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HomeMy WebLinkAbout07/01/2008, B 2 - SECOND MODIFICATION TO OPTION AGREEMENT FOR THE PURCHASE OF PROPERTY FROM THE CITY BY COPELAND ENTE i council 7-1.08 l agenda RepoRt 1¢m Num6e CITY OF SAN LUI S OBIS PO FROM: Ken Hampian, City Administrative Officer Jonathan Lowell, City Attorney Prepared By: Claire Clark, Economic Development Manager SUBJECT: SECOND MODIFICATION TO OPTION AGREEMENT FOR THE PURCHASE OF PROPERTY FROM THE CITY BY COPELAND ENTERPRISES FOR THE CHINATOWN PROJECT CAO RECOMMENDATION Approve a Second Modification to Option to Purchase Real Property (hereinafter Amended or Modified Option Agreement) with SLO Chinatown, LLC, successor in interest to San Luis Obispo Court Street, LLC (hereinafter Copeland or Copelands) related to the Chinatown project and authorize the Mayor to execute the Modified Option Agreement. REPORT-IN-BRIEF There are a number of issues covered in the proposed Amended Option Agreement that are discussed in detail in the following report. However, it is important to first place the issue into the larger context: the Chinatown transaction isn't a "straight business deal." It is a public- private partnership transaction that the City is involved in to achieve specific public serving goals. In this respect, it is important to ask three key questions: 1. Does the Chinatown project significantly advance the City's goals for Downtown, including a better use of surface parking lots? Staff believes that the answer to this fundamental question is yes. The Council supported the original revitalization concept presented by the Copeland's in 1999 in order to achieve several Downtown goals, many of which were achieved with construction of the Court Street and 919 Palm projects. Although aspects of the original concept have changed, an extension of the Chinatown Option can lead to the completion of the final piece of the fundamental Downtown revitalization concept set forth nearly 10 years ago. 2. Are there other feasible alternatives on the horizon that would also accomplish these goals? Given the current economy and the status of this project in the development review process, staff believes that the answer for the foreseeable future is no. While it is possible that another desirable project at this location might surface, it is doubtful that such a project could reach the same stage as Chinatown for at least another ten to fifteen years, should the Option Agreement expire. And because Copeland owns a substantial part of the block and project site, a similar, consolidated project is quite unlikely. Additionally, Allan Kotin the City's 2 - r Amended Option.Agreement Page 2 economic consultant has observed that even with a "reuse" valuation, Copelands returns on investment will be below market for this type of development project. Other developers without Mr. Copeland's local history and investment may not accept such returns, should they somehow acquire the same properties. 3. Does the sale of this property make fiscal sense for the City? Staff believes that the answer to this question is yes: this project will generate net new revenues of almost $1 million annually, and this ongoing revenue is a major factor in weighing the amount of one-time sales proceeds. In terms of the one-time proceeds, the reuse valuation of the City's property, combined with the development and environmental mitigation conditions placed on it, values the property at approximately $3.7 million. This is an increase of approximately $600,000 from the amount required in the current Option Agreement. However, while the net cash proceeds to the City under the proposed amendment will be about $3.7 million, approximately$2.6 million of this amount will be in the form of payment to the Parking Fund. This payment is a mitigation measure imposed by the EIR that requires replacement of the public parking in an amount equal to the parking in-lieu fee. This results in net property sales proceeds of$1.1 million. Placed in context, the real fiscal value of this project to the City lies in the significant ongoing revenue stream that it will generate rather than the one-time proceeds from the sale of the property. This is coupled with the revitalization of a portion of Downtown that is currently underperforming. DISCUSSION Background—The Genesis of the Chinatown Option 1. Initial Vision for Monterey and Palm Street Revitalization. In 1999, the Copelands presented a conceptual proposal to the City and the community entitled, Chinatown-Court Street., A Vision for the Future of Downtown San Luis Obispo California Inspired by its Past (Reading File). This initial vision contemplated the redevelopment of public (the City) and privately owned (the Copelands) surface parking lots. Because of the unique circumstances (and the fact that the City and the Copelands each owned property the other was interested in acquiring), the Council authorized exclusive negotiations with the Copelands to develop a possible framework to facilitate this vision. Z Initial Memorandum of Understanding. Council approved the initial Memorandum of Understanding (MOU) for this project concept on September 19, 2000 (Reading File). The initial MOU contemplated the development of three different properties: a City parking lot at Monterey and Osos, the Copelands Parking lot and building at Palm and Monro, and the City parking lots and building at Palm, Morro, and Monterey. As this project concept was analyzed, it became apparent that the City-owned property (bounded by Monterey and Palm Streets along Morro Street) presented too many issues to be developed simultaneously with the other two properties. A subsequent Amended MOU was approved on December 11, 2001 (Reading File). Z -2 Amended Option Agreement Page 3 This MOU was eventually followed by the approval of legal documents governing the land transactions necessary to facilitate the now completed Court Street and 919 Palm Parking and Office Building projects as discussed below. 3. Approval of a Series of Agreements. In 2003, the Council approved several agreements. These agreements included the terms necessary to immediately facilitate the development of the City's Court Street property and the land owned by the Copelands at 919 Palm Street. An option agreement was also approved to allow for the possible future development of the City owned properties that now compose a portion of the proposed Chinatown Project. This "Chinatown Option Agreement" stated the terns for the purchase and sale of City parking Lots 3, 11, and 18 plus the building located at 955 Morro on the block bounded by Palm, Morro, Monterey, and Chorro Streets (Vicinity Map-Attachment 2). On November 5, 2003, the Option to Purchase Real Property with Court Street LLC (the Option Agreement-Attachment 1)became effective. The Court Street development has been operating with a variety of office tenants and retailers including: Palazzo Guiseppe restaurant and deli, Pottery Barn, Banana Republic, Sephora, Salon Lux, Pottery Barn, Talbots, Chico's, and Addicted. The 919 Palm parking garage and office building was also completed and occupied in 2006. Both Court Street and 919 Palm have added to the vitality of the Downtown by expanding office, retail, and restaurant uses, inspiring redevelopment along a Court Street paseo, and providing improved City services through the co- location of Community Development and Public Works. 4. The Chinatown Option. The initial Chinatown Option became effective on November 5, 2003, upon the close of escrow associated with the Court Street and 919 Palm Street purchase and sales. The Option provided the Copelands with the time necessary to refine the project concept and design, and to resolve possible issues associated with the development of these properties. The option also provided time for relocation of Public Works from 955 Morro into the new offices at 919 Palm. The Option had an initial term of 18 months upon payment of$88,500. The purchase price for the real property was $2,950,000 if exercised within the initial 18 months of the initial Option. The option price increased at the rate of 0.0833% of the purchase price each month thereafter if the Chinatown Option term was extended. The initial Chinatown Option allowed for three possible extensions of one year upon payment of$29,500 for each additional year. Court Street, LLC extended the Chinatown Option, in accordance with its terms; each of the three years as they worked toward obtaining the necessary prerequisites to purchase of the property. The key prerequisites for transfer of the City property to Court Street, LLC remain the same under the initial Chinatown Option and the proposed Second Modification of the Option Agreement: 1. Building permits for the project must be obtained 2. Evidence of project financing 3. Executed construction contracts for the project 12 -3 Amended Option Agreement Page 4 In addition, under the proposed Second Modification of the Option Agreement and the initial Option Agreement there are restrictions on title that mandate development in accordance with the permitted and approved project. These provisions also allowed for reversion of the property to the City in the event that the project is not commenced or completed. The Option requires that the project is to provide for retail, office, and housing. Chinatown Project Application and Review The Copelands submitted plans for development of the Chinatown project in spring 2005. Subsequent to this initial submittal, the Copelands acquired properties adjacent to the City's surface parking lots. After acquiring these properties, Copeland submitted a broader development proposal and a new project design that included the adjacent Blackstone Hotel, Pier One building (Sauer Bakery), Muzio's Building, and Bello's Building. The development review of this project since 2007 has included completion of an Environmental Impact Report (EIR) to identify the environmental impacts as well as the preparation of a fiscal impact analysis. In response to environmental impacts identified and time constraints generated by the deadline in the initial Chinatown Option, Copeland revised the Chinatown project and proposed a significantly scaled back version. While many of the previously identified impacts were addressed, this revised proposal, which served as the project description for the EIR, still generated advisory body concern for its treatment of the historic Sauer Bakery and Blackstone Hotel. Council certified the EIR in December 2007 and directed that a formal historic analysis of the two historic buildings occur prior to Council's consideration of the project's final approval. Initial Term Extension for Negotiations May 5, 2008—July 3, 2008 The original option provided for expiration if the prerequisites to transfer of the property had not been met by May 3, 2008. As expiration of the Option neared without possibility of completing all of the prerequisites, the Copelands requested an extension. The Copelands cited the progress made with the environmental work and their continued efforts to craft a project that met the concerns of the community. The Council identified the need for a new market appraisal coupled with a reuse valuation (as was done in the Garden Street Terraces Project Memorandum of Understanding) along with negotiations regarding price and the length of any amended Option term. Staff and the Copelands' team met and, with the help of City Fiscal Advisor, Allan Kotin, and Copelands' advisor, Bruce Spikell, the two sides came to agreement on a process for developing the terms for a second modification to the Option Agreement. On March 18, 2008, the Council agreed to allow a short 60-day extension until July 3, 2008 to allow time for the preparation of a market rate appraisal and a reuse valuation. The short extension also allowed for consideration of a more formal amendment to the Chinatown Option based on the property value, timing to complete the project entitlements and issuance of the building permit, and an update of future estimated City fiscal benefits. City staff contracted with CB Richard Ellis Consulting (CBRE) for the appraisal, reuse value determination, and updated fiscal study. CBRE was chosen because it prepared Fiscal Impact Report for Chinatown in late 2007, provided the appraisal and reuse analysis for the Garden Street Terraces project, is familiar 2 Ll C Amended Option Agreement Page 5 with the community, and was available and willing to accomplish the work within the short timeframe the City requested. In the Meantime, a Much Improved Site Plan With the request for more time, the Copelands also presented an amended project design, (Attachment 3) which accommodated the need for the historic building analysis while allowing the hotel component to progress. The new project layout relocates retail uses to Monterey Street to complement existing retail; relocates the hotel to Palm Street and increases the number of rooms; relocates restaurant uses to Palm Street; and relocates residential to the Monterey Street frontage above the retail uses. The new project layout also improves the project's circulation, separation of uses, and generation of City revenues. Now What?—Should the City proceed with a second modification of the Option? As discussed shortly, the City's economic advisor, Allan Kotin, and City staff believe that the land sale terms of the proposed option extension make sense financially when viewed through the prism of a public-private redevelopment project. However, unless the City Council continues to concur that the project holds many other potential rewards, the modification to the land sale terms is irrelevant. Lacking Council enthusiasm for the project, the land should not be sold at this time. Thus, prior to moving on with a discussion of the new proposed option terms, it is important to reconsider the potential project rewards. Potential Project Rewards The potential rewards of the Chinatown Project have increased since originally presented to Council. The assessment of the fiscal impact, discussed later in this in this report, shows some of the rewards. Others include: Willing and Able Developer. The project continues to have a willing and able developer, with a clear track record for successful developments in the Downtown. The Center was the first such project to revitalize the Downtown, which it continues to do with stores such as Apple Computer, restaurants such as California Pizza Kitchen and Mondeo, and a major theater complex. Following in these footsteps, the Copelands envisioned and executed the Court Street project, bringing vitality further up Higuera and generating upgrades by adjacent property owners along Court Street as well as across the street on Monterey. Unlike many other communities that have seen various development projects disappear in our current economic climate, San Luis Obispo's Downtown shows continual growth and vitality. By engaging in this "public/private" partnership, the City is able to accomplish redevelopment without a redevelopment agency and the funding mechanism that it would entail. New Retail and Tourism Opportunities. The project has grown from the City-owned parcels to inclusion of adjacent parcels. This increase in footprint has allowed for inclusion of tourism- oriented amenities such as a downtown hotel, restaurant, and meeting spaces. The hotel and the new retail opportunities located primarily along Monterey Street reverse the waning vitality up and down this stretch and bring more active uses to the current passive parking areas. Z-5 C Amended Option Agreement Page 6 Improvement and Seismic Retrofit of Downtown Properties. The project is likely to serve as a catalyst for further Downtown improvements and enhancements. Seismic retrofits have already begun to enhance the character of the area, such as the Feliciano Building's retrofit and improvements, the Urban Outfitters retrofit and facelift, the Tartaglia retrofit and historic enhancements, and the new construction planned on the adjacent corner of Monterey and Morro. The benefit of revitalization efforts is the whole "neighborhood" is improved from simple, fresh coats of paint to more dramatic remodeling efforts. Achieving Policy Objectives. This project helps the City achieve various policy objectives, as it is consistent with many of its growth policies: a compact, mixed-use, infill development that makes efficient use of existing land resources. A series of City policies provides guidance for mixed-use development in the Downtown. For example, the General Plan (the community's blueprint for its future) contains many relevant policies. In particular, Land Use Element (LUE) Section 4.1 states that: Downtown is the cultural, social and political center of the city for its residents . . . The City wants its commercial core to be economically healthy, and realizes that private and public investments in the support each other...Civic, cultural and commercial portions of should be a major tourist destination. Downtown's visitor appeal should be based on natural, historical, and cultural features, retail services, and numerous and varied visitor accommodations. LUE Section 4.2 also states that all new, large commercial projects Downtown should include dwellings. Lastly, the Housing Element strongly encourages the creation of residential units in Downtown and provides a series of polices to encourage new residential projects. The Chinatown project would assist in satisfying this community need for housing. Additional policy guidance can be found in A Conceptual Physical Plan for the City's Center (the Downtown Concept Plan). Particularly relevant policies to this conceptual project contained in the Downtown Concept Plan include: 1. The success of the Downtown is a fragile thing; if not nurtured it will likely be lost. Constant vigilance, ongoing experimentation, and visionary leadership are necessary to keep the Downtown vital. 2. Downtown should be enhanced as. . . a major destination point for tourists. 3. The reduction of surface parking within the core area to allow infill of commercial and mixed use functions should be encouraged. 4. Downtown should provide and maintain a quality environment which will keep office and retail establishments in the core area and attract smaller independent businesses. 2 -lv C , - Amended Option Agreement _ _ Page 7 5. Residential uses should be encouraged on upper stories of commercial buildings in the core area. Relationship to Major City Goals 2007-09 and Current Policies The Chinatown project is also highly relevant to two major City Goals for 2007-09 and would play a significant role in implementing various tasks associated with these goals, as well as in the implementation of other City policies: 1. Downtown Support Goal. A major City goal for 2007-09 is to continue the City's strong support for the Downtown in areas such as economic development and tourism promotion. The proposal would assist in accomplishing various tasks outlined in the Downtown support goal such as: the implementation of the Downtown Strategic Plan (which supports this type of mixed- use development), and continued support of the seismic retrofit program. 2. Downtown Strategic Plan. The Council adopted the 2007 Downtown Association Strategic Business Plan that recommends strategic goals and sets out strategies for keeping the Downtown socially, economically, and aesthetically viable. The strategies include encouraging development of downtown hotel rooms and maintaining retail health and a diverse mix of uses. The Chinatown project is consistent with these strategies and will bring a mix of hotel, retail, and housing to a block that is currently underutilized and primed for revitalization. 3. Continued Compliance with City's Seismic Retrofit Ordinance. An unexpected outgrowth of acceleration of compliance deadlines for the City's unreinforced masonry (URM) ordinance has been the transfer of ownership of multiple downtown properties. These transfers have allowed property owners, who for various reasons did not want to retrofit their buildings, to sell them to other interested parties. In many instances properties have been assembled into larger parcels which potentially present more efficient opportunities for retrofit and redevelopment. All of the Chinatown project properties are URMs. The project offers the opportunity to bring seismic safety through redevelopment of the site. Primary Chinatown Option Modification Issues 1. Fiscal Impact Analysis Update. In 2007, a fiscal impact analysis of the then proposed Chinatown Project was prepared by CBRE. It showed a positive annual fiscal impact $702,300 at build-out. The largest revenue producers in this analysis were: transient occupancy tax (TOT) generated from the hotel operations; retail sales tax and Measure Y revenues; and the City's share of property tax. Subsequent to the EIR certification, the Copelands identified areas of improvement for the project that resulted in the changes in placement of various project components, as shown on Attachment 4. These changes impact several aspects of the project, including the net annual revenues generated by the project. With the reorientation of the hotel entrance to Palm Street and the retail shop space to the more dynamic Monterey street, the proposed project will result in an annual net fiscal impact of$926,200, an increase of$223,900 per year from the previous plan. 1z -7 Amended Option Agreement Page 8 2. Term Extension. An important part of the negotiation for the proposed Second Modification to the Option Agreement was consideration of the new term. City staff's analysis of the time needed for the historic analysis, the additional environmental review caused by changes to the project after certification of the EK and completion of the entitlement process is expected to take another 12 to 18 months. To meet the prerequisites for transfer of the property, the Copelands must obtain a building permit, have evidence of financing and tenancies, and enter into a construction contract. This is expected to take another 18 to 24 months. During the negotiations, the City was looking for the shortest extension possible. The Copelands were looking to assure that they could complete the City's review processes and then have the necessary time to complete construction drawings, obtain financing, hire the contractor and settle tenancies. This originally left the sides to the negotiation with vastly different expectations. Through a process of give and take, the sides came together to reach a tentative agreement on an additional 36-month extension, i.e. until July 2, 2011. To assure the City has adequate time for entitlement processing without detriment to the project outcome, six additional six month extensions beyond the 36-month mark can be "purchased" via accelerated additional option payments. If the property does not transfer by July 2, 2014 the City retains the land and the accelerated option payments made (approximately$1.1 million). Given the City's interest in having the project operating as soon as possible, the proposed Second Modification to the Chinatown Option has been structured to provide incentive for timely completion of the transaction without penalizing the project in the event that there are complications along the way. Appraisal and Reuse Valuation One of the requirements that Council imposed in consideration of a second modification of the Option Agreement was a reevaluation of the purchase price. Accordingly, the City retained CBRE to determine the market value of the property. Although San Luis Obispo does not have a redevelopment agency, the City agreed to use a redevelopment tool — a reuse valuation to determine the value of the property. This valuation methodology takes into account such things as the terms and conditions imposed in the course of the EIR and development review processes. This tool was chosen because, even without an "agency," the project is essentially a redevelopment project and should be evaluated using customary redevelopment tools. 1. What is fair market value? The fair market value of property is based on its "highest and the best use." That is the use (and intensity of use) permitted by land use and zoning codes as determined by an independent private appraiser. hi the case of this property, CBRE determined that the highest and best use of this property would be a use that is physically possible, legally permissible, financially feasible, and maximally productive as explained in the Summary Appraisal Report (Attachment 5). Because the highest and best use value was determined using comparable sales of commercial property in San Luis Obispo, no requirement for the replacement of existing public parking was incorporated. Highest and best use analysis also involves assessing the subject property as vacant and ready to accommodate various types of development allowed under the current zoning requirements and Z- C Amended Option Agreement Page 9 not confined to what might be allowed through the permitting process. As described in the attached analysis, the potential project that is the "highest and best use" of this property is far different than the one being proposed: an all-market rate condominium project that disregards the very design standards that help preserve the San Luis Obispo ambiance. The highest and best use value of the property, with no requirement for replacement of existing public parking, was determined by CBRE to be $8.8 Million. 