City of Culver City, California
Redevelopment Agency Agenda Item Report
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RECOMMENDATION:
Staff recommends the Culver City Redevelopment Agency Board (Agency Board)
approve Purchase Agreements with (1) Melvin Segal in the amount of $6,039,000
for the properties located at 8910-12, 8914, 8916-18 Venice Boulevard and (2) Bob
and Ben Kalmuk for the property located at 8930 Venice Boulevard in an amount of
$2,082,400, in connection with the Agency’s proposed Washington/National Transit
Oriented Development (TOD).
BACKGROUND:
The Metropolitan Transit Authority (MTA) anticipates operation of the Exposition
Light Rail Line (Expo Line) to commence in 2012. The Expo Line will connect Culver
City to Downtown Los Angeles during the initial phase and then to Santa Monica
during the subsequent phase.
Over the past several years, the Agency has been assembling properties to create a
Transit Oriented Development around the Culver City Expo Station with the intent of
bringing shopping, housing, employment and transit together in a place-making
development. Prior development plans for the site had extremely inefficient
subterranean parking with an estimated cost of $60 million and did not incorporate
Venice Boulevard properties. The costly and inefficient parking distorted the
development program for the TOD requiring increased density and over-height
buildings to support the extraordinary parking costs. Consequently, the project was
Meeting Date: 02/28/11 Item Number: A-2
REDEVELOPMENT AGENCY BOARD AGENDA ITEM(1) Approval of Purchase
Agreements for Properties Located at 8910-12, 8914, 8916-18 Venice Boulevard and
8930 Venice Boulevard and (2) Approval of a Budget Amendment Related Thereto.
Contact Person/Dept.: Sol Blumenfeld/CDD
Todd Tipton /CDD
Phone Number: 310-253-5760
Fiscal Impact: Yes [X] No []
General Fund: Yes []
No [X]
Public Hearing: [] Action Item: [X] Attachments: [X]
Commission Action Required: Yes [] No [X] Date: _______________
Public Notification: (E-Mail) Meetings and Agendas – Redevelopment Agency
(02/24/11); (E-Mail) Melvin Segal (02/24/11) and Bob and Ben Kalmuk (02/24/11). .
Department Approval:
Sol Blumenfeld: (02/24/11)
Agency General Counsel Approval:
Murray Kane: (02/22/11)
Chief Financial Officer Approval:
Jeff Muir (by N. Kimball): (02/24/11)
Executive Director Approval:
John M. Nachbar: (02/24/11) City of Culver City, California
Redevelopment Agency Agenda Item Report
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not well received by the community. In order to more efficiently provide parking,
staff prepared a plan to expand the size and change the shape of the site below
ground, requiring multi-jurisdictional agreements with Expo, MTA, Caltrans and the
City of Los Angeles. The site area was increased below grade by including land
beneath a portion of MTA’s property, a portion of National Boulevard, and beneath
the properties on Venice Boulevard in the City of Los Angeles. In addition to
resolving the parking problems, incorporating the Venice Boulevard frontage in the
revised plan eliminated their blighting effect on the project. If a project were
constructed on the Agency property without including the Venice Boulevard frontage,
the parking costs would increase and the value of the Agency’s property would
decrease due to the poor appearance and condition of the Venice frontage, lack of
visibility and connection from Venice Boulevard and the inability to provide sufficient
development without increasing building coverage or creating over-height buildings.
Thus, the Venice Boulevard properties are a key element in implementing an
efficient and attractive TOD project at the Culver City Expo Station.
1
DISCUSSION:
As authorized by the Agency Board, staff commenced negotiations with the five
Venice property owners (Owners) in 2008, conducting preliminary environmental
analysis, preparing property survey’s, preparing preliminary land plans and
development proforma and obtaining relocation estimates from the Agency’s
relocation consultant in the event tenant relocation was necessary. Pursuant to
California Redevelopment Law, the Agency is required to relocate tenants of
property it acquires for redevelopment purposes. Because the properties are
located in the City of Los Angeles, the Agency does not have the power to acquire
property as it might if the property were located in the Redevelopment Project Area.|1010|
In order to address the Owner’s concerns about tax implications and speculation that
property value would increase if the Agency developed its property, staff explored
other acquisition methods including a property exchange and long-term ground
leasing with option agreements during the anticipated development entitlement
period. The ground lease negotiations were problematic since the duration of the
leases and the lease interest did not provide immunity from catastrophic defaults nor
insure continuity of lease payments over the lease terms.
