entitled. We spoke with several brokers and developers on typical entitlement timing for a new Specific Plan (General Plan Amendment Price
PSF
Indicated Value $5.65
SQFT Measure x 2,457,654
Indicated Value $13,885,745
$13,900,000
$/SF Basis $5.66
LAND VALUE CONCLUSION $13,900,000
$/SF Basis $5.66
Compiled by Cushman & Wakefield Western, Inc.
HYPOTHETICAL LAND VALUE, AS
IF ENTITLED CONCLUSION
Rounded to nearest $100,000
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and Rezoning of the site), all environmental and geotechnical studies completed and EIR in place (all CEQA issues addressed).
Land Growth Rate: Due to the current market environment with t he COVID-19 pandemic, there is considerable uncertainty in the market on pricing and land values are directly affected is there is a change in the underlying value fundamentals. Therefore, we have provided a sensitivity analysis for our change in land value over the 12 quarters. We utilized an annual grow rat e of -2 percent, 0 percent and a 2 percent and have provided a value range for our conclusion.
We spoke with local builders who provided an estimate on entit lements (includes rezoning and environmental and geotechnical studies) for the subject and a r ange of $1,500,000 to $2,500,000 was indicated. We have assumed a cost of $2,000,000 or $35,488 per acre (based on subject site size of 56.42 acres). Also, the cost of CEQA needs to be addressed and will vary by location. Per discussions with developers, the cost for CEQA issues could be in the $1,000,000 range (used by developers as an estimate). Therefore, we have estimated overall entitlements costs of $3,000,000 for the subject site. We have discounted the Net Cash Flows to conclude to our Net Present Value (NPV) of the land. A range of discount rates between 14 to 15 percent were considered base d on information from PwC, 4 th Quarter 2019 Real Estate Investor Survey and Realty Rates’ 1 st Quarter information for Residential Mixed-use projects, see below:
The discount rates above consider the land to be free-and-clear including developer’s profit and assumes entitlements are in place. Without entitlements in place, some investors consider increasing the discount rate between 100 and 800 basis points (an average increase of 400 ba sis points). Therefore, since the subject site is currently not entitled, we have concluded to a discount rate slightly higher than the average or at 19.0 percent for this analysis.
Below are three tables with our sensitivity analysis at a -2 pe rcent, 0 percent and 2 percent annual land growth rates over the following 12 quarter period.
DISCOUNT RATES (IRR)
Survey Date Average
PwC Institutional Fourth Quarter 2019 10.00% - 20.00% 15.90% Realty Rates First Quarter 2020 10.87% - 20.37% 14.99%
PwC - National Development Land Market (published in 2nd & 4th Qtr. only) Realty Rates - Residential - Mixed Use
Range
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Land Value (SF) $5.65
Site Size (SF) 2,457,654
Hypothetical Land Value, As If
Entitled (March 27, 2020) $13,885,745
Rounded $13,900,000
Annual Land Value Growth Rate: -2%
Time Period (Qtly) 1 2 3456 78 9 1 0 1 1 1 2
