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Home My WebLink About04/01/2008, C9 - MODIFICATION TO OPTION TO PURCHASE REAL PROPERTY (CHINATOWN OPTION) PROVIDING FOR A 60 DAY EXTENSIO council M�D� 4-1-08 j AQcnaa nEpont eq CITY OF SAN LUIS O B I S P O FROM: Ken Hampian, City Administrative Officer . Jonathan Lowell, City Attorney SUBJECT: MODIFICATION TO OPTION TO PURCHASE REAL PROPERTY (CHINATOWN OPTION) PROVIDING FOR A 60 DAY EXTENSION TO FACILITATE FURTHER NEGOTIATIONS OF A LONGER TERM EXTENSION OF THE OPTION CAO RECOMMENDATION Authorize the Mayor to enter into, on behalf of the City, a Modification to Option to Purchase Real Property (the Option) between the City and SLO Chinatown LLC (successor in interest to SLO Court Street LLC) providing for a 60 day extension to facilitate further negotiations of a longer term extension of the Option. DISCUSSION The Option for SLO Chinatown LLC to purchase City owned property between Palm, Morro and Monterey Streets for the Chinatown Project is set to expire on May 4, 2008. SLO.Chinatown LLC requested, through a letter from its legal counsel to the City Attorney, an extension of the Option. In accordance with direction from Council in closed session, the parties' real property negotiators have been working towards developing terms governing a possible extension. Agreement on the specific terms has been hindered by the lack of current data on the value of the subject property. In order to obtain such information, the City has hired a consultant to prepare two appraisals — one a market rate appraisal, one a reuse appraisal (valuation taking into account development costs and regulatory constraints) — and SLO Chinatown LLC has made payment to the City to cover the $18,000 cost of such appraisals. The appraisals should be completed in mid-April, thereby allowing the parties' real property negotiators time to analyze the data, negotiate further, and arrive at a possible extension of the Option that will allow SLO Chinatown LLC to proceed forward in processing its project application under terms that make sense for the City. It is contemplated that such a draft extension could be considered by the Council in public session in early June 2008, but not later than the council meeting of July 1, 2008. However, without the proposed 60-day extension, it will not be possible to develop and analyze the information needed in order for either party to make reasonable decisions. about the terms under which a longer-term extension might be agreed upon. I Modification to Option to Purchase Real Property(Chinatown Option) Page 2 FISCAL IMPACT There are no direct fiscal impacts associated with the 60-day extension. The cost of the appraisal will be fully funded by SLO Chinatown LLC. Depending on the results of the appraisal and the terms under which any further extension might be granted (if at all), there are likely to be significant long-term fiscal impacts. However, until these terms are agreed upon, it is not possible to assess the magnitude of this impact, favorable or unfavorable. For this reason, we are concurrently preparing an update to the prior fiscal impact analysis of this project, and this information will be available for consideration as part of the 60-day extension review period. ALTERNATIVES Do not approve the 60 day extension. This is not recommended, as the appraisals are needed to facilitate a fuller understanding of what is involved in extending the Option. Without the 60-day extension, even if the appraisals are timely prepared, there will not be sufficient time to negotiate the terms of a possible longer-term extension to the Option, thereby resulting in the Option lapsing. Both parties believe that there is significant value in developing the added appraisal information that the 60-day extension period will provide before making a final decision to let the Option expire. ATTACHMENT 1. Modification to Option to Purchase Real Property GAChinatown\Chinatown Option Extension CAR 4-1-08.doc Cq `ATTACHMENT 1. MODIFICATION TO OPTION TO PURCHASE REAL PROPERTY This Modification to Option Agreement is made as of April 2008, by and between THE CITY OF SAN LUIS OBISPO, a municipal corporation and charter city("City"), and SLO CHINATOWN, LLC, a California limited liability company ("Copelands"), as successor in interest to SAN LUIS OBISPO COURT STREET, LLC, a California limited liability company, with respect to that certain Option to Purchase Real Property, dated as of November 5, 2003, between the City and Copelands (the"Original Agreement"). All capitalized terms not otherwise defined herein shall have the meaning given in the Original Agreement. RECITALS A. The Initial Option term began on November 5, 2003 and ended on May 4, 2005. Copelands exercised the first Additional Option Term in a timely manner by submitting a Development Application to the City on April 28, 2005, and paying the applicable Additional Option Price, and such Additional Option Term ended on May 4, 2006. Copelands exercised the second Additional Option Term in a timely manner by paying the applicable Additional Option Price, and such Additional Option Term ended on May 4, 2007. Copelands exercised the third Additional Option Term in a timely manner by the paying the applicable Additional Option Price and such Additional Option term (the "Current Option Term") will end by its terms on May 4, 2008. The parties acknowledge that construction of the Retail Complex on the Court Street Project Property was commenced as required under the Real Property Exchange Agreement and has been completed. B. Copelands have entered into a Reimbursement Agreement with the City, and have paid the amount due thereunder, in connection with the fair market and re-use appraisal of the Property by C.B. Richard Ellis, ' C. In order to preserve the status quo and the rights of all the parties under the Original Agreement, the parties desire to modify the expiration date of the Current Option Term to extend through July 3, 2008, on the terms and conditions set forth herein. AGREEMENT NOW, THEREFORE, the City and Copelands, in consideration of the mutual representations, warranties and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, subject to the terms and conditions hereinafter set forth, and intending to be legally bound, do hereby mutually agree as follows: 1. Notwithstanding anything to the contrary in the Original Agreement, the term of the Option shall extend through 5 p.m., on July 3, 2008. 2. Except for the modification set forth above, the Original Agreement shall remain in full force and effect. 1 OptionModification-032108 n Q 3 ATTACHMENT 1 3. This Modification may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original and all of which shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties to this Modification have duly executed it as of the day and year first written above. SLO CHINATOWN, LLC, a California limited liability company By: Tom Copelai Its: Manager CITY OF SAN LUIS OBISPO, a municipal corporation and Charter City By: David F. Romero Mayor Attest: By: Audrey Hooper City Clerk Approved as to Form: By: Jonath6 P. Lowell Attorney Approved as to Form: By: e F er Gen unsel, SLO Chinato , LLC 2 OptionModiScation-032108 c9 - 4