City of Sacramento
City Council - 2PM Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2023-00835 7/25/2023 Consent Item 8.
Budget Adjustment and Purchase & Sale Agreement: Acquisition of 827 K Street from Hale Bros. Investment Company, LLC. (I80310000) (Two-thirds Vote Required) File ID: 2023-00835
Location: 827 K Street, District 4, Represented by Councilmember Valenzuela Recommendation: Pass a Resolution by two-thirds vote: 1) authorizing the City Manager or the City Manager’s designee to transfer $15,000,000 (Fund 6502- Risk Management) from the available fund balance within the Risk Management Fund to the expenditure budget of the Citywide Litigation Project (I80310000), 2) waiving the requirement for 10-day posting of agreements over $1,000,000, pursuant to City Code section 4.04.020(C) and Council Rules of Procedure Chapter 7, Section E.2.d, for the acquisition of the real property located at 827 K Street; 3) authorizing the City Manager or the City Manager’s designee to execute the attached Purchase and Sale Agreement in the amount of $18.5 million plus closing costs with Hale Bros. Investment Company, LLC for the City’s acquisition of real property located at 827 K Street; and 4) authorizing the City Manager or the City Manager’s designee to execute any related documents to consummate the real property purchase transaction.
Contact: Richard Sanders, Facilities and Real Property Superintendent, (916) 808-7034, [email protected] Department of Public Works; James Christensen, Facilities Manager, (916) 808-5863, [email protected] Presenter: None
Attachments:
1-Description/Analysis
2-Resolution
3-Purchase and Sale Agreement
Description/Analysis
Issue Detail: The property located at 827 K Street, referred to as parcel number 006-0097-012-0000 (the “Property”) consists of approximately 19,680 square feet of land area and a building containing approximately 73,098 gross square feet in the downtown corridor. The building consists of retail and office space. Staff have inspected the building and have concluded that it is in overall good condition.
An independent appraisal conducted by a third party indicated that the market value of the Property was $18.5 million. The City seeks to acquire the Property for the appraised value as part of the
File ID: 2023-00835 7/25/2023 Consent Item 8.
settlement of the following cases:
Petrovich Development Company et al v. City of Sacramento et al., Court of Appeal, Third Appellate District, Case No. C094400;
Calvine & Elk Grove-Florin, LLC, et al., v. City of Sacramento, et al., Sacramento Superior Court Case Number 34-2016-00200153;
Petrovich Development Company et al v. City of Sacramento et al., Sacramento Superior Court Case No. 34-2022-80003871.
Policy Considerations: The acquisition of the Property is a key component of the resolution of seven years of litigation with the Petrovich Development entities. The recommendation in this report is in accordance with City Code section 3.04.020, which requires City Council approval of real property agreements involving expenditures of $250,000 or more.
Sacramento City Code Section 4.04.020 and Council Rules of Procedure (Chapter 7, Section E.2.d) mandate that unless waived by a two-thirds vote of the City Council, all labor agreements and all agreements greater than $1,000,000 shall be made available to the public at least ten (10) days prior to council action. The recommendation is to waive this requirement.
Economic Impacts: None.
Environmental Considerations:
California Environmental Quality Act (CEQA): The actions contained in this report to purchase the Property will have no significant effect on the environment and are exempt from CEQA pursuant to CEQA Guidelines Section 15061(b) (3) and 15301. This action only proposes execution of a Purchase and Sale Agreement for the City’s acquisition of the Property. Purchase of the Property will impose no obligation on the City for any particular use of the property. No project shall be deemed to be approved, until after (i) the proposed project is reviewed in accordance with the requirements of CEQA, and (ii) any additional conditions or changes to the project based on the CEQA review have been resolved in a manner acceptable to the City. As required by law, the City retains the sole and independent discretion as the lead agency to, among other things, balance the benefits of any project against any significant environmental impacts prior to taking final action if such significant impacts cannot otherwise be avoided, and determine not to proceed with a project.
Sustainability: Not applicable.
Commission/Committee Action: None.
File ID: 2023-00835 7/25/2023 Consent Item 8.
Rationale for Recommendation: The acquisition of the Property is a key component of the resolution of seven years of litigation with the Petrovich Development entities and will provide the City with ownership of a key piece of real estate in the downtown K Street corridor.
Financial Considerations: Upon approval of the transfer of $15,000,000 from the available fund balance within the Risk Management Fund (Fund 6502), there is sufficient funding within the Citywide Litigation Project (I80310000) to execute the Purchase and Sale Agreement in the amount of $18.5 million ($15 million- Risk Management-Fund 6502 and $3.5 million General Fund- Fund 1001).
Utilization of Risk funds will require an increase in the General Fund contribution to the Risk Fund.
Closing costs will be paid out of the City Manager’s FY2023/2024 Administrative Contingency.
Local Business Enterprise (LBE): Not applicable.
RESOLUTION NO. 2023-XXXX
Adopted by the Sacramento City Council
July 25, 2023
Budget Adjustment and Purchase & Sale Agreement:
Acquisition of 827 K Street from Hale Bros. Investment Company, LLC. (I80310000)
BACKGROUND
A. The property located at 827 K Street, referred to as parcel number 006-0097-012-0000 (the “Property”) consists of approximately 19,680 square feet of land area and a building containing approximately 73,098 gross square feet in the downtown corridor. The building consists of retail and office space. Staff have inspected the building and have concluded that it is in overall good condition. An independent appraisal conducted by a third party indicated that the market value of the Property was $18.5 million. The City seeks to acquire the Property for the appraised value as part of the settlement of the following cases:
Petrovich Development Company et al v. City of Sacramento et al., Court of Appeal, Third Appellate District, Case No. C094400;
Calvine & Elk Grove-Florin, LLC, et al., v. City of Sacramento, et al., Sacramento Superior Court Case Number 34-2016-00200153;
Petrovich Development Company et al v. City of Sacramento et al., Sacramento Superior Court Case No. 34-2022-80003871.
B. The acquisition of the Property is a key component of the resolution of seven years of litigation with the Petrovich Development entities and will provide the City with ownership of a key piece of real estate in the downtown K Street corridor.
C. Staff requested that the requirement for 10-day posting of agreements over $1,000,000 be waived, pursuant to City Code section 4.04.020(C) and Council Rules of Procedure Chapter 7, Section E.2.d, for the acquisition of the real property located at 827 K Street.
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:
Section 1. The City Manager or the City Manager’s designee is authorized to increase the expense budget in the Citywide Litigation Project (I80310000) by $15,000,000 (Risk Management Fund, Fund 6502).
Section 2. The City Manager or the City Manager’s designee is authorized to execute the attached Purchase and Sale Agreement in the amount of $18.5 million plus closing costs with Hale Bros. Investment Company, LLC for the C ity’s acquisition of real property located at 827 K Street . The purchase is exempt from CEQA pursuant to CEQA Guidelines Section 15061(b) (3) and 15301.
Section 3. The City Manager or the City Manager’s designee is authorized to execute any related documents to consummate the real property purchase transaction.
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Agreement for Sale of Real Property (827 K Street) Page 1 of 15
AGREEMENT FOR PURCHASE AND SALE OF
REAL PROPERTY AND JOINT ESCROW INSTRUCTIONS
(827 K STREET, SACRAMENTO, CA)
SUMMARY OF TERMS
Effective Date: The date upon which the last party executes this Agreement and delivers it to the other party.