Development Timeline (Ending): Total Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q 2 2022 Q3 2022 Q4 2022 Q1 2023 Land Value As If Entitled $5.65 $5.62 $5.59 $5.57 $5.54 $5.51 $5.48 $5. 46 $5.43 $5.40 $5.37 $5.35 Total Land Value (Trended) $13,885,745 $13,816,316 $13,747,235 $13,678,499 $13,610,106 $13,542,056 $13,474,345 $13,406,974 $13,339,939 $13,273,239 $13,206,873 $13,140,838 Less: Property Taxes ($176,018) ($13,124) ($13,386) ($13,654) ( $13,927) ($14,206) ($14,490) ($14,780) ($15,075) ($15,377) ($15,684) ($15,998) ($16,318) Less: Property Insurance ($122,883) ($30,721) ($30,721) ($30,7 21) ($30,721) ($31,642) ($31,642) ($31,642) ($31,642) ($32,592) ($32,592) ($32,592) ($32,592) Less Entitlement Costs ($3,000,000) ($250,000) ($250,000) ($25 0,000) ($250,000) ($250,000) ($250,000) ($250,000) ($250,000) ($250,000) ($250,000) ($250,000) ($250,000) Less Cost of Sale (2%) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 ($256,839) Total Carrying/Entitlement Costs (3,298,900) (293,844) (294,107) (294,375) (294,648) (295,848) (296,132) (296,422) (296,717) (297,968) (298,276) (298,589) (555,748) Net Cash Flow ($293,844) ($294,107) ($294,375) ($294,648) ($295,848) ($296,132) ($296,422) ($296,717) ($297,968) ($298,276) ($298,589) $12 ,585,091 Discount Rate % Range 18.0% 19.0% 20.0%
Net Present Value (NPV) $4,897,589 $4,721,165 $4,550,493 Concluded Market Value As Is
March 27, 2020 $4,700,000
Total NPV, PSF $1.91
Variance in current $ As Is vs. entitled site 195.7%
LAND RESIDUAL - Sensitivity Analysis at -2% Land Growth Rate F.1.f
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Land Value (SF) $5.65
Site Size (SF) 2,457,654
Hypothetical Land Value, As If Entitled
(March 27, 2020) $13,885,745
Rounded $13,900,000
Annual Land Value Growth Rate: 0%
Time Period (Qtly) 1 2 3 456 7 8 9 1 0 1 1 1 2
Development Timeline (Ending): Total Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Land Value As If Entitled $5.65 $5.65 $5.65 $5.65 $5.65 $5.65 $5.65 $5. 65 $5.65 $5.65 $5.65 $5.65 Total Land Value (Trended) $13,885,745 $13,885,745 $13,885,745 $13, 885,745 $13,885,745 $13,885,745 $13,885,745 $13,885,745 $13,885,745 $13,885,745 $13,885,745 $13,885,745 Less: Property Taxes ($190,998) ($14,241) ($14, 526) ($14,816) ($15,112) ($15,415) ($15,723) ($16,037) ($16,358) ($16,685) ($17,019) ($17,359) ($17,707) Less: Property Insurance ($122,883) ($30,721) ($30, 721) ($30,721) ($30,721) ($31,642) ($31,642) ($31,642) ($31,642) ($32,592) ($32,592) ($32,592) ($32,592) Less Entitlement Costs ($3,000,000) ($250,000) ($250,000) ($250,000) ($250,000) ($250,000) ($250,000) ($250,000) ($250,000) ($250,000) ($250,000) ($250,000) ($250,000) Less Cost of Sale (2%) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 ($271,709) Total Carrying/Entitlement Costs (3,313,881) (294,961) (295,246) (295,537) (295,833) (297,057) (297,365) (297,680) (298,000) (299,277) (299,611) (299,951) (572,007) Net Cash Flow ($294,961) ($295,246) ($295,537) ($295,833) ($297,057) ($297,365) ($297,680) ($298,000) ($299,277) ($299,611) ($299,951) $13 ,313,738 Discount Rate % Range 18.0% 19.0% 20.0%
Net Present Value (NPV) $5,316,799 $5,128,372 $4,946,066 Concluded Market Value As Is
March 27, 2020 $5,100,000
Total NPV, PSF $2.08
Variance in current $ As Is vs. entitled site 172.5%
LAND RESIDUAL - Sensitivity Analysis at 0% Land Growth Rate F.1.f
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Land Value (SF) $5.65
Site Size (SF) 2,457,654
Hypothetical Land Value, As If Entitled
(March 27, 2020) $13,885,745
Rounded $13,900,000
Annual Land Value Growth Rate: 2%
Time Period (Qtly) 1 2 3 4 5 6 7 8 9 10 11 12