2. What is a re-use valuation? The redevelopment land evaluation approach reflects the value of property being sold based on additional conditions and limitations beyond those permitted by land use and zoning codes. These conditions result in a lower value because the"highest and best use" cannot be achieved under the limitations imposed. This was the approach used in valuing the Garden Street Terraces property. For the Chinatown project, above and beyond"parking"the project to meet proposed new uses, the 2007 EIR imposed a requirement that the developer pay for the loss of the 155 public surface parking spaces. The mitigation anchored this payment to a calculation based on the current parking in-lieu fee. (While the current project proposal accommodates all of the parking requirements triggered by their project, if the final on-site parking plan falls short, a parking in-lieu fee will also be paid to cover the difference). The reuse value for the City site, as described in the Reuse Valuation Report (Attachment 6) exclusive of the portions of the project site owned by the Copelands, was determined to be approximately $3.7 million before consideration of the limitations imposed by the EIR, namely payment for the eliminated public parking. With the parking mitigation measure valued at about $2.6 million, the residual reuse value is established at $1.1 million. Significant Features of Proposed Amendment to Chinatown Option The proposed Second Modification to the Chinatown Option (Attachment 7) is just that, a modification of the original agreement. As such, many of the safeguards and terms of the Chinatown Option will continue to be in effect after amendment. For instance, the "Additional Option Price" shall remain in effect wherein the Copelands will pay $29,500 for each of the additional years of the Second modification to the Agreement, which payments will be applied to the purchase price unless the Option is not exercised. The purchase price will continue to increase at the rate of 0.0833%per month to reflect inflation. The terms that are proposed to change include the length of time that the Modified Option Agreement is in effect; the price for the land subject to the Modified Option Agreement; and some of the prerequisites to transfer of ownership. A few new provisions are proposed: an agreement to peer review the historic analysis provided by the developer in an effort to save time; tolling of the term of the Option in the event of litigation or an event of force majeure; a provision for accelerated additional option price payments in return for additional time to complete the development; and cost of living adjustments to the amount to be paid per parking space for the public parking spaces per the EIR. The Option preserves aspects of the original option that safeguard the City's interest in development of a project on this site that meets very specific public goals—and that ownership shall not transfer unless such a project is certain. C Amended Option Agreement Page 10 Key features include: 1. Modified Term. The proposed term is for an additional 36 months beginning with approval of the modification by the Council on July 1. 2. Modified Purchase Price. The proposed price as of July 1, 2008 is estimated to be $3,670,616 based on the reuse valuation, reduced by the payment to the Parking Fund of approximately $2.6 million, resulting in a net payment of $1.1 million. (Figures are estimates or approximations because the exact number of spaces on which the EIR mitigation measure is to be applied may vary, depending upon the exact number of parking spaces displaced, which number will not be known until final project drawings are submitted and a building permit is issued. Also, as the current parking in lieu fee includes an escalator provision based upon a cost of living index, the actual fee will vary, depending upon when exactly building permits are issued.) This price will rise incrementally over time due to cost of living increases applied to the parking rates as well as the incremental increases to the purchase price. 3. Accelerated Option Price. In the event that the property has not transferred to the Copelands within 36 months after entering into the Amendment of Option, the Copelands will pay to the City an Accelerated Option Price of 20% of the remaining balance of the new purchase price. This payment will be made to the City every six months after expiration of the new term for no more than six, six-month terms. After this last extension (36 months in total), the Option will be terminated and the City entitled to keep all Option payments and all Accelerated Option payments. Conclusion The long term benefits of the proposed Chinatown project are the continued vitality of the Downtown, including completion of seismic safety upgrades, revitalization of that section of Monterey Street that intersects with Mission Plaza, and increases in revenues to support. City services. Bolstering the vitality of the community through creative public/private partnerships has been accomplished previously with this developer. Given the problems in the real estate financing sector and the slow down in new development, this is a unique opportunity to sustain momentum in the continued enhancement of Downtown at a time when it might not otherwise occur. The proposed Amendment is a continuation of the course that was set by Council to create a vital, vibrant, and productive Downtown through development of surface parking areas. FISCAL IMPACT In addition to achieving key City goals for the Downtown as discussed above, there are four key fiscal benefits from this project: 1. The most significant is the ongoing generation of about $1 million annually net new General Fund revenues to the City. 2. Based on past experience from similar projects, secondary added revenues from the stimulus that this project is likely to generate from nearby properties. Z 0 Amended Option Agreement Page 11 3. $2.6 million to the Parking Fund towards replacing surface parking — keeping in mind that the project itself fully meets its `hew demand"parking on-site. 4. $1.1 million in one-time sales proceeds. ALTERNATIVES 1. Alter the Terms of the Proposed Amendment. Council may direct staff to return to Council after renegotiation of specified terms of the proposed amendment to the Option Agreement. With a current expiration date of July 3, 2008, Council would also need to extend the current Option Agreement for additional time to allow for such reconsideration. Staff does not support this alternative because extensive negotiation was required to produce the proposed amendment terms and it is not believed that further negotiations will be fruitful. Therefore, if the Council is dissatisfied with the major terms of the agreement, the most straightforward alternative would be Alternative 2. 2. Reject the Amendment. Council may reject amending the Option Agreement. Staff does not recommend this course of action because of the project rewards set forth in this agenda report. Although there is uncertainty associated with any project, greater uncertainty and time would be a product of starting over with a different developer or in review of a different project. ATTACHMENTS 1. Chinatown Option Agreement 2. Vicinity Map 3. Project Site Layout 4. Fiscal Impact Analysis and Update 5. Market Rate Appraisal Report 6. Reuse Valuation Report 7. Second Modification to the Option Agreement COUNCIL READING FILE 1. Chinatown-Court Street: A Vision for the Future of Downtown San Luis Obispo California Inspired by its Past 2. Initial MOU(City and Copelands) G:File Path:T:/CouncilAgendaReports/Administration/ChinatownExtension7-1-2008/ChinatownOptionExtension7-1-2008 FINAL Z -H • ATTACHMENT 1 OPTION TO PURCHASE REAL PROPERTY r/ This Option Agreement is made as of �c 3 by and between THE CITY OF SAN LUIS OBISPO, a municipal corporation and charter city ("City'), and SAN LUIS OBISPO COURT STREET,LLC, a California limited liability company("Copelands'). THE PARTIES HEREBY AGREE AS FOLLOWS: 1. The hRRg11 . The property (hereinafter, the"Property") consists of the five (5) parcels located in the block between Paha and Monterey Streets and Morro and Chorro Streets, in San Luis Obispo County, California, identified as portions of APN#002-416-034, #002-416-034, #002-416-029, #002-416-029, and #002-416-029, together with any improvements made thereon. A legal description of the Property is attached hereto and incorporated herein as Exhibit A. 2. Grant of Wtion. In consideration for the payment of Eighty-eight Thousand Five Hundred Dollars ($88,500) (the "Initial Option Price') on or before the Cl s ng, as that term is defined in that certain Real Property Exchange Agreement, dated as of February 2003,between the City and the Copelands,the City hereby grants to Copelands an option("Option')to purchase the Property at the Purchase Price on the terms and conditions set forth in this Option Agreement. 3. Term of Option (a) The term of this Option shall commence as of the date of this Agreement and shall expire at 5 p.m., on the date which is eighteen months thereafter ("Initial Option Temm'J,unless extended as provided in the following sentences or otherwise by the written agreement of the parties. Copelands may extend the term of the Option (the"Option Term") up to three times for an additional year(each an"Additional Option Term") each,by paying to the City the sum of Twenty-nine Thousand Five Hundred Dollars ($29,500) (each an "Additional Option Price) for each such one year extension Notwithstanding the foregoing, Copelands shall not be entitled to the first Additional Option Term unless prior to the end of the Initial Option Term, Copelands has submitted an application to the City for development(the"Development Application')of the project known as the"Chinatown Project" (the "Project') to be built on the Property consistent with paragraph 4A below and the Copelands shall not thereafter be entitled to any subsequent Additional Option Term unless, at the end of each Additional Option Period, either (i) the Development Application has been approved and has not been terminated and has not expired or(ii)it remains pending. Each Additional Option Price shall be paid to the City,if at all,prior to the expiration of the immediately preceding Option Term or Additional Option Term, as the case may be. The Option Term or any Additional Option Term may be terminated earlier by written agreement of the parties hereto. 4. Conditions of Exercise of the Option The option is to be exercisable on the following conditions: A. The Option must be exercised, if at all, during the Option term or any duly exercised Additional Option Term. During such period, the Copelands shall pursue the issuance of building permits and other required regulatory entitlements (if any) ("Permits') for construction of a development on the Property consistent with paragraph 7 below B. The Option can be exercised only if all of the following conditions have been satisfied: F:\TRANS\AGR\COPELANDWmSMptlm(&21)}0515Aoe r/2 6 _ /)CC Q,--. atc 304800TI5/152003 ii/� 7,_ p G�� �C � 7,s-/"3 0Q_ ,r G ATTACHMENT 1 i. The Permits for construction of the Project have been issued and have not expired; U. the Copelands have submitted evidence to City that the Copelands have the financial resources, from lenders and from equity fimds and investors as may be necessary, in a sufficient amount to complete the construction and equipping of the Project in accordance with a budget prepared by Copelands; iii. the Copelands have entered into construction contracts for the Project evidencing that the work of construction can be completed within.the budget; iv. Construction of the Retail Complex on the Court Street Project Property shall have been commenced as required under the Real Property Exchange Agreement refen-ed to above, and,if construction shall have already commenced,construction to completion of the Retail Complex is being diligently pursued. 5. Restrictions on Title to the ProDerty. The parties agree, and the Deed transferring title to the Property to Copelands shall reflect, that until substantial completion of the Project substantially in accordance with the Permit: (i)the use of the Property shall be limited and restricted to the construction of the Project, (ii) the Copelands shall not encumber the Property except as security for construction loans to finance the construction of the Project,and(iii). the City has the right of reverter and a power of termination(Civil Code section 885.010)to cause the title of the Copelands to the Property to terminate and to revert to the City if the construction of the Project pursuant to the Permit does not commence as required by this Agreement, or if construction is commenced, such construction is not completed. Upon the substantial completion of the Project in accordance with the Permit, the City shall execute and deliver to the Copelands, a Certificate of Completion in substantially the form attached hereto as Exhibit B which shall acknowledge that the deed restriction and any right of reverter in favor of the City shall have terminated. In the event the City,being entitled to do so,causes the title to the Property to revert to the City,the City shall pay to the Copelands an amount equal to the Purchase Price(as defined below). 6. Due Diligence Inspections by Couelands. Prior to the exercise of the option, the Copelands shall first have performed such due diligence as it elects to perform as to the condition of the title to the property and the suitability of the site of the property for the proposed uses and construction, and shall have inspected,investigated and tested the condition of the soil and the geology of the site and the presence of hazardous substances or archaeological materials and shall have accepted such conditions"as-is"with all defects,known or unknown,and without wairmty,representation or promises of remediation or cure by the City. 7. The Project. The Project shall incorporate a retail and office space, as well as a downtown residential component for the upper floor or floors of the Project. In connection with the Project, Copelands shall be responsible to comply with all laws and to conform to all land use,building and safety and other regulatory laws, to bear the cost of any compliance with the California Environmental Quality Act or other laws, and to apply for and obtain any variances, zoning changes or other special permits as the Project may require,all of which shall be accomplished and obtained within the time allowed for exercise of this Option. This Option Agreement shall not constitute any agreement by the City to agree to take any action in.its regulatory function to implementor favor the Project, to waive or reduce any fees, charges or exactions that are otherwise applicable or to agree to grant or issue any entitlement or permits. Copelands understands that it may be required to pay in-lieu parking fees in 2 F:ITRANSIAGRVCOPELANDTalinSWp on(fm "51S.doc 3048002/5/152003 2, ATTACHMENT 1 connection with the Project, as required by the City's then applicable ordinances and regulations, without any preference or reduction. .8. Exercise of the Ogtion Provided that Copelands is not in default under any term or provision of this Option Agreement,the conditions to the exercise of the Option have been satisfied and the City has certified in writing that Copelands have submitted evidence satisfactory to City that the conditions to the exercise of the Option referred to above have been satisfied, the Option may be exercised by Copelands delivering to Escrow Holder, as defined below,with a copy to the City, a copy of the Exercise Notice, in the form attached hereto as Exhibit C, and a copy of the Purchase Agreement and Sale Agreement in the form attached hereto as Exhibit D("Purchase Agreement'). Prior to the time the Property is transferred, Copelands shall determine the status of title to the Property and accept it as- is. The City agrees not to add any encumbrance or lien, or suffer any such encumbrance or lien to exist, on the Property hereafter. The City shall not have any obligation to eliminate any exceptions identified in a title report obtained by the Copelands unless the City is not in compliance with the foregoing sentence. A. Purchase Price. The Purchase Price for the purchase of the Property if the title to the Property is vested in the Copelands, or its designee, during the initial 18 months shall be $2,950,000, net of all expenses and costs of such escrow and the transfer of title to the Property; provided that if the title to the Property is not vested in the Copelands during the Initial Term, the Purchase Price shall be increased at the rate of.0833% of$2,950,000 for each month or part thereof from the effective date of this Option until title is vested in the Copelands pursuant to the exercise of this Option. At the closing of escrow for the Property, Copelands shall be entitled to a credit against the Purchase Price for the Initial Option Price plus any Additional Option Price already paid to the City. B. Escrow. The escrow holder shall be Chicago Title Insurance Company(.Escrow. Holder'). Upon delivery by Copelands to Escrow Holder of the Exercise Notice as provided above, Escrow Holder shall deliver the grant deed conveying the Property to Copelands in compliance with the escrow instructions provided in the Purchase Agreement and any further escrow instructions that may be submitted by both parties to Escrow Holder. 9. Specific Performance. Without waiving any other available rights or remedies, Copelands shall specifically have the right,if applicable,to sue in equity for specific performance of this Option Agreement or any part of this Option Agreement, and expressly the right to file a notice of pending action against the Property as provided in California Code of Civil Procedure Section 409 and Civil Code Section 1214, subject to all defenses, claims and rights to defend against such suits or to eliminate such notices if such notice or filing is found not to be appropriate or warranted. Except as provided by the foregoing, nothing contained herein shall be deemed an agreement by the City to grant rights to Copelan& for specific performance, suits in equity, for the filing of notice of pending actions or other remedies that are not afforded to Copelands without agreement by City, by applicable law.or principles of equity,nor shall City be deemed to waive or surrender any rights or remedies that City may have due to such actions by Copelands. 10. Disclaimer of Warranties. The City makes no representations or warranties regarding the Property. 11. Inspection:Indemnification. A. During the Option Term, Copelands and its designated agents and independent contractors, shall have the right, at their sole risk and expense, to enter onto the Property to the extent 3 F:\TRANS\AGRICOPE\.ANDUWmSt�Optim(f nal)-015 A= 3048002/5/15/2003 ATTACHMENT 1 necessary for the purpose of conducting such surveys, tests and inspections as Copelands shall reasonably require, provided that Copelands shall not make any alterations to the Property, use any of the City's personal property in such survey, test or inspection or interfere with the City's use of the Property without the prior written consent of the City. Copelands shall leave the Property in the same condition as it was prior to such survey,test or inspection. B. Copelands agrees to indemnify and hold the City, its officers, shareholders and directors, employees, agents and representatives harmless from any and all costs, claims, expenses, liability and damages of any kind arising from or in connection with the conduction of such inspection, test or survey on the Property. 12. Failure to Exercise. Time is of the essence of this Option Agreement. If the Option is not exercised in the manner provided in Section 4 above before expiration of the Option Tenn or any Additional Term, as the case may be, this Option shall automatically terminate, and Copelands shall . have no interest whatever in the Property. If the Closing never occurs or the Initial Option Price is not paid in a timely manner, then the Initial Option Term shall never commence, this Option shall automatically terminate;and Copelands shall have no interest whatever in the Property. This Option may not be revived by any subsequent payment or further.action by Copelands, without the express written consent of the City. 13. Qgitclaim. If this Option Agreement expires or is terminated, Copelands agrees, if requested by the City, to execute, acknowledge and deliver to the City a quitclaim deed within ten (10) days after such request quitclaiming its interest in this Option Agreement or the Property and to execute, acknowledge, and deliver any other documents required by the City or any title company to remove the cloud of this Option from the Property. 14. Expenses. Each of the parties shall bear its own respective costs and expenses incurred or to be incurred by it in negotiating and preparing this Option Agreement and in closing and carrying out the transactions contemplated by this Option Agreement, except as specifically provided in this Option Agreement: 15. Broker's Commission. The City and Copelands ("Indemnitors') hereby represent that there are no broker's commissions or finder's fees payable regarding this transaction and that neither the City nor Copelands has entered into any agreements or understandings with any broker or finder regarding this transaction. Indemnitors each agree to indemnify, defend and hold the other harmless from and against all liability,claims, demands,damages and costs of any kind arising from or connected with any broker's or finder's fees or commission or charge claimed to be due any person arising from any Indemnitors'conduct regarding this transaction. 16. Effect of Headines. The subject headings of the sections, paragraphs and subparagraphs of this Option Agreement are included for convenience only, and shall not affect the construction or interpretation of any of its provisions. 17. Modification. Waiver and Entire Ant This Option Agreement and the Exhibits hereto constitute the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all other prior and contemporaneous agreements, representations and understandings of the parties. No supplement, modification or amendment of this Option Agreement shall be binding unless executed in writing by all the parties. No waiver of any of the provisions of this Option 4 F:\TRANS\AGR\COPELANDftlmSt'Optim(Hmd).0515.doc 3048002/5/15/2003 2 -/5 y ATTACHMENT 1 Agreement shall be deemed,or shall constitute,a waiver of any other provisions,whether or not similar, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party malting the waiver. A Memorandum of Option shall be executed by the parties in recordable form which may be recorded by the Copelands,but in the event of any inconsistency between the Memorandum and this Option Agreement,this Option Agreement shall prevail. 18. Countemarts. This Option Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 19. Partial Invalidity. The conditions and provisions of this Option Agreement shall be interpreted in such a manner as to enhance their enforceability, nonetheless, if any term, covenant, condition or provision of this Option Agreement is held by a court of competent jurisdiction to be invalid, void or.unenforceable, the remainder of the provisions hereof shall remain in full force and effect and shall in no way be affected,impaired,or invalidated thereby. 20. Parties in Interest. Nothing in this Option Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Option Agreement on any persons other than the parties to it and their respective successors and assigns, nor is anything in this Option Agreement intended to relieve or discharge the obligations or liability of any third persons to any party to this Option Agreement, nor shall any provision give any third persons any right of subrogation or action against any party to this Option Agreement. 21. Successors and Assitans. Notwithstanding Section 22 below,this Option Agreement shall be binding on, and shall inure to the benefit of, the parties to it and their respective hens, legal representatives,successors and assigns. 