Seller: HALE BROS. INVESTMENT COMPANY, LLC, a California limited liability company
Seller’s Address: 825 K Street, Third Floor
Sacramento, CA 95814
Phone No.: (916)442-4600
Email: [email protected]
Seller’s Counsel: John Cox
825 K Street, Third Floor
Sacramento, CA 95814
Phone No.: (916)442-4600
Email: [email protected]
Buyer: CITY OF SACRAMENTO, a municipal corporation
Buyer’s Address: City of Sacramento
Office of the City Manager
Attention: Howard Chan
New City Hall
915 I Street, 5th Floor
Sacramento CA 95814
Phone No.: (916) 808-7488
E-Mail: [email protected]
Buyer’s Counsel: Leslie Z. Walker
Senior Deputy City Attorney
915 I Street, 4th Floor
Sacramento, CA 95814
Phone No.: (916) 808-7272
Email: [email protected]
5655.003-8048828.1
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Property: That certain parcel of land located at 827 K Street in the City of Sacramento, County of Sacramento, State of California, consisting of approximately 19,680 square feet of land area and a constructed building containing approximately 73,098 gross square feet encompassing Assessor’s Parcel Number 006 -0097-012-0000 as described in Exhibit A (the “Legal Description”), including, but not limited to, all improvements, buildings, fixtures, streets, alleys, vacated public rights of way abutting the real property, intellectual property, entitlements, easements, rights, privileges, mineral rights, oil and gas rights, water, water rights, development rights, certain leases, certain agreements, and appurtenances, together with Personal Property as defined in this Agreement and as described in the General Assignment and Bill of Sale in Exhibit C (the “General Assignment”).
Leases: Those certain leases described in Exhibit B, attached hereto.
Purchase Price: EIGHTEEN MILLION FIVE HUNDRED THOUSAND & 00/100THS DOLLARS ($18,500,000.00)
Contract Fee: ONE HUNDRED & 00/100THS DOLLARS ($100.00) Closing Date, Close of
Escrow, or Closing:
No later than March 31, 2024
Escrow Holder: Fidelity National Title Company
Attn: Paul Avila
8525 Madison Avenue, Suite 110
Fair Oaks CA 95628
Ph.: 916-646-6057
Email: [email protected]
Escrow Instructions: The instructions shall be issued by Seller and Buyer to Escrow Holder prior to Close of Escrow, in addition to the terms and conditions set forth in this Agreement for Escrow No. 01007135-010-PA.
Title Company: Fidelity National Title Company
8525 Madison Avenue, Suite 110
Fair Oaks CA 95628
Preliminary Title Report: As set forth in Section 3(c).
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AGREEMENT FOR SALE OF REAL PROPERTY
This Agreement for Sale of Real Property and Joint Escrow Instructions (the “ Agreement”), dated June 14, 2023, for reference purposes of identification, is between CITY OF SACRAMENTO, a municipal corporation (the “Buyer”); and the HALE BROS. INVESTMENT COMPANY, LLC, a California limited liability company (the “Seller”) who agree as follows:
Background & Recitals
A. The Seller desires to sell and convey to the Buyer, and the Buyer desires to purchase from the Seller, fee -simple title to the property located at 827 K Street in the City of Sacramento and designated as Assessor Parcel Number 006 -0097-012-0000, with all of the Seller’s rights, title, and interest in and to that real property, including all improvements, buildings, fixtures, streets, alleys, vacated public rights of way abutting the real property, Personal Property (as hereafter defined), intellectual property, entitlements, easements, rights, privileges, mineral rights, oil and gas rights, water, water rights, development rights, certain leases, certain agreements, and appurtenances (collectively, the “Property”) as further defined in the Summary of Terms; provided, however, the parties understand and acknowledge that term Property shall not include (nor shall it ever be deemed part of this sale) any (i) personal property and furniture, fixtures, and/or equipment (the “ FF&E”) owned by any tenant (excluding tenant under that certain Seller Affiliate Lease, as defined below) of the Property (except to the extent that such FF&E are surrendered to the landlord under the respective Lease) or (ii) Excluded Personal Property , but shall, notwithstanding the definition of Excluded Personal Property, include all FF&E and personal property used in the operation or maintenance of the Property . “Personal Property” shall mean all personal property owned by Seller and used in the operation or maintenance of the subject real property and improvements thereon. “Excluded Personal Property” shall mean any FF&E or personal belongings owned by Seller, any Seller affiliated entity, or any of Seller’s beneficial owners (the “ Excluded Personal Property”).
B. Prior to ente ring into this Agreement, Buyer to its satisfaction initiated review of the Property (“Due Diligence”) in or around December 2022, wherein the Due Diligence included the Buyer (i) consulting with qualified professional consultants concerning the Property; (ii) receiving and reviewing a Preliminary Title Report, with an effective date of December 1, 2022 in which such Preliminary Title Report included hyperlinks to legible copies of all documents referenced therein; (iii) conducting onsite inspections and investigations of the Property; and (iv) receiving and reviewing, to the extent available and within Seller’s control or possession, records related to operations of Property, buildi ng and parking plans, environmental reports and studies, building maintenance schedules and expenses (which include, HVAC systems, elevator, and fire monitoring), property tax information, roof report and warranties, as-builts, estoppel certificates, appraisals, and insurance policies including loss reports (the “Seller’s Records”).
C. Except as expressly provided otherwise in this Agreement, Buyer has completed its Due Diligence and satisfied itself with the Property.
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D. Seller and Buyer hereby enter into this Agreement for the purposes described above and in accordance with the terms set forth herein:
With these background facts and recitals incorporated into and made a part of this Agreement, the parties agree as follows:
1. Sale and Purchase Price. The Seller shall sell and convey the Property to the Buyer, and the Buyer shall accept and purchase fee-simple title to the Property from the Seller, upon the terms and conditions set forth below. The Purchase Price of the Property is EIGHTEEN MILLION FIVE HUNDRED THOUSAND & 00/100THS DOLLARS ($18,500,000.00).
2. Deposits.
(a) Contract Fee. On or before three (3) business days from and after the Effective Date, Buyer shall deposit with the Escrow Holder the sum of the Contract Fee in the amount of ONE HUNDRED & 00/100THS DOLLARS ($100.00), which shall be valuable consideration for entering into this Agreement, and it shall be non-refundable in all cases.
(b) Purchase Price . On or before the twenty -first (21 st) business day from and after the Effective Date, Buyer shall deposit with Escrow Holder the Purchase Price. At all times herein, the Purchase Price and any accrued interest thereon shall be non- refundable except in the event of a Seller default or failed Buyer’s condition precedent, and shall be credited against Buyer’s obligation to pay the Purchase Price upon Close of Escrow. Escrow Holder, as hereinafter designated, shall invest the Purchase Price in an interest bearing account with a federally-insured financial institution or such other investment instrument or account as may be designated by Buyer.
3. Escrow. An escrow account (number 0 1007135-010-PA) to consummate the sale of the Property according to the terms of this Agreement has been opened at the office of Fidelity National Title Company (the “Escrow Holder”), 8525 Madison Avenue, Suite 110, Fair Oaks, California 95628.
As soon as practicable after the Effective Date of this Agreement, a copy of it will be deposited with the Escrow Holder. This Agreement may serve in whole or in part as escrow instructions. The issuance of any further escrow instructions shall not be inconsistent w ith the terms and provisions of this Agreement without Buyer’s prior express written consent. The Escrow Holder will be concerned only with the provisions of this Section 3 . The escrow shall be on the following terms and conditions:
(a) Close of Escrow. The escrow will be closed, and the Buyer will be entitled to possession of the Property on the date that a grant deed conveying the Property from the Seller to the Buyer (the “ Grant Deed”) is recorded (the “Close of Escrow ” or the “ Closing Date”). The escrow will be considered to be in a condition to close when the Escrow Holder is authorized under this Agreement to record the Grant Deed and is otherwise able to do so. The Close of Escrow will occur upon notice to Escrow Holder from both Buyer and Seller of a mutually- acceptable date, provided that (1) Seller shall give Buyer no less than twenty-one (21) days’ 5655.003-8048828.1
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notice prior to its proposed Closing Date, and (2) the Closing Date shall be no later than March 31, 2024. Notwithstanding the foregoing, in the event that any replacement property (per 1031 exchange) Seller intends to acquire with sale proceeds fails to consummate after Seller notifies Buyer of proposed Closing Date, Seller may retract such notice prior to scheduled Closing Date; provided, however, in no event shall Close of Escrow ever be extended beyond March 31, 2024.
(b) Payment of Closing Amounts . Before the Close of Escrow, the Buyer shall deposit with the Escrow Holder an amount equal to any prorations as provided in this Agreement plus the Escrow Holder’s estimate of the Closing Costs (as defined in Section 3(g) below).
