HomeMy WebLinkAbout08/15/2000, C7 - APPROVAL OF OPTION AGREEMENT FOR PURCHASE OF THE AYERS PROPERTY council
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CITY OF SAN LUIS OBISPO
FROM: Ken Hampian,Assistant City Administrative Officer/e/
Prepared By: Neil Havlik,Natural Resources Manager
SUBJECT: APPROVAL OF OPTION AGREEMENT FOR PURCHASE OF THE AYERS
PROPERTY
CAO RECOMMENDATION
Approve an Option Agreement with the Ayers family for an exclusive, one year option to purchase
the 242 acre property commonly referred to as the "Johnson Ranch" for a purchase price of
$1,600,000 by making an option payment of$35,000, subject to certain other conditions described
in the staff report,and also subject to non-substantive changes approved by the City Attorney.
DISCUSSION
The 242-acre Ayers property was one of the properties identified as priority acquisitions in the
"Saving Special Places".report,produced by the Land Conservancy of San Luis Obispo County for
the City of San Luis Obispo in July 1995. The property lies about two miles south of San Luis
Obispo at the eastern end of the Irish Hills adjacent to Highway 101. It includes both steep,hilly
country and more gentle rolling land closer to the highway. Vegetation on the site consists of open
grassland, oak woodland, chaparral, and a riparian corridor along a small, unnamed creek, which
traverses the property. The property includes a small farmhouse, and a portion of the old railroad
right-of-way between San Luis Obispo and Port San Luis. Land near the highway is relatively
gentle and is attractive as a small park site, as well as having development potential. The rest of the
property has considerable habitat and scenic value.
The property was on the market from 1995 through 1998, apparently without generating serious
offers. City staff have spoken to family members on several occasions about the property but we
had not been able to identify sources of fmmding for the project. That situation changed in May of
last year when the Central Coast Regional Water Quality Control Board authorized a grant of
$400,000 to the City in support of acquisition of this property. The Regional Board's action
reenergized City staff's efforts on this project, and this effort has finally bome fruit in that the
family has verbally offered to sell the property to the City under the following conditions:
1. the purchase price would be$1,600,000, or approximately$6,612 per acre;
2. the entire property would be restricted to open space uses in perpetuity;
3. there would bean option payment of$35,000(applicable to the purchase price); and
4. the City would have one year to complete the funding package for the transaction.
The Option Agreement formalizes these points of understanding.
C7-1
Council Agenda Report—Approval of Option to Purchase Real Property
Page 2
Importance of the Property
The Ayers property is a highly visible property in the Irish Hills,just south of the City of San
Luis Obispo and directly across Highway 101 from the recently purchased Filipponi property.
The property consists of rolling open hills close to the freeway, and a steep, brushy hill at the
northern end of the property, which reaches an elevation of 761 feet. The property consists of
four legal parcels and there have been unsuccessful attempts to sell all or some of them in recent
years. These efforts have been unsuccessful possibly because the asking price at that time ($2
million) was too high. The current asking price to the City, however, appears reasonable in
comparison to the similar Filipponi property, which was purchased by the City for $575,000 or
$7,770 per acre. The price would be confirmed by an appraisal, which will be underway soon.
The site would "anchor" open space at the southern end of the Irish Hills fronting the City, and
would be part of a larger open space reserve ultimately envisioned for that portion of the hills.
The property also has value as a potential park site, involving a small parking area and playfields.
Assembling the Funding Package
Acquisition of the Ayers property will be the most difficult project yet undertaken by the City's
Natural Resources Protection Program. This is because of(1) the cost of the property which has
existing development entitlements; (2) the need to assemble funding from a variety of sources;
and (3) the potential for development pressure to defeat any possible extensions of option
agreements.