22. Assignment. Copelands may assign this Option Agreement to an affiliate controlled by, or under common control with,Copelands without the prior written consent of the City. 23. Recovery of Litigation Costs. If any legal action or other proceeding is brought for the enforcement of this Option Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Option Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys' fees and other costs incurred.in that. action or proceeding,in addition to any other relief to which it or they may be entitled. 24. Notice of Party Defaults. If the City or Copelands defaults in the due and timely performance of any of their warranties,covenants or agreements under this Option Agreement,the non- defaulting party or parties may give notice of such default in the manner provided in Section 26 below. The notice shall specify with particularity the default or defaults on which the notice is based and the defaulting party shall be given ten (10) days from the receipt of notice to cure its default. If the defaulting party does not cure its default within such ten-day(10-day) period, the non-defaulting party may avail itself of all legal rights and remedies available, subject to the terms of this Option Agreement. 25. Amicable Law. The validity, performance and enforcement of this Option Agreement shall be construed under the lawsof the State of California applicable to agreements fully executed and to be performed in such state. 5 F\TRANSIAGRMPEI.AND1PahriStoption(final).051 s.da 304900vsn5n003 -- ATTACHMENT I 26. Consent to Jurisdiction The City and Copelands agree that any suit, action or other legal proceeding arising out of or in connection with this Option Agreement may be brought, and shall be brought only,in a superior or municipal court of the County of San Luis Obispo, State of California and hereby consent to the jurisdiction of any such court in any such suit, action or proceedings. The City and Copelands hereby waive any objection which such party may have to the laying of any such suit, action or proceeding in any such court. 27. Notices. All notices, requests, demands and other communications under this Option Agreement,.except for the Exercise Notice which shall be personally delivered under Section 4 above, shall be in writing and shall be deemed to have been duly given on the date of service if served personally, by reliable overnight courier, or by telecopy transmission for receipt during the receiving parties'normal business hours to the party to whom notice is to be given, or on the third(3rd)day after mailing if mailed to the party to whom notice is to be given, by first class mail, registered or certified, return receipt requested,postage prepaid,and properly addressed as follows: City: City of San Luis Obispo 990 Palm Street San Luis Obispo,California 93401-3249 Attention: City Administrative Officer . Facsimile: (805)781-7109 With a copy to: City Attorney City of San Luis Obispo 990 Palm Street San Luis Obispo,California ,93401-3249 Facsimile: (805)781-7409 Copelands: Court Street Partners,LLC Post Office Box 1348 San Luis Obispo,California 93406 . Attention: Tom Copeland With a copy to: K.Robin Baggett,Esq. Sinsheimer,Schiebelhut&Baggett 1010 Peach Street San Luis Obispo,California 93401 Facsimile: (805)541-2802 Any party may change its address for purposes of this Section 26 by giving the other parties written notice of the new address in the manner set forth above. 28. Interpretation. This Option Agreement has been negotiated by the parties and each party had the opportunity to have this document reviewed by their respective legal counsel. That a party drafted the language of this Option Agreement shall not cause such language to be interpreted for or against such party. 6 F:\TRANS"R\COPEIANDiPalrtStlOption(fnW)-0515A= 3048002/5/15/2003 -t 7 ATTACHMENT 1 IN WITNESS WHEREOF, the parties to this Option Agreement have duly executed it as of the day and year fust written above. SAN LUIS OBISPO COURT STREET,LLC, a California limited liability company By: Tom Copeland Its: Managing Member CITY OF SAN LUIS OBISPO, a municipal corporation and Charter City By: 5�� �,D' David F.Romero Mayor Attest: y _ . By: Lee Price City Clerk Approved as to Form: r Gilbert A. Trujill Acting City Attorney BY Herb Weiser City Special Counsel F:\TRANS\AGR\COPELAND\Pa1mSt\Option(f nal)-0515.doc 304800715/152003 ATTACHMENT 1 Jill c4 of say IUIS OBISPO • 990 Palm Street, San Luis Obispo, CA 93401-3249 April 26, 2005 Scott W.Wall Andre,Morris &Buttery 1102 Laurel Lane P.O. Box 730 San Luis Obispo, California 93406-0730 Re:,, Chinatown Option Dear Mr. Wall: Thank you for your letter of April 13, 2005 regarding your clients' concerns about the Chinatown Option Agreement. We have now had an opportunity to review and consider the information included in your letter and respond as follows. • With respect to your input regarding easements apparently affecting the Bello and Pier One buildings, the City notes your clients' concerns and will consider the information contained in your letter more thoroughly at such time as any action is taken to pursue development of the property that is the subject of the Chinatown Option. However, as there is no development plan currently on file with the respect to the subject property, the City has not undertaken any extensive review of the viability of any particular project or the potential impacts of any development on neighboring properties. We believe such review would.be premature given the absence of a formal development proposal. As your clients are aware, no development in the City proceeds without extensive City review and ample opportunity for and consideration of community input. The City has always found participation from community stakeholders to be an invaluable tool in assisting both staff and the City Council in their careful analyses of development impacts on neighboring property owners and the community as a whole. Such community input.is an integral part of the City review process and staff looks forward to your clients' active participation in the public review process that will follow the submission of any development proposal. With regard to your suggestion that the Chinatown Option expired on August 18, 2004, we have reviewed the relevant documents and respectfully disagree. You are correct that the Option To Purchase Agreement is hand-dated February 18, 2003. However, both the Payment Agreement and the Real Property Exchange Agreement contain the Condition The City of San Luis Obispo is committed to include the disabled in all of its services,programs and activities. Telecommunications Device for the Deaf(805)781-7410. Scott W. wall ATTACHMENT April 26, 2005 Page 2 O Precedent to Exchange that "The City and the Copelands shall have executed the Option Agreement(the"Chinatown Option Agreement"), and deposited it with the Escrow Company with the instructions to date the Chinatown Option Agreement as of the Closing Date..." Clearly, the insertion of the February 18 date into the agreement reflects a clerical error on the part of the Title Company, which is inconsistent with the expressed intent and mutual agreement of the parties to the Option Agreement. The closing occurred on November 5, 2003. Thus, it remains the City's position that the Option Agreement was intended to and does extend until May 5, 2005. Consequently, the City considers the option payment received from the Copelands on April 14, 2005 to be timely. Should the current option expire without action to extend or exercise the option, the City likely would solicit requests for proposals to develop the property and certainly would welcome any development proposal your clients might wish to submit at the appropriate time. Thank you again for your letter and please feel free to call should you have any further questions regarding this matter. Very truly yours, onathan P. well O City Attorney JPLJjcd cc: Ken Hampian,City Administrative Officer Shelly Stanwyck,Economic Development Director Suzanne Fryer,Esq. O 2 -20 MACHMENT 1 MODIFICATION TO OPTION TO PURCHASE REAL PROPERTY This Modification to Option Agreement is made as of Aprih3 , 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 Tenn") 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. t OptionM odification-032108 Z-21 i ATTACHMENT I 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 Copel Its: Manager CITY OF SAN LUIS OBISPO, a municipal corporation and Charter City By:!L��Z�" David F. Romero Mayor Attest: . Audrey oper ,,�) City ClQtk Approved as to Form: By: athan P. Lowell City Attorney Approved as to Form:. B y: � t�hc� �a e F yer �. GeneW_ unsel, SLO Chinato , LLC 2 OptionM odi ficat ion-032108 Z•:?� OAPO s, usS. pepper Street \ m va° Johnson Avenue , �Qy m 1 PQr m Toro Street in w 05 Santa Rosa Street = E r W N r Osos Street rn m a ❑ ❑� in ❑� ° Morro Street a — m a Chorro Street c~i Garden Street D Broad Street LU y m C O U a Broad Street > 3 C_ O 0 m j 0 C °'m U ° Nipomo Street s W E d a. Beach Street m ❑ Z Carmel Street D m a , o� ❑ ❑ ° C C U C `aC C m o o m 5 N m p w m a U M = N LL S /a r IM w 3 3 3 3 C Z o c°r` e��S t, 0 0 0 o c w m m`a; �•e c c c U) ¢ �6 J O O o L CL ❑ ❑ ❑. U N o S,Gjo A t m W to 1D o 2-2., 0 1 l 111111111111111111111 "' " ' = U PALM STREET – r Red Hut Restaurant Motor Court I – – Lounge pommy ' g —' t-lO--1 jPpt°Tl n¢r Wi oma. EL Adobe Redy Paddny lie bo H;.rooc MuSon ,,, U 6 courtyer esti Roo Spa o c� — 13 Al Ejring Residential B Historic Residential – – over ""g _ – "'.Pover _ – Retail I Retail ttdan Mission A - – .r,. ,... 1 I I I I I I LI_ 1 I i I S I I r_-i.•, I I � I I I I I I — _ —– STREET -- MONTEREY – — _ – — – — – – —_ – _ 1 '� irc?sA Rom ]kvcly�s I Ands = W ° .- I •$� I_ � I tS I I I _ � I _ Itad Conceptual Site Plan CHINATOWN O Z �y I/ AITACHU4 CBRE CONSULTING CBRE CB RICHARD ELLIS 355 South Grand Avenue, Suite 1200 Los Angeles, CA 90071-1549 T 213 613 3750 F 213 613 3780 www.cbre.com April 14, 2008 Ms. Claire Clark Economic Development Manager City of San Luis Obispo 990 Palm Street San Luis Obispo, CA Re: Fiscal Revenue Analysis for Chinatown Project San Luis Obispo Dear Ms. Clark: CBRE Consulting is pleased to submit its updated fiscal revenue analysis of the revised Chinatown mixed-use development proposal. BACKGROUND CBRE Consulting previously prepared a fiscal revenue and cost analysis of an earlier version of the Project on the City's General Fund that indicated gross revenues of $803,700 at stabilized occupancy, and after subtracting for a transfer effect. However, several components of the Project have changed as follows. . Retail uses of 42,000 square feet relocated to face Monterey . Relocated restaurant use totaling 6,000 square feet . Hotel of 85 rooms, an increase from 67 rooms; and • 30 residential condominium units, a decrease from 36 residential units CONCLUSION With the reorientation of the hotel entrance to Palm Street and the retail shop space to the more dynamic Monterey Street, the proposed project will yield an estimated $650,000 increase in annual retail sales from more productive sales space. This will result in $65,000 increase in sales taxes and $33,400 increase in Measure Y revenue. This revised estimate also assumes the retail transfer effect of approximately 25%. Z _Z� ATTACHME94 Claire Clark Fiscal CBR E Fiscal Report Update April 14, 2008 CB RICHARD ELLIS The increase in the hotel size from 67 to 85 rooms will result in an increase of gross revenues of approximately $1.1 million according to PKF Consulting, yielding $99,000 in higher TOT, after a 15%transfer factor from existing hotels. The increased sales volume and hotel rooms will also increase miscellaneous revenue sources such as utility users tax and business license fees. Overall, the revised plan will result in stabilized annual fiscal revenues of $1,032,000, an increase of $229,000 from the previous plan as shown in the revised Exhibit G-1. We appreciate the opportunity to assist the City planning efforts on this important project. If there are any questions, please do not hesitate to call me. Sincerely, Thomas R. Jirovsky Senior Managing Director Page 2 2."26 ATTACHMENT 4 Claire Clark Fiscal C g R E Fiscal Report Update April 14, 2008 CB RICHARD ELLIS SAN LUIS OBISPO-CHINATOWN PROJECT ANNUAL FISCAL REVENUES AND COSTS(2007$) Percent Source December Diftranee Amount of Total Exhlblt(s) 2007 Amount Percent Annual Revenues Sales and Use Tax $197,200 19.1% G-5 130.400 66.800 51.2% Measure Y 98,600 9.5% G-5 65,200 33.400 512% Property Tax 104,100 10.1% G4 97,100 7,000 72% Transient Occupancy Tax 465,000 45.0% GA 366,000 99,000 27.0% Real Property Transfer Tax 1,800 0.2% G7 2,200 (400) -18.2% Utility Users Tax 31,800 3.1% G-9 29,200 2,600 8.9% Utility Franchises 17,400 1.7% G-9 15,900 1,500 9.4% Business License Tax 14,500 1.4% G7 10,300 4,200 40.8% Gasoline Tax 1,100 0.1% G-3&G-9 1,300 (200) -15.4% Vehicle License Fee1V F Swap 51,900 5.0% CG7 48,400 3,500 7.2% Other Revenues 100 0.0% G-9 100 0 0.0% Investment Earnings 49,400 4.8% G-a 37,600 11,800 31.4% Total $1,032,900 100.0% $803,700 $229,200 28.5% Annual Municipal Service Costs Public Safety Police Protection $43,000 50.0% Ga a Ga $40200 $2,800 7,0% Transportation Transportation Planning 2,900 3.4% Ga a Ga 2,700 200 7.4% Streets Maintenance 5,900 6.9% Ga a GB 5,500 400 7.3% Flood Protection 2,600 3.0% G-3&G-8 2,400 200 8.3% Leisure,Cultural and Social Services Parks B Recreation 6,500 7.6% GaaG-9 7,700 (1,200) -15.6% Cultural Services 500 0.6% Ga s G-9 600 (100) -16.7% Social Services 300 0.3% Ga&Ga 300 0 0.0% Community Development Planning and Building 1,700 2.0% G-3&G-a 1,500 200 13.3% Natural Resource Protection 1,300 1.5% Ga a c a 1,200 100 8.3% Engineering 6,000 7.0% Ga a G-8 5,600 400 7.1% Community Promotion 1,600 1.9% Gaeta 1,500 100 6.7% Economic Development 800 0.9% G-3&Ga 700 100 14.3% General Government 12,900 15.0% G-9 12,200 700 5.7% Total $86,000 100.0% $82,100 $3,900 4.8% Not Recurring Operating Surplus $946,900 $721,600 $225,300 312% Capital Improvement Plan Costs 20,700 G-3&Ga 19,300 1,400 7.3% Not Fiscal Impact $926,200 $702,300 $223,900 31.9% Page 3 2-z0 f 1 ATTACHMENT 4 RDK&IN 313. 20.0900 213.6623.3841 Fax 213.623.4231 Allan D. Kotin &Associates Real Estate Consulting for Public Private Joint Ventures 949 S. Hope Street,Suite 200, Los Angeles,CA 90015 akotin@adkotin.com Memorandum TO: Claire Clark,Economic Development Manager, DATE: December 12,2007 City of San Luis Obispo CC: Shelly Stanwyck,Bill Statler,and Robert Horch FROM: Ross S. Selvidge and Allan D.Kotin RE: CHINATOWN FISCAL IMPACT ANALYSIS—GENERAL FUND AND PARKING FUND At your request, Allan D. Kotin & Associates in association with CBRE Consulting is pleased to present this analysis of the potential fiscal impacts of the proposed redevelopment of a portion of the Chinatown block in downtown San Luis Obispo. The analysis is based primarily on project information provided by Copelands' Properties as well as financial and other data from several departments of the City of San Luis Obispo. With respect to the impact of the project on the General Fund, the approach and format for the fiscal impact follows that used in a similar study for the proposed San Luis Marketplace in 2002. In this instance, a supplementary analysis of the impact of the project on the Parking Fund has also been included at the City's request EXECUTIVE.SUMMARY Summary Findings The proposed project, known as "Chinatown", consists of 43,750 square feet of retail space, 4,600 square feet of office space, a 67 room hotel with associated meetin� space and a 6,000 square foot restaurant, 36 residential units, and 122 underground parking spaces. The project should generate a positive annual General Fund net fiscal impact measured at stabilized operations. In 2007 dollars, annual fiscal revenues are estimated at$798,700. Annual operating costs of funding the necessary municipal services are estimated at $173,900. This produces an annual General Fund surplus of $624,800. After an allowance of $32,600 for a share of the City's capital improvement plan costs,the General Fund's annual net fiscal surplus is estimated at$592,200. ANNUAL IMPACT ON GENERAL FUND(2007$) Revenues $798,700 Less Municipal Service Costs17( 3,900) Net Fiscal Revenues-Operations $624,800 Less Allocation to Capital Improvements3( 2,600) Net Fiscal Revenues (with Capital) $592,200 Note that these specifications reflect the revised and reduced project description of November 2007, not the larger project described in the original application. 2.Ib R DKJ1 ATTACHMENT 4 Memorandum RE: CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS Note that these estimates of general fund impact consider only direct impacts and do not consider the potential catalytic effect this project may have on other spending and property values in Downtown San Luis Obispo. This approach is consistent with prior fiscal impact analyses. Due to the need to compensate for the loss of public parking spaces now provided on the project site and to provide the additional parking needed for the added project improvements, the project will have a modest adverse impact on both the operating and capital budgets of the Parking Fund. Part of the adverse capital impact will be offset by the allocation to the parking fund of a portion of the sales proceeds the City will realize from the sale of the site to the developer. The parking fund analysis acknowledges that the project's internal parking requirements are apparently satisfied by the proposed provision of onsite parking. ANNUAL IMPACT ON PARKING FUND(2007$) New Revenues From Transferred Demand $ 16,000 Less Loss in Revenue from Lot Closure24( 2.000) Net Fiscal Loss from Operations ($226,000) Less Annual Debt Service for New SpacesZ ($143,000) Net Fiscal Loss (with Capital Charges) ($369,000) Categories of General Fund Revenues and Expenditures The four largest components of the revenues make up more than 82% of the total. The largest of all is the $366,000 in transient occupancy tax (TOT) generated from the hotel operations. New taxable retail sales are expected to generate sales and use tax revenue (at 1% of sales) and Measure Y revenue (at 0.5% of sales) equal to approximately $130,400 and $65,200, respectively. The City's share of property tax revenue is estimated to be approximately $97,100 based on the expected value of the new improvements. The remaining$140,000 in revenue is derived from other sources such as utility and franchise taxes, business license tax,vehicle license fees, and investment earnings. The three largest components of the new municipal service costs are police protection, parks and recreation, and general government. They constitute more than 77% of the total. Police protection at $68,000 is the largest new cost followed by parks and recreation at $42,500 and general government at $24,900. Three categories of transportation costs combined equal $18,100. The remaining costs are attributable to several social services and community development categories. These municipal service costs are net of any revenues received directly in some of the categories that offset the gross costs. The amount of these new costs is largely based on the increase in new 2 Based on a 30-year bond at 5.5%interest to service a net cost of$2,097,000 which reflects a total cost of$5,869,000 for 144 spaces at$40,900 reduced by$1,832,000 in parldng in lieu fees (current rates)and$1,940,000 in allocated land proceeds. (See Exhibit P-1 for details) Allan D.Kotin&Associates Page 2 12/13/2007 Z-�_ RDK&R ATTACHMENT 4 Memorandum RE: CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS residents or new daytime population including residents, employees and hotel guests. Consistent with prior fiscal impact analyses, no added incremental costs (after revenue recovery for fee-based services) are shown for fire costs. This is based on two factors: 1) from a staffing perspective, the City is currently meeting its policy goals for three-person engine companies at all stations at all times as well as its constant staffing standards; and 2) given the project's location, it is within the City's four minute response time goal. Accordingly, unless the City changes its fire protection plans and policies (which are currently under review as part of a strategic planning effort approved in the 2007-09 Financial Plan), no added "net" fire costs are projected to be incurred in serving this project. DETAILED SUPPORTING CALCULATIONS—GENERAL FUND General Fund Summary Exhibit G-1 presents a summary tabulation of the amount of the annual individual fiscal revenue and cost components. Exhibits G-2 through G-9 show the detailed derivation of the amounts presented in Exhibit G-1. Each of the major steps in the analysis associated with these exhibits is discussed below General Fund Input Assumptions and Factors The fiscal impact is based primarily on 1) the project specifications, 2) the number of residents, employees and hotel guests, and 3) city demographic and fiscal factors. The project description by use type and area is presented in Exhibit G-2. The use types, areas and parking specifications were provided by Copelands' Properties and are consistent with the Updated EIR dated November 2007. Estimates of resident, employee and hotel guest counts are presented in Exhibit G-3 along with the current City population and number of employees working in the City. Based on average unit occupancy provided by the City, it is estimated that the project will contain 69 new residents. The estimate of 222 employees in the project is based on industry average employee densities. The 88 hotel guest person years is based on estimates of the average room occupancy and number of guests per night per room. The equivalent residents figure of 379 is based on an employee or hotel guest as being equivalent to 0.50 residents for the purpose of estimating certain municipal costs. That is a commonly used factor in fiscal analyses. General Fund Derivation of Specific Taxes Property Taxes The property tax revenue derivation is presented in Exhibit G-4. The City's receives approximately 14% of the 1.00% general levy on the assessed value of real estate in the City. The areas of the different project components were multiplied by estimates of their values per square foot (or room count multiplied by the value per room in the case of the hotel) to determine the assessed value that Allan D.Kotin&Associates Page 3 12/13/2007 Z ' R D K&IN ATTACHMENT 4 Memorandum RE: CHINATOWN FISCAL IMPACT AND PARIQNG ANALYSIS would be taxed. The estimated combined assessed value of the residential and non-residential portions of the project is $79.9 million. That assessed value would initially produce an annual general levy of $799,000. The City's share would be $111,900. Since current property taxes are approximately$14,800, the City's net new property tax would equal $97,100. Sales Taxes The City will receive sales tax revenue equal to 1.00% of the taxable sales that will occur on the project site. Exhibit G-5 presents the derivation of the estimated taxable retail sales that will be generated by the project and the net tax the City will receive. The estimates of sales per square foot prepared by Copelands' Properties and are within a range that is considered reasonable. It is estimated that there will be$19.6 million in annual taxable sales at the project.This is approximately a 20% to 25% increase in taxable retail sales in the downtown area. Given that scale of additional retail sales in the downtown area, there will be some transfer of sales from existing retailers, at least initially. Given the amount and character of the existing retail sales, it is estimated that the transfer will initially be in the range of 25% of sales at the project. That transfer may decrease over time as retail demand grows. The existing retailers project site that will be displaced currently generate $17,000 in annual sales tax for the City. Adjusting for the transfer effect and existing taxable sales on the project site, it is estimated that the City will receive a net increase of$130,400 in sales tax revenue. The City will also receive Measure Y revenue equal to 0.50% of the net new taxable retail sales or$65,400. Hotel Taxes The derivation of the impacts from the hotel operations are presented in Exhibit G-6. The annual daily room rate, occupancy levels and estimated spending on food and beverages used were provided by PKF Consulting, a specialist in the hospitality industry. Based on the level of competition for the proposed hotel and the growth in hotel demand projected by PKF Consulting, it is estimated that upon stabilization, approximately 15% of the hotel's business will be transfers from existing hotels. Net of the transfer effect, it is estimated that the hotel will produce $366,000 in TOT (Transient Occupancy Tax), $2.6 million in taxable spending,and$623,000 in other spending. Other Revenues A derivation of the business license tax, real property transfer tax and vehicle license fee swap revenue is presented in Exhibit G-7. The business license tax is essentially a tax on the receipts of businesses. The rate is 0.05% of gross receipts. Based on estimates of the gross