(c) Preliminary Title Report. Upon Seller issuing its notice to Close, Escrow Holder shall issue an update to the Preliminary Title Report issued on or about December 1, 2022, which such updated Preliminary Title Report shall include, as applicable, hyperlinks to legible copies of all documents referenced therein. Buyer shall have five (5) business days from receipt of the updated Preliminary Title Report to give Seller written notice (the “Buyer’s Title Notice”) of Buyer’s approval or disapproval; provided, however, Buyer’s disapproval of the Preliminary Title Report shall be solely limited to any material adverse change(s) to the December Preliminary Title Report (including new exceptions). Seller shall, within three (3) days from receipt of Buyer’s Title Notice, shall notify Buyer of any (if any) material change to which Seller is unwilling or unable to have eliminated from title to the Property prior to the Close of Escrow. Notwithstanding the foregoing provisions, Seller, at its sole cost, on or prior to the Closing, shall cause to be eliminated all liens evidencing monetary encumbrances (other than liens for non-delinquent real estate taxes and assessments, and supplemental taxes and assessments). Failure of Buyer to object to such monetary encumbrances shall in no event be deemed a waiver of Buyer’s right to require Seller to eliminate such monetary encumbrances on or before the Closing.
(d) Title. The Seller shall execute and deliver to the Escrow Holder a good and sufficient recordable Grant Deed conveying to the Buyer fee-simple title to the Property, free from all liens, charges, encroachments, encumbrances, restrictions, easements, tenancies, and other title defects except (1) a lien to secure payment of current real-estate taxes not delinquent; (2) the lien of current supplemental taxes not delinquent; and (3) exceptions that the Buyer approves or permits in accordance with this Agreement, which such exceptions including those identified in the original December Preliminary Title Report as attached hereto as Exhibit D (collectively, the “ Permitted Exceptions ”). Notwithstanding anything to the contrary, the Permitted Exceptions shall exclude exceptions 10 -18 in the December Preliminary Title Report which Seller shall remove or terminate at Seller’s sole cost and expense.
(e) Conditions to Close of Escrow. When all of the conditions to closing that are set forth in this Agreement have been either satisfied or waived by the parties (with the satisfaction or waiver confirmed in writing) and the escrow is ready to close, the Escrow Holder will cause the Grant Deed to be recorded.
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(f) Delivery of Title Policy at Closing . As a condition to the Buyer’s obligation to close, the Escrow Holder must deliver to Buyer at the closing a CLTA or ALTA standard owner’s policy of title insurance (whichever is issued by the title company), (or, at Buyer’s election an ALTA extended owner’s title policy, so long as Buyer provides the necessary ALTA survey to the Escrow Holder) that is issued as of the date and time of the recording of the Grant Deed, is in the amount of the Purchase Price, contains such endorsements as the Buyer may request, and insures the Buyer as owner of good, marketable, and indefeasible fee-simple title to the Property, subject only to the Permitted Exceptions (the “ Title Policy”). The Title Policy may be delivered after the Closing Date if, at the Closing Date, the Escrow Holder issues a currently effective, duly executed “marked -up” title commitment or pro forma policy and irrevocably commits in writing to issue the Title Policy in the form of the “marked -up” title commitment or pro forma policy promptly after the Closing Date. The Seller shall deliver to the Escrow Holder any affidavits or other documents reasonably requested by the Escrow Holder to issue the Title Policy to the Buyer.
(g) Escrow Fees and Expenses. As used in this Agreement, the term “ Closing Costs” means all costs of escrow and closing, including, but not limited to, the cost of any escrow fees, the charge for preparation of escrow documents, city and/or county transfer taxes, recording costs, any affordable housing fee, the cost of the Title Policy, any title endorsements, and all other similar costs incurred as part of the Close of Escrow. Buyer shall be responsible for paying all Closing Costs pertaining to this transaction.
(h) Commission. Buyer and the Seller each warrant that they have not dealt with any real estate brokers, agent or finder in connection with this transaction. Each party agrees to defend, indemnify, and hold each other harmless for any claim for commission, finder’s fee or other compensation arising from the act of the indemnifying party. Each party’s obligations under the previous sentence shall survive Closing for a period of one (1) year.
(i) Proration and Costs. All real estate taxes and all personal property taxes due and owing as of the Closing Date, and all penalties and interest thereon, shall be paid by Seller. Current real estate taxes, special assessments and personal property taxes which are not yet due and owing shall be prorated based upon the most recent tax bill, so that the portion of current taxes allocable to the period from the beginning of such tax year through the Closing Date shall be charged to and paid by Seller and the portion of the current taxes allocable to the portion of such tax year from the Closing Date to the end of such tax year shall be charged to and paid by Buyer.
(j) Rental Income. Notwithstanding the foregoing, the parties hereby acknowledge and agree that Seller reserves (1) rental income from the Property due and payable in calendar year 2023 (the “ 2023 Rental Income ”); and (2) any delinquent rents attributable to any period prior to the Closing Date, both of which shall be retained by Seller, and Buyer shall have no claim thereto and no responsibility of any kind with respect thereto. Seller may take all appropriate collection measures (including litigation if deemed by Seller to be necessary 5655.003-8048828.1
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or desirable), except that Seller may not seek to terminate any such tenant’s continued occupancy and full use of its premises under such tenant’s lease. Any rents to which Buyer is entitled to under the terms of this Agreement that are actually and indefeasibly received by Seller after the Closing Date shall be promptly paid to Buyer by Seller within thirty (30) days of actual receipt, less actual costs of collection. Any rents to which Seller is entitled to under the terms of this Agreement that are actually and indefeasibly received by Buyer after the Closing Date shall be promptly paid to Seller by Buyer within thirty (30) days of actual receipt, less actual third -party costs of collection. Buyer shall be credited, as against the Purchase Price, with any unapplied security deposits made by tenant(s) under any Agreements to be Assigned. The terms of this Section 3(j) will survive the Close of Escrow for a period of one (1) year thereafter and will not merge into the Grant Deed.
(k) Standard Escrow Instructions . For those escrow matters not specifically addressed herein, the Escrow Holder’s standard escrow instructions will apply. If there is a conflict between this Agreement and the Escrow Holder’s standard escrow instructions, then this Agreement will control.
(l) Actions by Escrow Holder. On the Closing Date, provided that each of the conditions to each party’s obligations has been satisfied or waived, and subject to authorization from Seller and Buyer to proceed to closing, the Escrow Holder will undertake and perform the following acts in the following order:
(i) record the Grant Deed in the Official Records of Sacramento Co unty and obtain a conformed copy of the recorded Grant Deed for delivery to the Buyer;
(ii) pay any transfer taxes;
(iii) instruct the Sacramento County Clerk -Recorder to return the recorded Grant Deed to the Buyer;
(iv) distribute to Seller, its 1031 Exchange Intermediary (if any), or as Seller may instruct, current funds in payment of the Purchase Price (including any deposit), as adjusted by prorations and other payments or deductions as set forth on Seller’s executed closing statement;
(v) deliver to Buyer (A) a conformed photocopy of the recorded Grant Deed, (B) the original executed Non -Foreign Affidavit, and (C) the original executed California Tax Certificate; and (D) an original counterpart of the General Assignment, substantially in the form attached hereto as Exhibit C (Form General Assignment); and (E) any other documents required under this Agreement;
(vi) deliver to the Seller an original counterpart of the General Assignment; and 5655.003-8048828.1
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(vii) issue to Buyer and the Seller final escrow closing statements reflecting the foregoing and all prorations between the Buyer and the Seller as instructed in this Agreement.