Development Timeline (Ending): Total Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Land Value As If Entitled $5.65 $5.68 $5.71 $5.74 $5.76 $5.79 $5.82 $5.85 $5.88 $5.91 $5.94 $5.97 Total Land Value (Trended) $13,885,745 $13,955,174 $14,024,950 $14,095,074 $14,165,550 $14,236,378 $14,307,559 $14,379,097 $14,450,993 $14,523,248 $14,595,864 $14,668,843 Less: Property Taxes ($209,723) ($15,637) ($15,950) ($16,269) ($16,594) ($16,926) ($17,264) ($17,610) ($17,962) ($18,321) ($18,688) ($19,061) ($19,442) Less: Property Insurance ($122,883) ($30,721) ($30,721) ($30,7 21) ($30,721) ($31,642) ($31,642) ($31,642) ($31,642) ($32,592) ($32,592) ($32,592) ($32,592) Less Entitlement Costs ($3,000,000) ($250,000) ($250,000) ($25 0,000) ($250,000) ($250,000) ($250,000) ($250,000) ($250,000) ($250,000) ($250,000) ($250,000) ($250,000) Less Cost of Sale (2%) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 ($287,336) Total Carrying/Entitlement Costs (3,332,606) (296,358) (296,670) (296,989) (297,315) (298,568) (298,907) (299,252) (299,604) (300,913) (301,279) (301,653) (589,370) Net Cash Flow ($296,358) ($296,670) ($296,989) ($297,315) ($298,568) ($298,907) ($299,252) ($299,604) ($300,913) ($301,279) ($301,653) $14,079,473 Discount Rate % Range 18.0% 19.0% 20.0%
Net Present Value (NPV) $5,755,267 $5,554,255 $5,359,750 Concluded Market Value As Is
March 27, 2020 $5,600,000
Total NPV, PSF $2.28
Variance in current $ As Is vs. entitled site 148.2%
LAND RESIDUAL - Sensitivity Analysis at 2% Land Growth Rate F.1.f
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Below is a summary of the sensitivity analysis of the indicated As Is land values:
VALUATION INDICES Market Value
As-Is
VALUE DATE March 27, 2020
Land Value
Indicated Value (Low-End): $4,700,000
Indicated Value (Mid-Point): $5,100,000
Indicated Value (High-End): $5,600,000
FINAL VALUE CONCLUSION
Real Property Interest: Fee Simple
Concluded Value: $4,700,000 to $5,600,000
Per Square Foot: $1.91 to $2.28
EXPOSURE AND MARKETING TIMES
Exposure Time: 12+ Months
Marketing Time: 12+ Months
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Reconciliation and Final Value Opinion
Valuation Methodology Review and Reconciliation
This appraisal employs the Sales Comparison and Land Residual A pproaches. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that this approach would be considered necessary and applicable for market participants. Typical purchasers do not generally rely on the Cost or Income Capitalization Approaches when purchasing a property such as the subject of this report. Therefore, we have not employed the Cost Approach or the Income Capitalizatio n Approach to develop an opinion of market value. The exclusion of these approaches to value does not reduce the credibility of the assignment results.
The approaches indicated the following:
We gave most weight to the Sales Comparison Approach and Land R esidual because this mirrors the methodologies used by purchasers of this property type.
Extraordinary Assumptions
For a definition of Extraordinary Assumptions please see the Gl ossary of Terms & Definitions. The use of extraordinary assumptions, if any, might have affected the assignment results.
It is an Extraordinary Assumption of this report that the city of Moreno Valley will work with a prospective buyer to develop a Specific Plan for the development of the subject site and we are assuming there is no entitlement risk associated with the site as this will be a Public Private Partnership.
Hypothetical Conditions
For a definition of Hypothetical Conditions please see the Glossary of Terms & Definitions. The use of hypothetical conditions, if any, might have affected the assignment results.
This appraisal does not employ any hypothetical conditions.
FINAL VALUE RECONCILIATION
Market Value
As-Is PSF
Date of Value March 27, 2020
Land Valuation
Land Value (Low-End) $4,700,000 $1.91
Land Value (Mid-Point) $5,100,000 $2.08
Land Value (High-End) $5,600,000 $2.28
Final Value Conclusion Range $4,700,000 to $5,600,000 $1.91 to $2.28 Compiled by Cushman & Wakefield Western, Inc.