Due to the inherent problems associated with a long-term lease and recent
indications by the State legislature to eliminate redevelopment authority in an
attempt to balance the State budget, the Venice property owners reconsidered their
position related to a land purchase.
3
Two Owners have now agreed to sell and all
have indicated their interest in pursuing a land sale. A purchase agreement is of
interest to the Owners because the Agency is offering an attractive purchase price, it
provides surety in regard to potential actions by the State, it eliminates the risks
associated with the option/ground lease scenario and can be structured to avoid City of Culver City, California
Redevelopment Agency Agenda Item Report
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adverse tax consequences. The agreement can be structured as a single payment
(outright sale) or as installments over a specified term.
The terms of the sale to the Segals and Kalmuks are summarized as follows:
Segal - 8910-12, 8914, 8916-18 Venice Boulevard:
§ Installment sale of $6,035,960 (net present value) calculated over 32 annual
payments.|1010|
§ 60 day escrow with an April 1, 2011 closing date or as soon as the Agency
completes due diligence and accepts the property.
§ Sale contingent on Agency acceptance of environmental reports for the property.
§ Tenant relocations estimated at $300,000 for two tenants.
§ Shared Closing Costs.
Kalmuk - 8930 Venice Boulevard:
§ Outright sale of $2,082,400.|1010|
§ 60 day escrow with an April 1, 2011 closing date or as soon as the Agency
completes due diligence and accepts the property.
§ No tenant relocation.
§ Sale contingent on Agency acceptance of environmental reports.
§ Shared closing costs.
Terms
Mr. Segal is interested in a purchase agreement that includes installment payments
that will be made over a 32 year period (see attached Purchase Agreement
payment schedule). The value of the sale is approximately 50 percent greater than
the appraised value determined at the start of negotiations.
Staff, Agency General Counsel and the Agency’s financial consultant (Keyser
Marston Associates) believe the value is acceptable because:
1. Other acquisition approaches would result in costs equal to or greater than this
amount.
2. Without the Venice properties the Agency would incur far greater cost to
construct parking on its property (due to less land area and decreased parking
efficiency); City of Culver City, California
Redevelopment Agency Agenda Item Report
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3. The value of the Agency’s adjacent property will increase because it will have
visibility from Venice Boulevard and won’t be located adjacent to aged and
unattractive properties;
4. A Purchase Agreement is less costly than the option/ground lease scenario;
5. Staff time and legal fees associated with ongoing option/ground lease
negotiations will cease;
6. Legal fees associated with a City acquisition effort will be avoided;
7. Financing for a TOD project will be less complicated if the Agency owns the
property as opposed to controlling it via a ground lease.
If the Agency Board approves the Purchase Agreements, escrow would close no
later than April 1, 2011 after the Agency’s environmental consultant concludes
remaining environmental testing.
FISCAL ANALYSIS:
Payments will be made in accordance with the Purchase Agreement payment
schedule. Sufficient funds are currently appropriated in the Washington/National
Sites Program (55092920) to fund the initial annual installment payment for the
Segal property. Future annual payments will be paid from future tax increment
receipts and included in the adopted budget.
The lump sum purchase of the Kalmuk property would be funded from available
unrestricted tax increment reserve. A budget amendment appropriating $2.1 million
in the Washington/National Sites Program (55092620) is necessary to fund the
purchase.
In addition to the purchase amount, the Agency would be subject to relocation
costs, which have been included in the FY 2010-11 Adopted Budget. In the event a
Purchase Agreement is authorized, staff and the Agency’s relocation consultant will
initiate discussions with the existing tenants in an effort to determine specific
relocation costs. Staff will return to the Agency for additional authorization once the
specific amount has been determined.
ATTACHMENTS:
1. Segal draft Purchase Agreement (to be provided at the Closed session)
2. Segal payment Schedule.
City of Culver City, California
Redevelopment Agency Agenda Item Report
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MOTIONS:
That the Redevelopment Agency Board:
1) Approve a budget amendment appropriating $8,135,960 for property acquisition
to the Washington/National Sites program (55092620); and
2) Approve Purchase Agreements with Melvin Segal in the amount of $6,039,000
for the properties located at 8910-12, 8914, 8916-18 Venice Boulevard and Bob
and Ben Kalmuk in the amount of $2,082,400 for the property located at 8930
Venice Boulevard; and
3) Authorize the Agency General Counsel to review/prepare the necessary
documents; and
4) Authorize the Executive Director to execute such documents on behalf of the
Agency.