receipts (after transfer effects) for the businesses in the project, the City can expect to receive $10,300 in annual business license tax. The City will receive a real property transfer tax equal to 0.055% of the value of real estate sold each year in the project. Each residential unit is assumed to sell at an average eight year interval. Based on the value of the residential components, this would produce approximately $2,200 in annual real Allan D.Kotin&Associates Page 4 12/13/2007 Z_31 R D KJI ATTACHMENT4 Memorandum RE: CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS property transfer tax revenue for the City. The non-residential portions of the project would sell at irregular intervals that make it too speculative to include in this projection. The vehicle license fee swap revenue is based on the annual percent increase in the City's assessed value. The project would constitute approximately a 1.28% increase in the assessed value in the City. This would produce a$48,400 increase in the City's annual vehicle license fee swap revenue. A summary tabulation of the factors by which the different revenue and municipal cost line items are estimated is presented in Exhibit G-8. These are consistent with common practices in fiscal analyses and the previous fiscal analysis conducted in 2002 for the San Luis Marketplace. General bund Derivation of Estimated Expenditures The derivation of the municipal cost factors and several revenue factors are presented in Exhibit G- 9. These factor derivations are based on cost and revenue patterns in the City's 2007-2009 Financial Plan budget. In the case of some of the cost categories, there are offsetting revenues that reduce the gross costs on which the factors are based. These factors are combined with other parameters such as the project's new residents or new equivalent residents to obtain a category's cost for the project. DETAILED SUPPORTING CALCULATIONS—PARKING FUND Parking Fund Calculations-Summary Exhibit P-1 provides a summary of the parking impacts. According to the City parking regulations, the project will create a parking demand for a total of 206 spaces. The residential component will require 43 parking spaces while the hotel, restaurant, retail, and office components will .require 163 spaces. According to the City code, existing uses on the project site constitute a demand for 95 spaces. Consequently, the project will produce a net increase in demand of 111 spaces. The project site currently has 155 public and private parking spaces. Those 155 spaces will be lost with the development of the project. Upon completion, the project will provide 122 parking spaces on-site in an underground parking garage and on the surface. Given the net new demand,there will be a parking deficit of 144 spaces. Project Demand 206 Less Existing Demand (95) Plus:Existing Parking Lost 155 Less: New Parking Provided (122) Parking Deficit 144 Allan D.Kotin&Associates Page 5 12/13/2007 R D K&SI SENT 4 Memorandum RE: CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS The potential annual financial impact to the City of this plan would equal the net revenues from the 143 space City parking lots on the project site that would be lost with an offset for any increased utilization of existing or new City-owned lots or structures (and thus net revenues) resulting from those facilities absorbing all or part of the parking deficit demand. The annual net revenue lost from the 143-space City lots is estimated at$242,000. If all the parking deficit demand were to relocate to existing or new facilities, the net increase in City revenues is. estimated at approximately $16,000. This would produce an overall annual loss of approximately$226,000 for the City. The net capital cost of providing spaces to eliminate the 144 space parking deficit is equal to the cost of the structure less the parking in lieu fee that would be levied and allocated proceeds from the sale of land. The cost including land to provide a parking in the vicinity of the project is estimated at $40,900 per space or approximately$5.9 million for the entire deficit. The City's $12,767 fee per deficit space would offset$1:8 million of that cost. Further offsetting the cost with the $1.9 million in proceeds from the sale of the two City-owned lots on the project site leaves a net cost of approximately $2.1 million. In the current capital markets, that cost could be financed over 30 years at an annual cost of approximately$143,000. Combining the annual operating deficit produced by the elimination of the two City-owned lots with the annual burden of the net capital cost of providing parking spaces to offset the parking shortfall, produces an annual deficit of$369,000.The derivation of this figure is presented in Exhibit P-1.The details behind the derivation in Exhibit P-1 are presented in Exhibit P-2 through P-5. Parking Fund -Supporting Calculations The back up computations for the parking deficit and costs are presented in Exhibit P-1. Details on which those back up computations are based are contained in Exhibits P-2 through P-5. As shown in Exhibit P-2, the two existing City-owned parking lots on the project site contain 143 spaces (excluding a loading zone)and generate approximately$242,000 in annual net revenue. The "net" revenue is estimated at $110 per space, based on the detailed analysis of structure revenues and costs that already developed by City staff as part of the parking fund review in May 2007. The derivation of the parking demand for the project is presented in Exhibit P-3. The residential derived parking demand of 43 spaces for the residential component and 163 spaces for the remainder of the project is consistent with the demand derived in Final Updated EIR. The existing buildings and improvements on the project site would require 95 parking spaces according to the City's parking regulations. A credit against the demand for the proposed project is allowed for the demand from the existing uses.The net increase of 111 spaces in the parking requirements for the project site is satisfied by the 122 spaces to be provided in the project. Allan D.Kotin&Associates Page 6 12/13/2007 ?.-33 RDIR�� C ATTACHMENT 4 Memorandum RE: CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS Exhibit P4 presents the derivation of the current 95 space demand for the existing uses on the project site. It also presents an additional derivation of the parking requirements for the residential component of the project. The specifications of the project by component and the amount of parking provided are presented in Exhibit P-5. SLO Chinatown Fiscal Impact Analysis 121207v2.doc Allan D. Kotin&Associates Page 7 12/13/2007 2 _. ADK&A ATTACHMENT 4 Memorandum RE: CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS EXHIBIT G-1 SAN LUIS OBISPO- CHINATOWN PROJECT ANNUAL FISCAL REVENUES AND COSTS (2007$) Percent Source Amount of Total Exhibit(s) Annual Revenues Sales and Use Tax 130,400 16.3% GF-5 Measure Y 65,200 8.2% GF-5 Property Tax 97,100 12.2% GF-4 Transient Occupancy Tax 366,000 45.8% GF-6 Real Property Transfer Tax 2,200 0.3% GF-7 Utility Users Tax 29,200 3.7% GF-9 Utility Franchises 15,900 2.0% GF-9 Business License Tax 10,300 1.3% GF-7 Gasoline Tax 1,300 0.2% GF-3&GF-8 Vehicle License Fee/VLF Swap 48,400 6.1% GF-7 Other Revenues 100 0.0% GF-9 Investment Earnings 32,600 4.1% GF-8 Total $798,700 100.0% Annual Municipal Service Costs Public Safety Police Protection $68,000 39.1% GF-3&GF-8 Transportation Transportation Planning 4,600 2.6% GF-3&GF-8 Streets Maintenance 9,400 5.4% GF-3&GF-8 Flood Protection 4,100 2.4% GF-3&GF-8 Leisure,Cultural and Social Services Parks&Recreation 42,500 24.40/6 GF-8&GF-9 Cultural Services 1,600 0.9% GF-3&GF-8 Social Services 900 0.5% GF-3&GF-8 Community Development Planning and Building 2,600 1.5% GF-3&GF-8 Natural Resource Protection 2,100 1.2% GF-3&GF-8 Engineering 9,500 5.5% GF-3&GF-8 Community Promotion 2,500 1.4°/a GF-3&GF-8 Economic Development 1,200 0.7% GF-3&GF-8 General Government 24,900 14.3% GF-8 Total $173,900 100.0% Net Recurring Operating Surplus $624,800 Capital Improvement Plan Costs $32,600 GF-3&GF-8 Net Fiscal Impact $592,200 Allan D.Kotin&Associates Page 8 11/13/1007 2_"3- IIDK&R AITACHME�T� Memorandum RE: CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS EXHIBIT G-2 SAN LUIS OBISPO- CHINATOWN PROJECT PROJECT DESCRIPTION Hotel Residential TOTAL Parking Laves Retail Restaurant Office Sq Ft Rooms Sq Ft Units SO FT Sq Ft Spaces Monterey 14,200 6,000 8,500 26,000 60 4,600 7,500 2,400 _ 18,800 6,000 16,000 28,400 6o Plaza 7,450 4,600 15,000 13 28,000 62 Palm 3,900 14,500 27 10,400 10 2,900 4,000 7,600 3,000 1,200 1,000 900 _ 17,500 21,500 27 10,400 10 Palm 2 14,500 27 25,470 16 Palm 3 21,700 10 Total 43,750 6,000 4,600 67,000 67 57,570 36 178,920 56,400 122 Source:Copelands'Properties Allan D.Kotin&Associates Page 9 12/13/2007 RDK&II ATTACHMENT 4 Memorandum RE:CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS EXHIBIT G-3 SAN LUIS OBISPO-CHINATOWN PROJECT PROJECT AND CITY DATA CITYWIDE Residents 44,440 Employees 39,000 Equivalent Residents Resident Residents or Equivalent Equivalent Employees Factor Residents Residents 44,440 100% 44,440 Employees 39,000 50% 19,500 Total 63,940 Non-Residential Improvements Square Feet 8,030,000 PROJECT Units Per Unit Total RESIDENTS Amount 36 1.92 69 SF Per Employees Total Sq Ft Employee Rooms Per Room Employees EMPLOYMENT Retail 43,750 500 88 Restaurant 6,000 125 48 Office 4,600 250 18 Hotel 67,000 67 1 87 Residentlal 57,570 1 Total 178,920 222 HOTEL GUESTS Guest Days 32,100 Hotel Guest Person Years 88 Resident Residents or Equivalent Equivalent Employees Factor Residents EOUIVALENT RESIDENTS Residents 69 100% 69 Employees 222 50% 222 Hotel Guest Person Years 88 50% 88 Total 379 Source:CBRE Consulting and City of San Luls Obispo Allan D.Kotin&Associates Page 10 12/13/2007 RDIGR ATTACHMENT 4 Memorandum RE: CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS EXHIBIT G-4 SAN LUIS OBISPO-CHINATOWN PROJECT PROPERTY TAX Assessed Value Property Tax Square Feet Units or PSF or General Unit/Room Total Rooms Room Total Levy City Share NEW PROPERTY TAX RETAIL Monterey 18,800 $375 $7,050,000 $70,500 $9,900 Pura 7,450 375 2,794,000 27,940 3,900 Palm 17,500 375 6,563,000 65,630 9,200 Subtotal 43,750 $16,407,000 $164,070 $23,000 RESTAURANT 6,000 In Hotel OFFICE 4,600 $375 $1,725,000 $17,250 $2,400 HOTEL 1,000 67,000 67 $450,000 $30,150,000 $301,500 $42,200 RESIDENTIAL 1,599 57,570 36 $550 $31,664,000 $316,640 $44,300 COMBINED $79,946,000 $799,460 $111,900 EXISTING PROPERTY TAX Amount $10,550,000 $105,500 $14,800 NET NEW PROPERTY TAX $69,396,000 $693,960 $97,100 Amount Notes: 1.Assessed value estimates provided by Copelands'Properties 2.Existing assessed vaue provided by City of San Luis Obispo Allan D.Kotin&Associates Page 11 12/13/2007 2-,v RDIG11 ATTACHMENT 4 Memorandum RE: CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS EXHIBIT G-5 SAN LUIS OBISPO - CHINATOWN PROJECT SALES TAX Sales Taxable Sales Sales Sq Ft. PSF Total Percent Total Tax NEW SALES TAX RETAIL Monterey 14,200 500 $7,100,000 100% $7,100,000 $71,000 4,600 500 2,300,000 100% 2,300,000 23,000 18,800 $9,400,000 $9,400,000 $94,000 Plaza 7,450 500 $3,725,000 100% $3,725,000 $37,300 Palm 3,900 200 $780,000 100% $780,000 $7,800 2,900 200 580,000 100% 580,000 5,800 7,600 200 1,520,000 100% 1,520,000 15,200 1,200 200 240,000 100% 240,000 2,400 1,000 200 200,000 100% 200,000 2,000 900 200 180,000 100% 180,000 1,800 17,500 $3,500,000 $3,500,000 $35,000 Subtotal 43,750 380 $16,625,000 $16,625,000 $166,300 RESTAURANT Monterey 6,000 In Hotel HOTEL FOOD&BEVERAGE $3,017,000 100% $3,017,000 $30,200 COMBINED Total 49,750 $19,642,000 $19,642,000 $196,500 NET OF TRANSFER FROM OTHER SLO RETAILERS Transfer Factor 25% $14,731,500 $14,731,500 $147,400 Amount EXISTING SALES TAX Amount $1,700,000 100% $1,700,000 $17,000 NET NEW SALES TAX Amount $13,031,500 $13,031,500 $130,400 NET NEW MEASURE Y TAX Amount $65,200 Notes: 1.Retail sales estimates provided by Copelands'Properties 2.Transfer factor estimated by CBRE Consulting 3.Existing sales on project site provided by City of San Luis Obispo Tax Rates Sales Tax 1.00% Measure Y 0.50% Allan D.Kotin&Associates Page 12 12/132007 RDK&II ATTACHMENT 4 Memorandum RE:CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS EXHIBIT G-6 SAN LUIS OBISPO -CHINATOWN PROJECT HOTEL OPERATIONS Specifications Square Feet 67,000 Rooms Number 67 SF Per Room 1,000 Rooms Average Daily Rate $235 Occupancy 75% Annual Revenue $4,310,000 Number of Guests Guests Per Room 1.75 Guest Days Per Year 32,100 Person Years 88 Transient Occupancy Tax Rate 10% Amount $431,000 Food&Beverage Spending Percent of Room Revenue 70% Amount $3,017,000 Other Revenues Percent of Room and F&B 10% Amount $733,000 Net of Transfer From Other SLO Hotels Transfer Factor 15% Net New Room Revenue $3,663,500 Transient Occupancy Tax 366,000 Food&Beverage Spending 2,564,000 Other Revenues 623,000 Notes: 1. Hotel operations estimates provided by PKF Consulting 2.Transfer factor estimated by CBRE Consulting Allan D.Kotin&Associates Page 13 12/13/2007 2 -�/c RDK&R ATTACHMENT 4 Memorandum RE: CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS EXHIBIT G-7 SAN LUIS OBISPO - CHINATOWN PROJECT OTHER REVENUES BUSINESS LICENSE TAX PSF Total Net New Gross receipts Retail $262 $13,031,500 Office 150 690,000 Hotel&Restaurant 102 6,850,500 Combined $20,572,000 Business License Tax Rate 0.05% Amount $10,300 REAL PROPERTY TRANSFER TAX Residential Property Value $31,664,000 Annual Trunover Average Holding Interval in Years 8 Percent Sold Each Year 12.50% Value $3,958,000 Transfer Tax Rate 0.0550% Amount $2200 VEHICLE LICENSE FEE Current Assessed Value $5,419,334,000 Current VLF Revenue 3,781,900 Assessed Value Added by Project Amount $69,396,000 Percent Increase 1.2805% New VLF Revenue from AV Increase Amount $48,400 Source:CBRE Consulting and City of San Luis Obispo 2007-2009 Financial Plan Allan D.Kotin&Associates Page 14 12/13/2007 RDK&A ATTACHMENT 4 Memorandum RE:CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS EXHIBIT G8 SAN LUIS OBISPO-CHINATOWN PROJECT REVENUE AND COST ESTIMATION FACTORS Revenue Factors Property tax allocation to City 14.0% Percent of General Levy Direct sales tax rate 1.0% Percent of Taxable Sales Measure Y tax rate 0.5% Percent of Taxable Sales Transient occupancy tax 10.0% Percent of Room Receipts Real property transfer tax 0.055% Percent of Annual Residential Sales Utility franchises Per Capita and SF of Non-Residential Utility users tax Per Capita and SF of Non-Residential Business license tax 0.05% Percent of Gross Receipts Gasoline Tax $18.65 Per Resident Vehicle License Fee Percent Increase in Assessed Value Other revenues $1.69 Per Resident Investment and property 5.5% of other revenue factors minus cost factors Cost Factors Public Safety Police protection $179.36 Per Equivalent Resident Transportation Transportation planning 12.20 Per Equivalent Resident Streets maintenance 24.76 Per Equivalent Resident Flood Protection 10.71 Per Equivalent Resident Leisure,Cultural and Social Services Parks&Recreation 112.04 Per Resident Cultural services 4.10 Per Equivalent Resident Social services 2.30 Per Equivalent Resident Community Development Planning and building 6.91 Per Equivalent Resident Natural resource protection 5.51 Per Equivalent Resident Engineering 25.10 Per Equivalent Resident Community promotion 6.62 Per Equivalent Resident Economic development 327 Per Equivalent Resident General government 13.71/6 Percent of Other Costs Capital Improvement plan 86.10 Per Equivalent Resident Source:CORE Consutdng and City of San Luis Obispo 2007-2009 Financial Plan Allan D.Kotin&Associates Page 15 12/13/2007 �J ! 2r /2- I 11DK&A ATTACHMENT 4 Memorandum RE: CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS EXHIBIT G-9 SAN LUIS OBISPO-CHINATOWN PROJECT FISCAL REVENUE AND COST FACTORS PART 1 OF 3 -General Fund Expenditure Relationships Service Cost 2=-2008 Functional Cost Unit See Notes Felat onship Cost Revenues(l) Net Cost Base Cost Public Safety Police protection Equiv Res $12,699,000 $1,231,000 $11,468,000 63,940 $179.36 Fire&environ safety 9,918,000 836,000 9,082,000r . �'' S2 Y Transportation Transportation planning Equiv Res 801,000 21,000 780.000 63,940 12.20 Streets Equiv Res 1,614,000 31,000 1,583,000 63,940 24.76 Flood protection Equiv Res 788,000 103,000 685,000 63,940 10.71 Leisure,Cultural&Social Services Parks&recreation Per Capita 6,012,000 1,033,000 4,979,000 44,440 112.04 Cultural services Per Capita 364,000 0 364,000 44,440 8.19 Social services Per Capita 204,000 0 204,000 44,440 4.59 Community Development Planning&building Equiv Res 2,712,000 2,270,000 442,000 63,940 6.91 Natural resource protection Equiv Res 352,000 352,000 83,940 5.51 Engineering Equiv Res 2,055,000 450,000 1,605,000 63,940 25.10 Community promotion Equiv Res 423,000 423,000 63,940 6.62 Economic development Equiv Res 209,000 209,000 63,940 3,27 General Government 2 Cost Ratio 7,181 000 249 000 6,932,000 na nal Total Operating Programs 45,332,000 6,224,000 39,108,000 Capital Improvement Plan(3) Equiv Res 5,505,000 5,505,000 63,940 86.10 Debt Service n.a. 1 464 400 1464 n.a n.a TOTAL $01 400 6,224 000 46 077 4110 iyy _.' . Wgff Notes 1. "Functional"revenues are deducted to arrive at a"net cost"to be supported.from general purpose revenues 2. General government costs will be incurred in proportion to total direct costs 3. CIP costs are based on the four year average General Fund contribution for"capital maintenance"costs: 2005-08 2006-07 2007-08 2008-09 Average Total $2,837,900 $3,012,500 $8,479,700 $7,690,000 $5,505,000 4. No future General Fund debt service costs are projected as a result of the Chinatown project Allan D.Kotin&Associates Page 16 12/13/2007 - 2 -y3 RDK&R ATTACHMENT 4 Memorandum RE: CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS EXHIBIT G-9 SAN LUIS OBISPO-CHINATOWN PROJECT FISCAL REVENUE AND COST FACTORS PART 2 OF 3-General Fund Revenue Relationships 2oo7-ae Source Revenue Relationship Revenues Taxes Sales tax—General Percent of Retail Sales $ 14,032,000 Measure Y Percent of Retail Sales 5,100,000 Sales tax--Prop 172 Functional revenue--police protection 333,000 Property tax Percent of Assessed value 8,771,000 Transient occupancy tax Percent of Room Revenues 5,007,000 Utility users tax Percent of Utility Usage 4,188,000 Franchise fee Percent of Utility Usage 2,288,000 Business tax Percent of Gross Revenues 1,699,000 Real property transfer tax Percent of Value of Real Estate Sold 350,000 Fines&forfeitures Functional revenue--police protection 224,000 Investment&property Estimated as percent of any net annual fiscal impact 716,000 Subventions&grants Motor vehicle in lieu Increases at rate of increase in assessed value 3,782,000 Gasoline tax Per capita 829,000 TDA Functional revenue—transportation planning 21,000 Homeowners subvention Not applicable to annexation under current City/County agreement 88,000 Other in-lieu taxes Existing agreements—no direct relationship to annexation area 16,000 SB 90 reimbursements Functional revenue—general government - Police training(POST) Functional revenue--police protection 70,000 COPS grant Functional revenue--police protection 100,000 OTS Grant 179,000 School resource officer Functional revenue—police protection - Maint of State highways Functional revenue—streets 31,000 Zone 9 revenues Functional revenue--creek&flood protection 103,000 Other grants No relationship to Chinatown project 22,000 Service charges Police protection Functional revenue 325,000 Fire&environ safety Functional revenue 836,000 Transportation Functional revenue Community development Planning&building Functional revenue 2,270,000 Engineering Functional revenue 450,000 Leisure,cult& soc sery Functional revenue 1,033,000 General government Functional revenue 249,000 Other revenues I Per Capita 75,000 Total Revenues $. 53,187,000 Source.City of San Luis Obispo 2007-2009 Financial Plan Allan D.Kotin&Associates Page 17 12/13/2007 IIDK&R ATTACHMINT 4 Memorandum RE:CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS PART 3 OF 3-Other General Fund Revenue Utility Users Tax Estimated at 60%of revenues from residential uses and 40%from non-residential uses. Revenue Revenue 2007-200$Revenue Will Relationship Base Percent Amount Revenue Residential Per capita 44,440 609/6 $2,512,800 $56.54 Non-Residential Per sq It 8,030 000 400/6 1,675,200 0.21 Total Revenue Residential 69 $3,900 Non-Residential 121,350 25,300 Total $29,200 Franchise Fees Estimated at 60%of revenues from residential uses and 40%from non-residential uses. Revenue Revenue 2007-2008 Revenue Unit Relationship Base Percent Amount Revenue Residential Per capita 44440 60�a $1,372,800 $30.69 Non-Residential Per 1000 s ft 81030:00 0 40% 915,200 0.11 Total Revenue Residential 69 $2,100 Non-Residential 121,350 13,800 Total $15,900 Gasoline Tax Revenues estimated based on ulation: i 2007-2008 Revenue Unit Revenue Base Revenue Gasoline tax Is 829.0001 44,4401$ 18.65 Other Revenues 2007-2008 I RevenueUnit Revenue Base Revenue $ 75,000 44,4401 4,440 $ 1.69 Residential 69 $100 Source:City o1 San Luis Obispo 2007-2009 Financial Pian Allan D.Kotin&Associates Page 18 12/13/2007 RDIGR ATTACHMENT4 Memorandum RE: CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS EXHIBIT P-1 SAN LUIS OBISPO - CHINATOWN PARKING COST SUMMARY Required Parking Project Parking Requirements 208 Less Credit for Existing Improvements 95 BASELINE New Perking Required 111 ANALYSIS OF Required va.Provided Parking Parking Provided In Project 122 PARKING GAINED Less New Parking Required 111 AND LOST Surplus or(Deficit) 12 Full.Parking Impact of Project Surplus or(Deficit) 12 Less Lot 3 and 11 Spaces Lost 143 Less Other Spaces Lost 72 Full Surplus or(Deficit) (144) Annual Net Revenue Per Deficit Parking Space Relocated $110 OPERATING COST Lots 3&i t Annual Net Revenue Lost ($242,000) IMPACT ASSUMING Estimated Revenue Impact of Relocating Deficit Parking Annual Net Revenue Per Space $110 NEW PARKING New Annual Net Income 16,000 CONSTRUCTED Combined Existing Lots and Structures ($242,000) Deficit Spaces Located to New Structures 16,000 Total ($226,GW) . Full Parking Deficit Before Any Relocation 144 ANNUAL AMORTIZED Cost Per.Dofioft Space Relocated to New Structure $40,900 Total Cost for New Structured Spaces Required 5.869,000 COST OF Parking In Lieu Fee(Based on Cement Fee) PROVIDING Per Deficit Space $12,767 Total ,1,932,000 144 Offsets to Cost for Land Purchase Price 1,940,000 ADDITIONAL SPACES Net Cost Alter Impact Fees and Purchase Price Offsets 2,097,000 . Annual Amortized Cost Bond Constant Factor(5.5%Interest and 30 years) 6.81% Amount $143,000 COMBINED COST IF Annual Operations ($226,000) ADDITIONAL SPACES Annual Amortized Capital Cort (143,000) ARE TO BE BUILT Total - ($369,000) Notes: 1.Operating and capital cost assumptions from City of San Luis Obispo 2.Demand is based on parking analysis provided in the updated project EIR 3 Annual net revenue per parking space based on prorated cost of new structure per William Stager from City parking review In May 2007 Allan D. Kotin&Associates Page 19 12/132007 RDK&R ATTACHMET 4 Memorandum RE:CHINATOWN FISCAL lmpACT AND PARKING ANALYSIS EXHIBIT P-2 PARKING OPERATING REVENUES AND COSTS Exiistfng Surface Lot Operating Revenues and Costs Annual Gross Revenues Annual Annual Not Revenue Surface Lots Spaces Meter Flnes Total Expenses Total Per Space Metered Lot 3 79 $39,785 $104,421 $144,206 Lot 11 64 37,064 74,037 111,101 Total 143 $76,849 $178,458 $255,307 $13,200 $242,000 $1,692 Unmetered Total 12 Parking Structure Operating Revenues and Costs(See Note) Revenues 1,134,400 Operating and Maintenance Costs 1,004,600 Net Revenue 129,800 Total Structure Spaces 1,179 Net Revenue Per Space $110 Note: Based on revenue and cost analysis by activity presented to the Council on May 31,2007 as part of the Parking Enterprise Fund review for 2007-09 Source:City of San Luis Obispo Parking Services Allan D.Kotin&Associates Page 20 12/13/2007 Z'�i 11DK&A ATTACHMENT Memorandum RE: CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS EXHIBIT P-3 COMPUTED PARKING STATUS Sq Ft of Project Project Spaces Units Per Sq Ft Units Per Space Per Unit Space Total Proposed Development Apartments Residents 36 1 36 Guests 36 5 7 Hotel Rooms 67 0.50 . 