Value Conclusion
Appraisal Premise Real Property Interest
Market Value As-Is Fee Simple
Compiled by Cushman & Wakefield Western, Inc.
Date of Value Value Conclusion Range
March 27, 2020 $4,700,000 to $5,600,000
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Exposure Time and Marketing Time
Based on our review of national investor surveys, discussions w ith market participants and information gathered during the sales verification process, a reasonable exposure ti me for the subject property at the value concluded within this report would have been approximately 12+ Months. This assumes an active and professional marketing plan would have been employed by the current owner. Due to the recent COVID-19 crisis, market exposure and market timing for vacant land is considered to be the most risk y asset class and we are assuming based on comments from local brokers that timing would last over a year.
We believe, based on the assumptions employed in our analysis, as well as our selection of investment parameters for the subject, that our value conclusion represents a price a chievable within 12+ Months even if this site was used for land banking.
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CITY OWNED LAND ASSUMPTIONS AND LIMITING CONDITIONS
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Assumptions and Limiting Conditions
"Report" means the appraisal or consulting report and conclusio ns stated therein, to which these Assumptions and Limiting Conditions are annexed.
"Property" means the subject of the Report.
"Cushman & Wakefield" means Cushman & Wakefield, Inc. or its subsidiary that issued the Report. "Appraiser(s)" means the employee(s) of Cushman & Wakefield who prepared and signed the Report.
The Report has been made subject to the following assumptions and limiting conditions:
No opinion is intended to be expressed and no responsibility is assumed for the legal description or for any matters that are legal in nature or require legal expertise or specialized knowledge beyond that of a real estate appraiser. Title to the Property is assumed to be good and marketable and the Property is assumed to be free and clear of all liens unless otherwise stated.
No survey of the Property was undertaken.
The information contained in the Report or upon which the Report is based has been gathered from sources the Appraiser assumes to be reliable and accurate. The owner of the Property may have provided some of such information. Neither the Appraiser nor Cushman & Wakefield shall be responsible for the accuracy or completeness of such information, including the correctness of estimates, opi nions, dimensions, sketches, e xhibits and factual matters. Any authorized user of the Report is obligated to bring to the attention of Cushman & Wakefield any inaccuracies or errors that it believes are contained in the Report.
The opinions are only as of the date stated in the Report. Changes since that date in external and market factors or in the Property itself can significantly affect the conclusions in the Report. The Report is to be used in whole and not in part. No part of the Report shall be used in conjunction with any other analyses.
Publication of the Report or any portion thereof without the prior written consent of Cushman & Wakefield is prohibited.
Reference to the Appraisal Institute or to the MAI designation is prohibited. Except as may be otherwise stated in the letter of engagement, the Report may not be used by any person(s) other than the party(ies) to whom it is addressed or for purposes other than that for which it was prepared. No part of the Report shall be conveyed to the public through advertising, or used in any sales, promotion, offering or SEC material without Cushman & Wakefield's prior written consent. Any authorized user(s) of this Report who provides a copy to, or permits reliance thereon by, any person or entity not authorized by Cushman & Wakefield in writing to use or rely thereon, hereb y agrees to indemnify and hold Cushman & Wakefield, its affiliates and their respective shareholders, directors, office rs and employees, harmless from and against all damages, expenses, claims and costs, including attorneys' fees, incurred in investigating and defending any claim arising from or in any way connected to the use of, or reliance upon, the Report by any such unauthorized person(s) or entity(ies). Except as may be otherwise stated in the letter of engagement, the Appraiser shall not be required to give testimony in any court or administrative proceeding relating to the Property or the Appraisal. The Report assumes (a) responsible ownership and competent mana gement of the Property; (b) there are no hidden or unapparent conditions of the Property, subsoil or structures that render the Property more or less valuable (no responsibility is assumed for such conditions or for arranging for engineering s tudies that may be required to discover them); (c) full compliance with all applicable federal, state and local zoning and environmental regulations and laws, unless noncompliance is stated, defined and considered in the Report; and (d) all required licenses, certificates of occupancy and other governmental consents have been or can be obtained and renewed for any use on which the value opinion contained in the Report is based.
