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HomeMy WebLinkAbout1995-01-10 - AGENDA REPORTS - SOLEDAD METROLINK STATION LAND (2)AGENDA REPORT City Manager Approval Item to be presented by: UNFINISHED BUSINESS 1 Jeff Kolin Douty Cit r Xf a DATE: January 10, 1995 SUBJECT: SOLEDAD METROLINK STATION LAND PURCHASE OPTIONS DEPARTMENT: Public Works This item was continued from the regular meeting of December 13, 1994 to their January 10, 1995 meeting. Heretofore, in April of 1991, the City entered into a lease agreement with the Whittaker Corporation. This five year lease allowed the City to build its first Metrolink station. The initial tern of the lease is for three years terminating in January of 1995. The lease contains the option of being extended once for two years. The rent for the initial term is one dollar per year or a total of $3.00 dollars. The rent for the extended term is 10% of the appraised value. Based on the City's recent appraisal this is $335,000 per year. Pursuant to the lease agreement, by January 21, 1995 the City must notify the Whittaker Corporation whether or not it intends to extend the lease for the optional two years. The purpose of this item before the City Council tonight is to update the Council and recommend that the City exercise its option to extend the lease until April 21,'1997. In October 1994, the 10 acre site (see Attachment l) was appraised by the firm P. Scott Voltz & Associates hired by the City. The land was appraised at $3,350,000 or approximately $7.50 per square foot. The lease has three incentives built into it. These are: The Bonus, Lease Credits and Two Year Escrow. The Bonus is available only if the City chooses to buy the land before April 1995. The Bonus is the increased land value the rail station adds to surrounding Whittaker land and that increase is subtracted from the purchase price. The recent appraisal has valued the Bonus at $0. Mathematically expressed . Purchase Price - Bonus = New Purchase Price. The Lease Credit is available if the City chooses the two year extension. The City would receive 35 % of the lease payment credited from the purchase price. Mathematically expressed ... Purchase Price - Lease Credit = New Purchase Price. APPR'no"o Agenda Item: _ The 71vo Year Escrow is available if the City, after extending the lease chooses a two year escrow. At the end of the two year extension, a 10 % down payment would be required and the owner would hold the "note" for up to two years at an interest rate of 2 % above the prime rate. This incentive is attractive only if delaying the purchase until 1999 is most beneficial to the City. Two years ago, a "Ten Year Transit Financial Forecast" was developed and is updated bi- annually. At that time, the land was estimated for forecasting purposes to be worth $4.5 million. The Forecast made the assumption that the two year lease option would be exercised and the land would be purchased in 1997. Current transit financial forecasting takes into account a lease payment for the land. Therefore, leasing would not disrupt the Transit Financial Plan. Staff has applied for various transit grants to purchase the property outright, but thus far has been unsuccessful in attaining grant funds. Staff will continue to search out funding opportunities. Other methods of purchasing the station would require financing. For discussion purposes, staff has investigated the cost of financing the cost of the station. The cost of financing the station for 15 years at 6.$ % interest, including issuance costs would be approximately $5,423,000 or $365,000 per year for 15 years. Because of the financing activities associated with the City's Recovery Division and Redevelopment Agency, at this time, staff recommends that the purchase of the rail station should not be financed, but rather the lease should be extended. Staff will continue to seek alternative funding opportunities as the land may be purchased at any time prior to the expiration date of the two year extension. RECOMMENDATION Direct the City Manager to send the attached letter to the Whittaker Corporation to extend the lease until April 1997. 2. Appropriate $335,000 from the Proposition C funds to Account 55-7000-220 for lease payment to the Whittaker Corporation for the lease payment of the rail station. ATTACHMENTS 1. Site Map 2. Letter to Whittaker Corporation requesting lease extension F:\home\del\witidpur.2 City of Santa Clarita 23920 Valencia Blvd. Suite 300 Santa Clanta California 91355 -2196 January 10, 1995 Phone (805) 259.2489 Fax (805) 259-8125 Whittaker Corporation 10880 Wilshire Boulevard, Suite 800 Los Angeles, California 90024 Re: Commuter Rail Station Site Lease with Option to Purchase Dated April 21, 1992 Gentlemen: Pursuant to Paragraph 12 of the Commuter Rail Station Site Lease with Option to Purchase dated April 21, 1992 executed by and between Whittaker Corporation and the City of Santa Clarita, please be advised that the City hereby exercises its option to extend the term of the Lease for a two year period. As you have previously been advised,. the City has retained the appraisal services of P. Scott Voltz and Associates, pursuant to Paragraph 12(c)(i) of the Lease, please advise the undersigned which appraiser has been selected by Whittaker so that we may proceed promptly to determine the fair market value of the property. Thank you for your cooperation. Very truly yours, JoAnne Darcy Mayor JAD.jk 2yrtww.j CC. City Council George Caravalho, City Manager Jeff Kolin, Deputy City Manager, Public Works Ron Kilcoyne, Transportation Manager Whittaker Corporation, General Counsel Office Sam Veltri, Northholme Partners James Richman, Pregerson, Richman & Luna Dennis Burke, Burke, Williams & Sorensen PRINTED ON RECYCLED PAPER