The project offers many potential enhancements or improvements to the preservation of the Irish
Hills area and its numerous rare plants and wildlife habitat qualities as well as recreational
features. Consequently staff feels that funding from a variety of sources including the State
Environmental Enhancement and Mitigation Program, Wildlife Conservation Board, Habitat
Conservation Fund and the David and Lucile Packard Foundation, and City of San Luis Obispo
fiords, can be added to the existing grant form the Regional Board to assemble a viable purchase
package for the property. City funds could come from the 2001-2003 Financial Plan open space
allocation, or possibly through funds associated with the Auto Center Expansion project. A
possible scenario for funding potential,based upon upcoming grant deadlines,is outlined below:
• Central Coast Regional Water Quality Control Board $400,000
• City of San Luis Obispo monies $300,000
. " Wildlife Conservation Board $300,000
• Environmental Enhancement and Mitigation Program $250,000
• David and Lucile Packard Foundation $250,000
• State Habitat Conservation Fund $100,000
• Total $1,600,000
The above scenario is preliminary and some changes are probable. Under any scenario, staff is
confident that grant fiords leveraged in comparison to any General Fund contribution will be well
in excess of the Council's"1 to 1"requirement. C7-2
Council Agenda Report—Approval of Option to Purchase Real Property
Page 3
Leases
Property is subject to three leases; a grazing, residential and two billboard leases. None of the
existing leases conflict with the purchase or present serious problems to the purchase, specific
information will be provided by sellers.
Need for an Option Agreement
Putting this transaction together will require significant energy, effort, commitment and
creativity. It will also require time. Recognizing this, the Ayers family have offered a one-year
Exclusive Option Agreement, during which the City can publicly raise funds for the project. The
Option Agreement is necessary because of the increasing activity in the real estate market,which
makes it appear unlikely that the property would remain available and unsold over the next year
in the absence of such an agreement,particularly at the more reasonable asking price.
Fiscal Impact
Funding to support the $35,000 option payment is available in the 2000-01 Capital Improvement
Plan Open Space Protection Fund ($382,500 total; 1999-01 Financial Plan Supplement, page E-
3). The option payment will be applied to the total purchase price.
Attachments:
Draft of Option Agreement
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ATTACHMENT I
AGREEMENT OF OPTION FOR PURCHASE AND SALE
OF REAL PROPERTY
This AGREEMENT OF OPTION FOR PURCHASE AND SALE OF REAL PROPERTY is
entered into by and between the CITY OF SAN LUIS OBISPO (`Buyer"), a California Charter
Municipal Corporation, and JEANETTE AYERS, STEVEN F. CURTISS, Managing Member of
Curtiss-Johnson Properties, LLC, and CAROLYN SILACCI (collectively, "Seller"), pursuant to the
following
RECITALS
WHEREAS,Buyer is a California Charter Municipal Corporation; and
WHEREAS, Buyer, acting through its City Council and through adopted public procedures,has
determined that certain lands surrounding the city of San Luis Obispo are important to the scenic
character, healthy natural environment, and economic and social well being of the community and its
citizens; and
WHEREAS, Buyer seeks to preserve and conserve characteristics such as visual quality,
wildlife habitat, and other community attributes where appropriate surrounding the City; and
WHEREAS, Seller is owner of certain lands adjacent to the City which are of scenic,
ecological, and agricultural value to the City of San Luis Obispo; and
WHEREAS, Seller wishes to preserve, protect and restore the scenic and ecological values
which exist or may exist on the Property, and
WHEREAS, the purchase of said land in the judgment of Buyer would act to preserve the
values indicated above and serve an important municipal purpose; and
WHEREAS, both Buyer and Seller recognize that time will be required to secure the funds
necessary for the transaction, and for other matters related thereto.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. OPTION AND OPTION TERM.