4. Additional Conditions to Buyer’s Obligations. The Close of Escrow and the Buyer’s obligations to consummate the transactions contemplated by this Agreement are subject to the satisfaction of the following additional conditions (or the Buyer’s waiver of the conditions) on or before the dates designated below for the satisfaction of the conditions or on or before the Close of Escrow in the absence of a specified date:
(a) Title Insurance . Upon the Close of Escrow, the Escrow Holder must have irrevocably committed to issue the Title Policy to the Buyer in the amount of the Purchase Price and subject to only the Permitted Exceptions. In the event that Escrow Holder cannot and/or has not irrevocably committed to the Title Policy, Seller, as its cure right under Section 5, shall have the right to designate an escrow company of is choosing so that a Title Policy, as required under this Agreement, is issued, subject to satisfaction of each of the following: (i) the replacement escrow and title company (the “ Replacement Escrow Holder ”) shall be a nationally-recognized company that will provide a title policy of equal or greater coverage and value than that of the original Escrow Holder , (ii) the preliminary title report (or equivalent) issued by the Replacement Escrow Holder shall be treated as an updated Preliminary Title Report under Section 3(c) for all purposes, (i ii) it shall be an additional Buyer’s condition precedent that Buyer shall, within five (5) business days after receipt of a pro forma Title Policy from the Replacement Escrow Holder, have approved of such pro forma Title Policy (which approval shall not be unreasonably withheld), and (iv) Close of Escrow will not be extended beyond March 31, 2024.
(b) The Seller’s Obligations . Upon the Close of Escrow, the Seller must have timely performed all of its obligations under this Agreement.
(c) The Seller’s Representations . Upon the Close of Escrow, the representations and warranties made by the Seller to the Buyer in this Agreement must be true and correct.
(d) Material Adverse Change. There has been no material adverse change in, or addition to, the information or items reviewed and approved by the Buyer during its Due Dilige nce, and there has been no materially adverse modification of, or addition to, any of the matters that are disclosed in or on the Preliminary Title Report or that otherwise affect title to the Property.
(e) Condition of Property. The physical condition of the Property must be substantially the same at the Close of Escrow as on the Effective Date of this Agreement. The parties hereto understand and agree that Seller’s removal of its Excluded P ersonal Property shall not be considered a substantial change to the condition of the Property, provided that (i) Seller removes the Excluded Personal Property in a good workmanlike manner, and (ii) Seller 5655.003-8048828.1
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repairs any damage to the Property arising from such removal prior to the Close of Escrow ; provided, however, Seller shall not be obligated to repaint, fill nail holes, clean carpets, or repair and minor damage or issues due to ordinary wear and tear.
(f) Legal Parcel. The Property must be a legal parcel before the Close of Escrow; neither the Buyer nor the Seller may waive this condition.
(g) Leases; Seller Affiliate Lease. Except for that certain Office Lease, dated November 11, 2011, as amended, by and between Seller and Seller’s affiliate, PDOC, LLC, a California limited liability company, (the “Seller Affiliate Lease”) which shall terminate, at Seller’s sole cost, six (6) months from Close of Escrow , but in no event, regardless of Close of Escrow date, later than March 31, 2024, as more particularly provided in Section 10(f), Buyer and Seller have agreed that Seller and all tenants shall continue to use and maintain their respective premises pursuant to their respective leases.
(h) Estoppel Certificates. As specified in Section 10(e), Seller shall provide Estoppel Certificates to Buyer for all tenants subject to the Leases. If any Estoppel Certificate claims that there is a default by the Seller under the respective tenant lease, Seller shall have opportunity to cure such default prior to Close of Escrow, provided that Seller shall deliver a revised Estoppel Certificate no later than three (3) business days prior to the Close of Escrow and Buyer shall have until the Close of Escrow to review and approve such revised estoppel certificate.
If any of the conditions set forth in Section 4 above are not timely satisfied or waived by Buyer on or before the Closing, then subject to the terms of Sections 5 and 12(c) of this Agreement (if applicable), Buyer may elect to terminate this Agreement by written notice thereof to Seller. Upon delivery of any such termination notice, this Ag reement shall terminate, except for any provisions that expressly survive the termination of this Agreement, the parties shall have no further rights or obligations under this Agreement. Notwithstanding anything to the contrary, in the event of any termination by Buyer under this Section 4, the Purchase Price shall be held by Escrow or as directed by a court of competent jurisdictio n (so long as that the Purchase Price is held by an independent third party) until any resolution of any dispute (pursuant to the provisions of Section 12(c)) between Buyer and Seller is reached or upon issuance of any final court judgement (subject to all rights of appeal).
5. Notice and Cure Period. Notwithstanding any other provision in this Agreement to the contrary, both parties shall be entitled to five (5) business days’ notice and opportunity to cure before being in default under this Agreement, provided that (i) such opportunity to cure may be extended to ten (10) business days if such additional time is reasonably necessary and the breaching party has commenced curing within the initial five (5) business day period, and (ii) unless otherwise agreed by the parties in writing, in no event shall Closing be extended as a result of any such notice and cure period. For avoidance of doubt, this Agreement may not be terminated, nor shall any remedy be enforced, under any provision set forth herein, unless and until the non-breaching party has issued notice and allowed for breaching party to cure in accordance with this Section 5. 5655.003-8048828.1
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6. Release and Indemnification of Seller . Because the Buyer has been afforded access to the Property to conduct tests and investigations, because the Buyer has been afforded acce ss to any information the Seller has relating to the Property, and because the Buyer has been afforded the opportunity to examine the Property and documents relating to the Property to the Buyer’s satisfaction, so that the Buyer may perform and rely upon its own independent investigation of the condition of the Property, the Buyer hereby releases and shall completely indemnify, defend, protect, and hold harmless the Seller and the Seller’s officers, employees, and agents from and against any and all claims, damages, liens, suits, causes of action, legal or administrative proceedings, fines, penalties, judgments, demands, obligations, costs, liabilities and losses and expenses (including without limitation, reasonable attorneys’ fees) for property damage or personal injury to the extent solely caused by the activities on the Property of Buyer or Buyer’s Representatives; provided, however, except for Hazardous Substances (as defined below) that Buyer or its duly authorized representative discovered or could have reasonably discovered during its Due Diligence, Buyer shall not be obligated to defend or indemnify Seller, nor to repair any damage caused in whole or part by any one or more of the following: (i) the discovery of any Hazardous Substances; (ii) a pre -existing condition in, on or about the Property; (iii) the spread of Hazardous Substances already present on the Property despite the use of reasonable care; or (iv) the negligence or willful misconduct of Seller or its agents. As used in this Agreement, “H azardous Substances” shall mean any flammable explosives, radioactive materials, hazardous wastes or substances, toxic wastes or substances and other related materials, including, without limitation, any substances defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” or “toxic substances” under any applicable federal, state or local laws or regulations. Nothing in this Section 6 shall supersede or limit Buyer’s rights or remedies with respect to any express representations and warranties made by Seller in this Agreement.
7. The Buyer is Purchasing the Property in its “As -Is; Where-Is” Existing Condition. Except as expressly set forth in this Agreement, the Buyer acknowledges that the Seller and the Seller’s officers, employees, and agents have not and do not make any representation or warranty to the Buyer concerning the Property, including representations or warranties regarding the suitability of the Property for the Buyer’s intended use; the Property ’s compliance with federal, state, or local statutes, ordinances, rules, regulations, and other law (including those relating to toxic or hazardous wastes, materials, or substances); the accuracy of Due Diligence Materials; or the need for land-use entitlements. The Buyer shall perform and, except as expressly set forth in this Agreement, rely solely upon its own independent investigation concerning the Property and the Property’s compliance with any applicable law. The Buyer acknowledges that it is acquiring the Property subject to all existing statutes, ordinances, rules, regulations, and law, and that neither the Seller nor any of the Seller’s officers, employees, or agents has made any warranties, representations, or statements regarding any statutes, or dinances, rules, regulations, or other law of any governmental or quasi - governmental body, entity, district, or agency having authority over the use, condition, or occupancy of the Property.