34 Meeting 3,000 350 9 Lounge 1,600 350 5 Manager 1 Retail 43,750 500 88 Restaurant 61000 350 17 Office 4,600 500 9 Total 58,950 139 206 Credit for Existing Buildings 95 New Parking Required After Credit for Existing Buildings 111 Parking Provided On Site 122 Surplus or(Deficit) 12 Source: Copelands' Properties Allan D. Kotin&Associates Page 21 12/13/2007 2 �y8 11 D K&R ATTACHMENT 4 Memorandum RE:CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS EXHIBIT P-4 REQUIRED PARKING FOR EXISTING AND PROPOSED NEW IMPROVEMENTS ON SITE Blackstone Sauer Muzlo 955 Hotel Building Building Bello's Morro Yung Total Apartments 15 0 6 7 0 0 28 Hotel 17 0 0 0 0 0 17 Retail 0 20 10 0 0 0 30 Restaurant 0 0 0 0 0 5 5 Office 0 0 0 011 4 15 Total 32 20 16 7 11 9 95 REQUIRED PARKING FOR PROPOSED RESIDENTIAL Unit Type Live/ 2 Br 3 Br 4 Br Work Total Palm Level 6 0 0 4 10 Palm Level 2 10 6 0 0 16 Palm Level 3 1 8 1 0 10 Total 17 14 1 4 36 Source: Copelands' Properties and City of San Luis Obispo Allan D.Kotin&Associates Page 22 12/13/2007 c IIDK&R ATTACHMOff 4 Memorandum RE: CHINATOWN FISCAL IMPACT AND PARKING ANALYSIS EXHIBIT P-5 CHINATOWN - SAN LUIS OBISPO PROJECT SPECIFICATIONS Hotel Residential Parking Level Retail Restaurant Office Sq Ft Rooms Sq Ft Units Sq Ft Spaces Monterey 14,200 6,000 8,500 26,000 60 4,600 7,500 2,400 18,800 6,000 16,000 28,400 60 Plaza 7,450 4,600 15,000 13 28,000 62 Palm 3,900 14,500 27 10,400 10 2,900 4,000 7,600 3,000 1,200 1,000 900 17,500 21,500 27 10,400 10 Palm 2 14,500 27 25,470 16 Palm 3 21,700 10 Total 43,750 6,000 4,600 67,000 67 57,570 36 56,400 122 Source:Copelands'Properties Allan D.Kotin&Associates Page 23 12/13/2007 z _5G ATTACHMENT s CITY OF SAN LUIS OBISPO LAND PARCEL 877 Palm Street and 955 Morro Street San Luis Obispo, San Luis Obispo County, California 93401 CBRE File No. 08-251 LA-0401 Summary Appraisal Report Prepared for: Claire Clark Economic Development Manager CITY OF SAN LUIS OBISPO 990 Palm Street San Luis Obispo, California 93401 VALUATION & ADVISORY SERVICES CBRE CB RICHARD ELLIS 7 -5 MOMENT 5 VALUATION & ADVISORY SERVICES CBRE CB RICHARD ELLIS 355 South Grand Avenue,Suite 1200 Los Angeles,Califomia 90071 T 213-613-3217 F 213-613-3131 www.cbre.com April 11, 2008 Claire Clark Economic Development Manager CITY OF SAN LUIS OBISPO 990 Palm Street San Luis Obispo, California 93401 RE: Appraisal of City of San Luis Obispo Land Parcel 877 Palm Street and 955 Morro Street San Luis Obispo, San Luis Obispo County, California CBRE File No 08-251 LA-0401 Dear Claire Clark: At your request and authorization, CB Richard Ellis (CBRE) has prepared an appraisal of the market value of the referenced property. Our analysis is presented in the following Summary Appraisal Report. The address of the subject property is 877 Palm Street and 955 Morro Street, city of San Luis Obispo, San Luis Obispo County, California 93401. The property is on the southwest corner of Palm Street and Morro Street, extending through to Monterey Street. The subject site contains 1.34-acres. As of April 3, 2008, the date of inspection, the site was improved with a 6,000 square foot office building and a metered surface parking lot. At present, the building is 100 percent owner occupied by the City of San Luis Obispo. The improvements appear to be in good condition and functional for their current occupancies. However, properties with similar improvements have been purchased in order to build higher density mixed-use projects. The existing improvements reflect an FAR of 0.30:1, while the subject's zoning designation allows development up to a 3.00:1 FAR. Furthermore, the subject is currently part of a proposed mixed-use development that will have a 3.36:1 FAR. The proposed development was not fully entitled as of the date of value. The purpose of this appraisal assignment is to estimate the market value "As-Is" of the subject property. Based on the analysis contained in the following report, the market value of the subject is concluded as follows: ©2008 C8 Richard Ellis, Inc. Z- 52 Claire Clark J ATTACHMENT` April 11, 2008 Page 2 MARKET VALUE CONCLUSION Appraisal Premise Inferesf Appraised Date of Value Value Conclusion As Is Fee Simple Estate April 3,2008 $8,800,000 Compiled by CBRE Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of, and inseparable from, this letter. The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute, the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and Title A Regulations. The report is for the sole use of the client; however, client may provide only complete, final copies of the appraisal report in its entirety (but not component parts) to third parties who shall review such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow an appraisal report prepared by CBRE or portions of such report, to become part of or be referenced in any public offering, the granting of such consent will be at our sole discretion and, if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter, in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors in its entirety (but not component parts) without the need to provide us with an Indemnification Agreement and/or Non-Reliance letter. CBRE hereby expressly granted to Client the right to copy this report and distribute it to other parties in the transaction for which this report has been prepared, including employees of Client, other lenders in the transaction, and the borrower, if any. It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CBRE can be of further service, please contact US. CBRE CB RICHARD ELLIS ©2008 CB Richard Ellis, Inc. C - Claire Clark ATTACHMENT IE I ACHMENTIE April 11, 2008 Page 3 Respectfully submitted, CBRE -VALUATION &ADVISORY SERVICES l� Richard Jue, MAI First Vice President California State Certification No. AGO03182 Phone: (213)-613-3217 Fax: (213)-613-3131 Email: riueCcDcbre.com CBRE CB RICHARD ELLIS ©2008 CB Richard Ellis, Inc. 2- 5y ATTACHMENT 5 SLO LAND CERTIFICATION OF THE APPRAISAL CERTIFICATION OF THE APPRAISAL We certify to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, impartial and unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in or bias with respect to the property that is the subject of this report and have no personal interest in or bias with respect to the parties involved with this assignment. 4. Our engagement in this assignment was not contingent upon developing or reporting predetermined results. 5. Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. b. This appraisal assignment was not based upon a requested minimum valuation, a specific valuation, or the approval of a loan. 7. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice, as well as the requirements of the State of California. 8. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice. 9. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 10.As of the dote of this report, Richard Jue, MAI has completed the continuing education program of the Appraisal Institute. 1 1. Richard Jue, MAI has made a personal inspection of the property that is the subject of this report. 12. Kelly Bower provided significant real property appraisal assistance to the person signing this report. 13.Valuation & Advisory Services operates as an independent economic entity within CBRE. Although employees of other CBRE divisions may be contacted as a part of our routine market research investigations, absolute client confidentiality and privacy are maintained at all times with regard to this assignment without conflict of interest. Richard Jue,MAI First Vice President California State Certification No.AGO03182 i CBRE CB RICHARD ELLIS ©2008 CS Richard Ellis, Inc. Z 'S� \1' AT`[ K SLO LAND SUBJECT PHOTOGRAPHS SUBJECT PHOTOGRAPHS Riu �3 ,tel'./�' r � y /�� � .�y��i#' ✓�� 7,✓�,✓ � � 3 r/ %r, % �'�t ,sem'/rr /✓'' �'✓��,'- ��Nyj.'�'(� /�`�/� z�✓,."' ,w.,�r�.✓� f�iiiriy, `3 h, �� / ii je'!,/ „l.. r TYPICAL VIES/ OF THE SUBJECT OFFICE BUILDING ���/�!��.;rr�;(/�%��,!M�,✓f" `ter?,cam ,;y;',/%,si%�' .".������; �� r�/ ..rte yg�%7��,����3/�.=�✓�s����sr. rte'/�f���s ;a; � I a TYPICAL VIEW OF THE SUBJECT PARKING LOT ii ©2008 CB Richard Ellis, Inc. 5 Mf�%'HM Kf SLO LAND SUBJECT PHOTOGRAPHS t MEN NINE Mi 10 a / 3 VIEW OF THE OFFICE BUILDING INTERIOR f Mg WIN III ?• axe a f .: r✓ v Rir I r' / -:vimn VIEW OF MONTEREY STREET ©2008 CB Richard Ellis, Inc. ;'i-,A o !�' 'HML 'T, SLO LAND SUBJECT PHOTOGRAPHS / 4 I, V / r✓ ,�,s' �'3��" f o�7�r y�r%�/3,/��/Ny`s'/'�r„� a/`� / F '�N)1 / ��,/ ���/ n �y��y/.�"js`,rcy'r�/l�r����r%/l �•ac„/fir" �S h �, ' /,� //��"r�;"" n':.�"sy.` ��•�����.�": �,'�/i�i'�� �sr�//"6",d%fir-/ '' y��j�� il�l�; "sem� � "�` ,�"• "",� ����/ � //��i///��� �,p / G 3 VIEW OF MORRO STREET iv ©2008 CB Richard Ellis, Inc. '� N A C H M SLO LAND SUMMARY OF SALIENT FACTS SUMMARY OF SALIENT FACTS Property Name City of San Luis Obispo Land Parcel Location 877 Palm Street and 955 Morro Street,San Luis Obispo,San Luis Obispo County,California 93401 Assessor's Parcel Number 002-416-029 002-416-034 Highest and Best Use As Vacant Commercial As Improved Redevelopment Property Rights Appraised Fee Simple Estate Land Area 1.34 AC 58,370 SF Improvements Property Type Office Number of Buildings 1 Number of Stories 1 Gross Building Area 6,000 SF Net Rentable Area 6,000 SF Year Built 1990 Condition Good Estimated Exposure Time 6 Months VALUATION Total Per SF Land Value $8,800,000 $150.76 CONCLUDED MARKET VALUE Appraisal Premise Interest Appraised Date of Value Value As Is Fee Simple Estate April 3,2008 $8,800,000 Compiled by CBRE EXTRAORDINARY ASSUMPTIONS & HYPOTHETICAL CONDITIONS None noted. V 2008 CB Richard Ellis, Inc. C ATTACHMENTS SLO LAND TABLE OF CONTENTS TABLE OF CONTENTS CERTIFICATION OF THE APPRAISAL.............................................................................................i SUBJECT PHOTOGRAPHS..........................................................................................................ii SUMMARY OF SALIENT FACTS....................................................................................................v TABLEOF CONTENTS...............................................................................................................vi INTRODUCTION ...................................................................................................................... 1 AREAANALYSIS......................................................................................................................... 4 NEIGHBORHOOD ANALYSIS .................................................................................................. 12 MARKETANALYSIS .................................................................................................................. 17 SITEANALYSIS ........................................................................................................................ 21 IMPROVEMENTSANALYSIS...................................................................................................... 23 HIGHESTAND BEST USE......................................................................................................... 25 APPRAISALMETHODOLOGY.................................................................. ............................... 27 LANDVALUE........................................................................................................................... 28 RECONCILIATIONOF VALUE.................................................................................................. 34 ASSUMPTIONS AND LIMITING CONDITIONS .......................................................................... 35 ADDENDA A Glossary of Terms B Land Sale Data Sheets C Operating Data D Legal Description E Required Client Information F Qualifications vi ©2008 CS Richard Ellis, Inc. 2��� ATTACHMENTS SLO LAND INTRODUCTION INTRODUCTION Property Identification: City of San Luis Obispo Land Parcel Location: 877 Palm Street and 955 Morro Street, San Luis Obispo, California Assessor's Parcel Number. 002-416-029 002-416-034 Property History: Current Owner: City of San Luis Obispo Current Asking Price: Not being marketed Previous Sale Date: Unknown Previous Sale Price: Unknown Other Sales- Past 3 Years: None Property Rights Appraised: Fee Simple Estate Date of Value: April 3, 2008 Date of Inspection: April 3, 2008 Date of Report: April 11, 2008 Intended Use & User of Report: To aid the City of San Luis Obispo in internal decisions Special Appraisal Instructions: None Exposure Time Information: Range Average National Investor Survey: 3-12 Months 5.3 Months Estimated Exposure Time: 6 Months Estimated Marketing Time: 6 Months PURPOSE OF THE APPRAISAL The purpose of this appraisal is to estimate the market value of the subject property. The current economic definition of market value agreed upon by agencies that regulate federal financial institutions in the U.S. (and used herein) is as follows: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1 ©2008 CB Richard Ellis, Inc. Z: .' ATTACHMENTS SLO LAND INTRODUCTION 1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their own best interests; 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. t TERMS AND DEFINITIONS The Glossary of Terms in the addenda provides definitions for additional terms that are, and may be used in this appraisal. SCOPE OF WORK The scope of the assignment relates to the extent and manner in which research is conducted, data is gathered and analysis is applied, all based upon the following problem-identifying factors stated elsewhere in this report: • Client • Intended use • Intended user • Type of opinion • Effective date of opinion • Relevant characteristics about the subject • Assignment conditions This appraisal of the subject has been presented in the form of a Summary Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the USPAP. That is, this report incorporates a summary of all information significant to the solution of the appraisal problem. It also includes summary descriptions of the subject and the market for the subject type Extent to Which the Property is Identified CBRE collected the relevant information about the subject from the owner (or representatives), public records and through an inspection of the subject. The property was legally identified through its postal address, assessor's records, legal description and title report. t Office of Comptroller of the Currency (OCC), 12 CFR Part 34, Subpart C — Appraisals, 34.42 (g); Office of Thrift Supervision (OTS), 12 CFR 564.2 (g);Appraisal Institute,The Dictionary of Real Estate Appraisal, 4'h ed. (Chicago:Appraisal Institute, 2002), 177-178. This is also compatible with the RTC, FDIC, FRS and NCUA definitions of market value as well as the example referenced in the Uniform Standards of Professional Appraisal Practice(USPAP). 2 ©2008 CB Richard Ellis, Inc. Z`! 2 ATTACHMENTS SLO LAND INTRODUCTION Extent to Which the Property is Inspected CBRE inspected both the interior and exterior of the subject, as well as its surrounding environs on the effective date of appraisal. Type and Extent of the Data Researched CBRE reviewed the micro and/or macro market environments with respect to physical and economic factors relevant to the valuation process. This process included interviews with regional and/or local market participants, available published data, and other various resources. CBRE also conducted regional and/or local research with respect to applicable tax data, zoning requirements, flood zone status, demographics, and comparable listing, sale and rental information. Type and Extent of Analysis Applied CBRE analyzed the data gathered through the use of appropriate and accepted appraisal methodology to arrive at a probable value indication via each applicable approach to value. Approaches to value used include Sales Comparison Approach. The steps required to complete the approach is discussed in the methodology section. CBRE then correlated and reconciled the results into a reasonable and defensible value conclusion, as defined herein. A reasonable exposure time and marketing time associated with the value estimate presented has also been concluded. This appraisal of the subject has been presented in the form of a Summary Report, which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the USPAP. That is, this report incorporates a summary of all information significant to the solution of the appraisal problem. It also includes summary descriptions of the subject and the market for the subject type SPECIAL APPRAISAL INSTRUCTIONS There have been no special appraisal instructions for this assignment. 3 ©2008 CB Richard Ellis, Inc. Z ATTACHMENT S SLO LAND AREA ANALYSIS AREA ANALYSIS •Corea ,I�VADA . ,ntwaeR. roa `'S ;. mrn nawiw.c^, 1\l,' —rfr:�; J ,o . , `p' Dewnv66ev _ , 4 `:i 1 bel Vv C(1, Sanaed U 1 T E`D B.. A T E S ® i r — �� C•A 4'I F 0 R I AN I '7; v :r• SOW* t �r�♦ v 11) i I NepMelFpea 1. t"1 1'955 MOao 5I ,4 f S.xWa .�9�a1 4VabC0a '• •'/ rixo p Y "'. `Np60al NonuM LI °e��n� -7 /' Euwertls AFB ,Sm Rnleel ��. LonPtl'ea ^.�p� �lrxrR� t �., Wtkne98' \ N61'grnl i� I~a 10 :. IM1 S� fy0•.t.. �•• CWft - VON! •-118' %--�}.J � T cam S ^ .-- GharM ISM*NP, A a C 17 1 C O C a a a Ta6mee® al ' Long m 6u.h C.wliru (� 61md `wJ 1�DDyddkf$2k0m crasonC YanN r.5�-Ti'•IUI.d hlsre "E- The regional analysis addresses post and probable future trends which may affect the economic structure of the real estate market. It focuses on discernible social, economic, governmental, and environmental forces in the region. The subject location within the region is shown on the map exhibit. SAN LUIS OBISPO COUNTY Social Forces Demographic statistics for San Luis Obispo County are summarized in the following table. 4 ©2008 CB Richard Ellis, Inc. Z-�� ATTACHMENT 5 SLO LAND AREA ANALYSIS SAN LUIS OBISPO DEMOGRAPHIC REPORT San Luis Obispo County Population 2012 Population 273,605 2007 Population 260,811 2000 Population 246,681 1990 Population 216,986 Growth 2007 - 2012 4.91% Growth 2000 - 2007 5.73% Growth 1990 - 2000 13.69% Households 2012 Households 107,100 2007 Households 100,744 2000 Households 92,739 1990 Households 80,229 Growth 2007 - 2012 6.31% Growth 2000 - 2007 8.63% Growth 1990 - 2000 15.59% 2007 Median Household Income $51,683 2007 Estimated Average Household Income $68,531 2007 Estimated Per Capita Income $27,490 2007 Median Value of all Owner-Occ HUs $503,188 Age 25+ College Graduates - 2007 42,507 Age 25+ Percent College Graduates- 2007 24.6% Source: CBRE As shown in the table population growth in San Luis Obispo County has been moderate since 2000 and is projected to remain moderate over the next five years. Education The California Polytechnic University in San Luis Obispo is the primary university in the region. This university is an accredited four-year college with a Fall 2007 student enrollment of 19,777 students, or 1,312 more students than the Fall 2006 academic year. FTE enrollment has exceeded 16,000 for the past six academic years (prior to this time period, FTE enrollment had never exceeded 15,500 students). The local community college is Cuesto College, which has one campus located along State Highway 1, west of San Luis Obispo, and a second campus just north of State Highway 46 in Paso Robles. 5 C 2008 CB Richard Ellis, Inc. 2- �` ATTACHMENT 5 SLO LAND AREA ANALYSIS ECONOMIC FORCES Historical Economic Trends A summary of 2007 statistics, based on information contained in the Economic Outlook — San Luis Obispo County — 2008 published by the UCSB Economic Outlook Forecast Project in November 2007, is presented in the following paragraphs. • The projected 2007 real growth rate will be less than 1.0 percent, or "the second worst year of the decade." • The weak economic growth is partly political as slow growth governmental policies limit job growth as "many of the County's jobs are in industries that are unable to grow without population growth, and this is pretty typical of a non-tradable service economy. For example, over 20 percent of San Luis Obispo County jobs are in the public sector. This is a double edged sword. It provides a bit of a buffer when the economy slows. At the some time, given the fiscal realities of California, it is not likely to contribute to energetic economic growth." • The Gross County Product in San Luis Obispo increased on estimated 0.9 percent in 2007 (constant 2000 dollars), well below the rates of 2.6, 3.2, and 2.8 percent over the prior three years. • Tourism is recovering with an estimated $203.1 M in Revenue from Booked Rooms in 2007, a 9.0 percent growth rate from the $186.4M in 2006. Occupancy levels have remained relatively constant (some new supply has been added) and has ranged from 62.6 to 63.9 percent over the past five years. • The unemployment rate was estimated at 4.2 percent in 2007, slightly higher than the 4.0 percent 2006 figure. The unemployment rate has been below 5.0 percent for over a decade. • After ten straight years in price appreciation in the median home price ($179,300 in 1997 to $580,800 in 2006),the estimated 2007 median home price declined to $563,200. In order to provide additional information on historical economic trends, we reviewed total labor force, total employment, and the unemployment rate for Son Luis Obispo County from 1990 through October 2007. This information, which is presented in the following table, is based on data provided by the State of California Employment Development Department. 6 ©2008 C8 Richard Ellis, Inc. 2-�� ATTACHMENTS SLO LAND AREAANALYSIS 1990-2006 EMPLOYMENT BASE Labor Unemployment Year Force Employment Rate 1990 99,800 95,200 4.6% 1991 96,100 90,300 6.1% 1992 99,600 92,100 7.5% 1993 101,300 93,000 8.2% 1994 99,800 92,600 7.2% 1995 100,800 94,200 6.6% 1996 102,200 96,400 5.7% 1997 105,300 100,300 4.8% 1998 108,200 103,700 4.2% 1999 111,200 107,600 3.3% 2000 122,800 117,900 4.0% 2001 126,300 121,400 3.9% 2002 129,000 123,200 4.5% 2003 129,000 123,100 4.6% 2004 131,000 125,300 4.4% 2005 131,900 126,500 4.1% 2006 133,900 128,600 4.0% Oct-07 135,600 129,700 4.4% Source:State of California EDD As shown in the preceding table, although the labor force has grown on an annual basis since 1994, the unemployment rate has generally stabilized within a range of 4.Oto 4.6 percent over the past five years. Total employment has increased by an average of 1,320 jobs over the past five years. Economic Forecast In addition to analyzing historical trends, the Economic Outlook - San Luis Obispo County - 2008 also includes projections about future economic/demographic activity. A summary of their projections is presented in the following paragraphs. • "San Luis Obispo County's economy is probably going to improve a bit in 2008. The weak dollar will be a significant source of that growth. We expect to see solid increases in its tourism from foreign sources ... it will also benefit from increased domestic tourism, as United States citizens will reduce overseas vacations due to rising costs." Overall, the forecast projects a 2.1 percent real 2008 output growth. • The employment growth forecast is 0.9 percent for 2008, well above the 0.1 percent growth rate in 2007. • Sectors which should odd significant jobs include Retail Trade and Leisure/Hospitality. Agricultural Production and Construction should fall in 2008, but at a slower rate than 2007. • The "weak dollar will also make Son Luis Obispo County wine more affordable relative to foreign wines. This will increase the demand for County wines. The wine industry will also get a boost from new processing and storage facilities in Paso Robles." 7 ©2008 CB Richard Ellis, Inc. 2-U7 - ATTACHMENTS SLO LAND AREA ANALYSIS • Retail sales are forecast to grow between 2.1 and 3.1 percent in 2000 dollars. Total Revenue from Booked Rooms is projected to increase from $212.8M in 2008 to $260.6M in 2012. • The housing market is expected to remain soft with home prices effectively remaining flat in 2008, followed by moderate increases. Total home sales will increase moderately from 2,205 units in 2008 to 2,981 units in 2012. Construction will be limited to less than 1,600 homes on an annual basis for the next five years. The data and conclusions in the 2008 Economic Outlook indicate that the regional economy should experience moderate-paced growth during the next five years. Employment By Sector Provided in the following table is a summary of the Job Growth by Sector as published in the Economic Outlook 2008. SAN LUIS OBISPO COUNTYEMPLOYMENT 2006/07 2006/07 Percent Percent Total Percent Sector 2006 of Total 2007 of Total Increase Increase Agriculture 4,267 4.0% 4,050 3.8% -217 -5.1% Mining and Construction 8,092 7.5% 7,778 7.2% -314 -3.9% Durable Manufacturing 3,358 3.1% 3,297 3.1% -61 -1.8% Non-Durable Manufacturing 3,025 2.8% 3,054 2.8% 29 1.0% Transportation,Warehouse,&Utilities 3,783 3.5% 3,866 3.6% 83 2.2% Information Services 1,625 1.5% 1,709 1.6% 84 5.2% Wholesale Trade 2,583 2.4% 2,642 2.5% 59 2.3% Retail Trade 14,300 13.3% 14,186 13.2% .114 -0.8% Finance,Insurance,Real Estate 4,900 4.6% 4,824 4.5% -76 -1.6% Other Services 39,501 36.7% 40,010 37.2% 509 1.3% Subtotal Private Sector .85,434 79.4% 85,416 79.3% -18 0.0% Public Sector 22,183 20.6% 22,253 20.70/a 70 0.3% TOTAL 107,617 100.0% 107,669 100.0% 52 0.0% Source:Economic Outlook,2008 UCSS As shown in the preceding table, employment growth over the past year is 52 jobs. The "Other Service" sector generated the highest number of jobs at 509. Tourism and Health Care dominate this sector. Major Employers Presented in the following table is a summary of the major employers (400 or more employees) in San Luis Obispo County. 