Seller, for valuable consideration, hereby grants to Buyer an exclusive Option to purchase the
Property identified as San Luis Obispo County APNs 076-111-031 and 076-121-019 in the County of
San Luis Obispo, (shown on Exhibit A attached hereto) totaling approximately 242 acres ("the
Property'). Buyer and Seller agree that the term of this Option shall commence on August 16, 2000,
and continue for ONE YEAR, to August 15, 2001. Buyer may exercise the Option at any time within
that period by sending written notice to Seller.
2. OPTION PAYMENT; RETURN OF OPTION PAYMENT.
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ATTACHMENT I
p. L
(a) In consideration of the Option and Option Term described above, Buyer shall pay Seller
the sum of Thirty Five Thousand Dollars ($35,000) as an Option Payment. This payment shall not be
refundable, except as described in Item 2(b) below. If the Option is exercised as described above, the
full Option Payment shall apply to the purchase price.
(b) In the event that Seller is unable to deliver clear title to the Property to Buyer, or in the
event that hazardous materials are found to exist on the site such that completion of the Purchase and
close of escrow or reasonable extension thereof as described herein cannot take place, then Seller shall
refund the full Option payment to Buyer.
3. PURCHASE PRICE
If and when the Option is exercised, the total purchase price for the property shall be $1,600,000.00,
payable in cash at the close of escrow.
4.- CONVEYANCE
Title to the Property shall be conveyed by Grant Deed and shall be insured by a CLTA (or at
Buyer's election, an ALTA) owners' policy of title insurance in the amount of the purchase price,
showing title vested in Buyer, subject only to those exceptions listed in the Preliminary Title Report
and/or Supplemental Report approved or deemed approved by Buyer.
5. CONDITIONS PRECEDENT FOR BENEFIT OF BUYER
Buyer's obligation to purchase the Property is expressly conditioned upon the satisfaction,
deemed approval, or Buyer's waiver of each of the following conditions, each of which is deemed
exclusively for the benefit of Buyer:
(a) Title Report. Buyer's approval of the exceptions to title set forth in a preliminary title
report for the Property (the "Preliminary Title Report'. Buyer shall have thirty (30) days after the
receipt of the Preliminary Title Report and copies of all documents referenced therein, to provide to
Seller and Escrow Holder written notice of Buyer's disapproval of any specific title exception. Any
title exception not so disapproved shall be deemed approved, provided that if a Supplemental Title
Report is issued showing any exception not shown in the Preliminary Title Report, Buyer shall have an
additional ten (10) calendar days after receipt of such Supplemental Report to similarly disapprove any
new title exception. If Buyer disapproves any title exception, Seller shall have no obligation to cure
'such disapproval (except that Seller shall be obligated to remove any liens) but Seller may elect, by
written notice to Buyer within ten (10) calendar days after receipt by Seller of such notice of
disapproval, to attempt to remove such disapproved items. If Seller is unable within a reasonable time
to accomplish such cure or removal, or if Seller elects not to attempt to so cure or remove (which
election shall be communicated to Buyer within ten (10) calendar days after receipt by Seller of such
notice of disapproval), then Buyer may elect to (i) terminate its obligations under this Agreement, (ii)
waive its objections to such exception, or(iii) elect to correct any such disapproved exception itself, in
.which case Seller will provide reasonable assistance to Buyer to cure the same.
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ATTACHMENT
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(b) Inspection and Approval of Property and of Any Testing Thereon. Buyer's inspection
and approval of the Property and all improvements thereon, including (at Buyer's option and expense)
any surveys or studies deemed necessary in Buyer's sole judgement. Access to the property shall be
given to Buyer, its agents and authorized representatives during normal business hours upon at least
one (1) business day's notice to Seller, at Buyer's own cost and risk, for any purposes relating to
Buyer's conditions. Buyer shall indemnify and defend Seller against and hold Seller harmless from all
losses, costs, damages, liabilities, and expenses, including, without limitation, reasonable attorney fees
arising out of Buyer's entry onto the Property or any activity thereon by Buyer or its agents, or
authorized representatives prior to the Close of Escrow, except to the extent any such losses, costs,
damages, liabilities, and expenses arise out of the gross negligence or willful acts of Seller. If Buyer
discovers through its investigations any defects on the Property or improvements thereon which it
disapproves of, Seller shall have no obligation to cure such disapproval (except that Seller shall be
obligated to remove any liens)but Seller may elect,by written notice to Buyer within ten (10) calendar
days after receipt by Seller of such notice of disapproval, to attempt to remove such disapproved items.