Buyer further acknowledges and agrees that except as expressly set forth in this Agreement (A) Buyer has not relied on any representations, warranties or promises of Seller, or anyone acting for 5655.003-8048828.1
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or on behalf of Seller; (B) all of the matters concerning the Property have been independently verified by Buyer to its full satisfaction, or will be independently verified by Buyer to its full satisfaction prior to the Closing Date, (C) Buyer hereby acknowledges that Seller’s Records (as previously provided to Buyer) may include copies of documents prepared by third parties and Seller has provided the true and correct copies of such Seller’s Records that are within Seller’s possession; that Seller has not taken any independent investigation as to the truth, accuracy or completeness of such Seller’s Records; and, except as provided in Section 8, that Seller expressly disclaims any liability for any and all defects or deficiencies contained therein; (D) Buyer shall purchase the Property based on its own independent inspection and examination thereof; and (E) B UYER SHALL PURCHASE THE PROPERTY WITH THE PROPERTY IN ITS “AS-IS; WHERE-IS” CONDITION INCLUSIVE OF
ALL FAULTS AND DEFECTS AS MAY EXIST ON THE DATE ON WHICH THE DUE DILIGENCE PERIOD EXPIRES AND IN ITS “AS -IS; WHERE-IS” STATE OF REPAIR INCLUSIVE OF ALL FAUL TS AND DEFECTS AS MAY EXIST ON SUCH DATE.
Buyer’s Initials: ______________
8. The Seller’s Representations and Warranties. In consideration of the Buyer entering into this Agreement, the Seller makes the following representations and warranties, which will survive the closing and not be deemed to have merged into the Grant Deed or other instrument of closing:
(a) The Seller is a limited liability company duly organized and existing under its charter and the laws of the state of California, is authorized to do business in the state of California, and it is duly authorized to execute and perform its obligations under this Agreement. The Seller’s performance of those obligations will not violate any materials terms of its organizational documents or any contract to which it is bound. The Seller has taken all requisite action in connection with the entering into this Agreement, the instruments referenced in this Agreement, and the consummation of the transaction contemplated by this Agreement. The individual who sig ns this Agreement on behalf of Seller and the instruments referenced in this Agreement has the legal power, right, and actual authority to bind the Seller to their terms and conditions.
(b) To the best of Seller’s knowledge, the Seller has not received and is not aware of any notification from the building department, health department or other city, county, or state authority having jurisdiction, alleging any violation of applicable laws or requiring any work to be done on or affecting the Property. The Sell er further warrants that if it receives any such notice or notices before the Closing Date, then it will promptly provide the Buyer with copies of the notice or notices.
(c) To the best of Seller’s knowledge: (i) the Seller has not received written notice of any pending condemnation, eminent- domain, or similar proceedings that affects the Property, and no such proceedings are contemplated; (ii) the Seller has not received written notice from any governmental authority regarding existing violations of environmental laws or any other laws applicable to the Property; (iii) the Seller has not received written notice of any action, suit, quasi-judicial or administrative proceeding, or arbitration affecting the Property 5655.003-8048828.1
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or Seller’s obligations under this Agreement that is pending in any court or any governmental or quasi-government authority; (iv) the Seller has no actual knowledge of any threatened or pending action, suit, or proceeding that is against or affects all or any portion of the Property; that relates to, o r arises out of, the ownership, management, development, proposed development, or operation of the Property; or that would affect the Seller’s ability to perform its obligations under this Agreement.
(d) To the best of Seller’s knowledge, the Seller has no ou tstanding contracts for any improvements to the Property that have not been fully paid for.
(e) The Seller is not a foreign person and is a “United States person” as that term is defined in the Internal Revenue Code of 1986 (26 U.S.C. § 7701(a)(30)).
(f) The Sel ler owns fee title to the Property; has not previously sold, transferred, or conveyed the Property; and has not entered into any executory contracts for the sale of the Property (other than this Agreement).
(g) Except the Leases (previously disclosed herein), at the Close of Escrow, there will be no other leases or agreements (whether oral or written) in effect that affect or relate to the rights of any person or entity with respect to the possession of the Prope rty or any portion of the Property.
(h) To the best of Seller’s knowledge, there are no encumbrances or liens against the Property, including, but not limited to, actual or impending mechanics’ liens against the Property, options, mortgages or deeds of trust, other than those set forth in the Preliminary Title Report.
(i) The Leases are in full force and effect and Seller, as landlord, is entitled to assign its interest in the Leases with respect to the Property, to Buyer. To best of Seller’s knowledge:
(i) neither Seller, as landlord, nor the tenant under the Leases are in default under the Leases and there exists no known condition or circumstance or written notice of any condition or circumstance which, with the passage of time, would constitute a default by either Seller, as landlord, or the tenants under the Leases; (ii) there is no rent credit, tenant improvement allowance or other similar amount or credit owing to the tenants under the Leases; (iii) no party is entitled to occupancy of any portion of the Property except for the tenant under the Leases; and, (iv) no leasing or brokerage commissions are or will be payable with respect to the Leases after the Closing and there are no existing leasing or brokerage commission agreements that will be binding on Buyer after the Closing.
(j) Prior to the Effective Date, Seller has delivered to Buyer all documents within its possession related to (i) title, (ii) books and records related to operations of Property, including without limitation, building and parking plans, environmental reports and studies, soils reports, building maintenance schedules and expenses, property tax information, roof report and warranties, maintenance schedules for the HVAC systems and elevators, property 5655.003-8048828.1
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condition or building inspection reports, warranties, ADA reports and studies, notices regarding hazardous substances or materials, notices of default or violation, permits and licenses, plans and specifications, as -builts, estoppel certificates, appraisals, operational contracts, surveys, insurance policies including loss reports, and prior litigation affecting the Property, (iii) leases and lease -related documents and materials to the extent they are currently in the Seller’s possession or under the control of the Seller, and (iv) and without limiting the foregoing, the copies of any documentation regarding Skyslope’s termination of its lease and subsequent extension and amendment thereto (if any), and a copy of the Seller Affiliate Lease (the “Due Diligence Materials”).
(k) All of the Due Diligence Materials furnished or made available to Buyer in accord ance with this Agreement that were created by Seller or to which Seller is a party, are true, accurate and complete, and have not been in any respect amended, modified or supplemented. All of the Due Diligence Materials delivered to Buyer are all of the documents and materials relating to the Property which are in Seller’s possession or under its control.
(l) The list of personal property as provided in under Section 10(g) is a true and complete inventory of all personal property currently used in the operatio n or maintenance of the Property, and to Seller’s knowledge, there is no other personal property that has historically been necessary or reasonably convenient for the operation or maintenance of the Property except as set forth on such list.
(m) Seller warrants that Paul S. Petrovich is the party most knowledgeable about the Property.
For purposes of this Agreement, any reference to Seller’s knowledge or best of Seller’s knowledge shall mean to the actual and present knowledge of Paul S. Petrovich.
Seller shall promptly notify Buyer in writing if any of the representations and warranties of Seller set forth in this Agreement are no longer true and correct as of the Closing. If Buyer discovers any facts or circumstances that render any of Seller’s re presentations and warranties materially incorrect or materially inaccurate, Buyer shall promptly notify Seller in writing of such facts or circumstances, and Seller shall have the opportunity to cure in accordance with Section 5. If any of Seller’s representations and warranties ceases to be materially true and correct then the applicable notice and cure period, Buyer may elect to terminate this Agreement or to proceed to Closing. In the event Buyer terminates under this Sectio n 8, the Purchase Price shall be held by Escrow or as directed by a court with competent jurisdiction (so long as that the Purchase Price is held by an independent third party) until any resolution of any dispute (pursuant to the provisions of Section 12(c), if applicable ) between Buyer and Seller is reached or upon issuance of any final court judgement (subject to all rights of appeal).
9. The Buyer’s Representation and Warranties. In consideration of the Seller entering into this Agreement, the Buyer makes the following representations and warranties, which will survive the closing and not be deemed to have merged into the Grant Deed or other instrument of closing. 5655.003-8048828.1
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(a) Buyer is a charter municipal corporation in the state of California and is duly authorized to execute and perform its obligations under this Agreement and such performance will not violate its charter, City Code, or any contract to which it is bound. All requisite action (including, but not limited to, approval of City Council) has been taken by Buyer in connection with the entering into this Agreement, the instruments referenced herein, and the consummation of the transaction contemplated hereby. The individual(s) executing this Agreement and the instruments referenced herein on behalf of Buyer , and the officials or designees of Buyer, if any, have the legal power, right, and actual authority to bind Buyer to the terms and conditions of this Agreement.