8 ©2008 CS Richard Ellis, Inc. Zig ATTACHMENT5 SLO LAND AREA ANALYSIS SAN LUIS OBISPO COUNTY MAJOR EMPLOYERS No. Company Industry Code Jobs 1 Cal Poly San Luis Obispo Education 4,617 2 County of San Luis Obispo Government 2,598 3 Atascadero State Hospital Prison Facility 2,166 4 California Men's Colony Corrections 1,875 5 Pacific Gas& Electric Company Public Utility 1,800 6 Cal Poly Foundation Fund Raising 1,568 7 Cuesta College Education 1,276 8 Lucia Mar Unified School District Education 1,116 9 San Luis Coastal Unified School District Education 821 10 Paso Robles Public Schools Education 821 11 Albertson's Stores Grocery Store 450 12 Sierra Vista Regional Medical Center Medical 726 13 United Staffing Administrative support 650 14 Von's Grocery Store 640 15 Atascadero Unified School District Education 624 16 City of San Luis Obispo Government 567 17 Twin Cities Community Hospital Health Care 550 18 French Hospital Health Care 492 19 Rabobank Banking 480 20 County Superintendent of School Education 444 Source: Economic Outlook 2008 UCSB Agriculture Production Agriculture is an important segment of the San Luis Obispo regional economy. The following table summarizes the crop production for Son Luis Obispo County. SAN LUIS OBISPO COUNTY FARM PRODUCTION 5-year Dollar value of Crops Produced Percent Product 2002 2003 2004 2005 2006 Change Animal $46,161-,000 $49,181,000 $59,620,000 $58,380,000 $64,244,000 39.2% Field Crops $15,595,000 $15,161,500 $15,342,100 $18,055,000 $17,477,000 12.1% Nursery and Seed $97,377,000 $91,476,000 $101,156,000 $100,697,000 $108,066,000 11.0% Fruit and Nut $167,555,000 $189,144,000 $195,712,000 $243,604,000 $236,491,000 41.1% Vegetable $156,687,000 $168,423,000 $167,606,000 $172,896,000 $195,269,000 24.6% Total $483,375,000 $513,385,500 $539,436,100 $593,632,000 $621,547,000 28.6% Source:San Luis Obispo County Crop Reports As shown in the prior table, the total dollar volume of agricultural crops in San Luis Obispo County has increased by 28.6 percent over the past five years. Total volume increased by 4.7 percent during the past year. The highest percentage increase over the five-year period is in the Animal and Fruit and 9 ©2008 C8 Richard Ellis, Inc. 2_44-9 C ATTACHMENT 5 SLO LAND AREA ANALYSIS Nut crop sectors. The fruit and nut crops increase is primarily due to the increase in grape/wine production. GOVERNMENTAL FORCES Jurisdiction The main governmental force impacting San Luis Obispo County is its reputation as a "slow growth" community. Specifically, the area has actively reduced growth in order to preserve the agricultural component of the economy. A slow growth measure which has restricted home construction on a countywide basis (for unincorporated portions of the county) has been in-place since the early 1990s. Real Estate Taxes In 1978, the residents of California voiced their opposition to increasing taxes through the legislative process. This major consumer "tax revolt" culminated in the passage.of Proposition 13, also known as the Jarvis-Gann Initiative, which was later made into law under the provisions of Article XIIIA of the California Tax and Revenue Code. In essence, Proposition 13 determined a maximum tax rate of one percent of market value plus an increment for pre-existing bonded indebtedness. The maximum allowable increase on property assessments, and hence taxes, was set at two percent per year, except when a property sells or undergoes major construction. ENVIRONMENTAL FORCES Transportation San Luis Obispo County is considered to have restrictive access. There is only one freeway, EI Camino Real (U.S. Highway 101), that traverses the entire length of the county. While this freeway is the primary coastal freeway in the State of California, it is not the primary north/south Highway through the state. The area is also serviced by the Pacific Coast Highway (State Highway 1), which traverses the coastline of California. This arterial is primarily used for recreational purposes, as it is a two-lane, winding arterial characterized by slow traffic in the northern sections of the county. There are four state highways (Highway Nos. 166, 58, 41, and 46) that provide east/west access. All four are generally two-lane highways. State Highway 166 runs in an easterly direction from U.S. Highway 101 in Santa Maria to the Golden State Freeway (Interstate 5) in the San Joaquin Valley. State Highway 58 runs in on east/west direction from U.S. Highway 101 just north of San Luis Obispo to Interstate 5 in the city of Buttonwillow. State Highway 41 runs in a southwest to northeast direction from Morro Bay to Interstate 5 in Kettlemon City (this highway continues to the northeast to provide direct access to Fresno and Yosemite National Park). Finally, State Highway 46 runs in an east/west direction from the small town of Harmony and the Pacific Coast Highway to Interstate 5 in Lost Hills. 10 ©2008 CS Richard Ellis, Inc. f 2v ATTACHMENT SLO LAND AREA ANALYSIS This highway also borders Paso Robles to the north. Overall, east/west access in the county is average. San Luis Obispo County also suffers from a lack of air transportation. Specifically, there are no large- scale municipal airports that service the region. The primary airport serving San Luis Obispo County is the Los Angeles International Airport. This airport is located approximately 195 miles southeast of the city of Son Luis Obispo. CONCLUSION San Luis Obispo County is expected to gain new jobs and the projected economic growth should translate to stability and/or growth in the local real estate markets. The outlook for the area is for stable performance with moderate improvement over the next several years. 11 ©2008 C8 Richard Ellis, Inc. Z_�� ATTACHMENTS SLO LAND NEIGHBORHOOD ANALYSIS NEIGHBORHOOD ANALYSIS Cwo Son Obd IVallmtl UJ) 44 I Ali C uuf l 4 Al�a��b Flrgi'darNlDr!. 1m � ] t\ TC9la A ^� 1 �'r•�Se Ukdd{pgC, 'A93�01 _ Ilk ., I' LL �/`�� t c.yun .M1�. VMf'�n�, .rnt ♦ �, i LakeR;k 4 'i�! '.. �. Woo IP'Aa.,( .:tl o f /1 o� 4irye `Vle.®�. � ,ti..� \ �r+ Tank"F iirti 17d ��f �q.,f���'�<p"� •moi �rZ 'Buck`laay-R ] 4 Co - ht P003 MiCfUSofl Co anNor As'sv Iia- N hls resenetl-"— 1. i 1 ) ..' .. i L' J Jam°*. LOCATION The city of San Luis Obispo is located in the southwest central portion of the county, approximately 10 miles east of the Pacific Ocean and 25 miles north of the San Luis Obispo - Santa Barbara County line. The city was incorporated in 1856 and encompasses approximately 10.5 square miles. It has a generally hilly topography, with foothills near the coastal mountain range to the west and the Santa Lucia Range to the east. POPULATION TRENDS Presented below are historic population figures, as well as current estimates for the city of San Luis Obispo: 12 ©2008 CB Richard Ellis, Inc. 1- 7z ATTACHMENT 5 SLO LAND NEIGHBORHOOD ANALYSIS POPULATION STATISTICS Description Total 2012 State Estimate 44,732 2007 State Estimate 44,127 2000 State Estimate 44,174 Annual Growth, 2000-2007 0.0% Annual Growth, 1990-2000 0.3% Source: California State Department of Finance As indicated in the preceding chart, San Luis Obispo has been characterized by slow growth over the past decade. The slow-paced growth is predominantly due to the political climate, which is effectively anti-growth. EMPLOYMENT The top 10 employers in the city include the following: TOP 10 EMPLOYERS CITY OF SAN LUIS OBISPO Name of Company Employment Industry Cal Poly San Luis Obispo 2,677 Education County of San Luis Obispo 2,546 Government California Men's Colony 1,800 Corrections Cal Poly Foundation 1,400 Fundraising San Luis Coastal Unified School District 821 Education Cuesto College 830 Education Sierra Vista Regional Medical Center 735 Medical City of San Luis Obispo 557 Government French Hospital 492 Health Care County Superintendent of Schools 430 Public Admin Source: Economic Outlook 2007 UCSB LAND USE The most common land use in the city is residential housing, ranging from apartment buildings to detached single-family homes on large parcels. Industrial uses are primarily limited to the south side of town, between Industrial Way and Orcutt Street along Broad Street. Commercial uses include suburban retail/office development along the perimeter of the city and a historic downtown corridor. The historic downtown retail area has benefited from major investment in public landscaping, walkways, etc. along an existing creek, tying it to the older retail buildings and a historic Spanish mission. The result has been the development of a strong retail/entertainment district, catering to local residents, college students, and tourists. 13 ©2008 CS Richard Ellis, Inc. 2 -73 ATTACHMENT SLO LAND NEIGHBORHOOD ANALYSIS One of the most significant public sector land uses is the California Polytechnic State University (Cal Poly), an accredited four-year college with an enrollment of approximately 18,150 students and 1,182 faculty members. Cal Poly is the second largest land-holding university in California, second only to UC Berkeley, and one of the largest land-holding universities in the nation. Cal Poly is located in the north central portion of the city on a 6,051-acre campus. It is on the east side of California Boulevard, north of the 101 Freeway and Foothill Boulevard. The University is one of the 23 campuses of the Califomia State University, one of the largest systems of higher education in the world. It has a very significant impact on the local economy due to the number of students and employment associated with the institution. Enrollment had been growing until a decline in 2004. There will be a series of new construction projects, which will add instructional capacity, as well as on- campus student housing to accommodate an increase of about 2,400 new students over the next decade. This should result in a steady increase in the overall economic impact that Cal Poly has on the local area. GROWTH PATTERNS The City was developed around Mission San Luis Obispo; which is located in the downtown. Growth patterns have occurred primarily along primary commercial thoroughfares such as Higuera Street, Broad Street and Santa Rosa Street. The major retail development in the neighborhood is the Madonna Plaza and Central Coast Mall, located at Highway 101 and Madonna Road. Across from these retail centers is Madonna Inn, a historic hotel. GOVERNMENT AND GOVERNMENT SERVICES San Luis Obispo is an incorporated city with an elected city council with an appointed chief administrative officer. The city is also the location of the county seat for San Luis Obispo County. Public utilities are provided by the Gas Company, Pacific and Electric, Pacific Bell, and the San Luis Garbage Company. TRANSPORTATION AND ACCESS Primary access is by the EI Camino Real Freeway (U.S. Highway 101), which extends in a north/south direction through the city. This is the major freeway serving the Central Coast. It provides direct access to Southern California to the south and the San Francisco Bay area to the north. The area is also served by the Pacific Coast Highway (Highway 1), which provides access to the Pacific Ocean, west of the city. The existing surface street system within the city of San Luis Obispo is somewhat erratic, reflecting problems due to topography, railroad lines, and U.S. Highway 101. There are few through street running in a consistent direction for any distance. The majority of the streets in the central portion of the city either run in a northwest to southeast direction or a southwest to northeast direction, reflecting 14 0 2008 CB Richard Ellis, Inc. C ATTACHMENT' SLO LAND NEIGHBORHOOD ANALYSIS the local topography. U.S. Highway 101 provides through access in the center of the town, although it runs somewhat diagonal to most streets. Interchanges are provided at Madonna Road, Marsh Street, Broad Street, Santa Rosa Street, California Boulevard, Grand Street, and Monterey Street. San Luis Obispo was historically a railroad center. As a result it benefits from AMTRAK passenger service, but street access suffers from extensive rail lines through the city. The San Luis Obispo County Airport, on the south side of the city, provides limited air service to other cities in the state. IMMEDIATE SURROUNDINGS North-City offices and parking garages. South-Parking lot and restaurants. East-Monterey Street retail. West-Office Buildings. The subject is located in an active area of downtown San Luis Obispo. The immediate area is filled with retail, restaurants, and office buildings. The area is well maintained. DEMOGRAPHICS Selected neighborhood demographics are shown in the following table: 15 ©2008 CB Richard Ellis, Inc. / 2 -7 - ATTACHMENTS SLO LAND NEIGHBORHOOD ANALYSIS SELECTED NEIGHBORHOOD DEMOGRAPHICS 955 Morro Street Radius 1.0 Radius 3.0 Radius 5.0 San Luis Obispo, California Mile Mile Mile Population 2012 Population 15,864 47,127 58,266 2007 Population 15,972 46,558 57,372 2000 Population 16,441 46,698 57,106 1990 Population 16,246 45,000 54,092 Annual Growth 2007 - 2012 -0.14% 0.24% 0.31% Annual Growth 2000 - 2007 -0.41% -0.04% 0.07% Annual Growth 1990 - 2000 0.12% 0.37% 0.54% Households 2012 Households 7,692 19,984 21,228 2007 Households 7,519 19,268 20,442 2000 Households 7,411 18,623 19,684 1990 Households 7,042 17,096 17,880 Annual Growth 2007 - 2012 0.46% 0.73% 0.76% Annual Growth 2000 - 2007 0.21% 0.49% 0.54% Annual Growth 1990 - 2000 0.51% 0.86% 0.97% Income 2007 Median HH Inc $32,504 $37,529 $39,289 2007 Estimated Average Household Income $48,231 $57,012 $59,725 2007 Estimated Per Capita Income $23,329 $24,486 $24,949 Age 25+ College Graduates - 2000 3,110 9,305 10,390 Age 25+ Percent College Graduates-2007 35.3% 36.3% 30.3% Source: CBRE CONCLUSION San Luis Obispo is an established small city, with an economy benefiting from a strong government and educational sectors, tourism, and a growing high tech industry. Politically, the region is characterized by slow-growth, which should result in stable market conditions. 16 C 2008 C8 Richard Ellis, Inc. - ATTACHMENTS SLO LAND MARKET ANALYSIS MARKET ANALYSIS The market analysis forms a basis for assessing market area boundaries, supply and demand factors, and indications of financial feasibility. According to the Institute of Real Estate Management (via Income/Expense Analysis: Office Buildings 2005), the following office property definitions may be applicable towards the subject property: General: Multi-tenant building (which includes buildings with owner-occupied space if there are other tenants in the building). Single-Purpose: Single tenant in a non-owner-occupied building (Sale leaseback type situation or leasing entire building). Medical: Building with at least 75% of its space dedicated to doctors and/or medical related offices. Includes owner-occupied and single tenants buildings if the owner/tenant is medical related. Financial: Building with at least 75% of its space dedicated to financial offices (banking, insurance, investment firm, etc.). Includes owner occupied and single tenant buildings if the owner/tenant is financial related. Government. Building owned by the government and operated by either public or private sector. Corporate Facility. Owner occupied facility (owner must occupy at least 75% of the square footage). SAN LUIS OBISPO COUNTY MARKET Region-wide statistics are not published on a consistent basis by.any recognized source. Based on information contained in the 2008 Economic Outlook — San Luis Obispo County, published by the UCSB Economic Outlook Forecast Project in October 2007, the Central Coast Investment markets are softening and capitalization rates are showing signs of rising. Cap rates are projected to increase through 2008, reversing the downward trend the last several years. Retail Market Analysis A new rental paradigm is emerging. Seismically retrofitted and new buildings are achieving market- high rents evincing a large spread between existing rents (under $2.00/square foot/month/NNN) and rents for the best locations. New asking rental rates can be $4.25/square foot/month/NNN, which is about double the former rate. Investors are continuing to pay higher prices for downtown properties ($400 to $700 per square foot), which also translates into higher rents for tenants. However, there is evidence of some price reductions as well. Downtown land values are approximately $250 per square foot. This would 17 ©2008 C8 Richard Ellis, Inc. ,2 -77 ATTACHMENTS SLO LAND MARKET ANALYSIS include properties with structures, which are destined for demolition and replacement with a denser development. Ultimately, the net result of costs associated with mandated earthquake retrofits of downtown San Luis Obispo City's un-reinforced buildings is raising rents. The more affordable space is invariably outside the downtown core. There are a limited number of "affordable" retail spaces in San Luis Obispo City, which means that some local retailers will have to move their operations out of the city or simply cease doing business. Given that rents are higher than local tenants have typically been paying, we are seeing a trend of more national retailers, not only in the newer centers away from downtown but downtown as well, with the Apple Store in the Copeland's Project and Peet's Coffee and Tea opening adjacent to the Court Street Project. A very stable retail sector continues to demonstrate low vacancy rates (1.8 percent at this reporting). Presently the retail market base is approximately 3,842,000 square feet. Most visible in the non downtown markets are the recent tenants at the Irish Hills Plaza next to Home Depot and Costco. Tenants include Circuit City, Pet Smart, Linens 'n Things, Old Navy, Bev More, Office Depot and Panda Express. Pad building rents at Irish Hills Plaza are generating approximately $42 to $45 per square foot for annual NNN rent. Office Market Analysis High construction costs are still the chief complaint from developers. This being said there are several projects which have been completed this year and some presently under construction. The typical asking rent is between $1.50 to $2.00/square foot/month/NNN. The office inventory base is approximately 2,624,000 square feet. Westpoc's medical office project at the Airport is still on hold. At the south west corner of Tank Farm Road and Broad Street, NKT Commercial's project of approximately 77,000 square feet is undergoing final touches with tenant improvements. The following tenants have announced occupancy: American Principle Bank, Chevron, San Luis Eye Associates, Mind Body and Caldwell Banker Vista Associates, which is moving from downtown—this is significant in that it further endorses this developing area as a business hub. Rents for this project are approximately $1.50/square foot/month/ NNN with a $30-$50/square foot tenant improvement (TI) allowance plus one year of free rent with a minimum 5 year term. The approximate 71,000 square foot mixed-use office/retail Airport Business Center on Broad Street is under construction. Frontage improvements are being made, building pads have been created and construction has started on the approximately 23,000 square foot building. Rental rates have not been established. The Tank Farm Commerce Park on Tank Farm Road is now the home to Idler's Appliance and the Regional Transportation Authority. Further 18 ©2008 C8 Richard Ellis, Inc. 2 -7 ATTACHMENTS SLO LAND MARKET ANALYSIS construction on the project includes 34,000 square feet along Tank Farm Road and 15,500 square feet along Suburban Road. Rental rates are approximately $1.35/square foot/month/NNN with the owner delivering a finished vanilla shell. Office vacancy rates are at 3.5 percent. Investment Market Analysis The Central Coast investment markets continue to soften as the number of transactions decreases compared with past years. Tax deferred driven transactions have been few as with the paucity of inquires as well. However, several have closed this year. Market sentiment has pressured capitalization rates to increase in 2008 following the upward trend that started nationally lost year. However, locally we are not seeing overwhelming evidence of this, especially given the dearth of investment transactions. There is no market ubiquitous Cap Rate being established, only an expanded range. Each transaction is a case-by-case basis, with buyers having their own basis for determining value. The upper end range results when projected rents are applied to vacancies in the market, not actual income. CONCLUSION There is a present concern in the real estate markets of San Luis Obispo County due to the uncertainty surrounding the debt crisis which started in August 2007. However, the commercial market continues to demonstrate strength and vacancy rates have remained consistently low. Central Coast commercial markets are stabile and demonstrate increased rents, while investment capitalization rates are increasing in 2008 following the upward tend in 2007. With respect to the subject property in particular, it is well located for a mixed use project in downtown San Luis Obispo. The site is conveniently located with respect to employment centers and major roadways, and the surrounding office and retail developments are experiencing average to above average levels of demand. Based upon our analysis, the subject property should enjoy good market acceptance. 19 ©2008 CB Richard Ellis, Inc. 7 ` 7� - ATTACHIMENT5 SLO LAND SITE ANALYSIS PLAT MAP TAX ARIA CODE NQ 2-416 Ar MORRO ST. r' 1 • Y . Sil b 0 I r � h '4'94. N.E.CAL IS p N A34- 0 0 $ 7 fly 2 JA loom /D I •lt' I 1 t � N it _ _ m __Y ABY__ NI M & F I�ti Jf'D/V O et 8j I y 30 i R J Z r Yet in A. W w� I Y4 An 24 J ! 1 Ji i ao �I 1335'J4'! 0 O�IO30s'--- __ rS.m OI I ¢ v 40 •' 4I I I 1 M I KK•ir).c CNORRO �'�• ST. BLOCK 14 CITY OF SAN LUIS OBISPO N=—ASSESSOn KOO( a LOT SAN LUIS ONSPO COUNTY NUMM &MOW W CIBCLIS CAUFORNIA 20 0 2008 CB Richard Ellis, Inc. 2-80 -- ATTACHMENTS SLO LAND SITE ANALYSIS SITE ANALYSIS The following chart summarizes the salient characteristics of the subject site. SITE SUMMARY AND ANALYSIS Physical Description Gross Site Area 1.34 Acres 58,370 Sq. Ft. Net Site Area 1.34 Acres 58,370 Sq. Ft. Primary Road Frontage Morro Street. 211 Feet Secondary Road Frontage Palm Street 209 Feet Additional Road Frontage Monterey Street 125 Feet Excess Land Area None Surplus Land Area None Shape Irregular Topography Level,with a slight downslope Zoning District C-D-H, Downtown Commercial Flood Map Panel No. &Date 0603100005C 1-Jan-87 Flood Zone C Adjacent Land Uses Commercial and residential uses Comparative Analysis Rating Access Good Visibility Good Functional Utility Good Traffic Volume Good Adequacy of Utilities Assumed adequate Landscaping Average Drainage Assumed adequate Utilities Provider Adeguacv Water City of Son Luis Obispo Yes Sewer City of San Luis Obispo Yes Other Yes No Unknown Detrimental Easements X Encroachments X Deed Restrictions X Reciprocal Parking Rights X Common Ingress/Egress X Source: Various sources compiled by CBRE 21 ©2008 CB Richard His, Inc. 2 -81 ATTACHMENT s SLO LAND SITE ANALYSIS COMMENTS The site slightly slopes in a southern direction down to Monterey Street from Palm Street. CONCLUSION The site is a 1.34-acre site in San Luis Obispo; medium to high-density uses are allowed. Sites with similar zoning have been purchased for redevelopment. Furthermore, the subject is part of a proposed redevelopment project called the Chinatown Project. Based on our inspection of the area, it is determined that the subject site is suitable for new higher density development. Overall, the subject property has an excellent location and the neighborhood is characterized by on-going redevelopment. 22 C 2008 CB Richard Ellis, Inc. Q 2'82 ATTR N NTS SLO LAND IMPROVEMENTS ANALYSIS IMPROVEMENTS ANALYSIS The following chart depicts a summary of the improvements. IMPROVEMENTS SUMMARY AND ANALYSIS Property Type Office (_Retail/Commercial) Number of Buildings 1 Number of Stories 1 Gross Building Area 6,000 SF Floor Area Ratio(FAR) 0.30 Parking Improvements Open Total Spawn: 10 Parking.Ratio(per 1,000 SF NRA) 1.67 Source: Various noun es compiled by CBRE 955 Morro Street (002-416-034) is improved with a 6,000 square foot office building. 