If Seller is unable within a reasonable time to accomplish such cure or removal, or if Seller elects not
to attempt to so cure or remove (which election shall be communicated to Buyer within ten (10)
calendar days after receipt by Seller of such notice of disapproval), then Buyer may elect to (i)
terminate its obligations under this Agreement, (ii) waive its objections to such exception, (iii) elect to
correct any such disapproved exception itself, in which case Seller will provide reasonable assistance
to Buyer to cure the same. The parties may also enter into additional negotiations, as may be mutually
acceptable, concerning adjustment of the purchase price, allocation of risk, or contribution to the costs
to cure or other matters, and the Escrow shall be extended for a reasonable time to effect such
negotiations.
6. ESCROW
(a) Escrow Holder. Buyer and Seller will establish an escrow ("Escrow's with Escrow
Holder within ten (10) business days of execution of this Agreement, subject to the provisions of the
standard conditions for acceptance of escrow and the terms and conditions in this Agreement, with a
signed counterpart of this document to be delivered as escrow instructions to Escrow Holder. In the
event of any conflict between the terms of this Agreement and the standard conditions for acceptance
of escrow,the terms of this Agreement shall control. The Escrow Holder shall be First
American Title Insurance Company, 899 Pacific Street, San Luis Obispo, CA. 93449.
(b) Proration and Fees.
(i) Real property taxes and rental income shall be prorated to the close of escrow.
(ii) Seller shall pay (1) the documentary transfer tax, (2) the premium for a CLTA
policy of title insurance, and (3) recording fees. If Buyer elects an ALTA policy of title
insurance, Buyer shall pay the portion of the premium that exceeds the premium for a
CLTA policy of title insurance.
(iii) All Escrow fees and costs shall be allocated according to custom in San Luis
Obispo County.
(c) Closing Date. Escrow shall close within forty-five (45) days of exercise of the Option
by-Buyer.
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ATTACHMENT 1
r �+
7. REPRESENTATIONS, WARRANTIES,AND AGREEMENTS
(a) Authorized Representative. Buyer and Seller hereby represent and warrant to each other
that the persons who sign this agreement and any other documents required to be executed by such
party to perform its obligations hereunder, shall have all requisite power and authority to have entered
into this Agreement, and that all authorizations required to be obtained by or on the part of such party
to execute and perform this Agreement have been obtained.
(b) Proof of Citizenship. Seller is not a foreign person as such term is used in Section 1445
of the Internal. Revenue Code. Prior to the Close of Escrow, Seller shall deposit in Escrow a non-
foreign affidavit as provided under said Section 1445. Failure to do so shall entitle Buyer to withhold
from the purchase price such sums as are required by said Section 1445.
(c) Delivery of Property. Possession of the Property shall be delivered by Seller to Buyer
upon the close of Escrow. Seller may remove, at Seller's expense, prior to the Close of Escrow, all
personal property and trade fixtures on the property, provided that the property is left in a safe, sound
and usable condition.
(d) Legal Actions. Seller represents and warrants to Buyer that there are no actions, suits,
or legal proceedings related to the ownership, use, operation or sale of the Property to which Seller is a
party nor has Seller received any notice that any such actions are pending or threatened.