(b) This Agreement has been duly authorized and executed by Buyer and, upon delivery to and execution by Seller, shall be a valid and binding agreement of Buyer.
(c) Excepting Seller’s representations set forth in this Agreement and Seller’s fraud, Buyer, in purchasing the Property, shall do so on the basis of its own investigation of the Property including, without limitation, the physical, environmental, economic, and legal condition and all other aspects of the Property and, Buyer is not relying upon any other representations or warranties made by Seller or anyone acting or claiming to act on Seller’s behalf concerning the Property.
(d) Except for any additional due diligence and investigation rights, Buyer has conducted its Due Diligence, and Buyer assumes the risk that any adverse matter may not have been revealed in this Agreement or by Buyer’s investigation.
(e) Notwithstanding Seller’s Representations and Warranties set forth in Section 8, Buyer hereby represents that (i) it has constructive knowledge of any and all notices it issues (if any) to Seller in Buyer’s governmental capacity , and (ii) Buyer hereby acknowledges and approves of such notices. In no event shall any Buyer notice to Seller constitute a default under any provision of this Agreement including, but not limited to, Seller’s Representations and Warranties.
10. Covenants; Seller Conduct Prior to Close of Escrow . Prior to the Close of Escrow, Seller, hereby agrees to the following:
(a) Seller shall not take any of the following actions without the prior written consent of Buyer, which consent shall be in Buyer’s sole discretion: (i) except for th e Seller Affiliate Lease as provided in Section 10(f), enter into, extend or otherwise materially modify or terminate any leases, contracts, guaranties, permits, licenses, warranties, options or agreements, including, without limitation, service, operating, maintenance, management or other agreement whatsoever affecting the Property that Seller cannot discharge or otherwise remove on or before the Closing; (ii) cause any lien, encumbrance, mortgage, deed of trust, right, restriction or easement to be placed upon the Property that Seller cannot discharge or otherwise remove on or before the Closing; (iii) permit any mortgage, deed of 5655.003-8048828.1
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trust or other lien to be foreclosed upon due to Seller’s actions or omissions, including failure to make a required payment or failure to obtain the consent of a beneficiary under any deed of trust and/or mortgagee; (iv) undertake any material modification or material improvements of any kind upon the Property or any portion thereof, except as may be required under the Leases or routine maintenance of the Property; (v) use, produce, treat, store, release, transport or dispose of any Hazardous Substances on the Property, except as permitted by law (and Seller shall promptly notify Buyer of any such activities); or (vi) violate or fail to comply with its material obligations under the Leases.
(b) From the Effective Date until the Close of Escrow or earlier termination of this Agreement, Seller shall not solicit or accept any back -up offers for the purchase of the Property.
(c) Seller agrees to advise Buyer as soon as practicable if Seller ( i) acquires knowledge of any suit, action, arbitration, legal, administrative or other proceeding or inquiry, pending or threatened against the Property or relating to Seller which would prevent Seller’s ability to perform its obligations under this Agreement, (ii) acquires actual knowledge of any material damage, destruction , or condemnation proceedings to any portion of the Property, ( iii) acquires actual knowledge of the filing of a petition of bankru ptcy under the Federal Bankruptcy Code by or against any tenant or guarantor under the Leases, ( iv) receives any written notice from a governmental entity of a claim that the Property does not materially comply in all respects with any law, ordinance, rule or regulation, including any environmental law, and (v) receives any written notice from any tenant or guarantor under the Lease, alleging any monetary or material nonmonetary default under the Leases.
(d) From and after the Effective Date until the Close of Escrow, upon thirty (30) days written notice from Buyer’s counsel , Buyer and/or Buyer’s third -party consultants and contractors (collectively: “Buyer’s Representatives”), Buyer at its sole cost and expense, may enter upon the Property during the business week and at times that are mutually agreeable to Seller and Buyer to inspect the Property; provided, however, Buyer’s right to inspect the Property shall be limited to one (1) inspection every forty -five (45) day period, provided that Buyer may also inspect the Property following a Seller default and, notwithstanding the timing of any previous inspection, five (5) business days after the Effective Date, and five (5) business days prior to Closing. Prior to entry onto the Property to perform any inspection pursuant to this Section 10(d), each of Buyer’s representatives entering onto the Property, shall have obtained and shall keep in force during the term of their work at the Property a policy or policies of commercial general liability insurance providing for a combined single limit of not less than ONE MILLION DOLLARS ($1,000,000.00) per occurrence and aggregate, covering liability to property or persons for its activities on or about the Property and naming Seller as an additional insured. A certificate of insurance shall be delivered to Seller prior to entry onto the Property by Buyer’s Representatives. If the Property is damaged directly by any of Buyer’s Representatives’ activities pursuant to this Agreement, Buye r, at Buyer’s sole cost and expense shall promptly repair such damage to the same material condition at the time immediately preceding such entry by Buyer. Seller agrees that Buyer may satisfy its insurance 5655.003-8048828.1
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requirements under this paragraph by submitting a letter of self -insurance to Seller.
Notwithstanding the foregoing, Buyer understands and acknowledges that Seller and tenants operate businesses from and/or maintain their offices at the Property. As such, any inspection by Buyer shall be conducted in a manner to not unreasonably interfere or disturb Seller’s and/or tenants’ businesses and operations.
(e) Within thirty (30) days from the Closing Date, Seller shall have obtained and delivered to Buyer a tenant estoppel certificate dated no earlier than thirty (30) days prior to the Closing Date from each tenant under the Leases, in form and substance as required under the Leases, or if the Leases do not provide a form, in form and substance reasonably acceptable to the Buyer (the “Estoppel Certificate”); provided, however, Buyer is aware that the tenant under the WI-FI Wireless Lease, as further described in Exhibit B, operates under a month-to-month tenancy, and, in the event Seller is not able to obtain a tenant executed estoppel for such tenant, Buyer shall accept, as satisfactory, a Seller executed estoppel, which shall affirm the same or similar terms that are provided in a typical tenant form estoppel and shall be treated as a Seller representation and warranty that survives Close of Escrow. Unless the applicable Lease obligates the tenant to deliver an Estoppel Certificate, Seller shall not be obligated to issue updated estoppels for (i) Bank of America ATM, (ii) Ultimate Wireless, or (iii) WI-FI Wireless, but in such case, Seller shall, as part of Seller’s Close of Escrow Notice to Buyer, represent and warrant to Buyer that there is no existing default under such tenant leases and that there are no outstanding obligations (including the payment of rent) due or unsatisfied and also affirm the same or similar terms that are provided in a typical tenant form estoppel, with such representation and warranty surviving Close of Escrow . Seller shall provide an updated Estoppel Certificate for SkySlope no less than thirty (30) days from Close of Escrow.
(f) At least twenty-five (25) days prior to the Closing Date, Seller shall deliver to Buyer for Buyer’s approval (which approval shall not be unreasonably withheld), a form of amendment to the Seller Affiliate Lease providing that the Seller Affiliate Lease shall termi nate six (6) months from Close of Escrow, but in no event, regardless of Close of Escrow date, later than March 31, 2024 at no cost to Buyer (whether as the Buyer under this Agreement or as successor landlord under the Seller Affiliate Lease) (the “Seller Affiliate Lease Termination”).
Seller shall deliver the duly-executed Seller Affiliate Lease Termination to Buyer no later than five (5) days prior to the Closing Date.
(g) On the Effective Date, Seller shall deliver to Buyer a detailed inventory of all FF&E and other personal property that are not Excluded Personal Property.
11. Mutual Cooperation.
(a) Property Maintenance. In order for Buyer to maintain the Property following Close of Escrow, Seller agrees to reasonably cooperate, as required with Buyer in providing information regarding the routine maintenance of the Property (as needed).
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(b) Rental Income. Buyer shall, at no material cost, burden, or liability to itself, reasonably cooperate with Seller’s efforts to collect 2023 Rental Income , which shall include, without limitation, assigning any and all rights to Seller that are reasonably necessary for it to collect such debts and providing any and all corre spondence, documents and other information reasonably necessary to assist in such efforts (but excluding privileged information and documents exempt from the California Public Records Act) . Conversely, Seller shall, a t no material cost, burden, or liability to itself, reasonably cooperate with Buyer necessary to enforce the terms of any lease.