877 Palm Street (002-416-029) is improved with a surface parking lot. The building is not encumbered by a lease but is currently being used by the city for"overflow" administrative offices. CONDITION ANALYSIS Our inspection of the property indicated no items of deferred maintenance. ZONING The following chart summarizes the subject's zoning requirements. ZONING SUMMARY Current Zoning C-D-H, Downtown Commercial Legally Conforming Yes Uses Permitted Offices or commercial uses serving neighborhoods and community needs Zoning Change Not likely Source: Planning &Zoning Dept. The subject site is zoned C-D-H. The C-D-H zone is a retail/commercial zone, which allows the development of commercial or residential/commercial mixed-use projects by right. The C-D-H zone permits a 3.0:1 FAR. Parcel No. 002-416-034 is improved with a 6,000 square foot office building. The land area for Parcel No. 002-416-034 is 20,038 square feet, which equates to a 0.30:1 FAR. This figure is for bellow the allowable building area. The following chart shows the allowable FAR according to "by-right" zoning: 23 ©2008 CB Richard Ellis, Inc. 2 -93 - ATTACHMrNTs SLO LAND IMPROVEMENTS ANALYSIS FAR Parcel Land SF Max FAR FAR 002-416-034 20,038 3:01 60,114 002-416-029 38,332 3:01 114,996 Total 58,370 175,110 Compiled by CBRE The subject is part of a proposed redevelopment project called the Chinatown Project. This project includes several other parcels that are not being valued in this appraisal assignment. The Chinatown Project will cover a 2.12-acre site (92,347 square feet) and the proposed improvements will contain 310,544 square feet, which equates to a 3.36:1 FAR. According to Shelly Stanwyck, the Chinatown Project is "sort of" entitled. The EIR for the project has been certified. However, the project has not received its design approvals and therefore cannot yet submit for a building permit. Since the project in not fully entitled we analyzed the subject according to "by-right" zoning. TAX ASSESSMENT DATA The subject is owned by the City of San Luis Obispo and is tax exempt. CONCLUSION The improvements are considered to be in good overall condition and are considered to be typical for the age and location in regard to improvement design and layout, as well as interior and exterior amenities. However, the subject is not developed to its potential. 24 ©2008 CB Richard Ellis, Inc. 2. -g� ATTACHMENT s SLO LAND HIGHEST AND BEST USE HIGHEST AND BEST USE In appraisal practice, the concept of highest and best use represents the premise upon which value is based. The four criteria the highest and best use must meet are: • legal permissibility; • physical possibility; • financial feasibility; and • maximum profitability. Highest and best use analysis involves assessing the subject both as if vacant and as improved. AS VACANT The property is zoned for commercial use and is of sufficient size to accommodate various types of development. The immediate area includes various commercial land uses. Considering the surrounding land uses, location attributes, legal restrictions and other factors, it is our opinion that a commercial oriented use would be reasonable and appropriate. Therefore, it is our opinion that the highest and best use would be for commercial-related use, time and circumstances warranting. ASIMPROVED The subject is improved with a parking lot and an office building. The current use is legally permissible and physically possible. The improvements no longer contribute the highest value to the property and based on our analysis. Therefore, it is our opinion that the highest and best use of the subject, as improved, is for redevelopment. PROOF OF HIGHEST AND BEST USE: 955 Morro Street is improved with a 6,000 square foot office building. The following chart displays office building sales in San Luis Obispo: SUMMARY OF COMPARABLE OFFICE SALES Transaction Land NRA Actual Sale Adjusted Prim NOI No. Name Type Date (Acres) FAR (SF) Prim Sale Price Per SF t Occ. Per SF OAR 1 505 Higuero Street, Solo Dec-07 23,522 0.43:1 10,333 $5,000,000 $5,000,000 $483.89 100% N/A N/A San Luis Obispo,CA 2 1531 Higuero Street, Sale Aug-07 6,111 0.59:1 3,632 $1,358,000 $1,358,000 5373.90 0% N/A N/A Son Luis Obispo,CA 3 672 Higuero Street, Sale Nov-06 2,962 2.53:1 7,500 52,500,000 $2,500,000 $333.33 0% N/A N/A San Luis Obispo,CA Subj. City of San Luis Obispo --- --- 20,038 0.30:1 6,000 --- --- 95% .-- Pro Land.Parcel, Forma San Luis Obispo, California Transaction mount adjusted for cash equivalency and/or deferred meinronanw(where applicablo) Compiled by CBRE 25 C 2008 C8 Richard Ellis, Inc. 2 - 95 `� \' RTTRCHMrNT � SLO LAND HIGHEST AND BEST USE The comparable sales range from $333.33/SF to $483.89/SF. Even if we value the subject at the upper end of the range, the value of the land is still higher than if sold as improved. The land value estimate is analyzed in the land value section of the report. BUILDING SALES COMPARISON APPROACH GRA(SF) X Value Per SF = Value 6,000 X $483.00 = $2,898,000 VALUE CONCLUSION Indicated Stabilized Value $2,898,000 Deferred Maintenance $0 Lease-Up Discount $0 Value Indication $2,898,000 Rounded $2,900,000 Value Per SF $483.33 Compiled by CBRE This analysis proves that the highest and best use of the subject is for redevelopment. 26 ©2008 CB Richard Ellis, Inc. ATTACHMENT SLO LAND APPRAISAL MMODOLOGY APPRAISAL METHODOLOGY In appraisal practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available. COST APPROACH The cost approach is based upon the proposition that the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements that represent the highest and best use of the land, or when it is improved with relatively unique or specialized improvements for which there exist few sales or leases of comparable properties. SALES COMPARISON APPROACH The sales comparison approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject. Valuation is typically accomplished using physical units of comparison such as price per square foot, price per.unit, price per floor, etc., or economic units of comparison such as gross rent multiplier. Adjustments are applied to the physical units of comparison derived from the comparable sale. The unit of comparison chosen for the subject is then used to yield a total value. Economic units of comparison are not adjusted, but rather analyzed as to relevant differences, with the final estimate derived based on the general comparisons. INCOME CAPITALIZATION APPROACH The income capitalization approach reflects the subject's income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over a period of time. The two common valuation techniques associated with the income capitalization approach are direct capitalization and the discounted cash flow (DCF) analysis. METHODOLOGY APPLICABLE TO THE SUBJECT In valuing the subject, only the sales comparison approach is applicable and has been used. 27 ©2008 CB Richard Ellis, Inc. 2 ,37 MACHMINT 5 SLO LAND LAND VALUE LAND VALUE The following map and table summarize the comparable data used in the valuation of the subject site. A detailed description of each transaction is included in the addenda. Serra Vista Medical e"J' e Carder -ID c— !�- Santa Rise Park I , ,, ��'� / 955 Marra R //-f,�g,�(�:t"� 4>•' ,�v� Sa,u,ls obkpo,cA 934ot yX< ID „ell rl pr Ive ck co nt®2003 Mlcrusoll Go .anWor'tls` u Ilere.Albr(nts•re 28 ©2008 C8 Richard Ellis, Inc. 218' ATTACHMENTS SLO LAND LAND VALUE SUMMARY OF COMPARABLE LAND SALES Transaction Actual Sale Adjusted Sale - sin Price Prke Per No. Property Location Type Date Zoning FAR Prim prim t SF FAR (SF) Per SF SF FAR 1 1308 Monterey Street, San Oearbtg Jan-08 C-R 3.0 $2,100,000 $2,100,000 65,340 21,780 $96.42 $32.14 Wit Obispo,CA 2 777 Marsh Street, San Luis Offering 00-07 C-D,Downtown 3.0 52,000,000 $2,000,000 20,908 6,969 $286.99 $95.66 Obispo,.CA commercial 3 Corner of Marsh 5treet and Sale Dec-07 C-D,Downtewn 3.0 $4,760,000 $4,760,000 84,000 28,000 $170.00 $56.67 Nipomo Street, San Luis commercial Opispo,CA 4 1035 Oak Street, San Luis Sale Sop-06 O,ORiw 1.5 $1,750,000 $1,750,000 52,800 35,200 $49.72 $33.14 Obispo,CA 5 1321 Osos Sheet, San Luis Sale Doc-05 O,OfBca 1.5 $1,750,000 $1,750,000 32,547 21,698 $80.65 $53.77 Obispo,CA 6 886 Monterey, San Luis Sale Jan-05 C-D-H, 3.0 $2,260,000 $2,100,000 15,747 5,249 $400.08 $133.36 Obispo,CA Downtown Commarcial Subject 877 Palm Street and 955 --- C-D-H, 3.0 .-- .-- 175,110 58,370 --- --- Morro Street, Downtown San Luis Obispo,California Commercial r Tramachon amoum adjusted for cash equivalency and/or development one(whore applicable) compiw by clum Land Sale One This comparable represents the January 2008 offer for purchase of a vacant commercial site located on the corner of Monterey Street and Johnson Avenue, in the city of San Luis Obispo. The site comprises approximately 21,780 square feet. The comparable was listed for $2,850,000. According to the listing broker the sellers received offers of $2,100,000 but they were not accepted. The sellers decided to take the comparable off of the market and redevelop the site. A downward adjustment was made for size (proportions of size). An upward adjustment was made for inferior location. Land Sale Two This comparable represents the October 2007 offer for purchase of a commercial site located on the corner of Marsh Street and Garden Street, in San Luis Obispo. The site comprises approximately 6,969 square feet. The site is currently improved with a retail and residential building and was sold as improved. However, according to the selling broker the seller's received several "land only' offers in the $2,000,000 range. These offers came from developers intending to redevelop the site to a higher density. The offer was $2,000,000, or $95.66/FAR. A downward adjustment was made for size (proportions of size). An upward adjustment was made for inferior location. A downward adjustment was made for conditions of sale. 29 ©2008 C8 Richard Ellis, Inc. 2 -97 ATTACHMENT s SLO LAND LAND VALUE Land Sale Three This is the sale of a 28,000 square foot site at the corner of Marsh Street and Nipomo Street in San Luis Obispo, CA. The subject sold entitled for mixed use development containing 48,000 SF FAR. This is below the allowable FAR of 84,000 square feet. However, in order to maintain consistency we analyzed the subject per the allowable FAR of 84,000 square feet. The December 2007 sale was for $4,760,000 or $170 PSF, or $56.67/FAR. An upward adjustment was made for inferior location. A downward adjustment was made for size (proportions of size). Land Sale Four This comparable represents the sale of a commercial redevelopment site on the southwest corner of Oak Street and Santa Rosa Street, in San Luis Obispo. This is a corner site comprising approximately 35,200 square feet, or 0.81 acres. The price was $1,750,000, or $49.72 per square foot, or $33.14/FAR. A downward adjustment was made for size (proportions of size). An upward adjustment was made for inferior location. An upward adjustment was made for market conditions (time). A downward adjustment was made for zoning/density. Land Sale Five This comparable represents the buyer's allocation to a portion of a larger site acquired in December 2005. This is an interior site comprising approximately 21,698 square feet, or 0.498 acres. The site has three street frontages. Of the total purchase price paid for the entire property acquired, the buyer allocated $1,500,000, or $69.13 per square foot, or $53.77/FAR to this portion of the transaction. A downward adjustment was made for size (proportions of size). An upward adjustment was made for inferior location. An upward adjustment was made for market conditions (time). A downward adjustment was made for zoning/density. Land Sale Six This is the sale of a 5,249 square foot lot with a 9,000 square foot, circa 1920s un-reinforced masonry building. It was rumored that the owner bought with the intent of redeveloping the site and stated that little to no value was given to the existing.improvement given that it has to undergo seismic retrofit at an estimated cost of $75 to $100 per square foot. It was noted that the buyers from January 2005 have re-sold the project for $2,760,000 to Copeland, but we could not confirm this on public records. Copeland would not confirm the price and said they purchased with the intent of 30 ©2008 CS Richard Ellis, Inc. 2:76 RTTACHM195 SLO LAND LAND VALUE redeveloping the site. Since we could not confirm from another source, we have relied upon the first sale. An upward adjustment was made for market conditions (time). A downward adjustment was made for size (proportions of size). SUMMARY OF ADJUSTMENTS Based on our comparative analysis, the following chart summarizes the adjustments warranted to each comparable. LAND SALES ADJUSTMENT GRID Comparable Number 1 2 3 4 5 6 Subject Transaction Type Offering Offering Sale Sale Sale Sale Transaction Date Jan-08 Oct-07 Dec-07 Sep-06 Dec-05 Jan-05 --- Zoning C-R C-D, C-D, O,Office O,Office C-D-H, C-D-H, Downtown Downtown Downtown Downtown Actual Sale Price $2,100,000 $2,000,000 $4,760,000 $1,750,000 $1,750,000 $2,260,000 --- Adjusted Sale Price $2,100,000 $2,000,000 $4,760,000 $1,750,000 $1,750,000 $2,100,000 --- SF FAR 65,340 20,908 84,000 52,800 32,547 15,747 175,110 Price Per SF FAR $32.14 $95.66 $56.67 $33.14 $53.77 $133.36 --- Price Per SF FAR $32.14 $95.66 $56.67 $33.14 $53.77 $133.36 Property Rights Conveyed 0% 0% 0% 0% 0% 0% Financing Terms' 0% 0% 0% 0% 0% 0% Conditions of Sale 0% -5% 0% 0% 0% 0% Market Conditions(rime) 0% 0% 0% 5% 10% 1D% Subtotal $32.14 $90.87 $56.67 $34.80 $59.15 $146.69 Size -15% -30% -15% -20% -25% -407 Shape 0% 0% 0% 0% 0% 0% Comer 0% 0% 0% 0% 0% 0% Frontage 0% 0% 0% 0% 0% 0% Topography 0% 0% 0% 0% 0% 0% Location 15% 5% 5% 15% 5% 0% Zoning/Density 0% 0% 0% -10% -10% 0% Other 0% 0% 0% 0% 0% 0% Highest&Best Use 0% 0% 0% 0% 0% 0% Total Other Adjustments 0% -25% -10% -15% -30% -40% Value Indication for Subject $32.14 $68.16 $51.00 $29.58 $41.40 $88.02 Average $51.72 'Transaction amount adjusted for cash equivalency and/or development costs(where applicable) Compiled by CBRE CONCLUSION The adjusted sale price ranges from $29.58 to $88.02 per FAR square foot, with an average adjusted sale price of $51.72 per FAR square foot. The concluded "price per FAR square foot" is the average "price per FAR square foot" of all six comparable sales. The following table presents the valuation conclusion: 31 ©2008 CB Richard Ellis, Inc. 2 ,7/ Q�ACHMINT 5 SLO LAND LAND VALUE CONCLUDED LAND VALUE Parcel $ FAR Subject FAR Total 002-416-034• $50.00 x 60,114 = $3,005,700 002-416-029 $50.00 x 114,996 = $5,749,800 Indicated Value: 175,110 $8,800,000 Compiled by CBRE The demolition costs associated with the 6,000 square foot building at 955 Morro Street (002-416- 034) would be off set by interim income. LAND RESIDUAL ANALYSIS The income projections are based upon office rental rates as analyzed in the market analysis section. Office rental rates range between $1.35/SF/Mo. and $2.00/SF/Mo NNN. Given the subject's excellent location we estimate rental rates at the upper end of the range. Furthermore, we did not include any parking income and have not allocated any of the space for retail use, which would potentially command a higher rental rate. Therefore, this is considered a conservative estimate of value. The development costs were derived from Marshall & Swift Software, use 15% for indirect costs and include an underground parking garage. A summary of the land residual analysis is outlined below. LAND RESIDUAL ANALYSIS $/SF $ Amount Prospective Income $21.00 $3,677,310 Vacancy 3.5% -$128,706 Net Rental Income $3,548,604 Operating Expenses NNN NOI $3,548,604 Capitalization Rate 6.50% Prospective Value $54,593,910 Development Costs - Direct and Indirect -$230.17 -$40,305,419 Profit 15% -$6,045,813 Land Value Indication $8,242,679 Rounded $8,240,000 Value $/FAR $47.06 Compiled by CBRE The land residual analysis provides additional support for our concluded land value. 32 ©2008 CS Richard Ellis, Inc. Z -9Z ATTACHMENTS SLO LAND LAND VALUE BROKER'S OPINION OF VALUE In additional to analyzing land sales we spoke with several real estate brokers in San Luis Obispo. The following chart displays their opinion of value on a $/SF basis for the subject property. Local Brokers Opinion of Land Value for the Subject Property Company Opinion of Value Date of Survey The Real Estate Group of San Luis Obispo $200/SF-$300/SF Apr-08 Rossetti Company $150/SF-$200/SF Apr-08 Lee&Associates $200/SF-$300/SF Apr-08 Richardson Properties $100/SF-$150/SF Apr-08 Compiled by CBRE The broker's opinions of value ranged for $100 to $300 per square foot with an average of $200/SF. Our concluded land value is $8,800,000 / 58,370 = $150.76/SF which is supported by the opinions of the local brokers. 33 ©2008 CB Richord Ellis, Inc. 213 ATTACHMENT5 SLO LAND RECONCILIATION OF VALUE RECONCILIATION OF VALUE In valuing the subject, the Sale Comparison Approach is considered most reliable and has been given primary emphasis. Based on the foregoing, the market value of the subject has been concluded as follows: Based on the foregoing,the market value of the subject has been concluded as follows: MARKET VALUE CONCLUSION Appraisal Premise Interest Appraised Date of Value Value Conclusion As Is Fee Simple Estate April 3,2008 $8,800,000 Compiled by CBRE 34 0 2008 CB Richard Ellis, Inc. ATTACHMEN15 SLO LAND ASSUMPTIONS AND LIMITING CONDITIONS ASSUMPTIONS AND LIMITING CONDITIONS 1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to title that would adversely affect marketability or value. CBRE is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CBRE, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject's title should be sought from a qualified title company that issues or insures title to real property. 2. Unless otherwise specifically noted in the body of this report, it is assumed: that the existing improvements on the property or properties being appraised are structurally sound; seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that the improvements, as currently constituted,conform to all applicable local, state, and federal building codes and ordinances. CBRE professionals are not engineers and are not competent to judge matters of on engineering nature. CBRE has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CBRE by ownership or management; CBRE inspected less than 100%of the entire interior and exterior portions of the improvements;and CBRE was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas ore critical to the decision process of the reader,the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CBRE reserves the right to amend the appraisal conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CBRE has no knowledge of the existence of such materials on or in the property. CBRE, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected,as thoroughly as possible by observation,the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is mode as to these matters unless specifically considered in the appraisal. 4. All furnishings, equipment and business operations,except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CBRE This report may be subject to amendment upon re-inspection of the subject subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information,conditions and projected levels of operation. 5. It is assumed that all foctual data furnished by the client, property owner,owner's representative,or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CBRE has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor's Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CBRE reserves the right to amend conclusions reported if made aware of any such error. Accordingly,the client-addressee should carefully review 35 ©2008 C8 Richard Ellis, Inc. 2'`�5 CHMENTS SLO LAND ASSUMPTIONS AND LIMITING CONDITIONS all assumptions, data, relevant calculations,and conclusions within 30 days after the date of delivery of this report and should immediately notify CBRE of any questions or errors. 6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further,that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CBRE will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CBRE assumes no private deed restrictions, limiting the use of the subject in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CBRE is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically,on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CBRE does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CBRE 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CBRE to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Also, unless otherwise noted in the body of this report,it is assumed that no changes in the present zoning ordinances or regulations governing use,density,or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based,unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CBRE nor may this report or copies hereof be transmitted to third parties without said consent, which consent CBRE reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express written consent of CBRE which consent CBRE reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a "sale" or "offer for sale" of any "security", as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CBRE shall have no accountability or responsibility to any such third party. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used. 36 ©2008 CB Richard Ellis, Inc. 2-9� ATTACHMENT 5 SLO LAND ASSUMPTIONS AND LIMITING CONDITIONS 17. The maps,plats,sketches,graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area of the subject and comparable properties has been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced,or used apart from this report. 18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CBRE unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CBRE assumes no responsibility for any costs or consequences arising due to the need, or the lack of need,for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client,or client's designees,to read in full,comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CBRE assumes responsibility for any situation arising out of the Client's failure to become familiar with and understand the some. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired. 20. CBRE assumes that the subject analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient. 21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated,defined and considered in the appraisal report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Notwithstanding any discussion of possible readily achievable barrier removal construction items in this report, CBRE has not mode a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so,this fact could have a negative effect on the value estimated herein. Since CBRE has no specific information relating to this issue, nor is CBRE qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject. 24. Client shall not indemnify Appraiser or hold Appraiser harmless unless and only to the extent that the Client misrepresents, distorts, or provides incomplete or inaccurate appraisal results to others, which acts of the Client proximately result in damage to Appraiser. The Client shall indemnify and hold Appraiser harmless from any claims, expenses, judgments or other items or costs arising as a result of the Client's failure or the failure of any of the Client's agents to provide a complete copy of the appraisal report to any third party. In the event of any litigation between the parties, the prevailing party to such litigation shall be entitled to recover from the other reasonable attorney fees and costs. 25. The report is for the sole use of the client; however, client may provide only complete, final copies of the appraisal report in its entirety (but not component parts) to third parties who shall review such reports in connection with loan underwriting or securitization efforts. Appraiser is not required to explain or testify as to appraisal results other than to respond to the client for routine and customary questions. Please note that our consent to allow on appraisal report prepared by CBRE or portions of such report,to become part of or be referenced in any public offering,the granting of such consent will be at our sole discretion and, if given, will be on condition that we will be provided with an Indemnification Agreement and/or Non-Reliance letter,in a form and content satisfactory to us, by a party satisfactory to us. We do consent to your submission of the reports to rating agencies, loan participants or your auditors in its entirety (but not component parts) without the need to provide us with an Indemnification Agreement and/or Non-Reliance letter. 26. As port of the client's requested scope of work, an estimate of insurable value is provided herein. CBRE has followed traditional appraisal standards to develop a reasonable calculation based upon industry practices and industry accepted publications such as the Marshal Valuation Service handbook. The methodology employed is a derivation of the cost 37 ©2008 CB Richard Ellis, Inc. 2 -77 - ATTACHMENTS SLO LAND ASSUMPTIONS AND LIMITING CONDITIONS approach which is primarily used as an academic exercise to help support the market value estimate and therefore is not reliable for Insurable Value estimates. Actual construction costs and related estimates can vary greatly from this estimate. This analysis should not be relied upon to determine proper insurance coverage which can only be properly estimated by consultants considered experts in cost estimation and insurance underwriting. It is provided to aid the client/reader/user as part of their overall decision making process and no representations or warranties are made by CBRE regarding the accuracy of this estimate and it is strongly recommend that other sources be utilized to develop any estimate of insurable value. 