The physical condition of the im provements considered by the Report is based on visual inspection by the Appraiser or other person identified in the Report. Cushman & Wakefield assu mes no responsibility for the soundness of structural components or for the condition of mechanical equipment, plumbing or electrical components. The forecasted potential gross income referred to in the Report may be based on lease summaries provided by the owner or third parties. The Report assumes no responsibility for the authenticity or completeness of lease information provided by others. Cushman & Wakefield recommends that legal advice be obt ained regarding the interpretation of lease provisions and the contractual rights of parties.
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The forecasts of income and expens es are not predictions of the future. Rather, they are the Appraiser's best opinions of current market thinking on future income and expenses. The Appraiser and Cushman & Wakefield make no warranty or representation that these forecasts will materialize. The real estate market is constantly fluctuating and changing. It is not the Appraiser's task to predict or in any way warrant the condi tions of a future real estate market; the Appraiser can only reflect what the investment community, as of the date of the Re port, envisages for the future in terms of rental rates, expenses, and supply and demand.
Unless otherwise stated in the R eport, the existence of potentially hazardous or toxic materials that may have been used in the construction or maintenance of the improvements or may be located at or about the Property was not considered in arriving at the opinion of value. These materials (such as formaldehyde foam insulation, asbestos insulation and other potentially hazardous materials) may adversely affect the value of the Property. The Appraisers are not qualified to detect such substances. Cushman & Wakefield recommends that an environmental expert be employed to determine the impact of these matters on the opinion of value.
Unless otherwise stated in the Report, compliance with the requ irements of the Americans wit h Disabilities Act of 1990 (ADA) has not been considered in arriving at the opinion of value. Failure to comply with the requirements of the ADA may adversely affect the value of the Property. Cushman & Wakefield recommends that an expert in this field be employed to determine the compliance of the Property with the requirements of the ADA and the impact of these matters on the opinion of value.
If the Report is submitted to a lender or investor with the prior approval of Cushman & Wakefield, such party should consider this Report as only one factor, together with its independent investment considerations and underwriting criteria, in its overall investment decision. Such lender o r investor is specifically ca utioned to understand all Extraordinary Assumptions and Hypothetical Conditions and the Assumptions and Limiting Conditions incorporated in this Report.
In the event of a claim against Cushman & Wakefield or its affi liates or their respective officers or employees or the Appraisers in connection with or in any way relating to this Report or this engagement, the maximum damages recoverable shall be the amount of the monies actually collected by Cushman & Wakefield or its affiliates for this Report and under no circumstances shall any claim for consequential damages be made. If the Report is referred to or included in any offering materi al or prospectus, the Report shall be deemed referred to or included for informational purposes only and Cushman & Wakefiel d, its employees and the Appraiser have no liability to such recipients. Cushman & Wakefield disclaims any and all liability to any party other than the party that retained Cushman & Wakefield to prepare the Report.
Unless otherwise noted, we were not given a soil report to review. However, we assume that the soil’s load-bearing capacity is sufficient to support existing and/or proposed structure(s). We did not observe any evidence to the contrary during our physical inspection of the property. Drainage appears to be adequate. Unless otherwise noted, we were not given a title report to rev iew. We do not know of any easements, encroachments, or restrictions that would adversely affect the site’s use. However, we recommend a title search to determine whether any adverse conditions exist.
Unless otherwise noted, we were not given a wetlands survey to review. If subsequent engineering data reveal the presence of regulated wetlands, it could materially affect property value. We recommend a wetlands survey by a professional engineer with expertise in this field.
Unless otherwise noted, we observed no evidence of toxic or haz ardous substances during our inspection of the site.
However, we are not trained to perform technical environmental inspections and recommend the hiring of a professional engineer with expertise in this field.
Unless otherwise noted, we did not inspect the roof nor did we make a detailed inspection of the mechanical systems. The appraisers are not qualified to render an opinion regarding the adequacy or condition of these components. The client is urged to retain an expert in this field if detailed information is needed. By use of this Report each party that uses this Report agrees to be bound by all of the Assumptions and Limiting Conditions, Hypothetical Conditions and Extraordinary Assumptions stated herein.