(c) Excluded Personal Property . Seller shall notify Buyer of its intentions and/or plans to remove the Excluded Personal Property. All Excluded Personal Property must be removed before the expiration of six (6) months from the Close of Escrow, but in no event, regardless of Close of Escrow date, later than March 31, 2024. For the avoidance of doubt, the Excluded Personal Property may only be stored on the premises leased under the Seller Affiliate Lease and in locations controlled by Seller or not otherwise occupied by any other tenant of the Building to the extent reasonably acceptable to Landlord, and subj ect to any reasonable conditions as may be required by Landlord.
The terms of this Section 11 will survive the Close of Escrow for a period of one (1) year thereafter and will not merge into the Grant Deed.
12. Miscellaneous.
(a) Additional Documents. The Buyer and the Seller shall execute such other documents and instruments as may be reasonably requested by the other party or the Escrow Holder in connection with the conveyance of the Property consistent with the provisions of this Agreement.
(b) Reservation of Rights . Seller understands and agrees that no entitlement, building permit, approval, or other regulatory action is being taken, promised, implied, or granted by Buyer pursuant to this Agreement. Buyer shall have no obligation whatsoever to exercise its legislative and discretionary municipal land use or other regulatory authority in any particular manner to benefit Seller. Buyer, acting as a government agency with municipal land use and other regulatory authority, makes no commitment or representation under this Agreement with respect to entitlements or other regulatory approvals or actions and reserves all of its municipal regulatory authority and discretion in reviewing any future entitlements or applications for governmental approvals. Nothing in this Agreement shall be construed as a waiver, limitation, or restriction on Buyer’s obligations and powers as a governmental agency. This subsection shall prevail in the event of any conflict or ambiguity with any other provision in this Agreement.
(c) Default and Disputes. Any controversy, claim, default, litigation, or enforcement of terms arising out of this Agreement or a breach of this Agreement (including any claim for attorney’s fees) will be subject to the parties’ rights and remedies under applicable law and 5655.003-8048828.1
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equity. For purposes of clarity, and without modifying or limiting the rights and remedies of the Parties pursuant to this Agreement, in the event of a material breach or default hereunder resulting in the termination of this Agreement, the non-defaulting party may , after any applicable notice and cure period, in accordance with and subject to California law, elect to seek either specific performance of the Agreement or actual damages, if any.
(d) Tax Deferred Exchange. Buyer agrees to reasonably cooperate with Seller’s efforts in effecting one or more like -kind tax -deferred exchanges pursuant to Section 1031 of the Internal Revenue Code, as amended; such cooperation to include, without limitations, executing documents reasonably requested by the exchanging party provided there shall be no delay in the Closing Date beyond extensions expressly approved in writing by Buyer and Seller (if any) and provided further that such exchange shall be at no cost to the cooperating party who shall not be required to assume any additional liabilities or obligations nor assume any personal liability as a result of any such exchange. The cooperating party hereby disclaims any responsibility for the qualification of the transactions contemplated by this Agreement as a tax -deferred exchange under Internal Revenue Code Section 1031, as amended, and the exchanging party agrees that the cooperating party shall not be liable for any tax liability, interest or penalties arising thereunder by virtue of the cooperating part y’s cooperation in the consummation of any such exchange.
(e) Authority of Signatories. Each party to this Agreement warrants to the other that it is duly organized and existing; and each signatory to this Agreement represents to the other party that it has full right and authority to enter into and consummate this Agreement and all related documents.
(f) Binding Effect. This Agreement is binding on, and inures to the benefit of, the parties to this Agreement and their heirs, personal representatives, successors, and assigns, except as otherwise provided in this Agreement.
(g) Counterparts. This Agreement may be executed in multiple counterparts, each of which will be deemed an original, and all of which will together constitute one and the same instrument. The parties agree that this Agreement may be executed with electronic signatures.
(h) Waiver. A party’s failure to insist on strict performance of this Agreement or to exercise any right or remedy upon the other party’s breach of this Agreement will not constitute a waiver of the performance, right, or remedy. A party’s waiver of the other party’s breach of any provision in this Agreement will not constitute a continuing waiver or a waiver of any subsequent breach of the same or any other provision. A waiver is binding only if set forth in writing and signed by the waiving party.
(i) Interpretation. This Agreement is to be interpreted and applied in accordance with California law, except that that the rule of interpretation in California Civil Code section 1654 will not apply. “Include” and its variants are terms of enlargement rather than of limitation. 5655.003-8048828.1
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For example, “includes” means “includes but not limited to,” and “including” means “including but not limited to.” Exhibits A, B, and C are part of this Agreement.
(j) Loss & Destruction. The Uniform Vendor and Purchaser Risk Act set forth in California Civil Code Section 1662 and its provisions governing the allocation of risk of loss governs this transaction except where a contrary result is specified in this Agreement. Civil Code Section 1662 states as follows:
Any contract hereafter made in this State for the purchase and sale of real property shall be interpreted as including an agreement that the parties shall have the following rights and duties, unless the contract expressly provides otherwise: [¶] (a) If, when neither the legal title no r the possession of the subject matter of the contract has been transferred, all or a material part thereof is destroyed without fault of the purchaser or is taken by eminent domain, the vendor cannot enforce the contract, and the purchaser is entitled to recover any portion of the price that he has paid; [¶] (b) If, when either the legal title or the possession of the subject matter of the contract has been transferred, all or any part thereof is destroyed without fault of the vendor or is taken by eminent domain, the purchaser is not thereby relieved from a duty to pay the price, nor is he entitled to recover any portion thereof that he has paid. [¶] This section shall be so interpreted and construed as to effectuate its general purpose to make uniform the law of those states which enact it. [¶] This section may be cited as the Uniform Vendor and Purchaser Risk Act.
(k) Notices. Any notice or other communication under this Agreement must be in writing and will be considered properly given and effective only when mailed or delivered in the manner provided by this Section 12( k) to the persons identified below. A notice or other communication that is mailed will be effective or will be considered to have been given on the third day after it is deposited in the U.S. Mail (certified mail and return receipt requested), addressed as set forth below, with postage prepaid. A notice or other communication sent in any other manner will be effective or will be considered properly given when actually delivered or when delivery is rejected by either Buyer or Seller. A party may change its address for these purposes by giving written notice of the change to the other party in the manner provided in this Section 12(k).
[Remainder of Page Intentionally Left Blank]
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If to the Seller:
Hale Bros. Investment Company, LLC
Attn: Paul Petrovich
825 K Street, 3rd floor
Sacramento, CA 95814
Email: [email protected]
With copies to:
Hale Bros. Investment Company, LLC
Attn: John M. Cox
825 K Street, 3
rd Floor
Sacramento, CA 95814
E-Mail: [email protected]
Smith McDowell & Powell
Attn: C. Jason Smith
100 Howe Ave, Suite 208
Sacramento, CA 95825
If to the Buyer:
City of Sacramento
Attn: Howard Chan
915 I Street, 5th Floor
Sacramento CA 95814
E-Mail: [email protected]
With a copy to:
City of Sacramento
Attn: City Attorney’s Office; Leslie Z. Walker
915 I Street, 4th Floor
Sacramento, CA 95814
E-Mail: [email protected]
(l) No Joint Venture . This Agreement does not create a joint venture, partnership, or other relationship between the parties.
(m) No Third-Party Beneficiary. This Agreement is solely for the benefit of the Seller and the Buyer.
It is not intended to benefit any person or entity that is not a party.
(n) Partial Invalidity. If a court with jurisdiction holds any nonmaterial provision of this Agreement to be invalid, void, or unenforceable, then the other provisions will remain in full force.
(o) Survival of Provisions. Notwithstanding any provisions of this Agreement to the contrary, this Agreement will survive the close of escrow and will not merge into the Grant Deed , and the covenants, representations, warranties, and obligations in this Agreement will survive the recording of the Grant Deed for the periods set forth in this Agreement.