NOTES:
1. With Venice frontage, the project can be developed with significant public amenities
including substantial open space (park, plazas and a transit plaza); substantial setbacks
permitting outdoor dining, streetscape improvement and include high quality design and
neighborhood serving uses (smaller format retail) that complements the area and
contributes to the surrounding neighborhood.
2. Although the Agency does not have certain powers to acquire property outside of the
Project Area, the City possesses acquisition powers that can be utilized when a public
purpose is involved (affordable housing, public parking, public open space, etc.).
3. Agency General Counsel determined that the option/ground lease scenario could be
invalidated if the Agency was eliminated because the option was not a binding Purchase
Agreement.
4. The purchase price is equivalent to 150% of the appraised value (based upon 8% interest
over 32 years. (Total interest costs over 32 years = $14,663,080).
5. The purchase price is equivalent to 150% of the appraised value.
MEETING DATE: 02.28.10
AGENDA ITEM: (1) Approval of Purchase Agreements for Properties
Located at 8910-12, 8914, 8916-18 Venice Boulevard and
8930 Venice Boulevard and (2) Approval of a Budget
Amendment Related Thereto
ATTACHMENTS
Page
1. Segal Draft Purchase Agreement (to be provided at the
Closed session).
2. Segal Payment schedule 1
.
SEGAL PROPERTY
INSTALLMENT SALE/LEASE PURCHASE ANALYSIS
WASHINGTON/NATIONAL MIXED-USE PROJECT
CULVER CITY, CALIFORNIA
Beginning
Balance|1010|Interest @
8%
Developer
Contribution|1010|Agency
Contribution|1010|Total
Ending
Balance
1 1/12 $6,038,960 $483,117 $0 $566,862 $566,862 $5,955,215
2 1/13 5,955,215 476,417 0 566,862 566,862 5,864,769
3 1/14 5,864,769 469,182 306,500 276,193 582,693 5,751,258
4 1/15 5,751,258 460,101 306,500 276,193 582,693 5,628,666
5 1/16 5,628,666 450,293 306,500 276,193 582,693 5,496,266
6 1/17 5,496,266 439,701 306,500 276,193 582,693 5,353,274
7 1/18 5,353,274 428,262 306,500 276,193 582,693 5,198,843
8 1/19 5,198,843 415,907 306,500 276,193 582,693 5,032,057
9 1/20 5,032,057 402,565 306,500 276,193 582,693 4,851,929
10 1/21 4,851,929 388,154 306,500 276,193 582,693 4,657,390
11 1/22 4,657,390 372,591 306,500 276,193 582,693 4,447,288
12 1/23 4,447,288 355,783 306,500 276,193 582,693 4,220,378
13 1/24 4,220,378 337,630 306,500 276,193 582,693 3,975,316
14 1/25 3,975,316 318,025 306,500 276,193 582,693 3,710,648
15 1/26 3,710,648 296,852 306,500 276,193 582,693 3,424,807
16 1/27 3,424,807 273,985 306,500 276,193 582,693 3,116,098
17 1/28 3,116,098 249,288 306,500 276,193 582,693 2,782,693
18 1/29 2,782,693 222,615 306,500 276,193 582,693 2,422,616
19 1/30 2,422,616 193,809 306,500 0 306,500 2,309,925
20 1/31 2,309,925 184,794 306,500 0 306,500 2,188,219
21 1/32 2,188,219 175,058 306,500 0 306,500 2,056,777
22 1/33 2,056,777 164,542 306,500 0 306,500 1,914,819
23 1/34 1,914,819 153,186 306,500 0 306,500 1,761,505
24 1/35 1,761,505 140,920 306,500 0 306,500 1,595,926
25 1/36 1,595,926 127,674 306,500 0 306,500 1,417,100
26 1/37 1,417,100 113,368 306,500 0 306,500 1,223,968
27 1/38 1,223,968 97,917 306,500 0 306,500 1,015,386
28 1/39 1,015,386 81,231 306,500 0 306,500 790,117
29 1/40 790,117 63,209 306,500 0 306,500 546,826
30 1/41 546,826 43,746 306,500 0 306,500 284,072
31 1/42 284,072 22,726 306,500 0 306,500 298|10101010|Payments
Beginning Balance is based on 152% of the appraised value of the property.
Equal to the estimated fair reuse value of the property amortized over a 30-year term.
Equal to the difference between the appraised value of the property and the estimated fair reuse value
of the property amortized over an 18-year term.
Year
Prepared by: Keyser Marston Associates, Inc.
File name: 1_16_11_WaNa_Lse Purch;Lse Option Page 1 of 1