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Certification
We certify that, to the best of our knowledge and belief:
The statements of fact contained in this report are true and correct. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions. We have no present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties involved.
We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. Our engagement in this assignment was not contingent upon developing or reporting predetermined results. Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice. The use of this report is subject to the requirements of the Ap praisal Institute relating to review by its duly authorized representatives.
Jennifer A. Hafner, MAI did make a personal inspection of the property that is the subject of this report. Jennifer A. Hafner, MAI has not provided prior services, as an appraiser or in any other capacity, within the three-year period immediately preceding acceptance of this assignment. Marilyn Olson provided significant professional assistance with respect to problem definition, preliminary analysis, data collection, highest and best use analysis, application of the approaches to value and final value conclusion. As of the date of this report, Jennifer A. Hafner, MAI has completed the continuing education program for Designated Members of the Appraisal Institute.
This letter is invalid as an opinion of value if detached from the report, which contains the text, exhibits, and Addenda.
Respectfully submitted,
CUSHMAN & WAKEFIELD WESTERN, INC.
Jennifer A. Hafner, MAI
Director
CA Certified General Appraiser
License No. AG039874
[email protected]
(909) 942-4676 Office Direct
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Addenda Contents
Addendum A: Glossary of Terms & Definitions
Addendum B: Client Satisfaction Survey
Addendum C: Engagement Letter
Addendum D: Preliminary Title Report
Addendum E: Comparable Land Sale Data Sheets
Addendum F: Qualifications of the Appraiser
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Addendum A:
Glossary of Terms & Definitions
The following definitions of pertinent terms are taken from The Dictionary of Real Estate Appraisal, Sixth Edition (2015), published by the Appraisal Institute, Chicago, IL, as well as other sources.
As Is Market Value
The estimate of the market value of real property in its curren t physical condition, use, and zoning as of the appraisal date. (Proposed Interagency Appraisal and Evaluation Guidelines, OCC-4810-33-P 20%)
Band of Investment
A technique in which the capitalization rates attributable to c omponents of a capital investment are weighted and combined to derive a weighted-average rate attributable to the total investment.
Cash Equivalency
An analytical process in which the sale price of a transaction with nonmarket financing or financing with unusual conditions o r incentives is converted into a price expressed in terms of cash.
Depreciation
1. In appraising, a loss in property value from any cause; the difference between the cost of an improvement on the effective date of the appraisal and the market value of the improvement on the same date. 2. In accounting, an allowance made against the loss in value of an asset for a defined purpose and computed using a specified method.
Disposition Value
The most probable price that a specified interest in real property is likely to bring under all of the following conditions:
Consummation of a sale will occur within a limited future marketing period specified by the client. The actual market conditions currently prevailing are those to which the appraised property interest is subject. The buyer and seller is each acting prudently and knowledgeably. The seller is under compulsion to sell.
The buyer is typically motivated.
Both parties are acting in what they consider their best interest. An adequate marketing effort will be made in the limited time allowed for the completion of a sale. Payment will be made in cash in U.S. dollars or in terms of financial arrangements comparable thereto. The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales conc essions granted by anyone associated with the sale.
Note that this definition differs from the definition of market value. The most notable difference relates to the motivation of the seller. In the case of Disposition value, the seller would be acting under compulsion within a limited future marketing period.
Ellwood Formula
A yield capitalization method that provides a formulaic solution for developing a capitalization rate for various combinations of equity yields and mortgage terms.
The formula is applicable only to properties with stable or stabilized income streams and properties with income streams expected to change according to the J- or K-factor pattern. The formula is
RO = [YE – M (YE + P 1/Sn¬ – RM) – ΔO 1/S n¬] / [1 + ΔI J] where
RO = Overall Capitalization Rate
YE = Equity Yield Rate
M = Loan-to-Value Ratio
P = Percentage of Loan Paid Off
1/S n¬ = Sinking Fund Factor at the Equity Yield Rate
RM =Mortgage Capitalization Rate
ΔO = Change in Total Property Value
ΔI = Total Ratio Change in Income
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J = J Factor
Also called mortgage-equity formula.