(p) Attorneys’ Fees. The prevailing party in any litigation regarding the interpretation of, breach and/or performance by either party under this Agreement shall be entitled to all reasonable attorneys’ fees, costs and expenses, including expert witness fees.
(q) Time of Essence . Time is of the essence of this Agreement. Unless the context otherwise requires, all periods terminating on a given day, period of days, or date shall terminate at 5:00 p.m. (Pacific Time) on such date or dates. References to “days” shall refer to calendar days except if such references are to “business days” which shall refer to days which are not a Saturday, Sunday or holidays (as defined in California Government Code Section 6700) (a “ Non-Business Day”). In the 5655.003-8048828.1
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event that any date specified in this Agreement falls on a Non- Business Day, such date shall be deemed to be the succeeding business day.
(r) Entire Agreement. The Settlement Agreement and this Agreement and the attached exhibits constitute the entire agreement between the parties relating to the sale of the Property. Any prior agreements, promises, negotiations, or representations not expressly set forth in this Agreement are of no force and effect. Any amendment to this Agreement must be in writing and signed by the parties.
(s) Defined Terms. Any capitalized terms not defined otherwise shall have the meaning set forth in the Summary of Terms.
(t) Miscellaneous. Each provision of this Agreement is severable from any and all other provisions of this Agreement. Should any provision of this Agreement be for any reason unenforceable, the balance shall nonetheless be of full force and effect. The parties to this Agreement agree that this Agreement is the product of joint draftsmanship and negotiation and that should any of the terms be determined by a court, or in any type of quasi -judicial or other proceeding, to be vague, ambiguous and/or unintelligible, that the same sentences, phrases, clauses or other wordage or language of any kind shall not be construed against the drafting party in accordance with California Civil Code Section 1654, and that each such party to this Agreement waives the effect of such statute.
[Signatures on Next Page]
5655.003-8048828.1
Agreement for Sale of Real Property (827 K Street) Page 22 of 20 IN WI
TNESS WHEREOF, Seller and Buyer have executed this Agreement for Purchase and Sale of Real Property and Joint Escrow Instructions as of the date of last signature shown below.
HALE BROS. INVESTMENT COMPANY, LLC,
a California limited liability company
By: _____________
_________________
Paul S. Petrovich, Manager
Date
d: ___________ __, 2023
Approv
ed as to Form
By:_______________
_______________
Name:___________________________
Title:_____________________________
CITY OF SACRAMENTO,
a municipal corporation
By: _____________
_________________
Howard Chan, City Manager
Date
d: ___________ __, 2023
Approv
ed as to Form
Senior Deputy City Attorney
By: _____________
__________________
Name: ____________________________
Title: ______________________________
Attest:
As
sistant City Clerk
By: _____________
___________________
Name: _____________________________
Title: _______________________________
June 26
John M. Cox
General Counsel
5655.003-8048828.1
Agreement for Sale of Real Property (827 K Street) Exhibit A EXHI
BIT “A”
Legal Description of Property
R
eal property in the City of Sacramento, County of Sacramento, State of California, described as follows:
A
LL OF LOT 5 AND A PORTION OF LOT 6 IN THE BLOCK BOUNDED BY 8TH AND 9TH, "J" AND "K"
STREETS OF THE CITY OF SACRAMENTO, ACCORDING TO THE OFFICE PLAT THEREOF, DESCRIBED AS FOLLOWS:
C
OMMENCING AT THE INTERSECTION OF THE WEST LINE OF SAID 9TH STREET WITH THE NORTH LINE OF SAID "K" STREET; THENCE FROM SAID POINT OF BEGINN ING, ALONG THE NORTH LINE OF SAID "K" STREET, NORTH 71º 52’ 28" WEST 123.31 FEET; THENCE NORTH 17º 59’ EAST 160.86 FEET TO A POINT ON THE SOUTH LINE OF A TWENTY FOOT ALLEY; THENCE ALONG THE SOUTH LINE OF SAID TWENTY FOOT ALLEY SOUTH 71º 54’ 46" EAST 123.30 FEET TO A POINT ON THE WEST LINE OF SAID 9TH STREET; THENCE ALONG THE WEST LINE OF SAID 9TH STREET SOUTH 17º 59’ 10" WEST 160.934 FEET TO THE POINT OF COMMENCEMENT.
A
PN: 006-0097-012-0000
5655.003-8048828.1
Agreement for Sale of Real Property (827 K Street) Exhibit B
EXHIBIT “B”
Property Lease Agreements
1. Office Lease, dated November 11, 2011, as amended, by and between PDOC, LLC, a California limited liability company (“Tenant”) and Hale Bros. Investment Company, a California limited liability company (“Landlord”)
2. Office Lease, dated September 16, 2016, as amended, by and between SkySlope, Inc., a California corporation (“Tenant”) and Hale Bros. Investment Company, LLC, a California limited liability company (“Landlord”)
3. Retail Lease, dated November 1, 2014, as amended, by and between SNRH Ultimate Inc., a California corporation, dba The Ultimate Wireless (“Tenant”) and Hale Bros. Investment Company, LLC, a California limited liability company (“Landlord”)
4. ATM Lease, dated September 18, 2013, as amended, by and between Bank of America, National Association, a national banking association (“Tenant”), and Hale Bros. Investment Company, LLC, a California limited liability company (“Landlord”)
5. WI-FI Wireless Lease, dated May 19, 2014, by and between Wayport, LLC d/b/a AT&T Wi-Fi Services (“Tenant”) and Hale Bros. Investment Company, LLC, a California limited liability company (“Landlord”)
5655.003-8048828.1
Agreement for Sale of Real Property (827 K Street) Exhibit C E
XHIBIT “C”
Form of General Assignment
G
ENERAL ASSIGNMENT
T
his General Assignment is made with reference to that certain Agreement for Purchase and Sale of Real Property and Joint Escrow Instructions (the “Agreement”) with a reference date of June 14, 2023, in which the seller is the Hale Bros. Investment Company, LLC, a California limited liability company (the “Seller”), and the buyer is City of Sacramento, a municipal corporation (the “Buyer”).
The Agreement provides the terms and conditions upon which the Seller shall sell, and the Buyer shall purchase, certain real property and improvements (the “ Property”) located at 827 K Street, Sacramento, CA 95814, the legal description of which is set forth on Exh ibit A attached hereto and incorporated herein by reference.
N
OW, THEREFORE, FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby assigns to the Buyer and the Buyer’s successors and assigns all of the Seller’s right, title, and interest in and to any intangibles related to the Property arising out of, or in connection with, the ownership, management, and operation of the Property, including but not limited to all claims and causes of action, governmental permits, use permits, warranties, guarantees, indemnities, rights and claims (including but not limited to those for workmanship, materials, and performance), and contract rights related to the Property or used in connection with the ownership and operation of the Property. Expressly included from this General Assignment is the 2023 Rental Income as defined in the Agreement.
T
he effective date of this General Assignment is the date on which a deed is recorded in the Official Records of Sacramento County, California, conveying the Property from the Seller to the Buyer. This General Assignment is governed by and is to be construed and interpreted in accordance with, the laws of the State of California.
(S
ignature page follows)
5655.003-8048828.1
Agreement for Sale of Real Property (827 K Street) Exhibit C I
N WITNESS WHEREOF, the undersigned have caused this General Assignment to be duly executed and delivered on the date set forth below.
HALE BROS. INVESTMENT COMPANY, LLC,
a California limited liability company
B
y: ______________________________
Paul S. Petrovich, Manager
Dated: _____________ __, 2023
Ap
proved as to Form
B
y:______________________________
Name:___________________________
Title:_____________________________
CITY OF SACRAMENTO,
a municipal corporation
B
y: ______________________________
Howard Chan, City Manager
Dated: _____________ __, 2023
Ap
proved as to Form
Senior Deputy City Attorney
By
: _______________________________
Name: ____________________________
Title: ______________________________
A
ttest:
Assistant City Clerk
B
y: ________________________________
Name: _____________________________
Title: _______________________________
John M. Cox
General Counsel
June
26 Type text here