(e) Seller's Knowledge of Environmental Conditions of the Property. To the best of
Seller's knowledge, there are not now nor have there been any hazardous or toxic wastes (as said terms
are defined in applicable Federal, State, or County laws or regulations) located on or within any portion
of the property; nor have there been any enforcement, cleanup, removal or other governmental or
regulatory actions instituted, contemplated, or threatened pursuant to any applicable Federal, State, or
local laws or regulations relating to any hazardous materials and affecting the property; nor have there
been any claims made or threatened by any third party against Seller or the property, relating to
damage, contribution, cost recovery, compensation, loss or injury resulting from any hazardous
materials.
8. LEASES.
(a). Purchase Subject to Existing Leases Seller warrants, and Buyer acknowledges that the
Property is subject to three existing leases as described in Exhibit B, and Buyer accepts the property
subject to said leases, provided, however, that said leases are in conformance to all conditions of the
lease and with all applicable County regulations regarding the uses being made of the premises by
lessees.
(b). No New Leases. Seller shall not enter into any new leases or modifications to existing
leases, nor accept the cancellation of any existing lease, nor consent to the assignment of a lease,
without Buyer's prior written consent,which shall not be unreasonably withheld.
(c). Seller's Warranty. Seller shall, within sixty (60) days of the date of this Agreement,
deliver to Buyer the following:
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ATTACHMENT I
F.<
(i). Originals or true copies of all leases and amendments to said leases affecting the
property;
(ii). Proposed form of assignment of Seller's rights under the leases;
(iii). An estoppel certificate executed by each Lessee. Estoppel certificates shall be in
substantially the form attached as Exhibit C. Seller warrants and represents that as of
the date of this Agreement and as of close of escrow no other leases of the property are
or will be in force; that no other party has a right of possession; no rent concessions
have been given; no other agreements written or verbal have been made with the lessee
or any sublessee; neither Seller nor tenant is in default of any condition of any lease;
and that all Lessees are in compliance with the leases, and any and all laws, ordinances,
rules, regulations, requirements, or orders of any federal, state, county, or municipal
governments which may apply thereto.
9. NOTICES
All notices, communications, consents, approvals and disapprovals required or permitted
hereunder must be in writing and shall be delivered by personal delivery, facsimile, or deposited in the
United States mail,postage prepaid and addressed as follows:
TO BUYER: City of San Luis Obispo
Dr. Neil Havlik,Natural Resources Manager
990 Palm Street
San Luis Obispo, CA 93401
Telephone (805) 781-7211
TO SELLER: Mr. Steve Curtiss
204 Paso Robles Street
Los Altos, CA. 94022
Telephone (650)-941-0627 or(408)-588-1980
The foregoing may be changed by written notice. If served personally, or by facsimile, service
shall be conclusively deemed made at the time of service. If served by mail, service shall be
conclusively deemed made seventy-two (72)hours after deposit thereof in the United States mail.
10. BROKERS
Buyer and Seller each represent to the other that it knows of no claim for broker's or finder's fees or
other commissions in connection with this transaction other than as provided in this paragraph. In the
event any other broker or finder asserts a claim for a commission or finder's fee, the party through
whom the broker or finder makes this claim shall indemnify the other party for any and all costs and
expenses (including attorney's fees) incurred by the other party in defending the same.
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ATTACHMENT
11. SURVIVAL f.FO
The warranties, representations, and agreements made in this Agreement shall survive the close of
escrow.
12. 1031 EXCHANGE
Buyer acknowledges that Seller may wish to sell the Property by way of a 1031 exchange.
Buyer agrees to cooperate in any such 1031 exchange, provided it shall be at Seller's sole cost and risk,
and shall not unreasonably delay the close of escrow.
13. MISCELLANEOUS
(a) Entire Agreement. This Agreement, and the exhibits hereto, contains the entire
agreement between the parties hereto. No modification or addition to any term or provision hereof
shall be effective unless made in writing and signed by both parties hereto. The captions and headings
in this Agreement are for reference only and shall not be deemed to define or limit the scope or intent
of any of the terms, covenants, conditions or agreements contained herein.