Exposure Time
1. The time a property remains on the market. 2. The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based on an analysis of past events assuming a competitive and open market. See also marketing time.
Extraordinary Assumption
An assignment-specific assumption, as of the effective date regarding uncertain information used in an analysis, which, if found to be false, could alter the appraiser’s opinions or conclusions.
Comment: Uncertain information might include physical, legal, o r economic characteristics of t he subject property; or conditio ns external to the property, such as market conditions or trends; or the integrity of data used in an analysis.
Fee Simple Estate
Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.
Highest and Best Use
The reasonably probable use of property that results in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity.
Highest and Best Use of Property as Improved
The use that should be made of a property as it exists. An exis ting improvement should be renovated or retained as is so long as it continues to contribute to the total market value of the property, or until the return from a new improvement would more than offset the cost of demolishing the existing building and constructing a new one.
Hypothetical Conditions
A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis.
Comment: Hypothetical conditions are contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.
Insurable Replacement Cost/Insurable Value
A type of value for insurance purposes.
Intended Use
The use or uses of an appraiser’s reported appraisal, appraisal review, or appraisal consulting assignment opinions and conclusions, as identified by the appraiser based on communication with the client at the time of the assignment.
Intended User
The client and any other party as identified, by name or type, as users of the appraisal, appraisal review, or appraisal consulting report by the appraiser on the basis of communication with the client at the time of the assignment.
Leased Fee Interest
A freehold (ownership interest) where the possessory interest h as been granted to another party by creation of a contractual landlord-tenant relationship (i.e., a lease).
Leasehold Interest
The tenant’s possessory interest created by a lease. See also negative leasehold; positive leasehold.
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Liquidation Value
The most probable price that a specified interest in real property is likely to bring under all of the following conditions:
Consummation of a sale will occur within a severely limited future marketing period specified by the client. The actual market conditions currently prevailing are those to which the appraised property interest is subject. The buyer is acting prudently and knowledgeably.
The seller is under extreme compulsion to sell.
The buyer is typically motivated.
The buyer is acting in what he or she considers his or her best interest. A limited marketing effort and time will be allowed for the completion of a sale. Payment will be made in cash in U.S. dollars or in terms of financial arrangements comparable thereto. The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales conc essions granted by anyone associated with the sale.
Note that this definition differs from the definition of market value. The most notable difference relates to the motivation of the seller. Under market value, the seller would be acting in his or her own best interests. The seller would be acting prudently and knowledgeably, assuming the price is not affected by undue stimulus or atypical motivation. In the case of liquidation value, the seller would be acting under extreme compulsion within a severely limited future marketing period.
Market Rent
The most probable rent that a property should bring in a compet itive and open market reflecting all conditions and restriction s of the lease agreement, including permitted uses, use restrictions, expense obligations, term, concessions, renewal and purchase options, and tenant improvements (TIs).
Market Value
As defined in the Agencies’ appraisal regulations, the most pro bable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.
Implicit in this definition are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
Buyer and seller are typically motivated;
Both parties are well informed or well advised, and acting in what they consider their own best interests; A reasonable time is allowed for exposure in the open market; Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and The price represents the normal consideration for the property sold unaffected by special or creative financing or sales conce ssions granted by anyone associated with the sale.1
Marketing Time
An opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of an appraisal. Marketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal. (Advisory Opinion 7 of the Appraisal Standards Board of The Appraisal Foundation and Statement on Appraisal Standards No. 6, “Reasonable Exposure Time in Real Property and Personal Property Market Value Opinions” address the determination of reasonable exposure and marketing time.) See also exposure time.
Mortgage-Equity Analysis
Capitalization and investment analysis procedures that recognize how mortgage terms and equity requirements affect the value of income-producing property.