(b) Attorneys' Fees. If litigation is commenced between the parties, the prevailing party in
that litigation shall be entitled to recover from the non-prevailing party all reasonable attorney fees and
costs.
(c) Successors. This Agreement shall inure to the benefit of and shall be binding upon the
parties to this Agreement and their respective heirs, successors, and assigns.
(d) Governing Law. This Agreement shall be governed and construed in accordance with
California law.
(e) Time of Essence. Time is of the essence in this Agreement.
(f) Offer and Acceptance. This Agreement shall be of no force or effect whatsoever until
signed by authorized representatives of both Buyer and Seller.
(g) Naming. Buyer agrees that the Property shall be known as the"Johnson
Ranch Open Space'or, if developed for park purposes,"Johnson Park".
(h) Maintenance Standards; Family's Opportunity to Comment Upon Development Plans.
Buyer agrees that the Property shall be maintained in a manner meeting the standards to which City
park and open space properties are required to be maintained under City regulations. Buyer further
agrees to provide Seller with the opportunity to review and comment upon plans for development of
park or recreational improvements as such may be proposed by the City.
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`TTACHMENT I
;0
(i) Signature in Counterp This Agreement may be signed in counterparts, each of
which shall be deemed an original.
"Seller"
JEANETTE AYERS DATE
STEVEN F. CURTISS, Managing Member DATE
CURTISS-JOHNSON PROPERTIES, LLC
CAROLYN SILACCI DATE
"Buyer"
CITY OF SAN LUIS OBISPO
by: DATE:
ALLEN K. SETTLE, MAYOR
ATTEST: APPROVED AS.TO FORM:
Lee Price, CMC *iA
City Clerk y
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CITY OF SAN LUIS OBISPO
GREENBELT PROTECTION PROGRAM
AYERS PROPERTY
scale 1"= 1,200'approx.
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ATTACHMENT 1
Exhibit B
Leases
To be provided by Sellers.
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ATTACHMENT I�
Exhibit C
Estoppel Certificate
TO: CITY OF SAN LUIS OBISPO
Attn: Dr. Neil Havlik
The undersigned certifies that:
1. I am a tenant and present occupant of , San Luis Obispo, California,
commonly known as the"Johnson Ranch" and more particularly described in the attached
Lease,_("the Premises').
2. The premises are leased under a lease commencing A copy of the lease is_
attached. The Lease contains all the agreements between the landlord and myself.
3. Rent of$ per month has been paid through
4. The Lease tern begins on and expires on I intend to voluntarily vacate
the premises at the end of the lease term, and any applicable extension thereof.
5. I have no option or right of first refusal to purchase the premises or any buildings. My only
interest in the Premises or the Buildings is the Lease.
6. The sum of$ was paid to the landlord as a security deposit and the sum of$ was
paid for the last month's rent. (If none paid, insert"none.")
7. All work required of the landlord by the Lease has been completed in accordance with the
terms of the Lease, and I have accepted, and I am now in possession of, the Premises.
8. No person or firm other than myself is in possession and to the best of my knowledge no other
person or firm other than the landlord has a future right to the Premises.
9. I have not assigned or entered into any subleases of the Lease,except as follows: (If
no subleases exist, insert`none.')
10. I claim no offset against the landlord, and the landlord is not in default under the Lease or in
connection with the Premises or the Buildings.
11. All uses of the Premises and Buildings are in accordance with the Lease and with all applicable
County, State, and Federal regulations, ordinances, and codes.
12. I am not in bankruptcy, and I am not now contemplating filing bankruptcy.
13. The statements in this letter may be relied on by the landlord, the purchaser of the Property, and
any lender who extends credit in connection with the purchase of the Property. I agree that I
will give the Purchaser notice of any default by the landlord during the term of the lease and a
reasonable period after the default within which the Purchaser may cure the default.
This certificate was executed on
Signature of Tenant Printed Name
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