Prospective Opinion of Value
A value opinion effective as of a specified future date. The te rm does not define a type of value. Instead, it identifies a va lue opinion as being effective at some specific future date. An opinion of value as of a prospective d ate is frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy.
Prospective Value upon Reaching Stabilized Occupancy
The value of a property as of a point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long- term occupancy. At such point, all capital outlays for tenant improvements, leasing commissions, marketing costs and other carrying charges are assumed to have been incurred.
1 “Interagency Appraisal and Evaluation Guidelines.” Federal Register 75:237 (December 10, 2010) p. 77472.
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CUSHMAN & WAKEFIELD
Special, Unusual, or Extraordinary Assumptions
Before completing the acquisition of a property, a prudent purc haser in the market typically exercises due diligence by making customary enquiries about the property. It is normal for a Valuer to make assumptions as to the most likely outcome of this due diligence process and to rely on actual information regarding such matters as provided by the client. Special, unusual, or extraordinary assumptions may be any additional assumptions relating to matters covered in the due diligence process, or may relate to other issues, such as the identity of the purchaser, the physical state of the property, the presence of environmental pollutants (e.g., ground water contamination), or the ability to redevelop the property.
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Attachment: Attachment C - Copy of Appraisal Summary (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY)
CITY OWNED LAND ADDENDA CONTENTS
CUSHMAN & WAKEFIELD
Addendum B:
Client Satisfaction Survey
Survey Link: https://www.surveymonkey.com/r/LQKCGLF?c=20-38017-900034-001 Cushman & Wakefield File ID: 20-38017-900034-001
Fax Option: (716) 852-0890
1. Based on the scope and complexity of the assignment, please rate the development of the appraisal relative to the adequacy and relevance of the data, the appropriateness of the techniques used, and the reasonableness of the analyses, opinions, and conclusions:
__ Excellent
__ Good
__ Average
__ Below Average
__ Poor
Comments:_____________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________
2. Please rate the appraisal report on clarity, attention to de tail, and the extent to which it was presentable to your internal/external users without revisions:
__ Excellent
__ Good
__ Average
__ Below Average
__ Poor
Comments:_____________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________
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Attachment: Attachment C - Copy of Appraisal Summary (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY)
CITY OWNED LAND ADDENDA CONTENTS
CUSHMAN & WAKEFIELD
3. The appraiser communicated effectively by listening to your concerns, showed a sense of urgency in responding, and provided convincing support of his/her conclusions:
__ Not Applicable __ Excellent
__ Good
__ Average
__ Below Average
__ Poor
Comments:_____________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________
4. The report was on time as agreed, or was received within an acceptable time frame if unforeseen factors occurred after the engagement:
__ Yes
__ No
Comments:_____________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________
5. Please rate your overall satisfaction relative to cost, timing, and quality:
__ Excellent
__ Good
__ Average
__ Below Average
__ Poor
Comments:_____________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________
6. Any additional comments or suggestions you feel our National Quality Control Committee should know? __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ F.1.f
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Attachment: Attachment C - Copy of Appraisal Summary (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY)
CITY OWNED LAND ADDENDA CONTENTS
CUSHMAN & WAKEFIELD
7. Would you like a representative of our National Quality Control Committee to contact you? __ Yes
__ No
Name & Phone (if contact is desired):
__________________________________________________________________ __________________________________________________________________
Contact Information: Rick Zbranek, MAI
S e n i o r M a n a g i n g D i r e c t o r , N a t ional Quality Control ( 7 1 3 ) 9 6 3 - 2 8 6 3
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Attachment: Attachment C - Copy of Appraisal Summary (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY)
CITY OWNED LAND ADDENDA CONTENTS
CUSHMAN & WAKEFIELD
Addendum C:
Engagement Letter
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Attachment: Attachment C - Copy of Appraisal Summary (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) 20-38003-900365 LOE
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Attachment: Attachment C - Copy of Appraisal Summary (6402 : PUBLIC HEARING – TOWN CENTER PROJECT ECONOMIC OPPORTUNITY) Michele Patterson
City of Moreno Valley
March 19,
2020