38 ©2008 CB Richard Ellis, Inc. 2 -98 ATTACHMENTS SLO LAND ADDENDA ©2008 CB Richard Ellis, Inc. 299 ATTACHMENT S SLO LAND ADDENDUM A GLOSSARY OF TERMS ©2008 CB Richard Ellis, Inc. 2 -loo ATTACHMENT S SLO LAND through to the tenant and are known as expense pass- assessed value Assessed value applies in ad valorem throughs. taxation and refers to the value of a property according to the tax rolls. Assessed value may not conform to going concern value Going concern value is the market value, but it is usually calculated in relation to a value of a proven property operation. It includes the market value base.t incremental value associated with the business concern, which is distinct from the value of the real estate only. cash equivalency The procedure in which the sale Going concern value includes an intangible prices of comparable properties sold with atypical enhancement of the value of an operating business financing are adjusted to reflect typical market terms. enterprise which is produced by the assemblage of the land, building, labor, equipment, and marketing contract rent The actual rental income specified in a operation. This process creates an economically viable lease. business that is expected to continue. Going concern effective rent The rental rate net of financial value refers to the total value of a property, including concessions such as periods of no rent during the lease both real properly and intangible personal property term; may be calculated on a discounted basis, attributed to the business value.t reflecting the time value of money, or on a simple, gross building area (GEA) The total floor area of a straight-line basis.; building, including below-grade space but excluding excess land In regard to an improved site,the land not unenclosed areas, measured from the exterior of the needed to serve or support the existing improvement. Falls. Gross building area for office buildings is In regard to a vacant site or a site considered as computed by measuring to the outside finished surface though vacant, the land no needed to accommodate of permanent outer building walls without any the site's primary highest and best use. Such land may deductions. All enclosed floors of the building be separated from the larger site and have its own including basements, mechanical equipment floors, highest and best use, or it may allow for future penthouses, and the like are included in the expansion of the existing or anticipated improvement. measurement. Parking spaces and parking garages See also surplus land.t are excluded.t hypothetical condition That which is contrary to extraordinary assumption An assumption directly what exists but is supposed for the purpose of analysis. false, could d aalte related to specific assignment, which, if found to ber the appraiser's opinions or Hypothetical conditions assume conditions contrary to conclusions. Extraordinary assumptions presume as known facts about physical, legal, or economic characteristics of the subject property; or about fad otherwise uncertain information about physical, conditions external to the property, such as market legal, or economic characteristics of the subject property; or about conditions external to the property conditions or trends;or about the integrity of data used in on analysis. See also extraordinary assumption.t such as market conditions or trends; or about the integrity of data used in an analysis. See also insurable value Insurable Value is based on the hypothetical condition.t replacement and/or reproduction cost of physical items fee simple estate Absolute ownership unencumbered that are subject to loss from hazards. Insurable value is that portion of the value of an asset or asset group that limitations any other interest or estate, subject only to the is acknowledged or recognized under the provisions of lmitations imposed the governmental powers of an applicable loss insurance policy. This value is often taxation,eminent domain,police power,and escheat.t controlled by state law and varies from state to state.t floor area ratio (FAR) The relationship between the investment value Investment value is the value of an above-ground floor area of a building,as described by investment to a particular investor based on his or her stands; in planning and zoning, often expressed as a the building code, and the area of the plot which it investment requirements. In contrast to market value, investment value is value to an individual, not value in decimal, e.g., a ratio of 2.0 indicates that the permissible floor area of a building the marketplace. Investment value reflects the p g is twice the total subjective relationship between a particular investor land area;also called building-to-land ratio.t and a given investment. When measured in dollars, full service lease A lease in which rent covers all investment value is the price an investor would pay for operating expenses. Typically, full service leases are an investment in light of its perceived capacity to satisfy combined with an expense stop, the expense level his or her desires, needs, or investment goals. To covered by the contract lease payment. Increases in estimate investment value, specific investment criteria expenses above the expense stop level are passed must be known. Criteria to evaluate a real estate ©2008 C8 Richard Ellis, Inc. 2 -101 - ATTACHMENT 5 SLO LAND investment are not necessarily set down by the never takes possession of the expense payment. In a individual investor; they may be established by an Triple Net Lease all operating expenses ore the expert an real estate and its value,that is,an appraiser. responsibility of the tenant, including property taxes, t insurance, interior maintenance, and other miscellaneous expenses. However, management fees leased fee and exterior maintenance are often the responsibility of See leased fee estate the lessor in a triple net lease. A modified net lease is one in which some expenses are paid separately by the leased fee estate An ownership interest held by a tenant and some are included in the rent. landlord with the right of use and occupancy conveyed by lease to others. The rights of the lessor (the leased net rentable area (NRA) 1) The area on which rent fee owner) and the leased fee are specified by contract is computed. 2) The Rentable Area of a floor shall be terms contained within the lease.t computed by measuring to the inside finished surface of the dominant portion of the permanent outer building leasehold walls, excluding any major vertical penetrations of the See leasehold estate floor. No deductions shall be made for columns and projections necessary to the building. Include space leasehold estate The interest held by the lessee (the such as mechanical room, janitorial room, restrooms, tenant or renter)through a lease conveying the rights of and lobby of the floor.' use and occupancy for a stated term under certain conditions.t occupancy rate The relationship or ratio between the income received from the rented units in a property and market rent The most probable rent that a property the income that would be received if all the units were should bring in a competitive and open market occupied.t reflecting all conditions and restrictions of the specified lease agreement including term, rental adjustment and prospective value opinion A forecast of the value revaluation, permitted uses, use restrictions, and expected at a specified future date. A prospective expense obligations.t value opinion is most frequently sought in connection with real estate projects that ore proposed, under market value Market value is one of the central construction, or under conversion to a new us,or those concepts of the appraisal practice. Market value is that have not achieved sellout or a stabilized level of differentiated from other types of value in that it is long-term occupancy at the time the appraisal report is created by the collective patterns of the market. Market written.t value means the most probable price which a property should bring in a competitive and open market under reasonable exposure time The estimated length of all conditions requisite to a fair sale, the buyer and time the property interest being appraised would have seller each acting prudently and knowledgeably, and been offered on the market prior to the hypothetical assuming the price is not affected by undue stimulus. consummation of a sale at market value on the Implicit in this definition is the consummation of a sale effective date of the appraisal; a retrospective opinion as of a specified date and the passing of title from based upon an analysis of past events assuming a seller to buyer under conditions whereby: 1) A competitive and open market.tt reasonable time is allowed for exposure in the open market; 2) Both parties ore well informed or well rent advised, and acting in what they consider their own See best interests; 3) Buyer and seller are typically full service lease motivated; 4) Payment is made in terms of cash in U.S. net lease dollars or in terms of financial arrangements market rent comparable thereto; and 5) The price represents the contract,coupon,face,or nominal rent normal consideration for the property sold unaffected effective rent by special or creative financing or sales concessions granted by anyone associated with the sale.§ shell rent The typical rent paid for retail, office, or industrial tenant space based on minimal "shell" marketing period The time it takes an interest in real interior finishes (called plain vanilla finish in some property to sell on the market subsequent to the date of areas). Usually the landlord delivers the main building an appraisal.t shell space or some minimum level of interior build- out, and the tenant completes the interior finish, which net lease Lease in which all or some of the operating can include wall, ceiling,and floor finishes;mechanical expenses are paid directly by the tenant. The landlord systems, interior electric,and plumbing. Typically these ©2008 CB Richard Ellis, Inc. 2 �I�2 ATTACHMENT 5 SLO LAND are long-term leases with tenants paying all or most surface of the dominant portion of the permanent outer property expenses.t building walls. Excludes areas such as mechanical rooms, janitorial room, restrooms, lobby, and any surplus land Land not necessary to support the highest major vertical penetrations of a multi-tenant floor.' and best use of the existing improvement but, because of physical limitations, building placement, or use value Use value is a concept based on the neighborhood norms, cannot be sold off separately. productivity of an economic good. Use value is the Such land may or may not contribute positively to value value a specific property has for a specific use. Use and may or may not accommodate future expansion of value focuses on the value the real estate contributes to on existing or anticipated improvement. See also the enterprise of which it is a part,without regard to the excess land.I property's highest and best use or the monetary amount that might be realized upon its sale.t usable area 1) The area actually used by individual tenants. 2) The Usable Area of an office building is value indication An opinion of value derived through computed by measuring to the finished surface of the application of the appraisal process.f office side of corridor and other permanent walls, to the center of partitions that separate the office from adjoining usable areas, and to the inside finished t The Appraisal of Real Estate, Twelfth Edition, Appraisal Institute,2001. I The Dictionary of Real Estate Appraisal, Fourth Edition, Appraisal Institute,2002. 4 Office of Comptroller of the Currency(OCC), 12 CFR Part 34, Subpart C — Appraisals, 34.42 (g); Office of Thrift Supervision (OTS), 12 CFR 564.2 (g); ApEraisal Institute, The Dictionary of Real Estate Appraisal, 4 ed. (Chicago: Appraisal Institute, 2002), 177-178. This is also compatible with the RTC, FDIC, FRS and NCUA definitions of market value as well as the example referenced in the Uniform Standards of Professional Appraisal Practice(USPAP). 2000 BOMA Experience Exchange Report, Income/Expense Analysis for Office Buildings (Building Owners and Managers Association,2000) tt Statement on Appraisal Standard No. 6, Appraisal Standards Board of The Appraisal Foundation, September 16,1993,revised June 15,2004. ©2008 CB Richard Ellis, Inc. 2 -ID3 ATTACHMENT 5 SLO LAND ADDENDUM B LAND SALE DATA SHEETS 0 2008 C8 Richard Ellis, Inc. / LAND SALE No. 1 � ATTACHMENT 1308 Monterey Street Location Data Sale Data Location: 1308 Monterey Street Transaction Type: Offering San Luis Obispo,CA 93401 Date: 1/2008 County: San Luis Obispo Marketing Time: N/A Assessor's Parcel No: 001-224-024 Grantor: NIA Atlas Ref: N/A Grantee: N/A Document No.: WA Sale Price: $2,100,000 Physical Data Financing: Not Available Type: Cash Eq.Price: $2,100,000 Land Area: Gross Usable Onsite/Offsite Costs: $0 Acres: 0.5000 0.5000 Adj.Sale Price: $2;100,000 Square Feet: 21,780 21,780 Verification: Mark Anderson(805)544 3900 Topography: Level,At Street Grade Shape: Rectangular Utilities: Zoning: C-R Allowable Bldg Area: 65,340 Floor Area Ratio: 3.00 No.of units: N/A Max FAR: 3 Frontage: Monterey Street;Johnson Avenue Analysis Use At Sale: Land Proposed Use or Dev. Office,retail or mixed-use Price Per Acre: $4,200,000 Price Per SF of Land: $96.42 Price Per Unit: N/A Price Per SF of Bldg: $32.14 Comments This comparable represents the January 2008 offer for purchase of a vacant commercial site located on the comer of Monterey Street and Johnson Avenue, in the city of San Luis Obispo.The site comprises approximately 21,780 square feet. The comparable was listed for$2,850,000. According to the listing broker the sellers received offers of$2,100,000 but they were not accepted. The sellers decided to take the comparable off of the market and redevelop the site. CBRE ©2008 CS Richard Ellis Inc. �•'106 ATTACHMENT LAND SALE No. 2. 5 777 Marsh Street Location Data Sale Data Location: 777 Marsh Street Transaction Type: Offering San Luis Obispo,CA 93401 Date: 10/2007 County: San Luis Obispo Marketing Time: N/A Assessors Parcel No: 003525-001 Grantor: N/A Atlas Ref: N/A Grantee: NIA Document No.: N/A Sale Price: $2,000,000 Physical Data Financing: Not Available Type: Cash Eq.Price: $2,000,000 Land Area: Gross Usable Onsite/Offsite Costs: $0 Acres: 0.1600 0.1600 Adj.Sale Price: $2,000,000 Square Feet: 6,969 6,969 Verification: Steve Ferrario 805-215-3350 Topography: Level,At Street Grade Shape: Rectangular Utilities: Zoning: C-D Allowable Bldg Area: 20,908 Floor Area Ratio: 3.00 No.of units: N/A Max FAR: Frontage: Marsh Street; Garden Street Analysis Use At Sale: Commerical and Residential Proposed Use or Dev. Office, retail or mixed-use Price Per Acre: $12,500,000 Price Per SF of Land: $286.99 Price Per Unit: N/A Price Per SF of Bldg: $95.66 Comments This comparable represents the October 2007 offer for purchase of a commercial-site located on the comer of Marsh Street and Garden Street,in San Luis Obispo.The site comprises approximately 6,969 square feet. The site is currently improved with a retail and residential building and was sold as improved. However, according to the selling broker the sellers received several'land only" offers in the$2,000,000 range. These offers came from developers intending to redevelop the site to a higher density. The offer was$2,000,000,or$95.66/FAR. CBRE ©2008 C8 Richard Ellis, Inc. cu xicnti+o ewn 1 - loco LAND SALE No. 3 ATTACHMENT 5 Comer of Nipomo Street and Marsh Street Location Data Sale Data Location: Comer of Nipomo Street and Marsh Transaction Type: Sale San Luis Obispo,CA 93401 Date: 12/2007 County: San Luis Obispo Marketing Time: N/A Assessor's Parcel No: N/A Grantor: N/A Atlas Ref: NIA Grantee: N/A Document No.: NIA Sale Price: $4,760,000 Physical Data Financing: Not Available Type: Cash Eq.Price: $4,760,000 Land Area: Gross Usable Onsite/Offsite Costs: $0 Acres: 0.6428 0.6428 Adj.Sale Price: $4,760,000 Square Feet 28,000 28,000 Verification: Chris Richardson 805-781-6040 Topography: Level,At Street Grade Shape: Rectangular Utilities: Zoning: C-0 Allowable Bldg Area: 84,000 Floor Area Ratio: 3.00 No.of units: N/A Max FAR: Frontage: Marsh Street; Nipomo Street Analysis Use At Sale: Commerical and Residential Proposed Use or Dev. retail or condominiums Price Per Acre: $7,405,102 Price Per SF of Land: $170.00 Price Per Unit: N/A Price Per SF of Bldg: $56.67 Comments This is the sale of a 28,000 square foot site at the comer of Marsh Street and Nipomo Street in San Luis Obispo,CA. The subject sold entitled for mixed use development containing 48,000 SF FAR. This is below the allowable FAR of 84,000 square feet. However,in order to maintain consistency we analyzed the subject per the allowable FAR of 84,000 square feet. The December 2007 sale was for$4,760,000 or$170 PSF,or$56.67/FAR. CBRE ©2008 C8 Richard Ellis, Inc. cv mcw.vv euv MIXED-USE LAND SALE No. . ATTACHMENT'" Commercial Redevelopment Site Location Data Sale Data Location: 1035 Oak Street Transaction Type: Sale San Luis Obispo,CA 93401 Date: 9/2006 County: San Luis Obispo Marketing Time: N/A Assessor's Parcel No: Multiple Grantor: WA Atlas Ref: 65343 Grantee: WA Document No.: 71724 Sale Price: $1,750,000 Physical Data Financing: Not Available Type: Mixed-Use Cash Eq.Price: $1,750,000 Land Area: Gross Usable Onsite/Offsite Costs: $0 Acres: 0.8081 0.8081 Adj.Sale Price: $1,750,000 Square Feet: 35,200 35,200 Verification: Listing Broker Topography: Level,At Street Grade Shape: Rectangular Utilities: All to site Zoning: O,Office Allowable Bldg Area: 52,800 Floor Area Ratio: 1.50 No.of units: WA Max FAR: N/A Frontage: Oak Street; Analysis Use At Sale: Residential Proposed Use or Dev. Mixed-use Price Per Acre: $2,165,573 Price Per SF of Land: $49.72 Price Per Unit: WA Price Per SF of Bldg: $33.14 Comments This comparable represents the sale of a commercial redevelopment site on the southwest comer of Oak Street and Santa Rosa Street,in San Luis Obispo.This is a comer site comprising approximately 35,200 square feet,or 0.81 acres.The price was $1,750,000,or$49.72 per square foot. CORE ©2008 C8 Richard Ellis, Inc. CORE 2 - 106 MIXED-USE LAND SALE No. ATTACHMENT S Commercial Site Location Data Sale Data Location: 1321 Osos Street Transaction Type: Sale San Luis Obispo,CA 93401 Date: 12/2005 County: San Luis Obispo Marketing Time: N/A Assessor's Parcel No: 002-442-013 Grantor: Mission land Co LLC Atlas Ref: 654-A4 Grantee: Westmac Properties Document No.: N/A Sale Price: $1,750,000 Physical Data Financing: Not Available Type: Mixed-Use Cash Eq.Price: $1,750,000 Land Area: Gross Usable Onsite/Offsite Costs: $0 Acres: 0.4981 0.4981 Adj.Sale Price: $1,750,000 Square Feet: 21,698 21,698 Verification: Buyer Topography: Level,At Street Grade Shape: Irregular Utilities: All to site Zoning: 0,Office Allowable Bldg Area: 32,547 Floor Area Ratio: 1.50 No.of units: N/A Max FAR: 1 Frontage: Osos Street; Morro Street Analysis Use At Sale: Parking Proposed Use or Dev. Mixed-use Price Per Acre: $3,513,350 Price Per SF of Land: $80.65 Price Per Unit: WA Price Per SF of Bldg: $53.77 Comments This comparable represents the buyer's allocation to a portion of a larger site acquired in December 2005.This is an interior site comprising approximately 21,698 square feet, or 0.498 acres.The site has three street frontages.Of the total purchase price paid for the entire property acquired,the buyer allocated$1,500,000,or$69.13 per square foot for this portion. CBRE ©2008 CB Richard Ellis, Inc. a ac�nxo cwa 2 ��I LAND SALE No. 6 ATTACHMENT 5 Bellos Building Location Data Sale Data Location: 886 Monterey Transaction Type: Sale San Luis Obispo,CA Date: 1/2005 County: San Luis Obispo Marketing Time: NIA Assessor's Parcel No: 002-016-009 Grantor: Kundert Trust Atlas Ref: N/A Grantee: Valley Vista Ranch Document No.: 379 Sale Price: $2,260,000 Physical Data Financing: Not Available Type: Cash Eq.Price: $2,100,000 Land Area: Gross Usable Onsite/Offsite Costs: $0 Acres: 0.1205 0.1205 Adj.Sale Price: $2,100,000 Square Feet: 5,249 5,249 Verification: Public records Topography: Moderate Slope Shape: Rectangular Utilities: to site Zoning: CD-downtown commercial Allowable Bldg Area: 15,747 Floor Area Ratio: 3.00 No.of units: N/A Max FAR: 3 Frontage: 48.08'-Monterey St.; Analysis Use At Sale: Retail Proposed Use or Dev. Future re-development Price Per Acre: $17,427,385 Price Per SF of Land: $400.08 Price Per Unit: N/A Price Per SF of Bldg: $133.36 Comments This is the sale of a 5,249 square foot lot with a 9,000 square foot,circa 1920s un-reinforced masonry building. It was rumored that the owner bought with the intent on redeveloping the site and stated that little to no value was given to the existing improvement given that it has to undergo seismic retrofit at an estimated cost of$75 to$100 per square foot.We estimated five years left in its useful life which is approximately one year prior to the seismic ordinance deadine. Based on a cost approach,this would equate to a total of approximately$160,000 to the improvements. We have made a downward adjustment to reflect this interiem use. It was noted that the buyers from January 2005 have re-sold the project for$2,760,000 to Copeland, but we could not confirm this on public records. Copeland did confirm this and said they purchased with the inenant on redeveloping the site. Since they are borrower of our subject and we could not confirm from another source,we have relied upon the first sale. CBRE ©2008 C8 Richard Ellis, Inc. C9 PKrWPO t1L0 Z - tic ATTACHMEN15 SLO LAND ADDENDUM C OPERATING DATA 0 2008 CB Richard Ellis, Inc. ATTACHMENTS SLO LAND ADDENDUM D LEGAL DESCRIPTION ©2008 C8 Richard Ellis, Inc. 2- I � Z PROPERTY INFORMATION ATTACHMENTS 1) Property: 877 PALM ST,SAN LUIS OBISPO CA 93401 C001 APN: 002416-029 Card#: Use: TAX EXEMPT County: SAN LUIS OBISPO, CA Prop Tax: Total Value: MapPg/Grid: 65344 Old Map: Tax Year: Delinq: Land Value: Census: 111.01 Tract#: Tax Area: 003008 Impry Value: High School: SAN LUIS COASTAL UNI Elem School: Taxable Val:. Comm Coll: SAN LUIS OBISPO Exemptions: Assd Year: Subdivision: % Improved: Owner: CITY OF SAN LUIS OBISPO(940) Phone: 8051781-7100 Owner Vest: Mail: 990 PALM ST; SAN LUIS OBISPO CA 93401-3249 C001 C/O ADMINISTRATION Owner Transfer= Rec Dt: Price: Doc#: Type: Sale Dt: SALE & FINANCE INFORMATION IMPROVEMENTS LAST SALE PRIOR SALE Bldg/Liv Area: Recording/Sale Date: Gross Area: Sale Price/Type: Ground Flr: Document#: Bsmnt Area: Deed Type: $/SgFt: 1 st Mtg Amt/Type: Yrblt/Eff: 1 st Mtg RtfType/Trm: / / #Stories: Rooms: 1st Mtg Lendec Bedrooms: 2nd Mtg Amt/Type: Full/Half Bath: 2nd Mtg Rt/Type/Trm: / / Ttl Baths/Fixt: Title Company: Fireplace:Pool: Seller: Porch Type: New Construction: Patio Type: Other Last Sale Info = #Parcels: Type 2: Pend: Construct SITE INFORMATION Foundation: Ext Wall: #Res. Units: County Use: 857 Acres: 0.88 Roof Shape: #Comm Units: Zoning: CC Lot Area: 38,332.8 Roof Type: #Buildings: Flood Panel: 0603100005C Lot Width: Roof Mat: Bldg Class: Panel Date: 07/07/1981 Lot Depth: Floor Type: Parking Sqft: Flood Zone: C Usable Lot: Floor Cover: Park Spaces: Sewer Type: Heat Type: Garage Cap#: Water Type: Heat Fuel: Park Type: Air Cond: Other Impvs: Quality: Condition: Legal Blk/Bldg: Site Influence: Style: Legal Lot/Unit: Amenities: Equipment: Legal: 000.88AC VACANT Other Rms: ©2008 CB Richard Ellis, Inc. 2- 11 -3 Nin2DataO Page: 1 of 2 PROPERTY INFORMATION ATTACHMENT J 2) Property: 955 MORRO , CA APN: 002-416-034 Card#: Use: TAX EXEMPT County: SAN LUIS OBISPO, CA Prop Tax: Total Value: MapPg/Grid: 65344 Old Map: Tax Year: Delinq: Land Value: Census: Tract#: Tax Area: 003008 Impry Value: High School: SAN LUIS COASTAL UNI Elem School: Taxable Val: Comm Coll: SAN LUIS OBISPO Exemptions: Assd Year. Subdivision: % Improved: Owner: CITY OF SAN LUIS OBISPO (940) Phone: 805/781-7100 Owner Vest: Mail: 990 PALM ST; SAN LUIS OBISPO CA 93401-3249 C001 C/O ADMINISTRATION Owner Transfer= Rec Dt: Price: Doc#: Type: Sale Dt: SALE & FINANCE INFORMATION IMPROVEMENTS LAST SALE PRIOR SALE Bldg/Liv Area: Recording/Sale Date: Gross Area: Sale Price/Type: Ground Flr: Document#: Bsmnt Area: Deed Type: $/SgFt: 1 st Mtg Amt/Type: Yrblt/Eff: 1st Mtg Rt/Type/Trm: / / #Stories: Rooms: 1st Mtg Lender. Bedrooms: 2nd Mtg Amt/Type: Full/Half Bath: 2nd Mtg Rt/Type/Trm: / / Ttl Baths/Fixt: Fireplace: Title Company: Pool: Seller: Porch Type: New Construction: Patio Type: Other Last Sale Info= #Parcels: Type 2, Pend: Construct: SITE INFORMATION Foundation: Ext Wall: #Res. Units: County Use: 851 Acres: 0.46 Roof Shape: #Comm Units: Zoning: CC Lot Area: 20,038 Roof Type: #Buildings: Flood Panel: 0603100005C Lot Width: Roof Matl: Bldg Class: Panel Date: 07/07/1981 Lot Depth: Floor Type: Parking Sgft. Flood Zone: AO Usable Lot: Floor Cover: Park Spaces: Sewer Type: Heat Type: Garage Cap#: Water Type: Heat Fuel: Park Type: Air Cond: Other Impvs: Quality: Condition: Legal Blk/Bldg: 14 Site Influence: Style: Legal Lot/Unit: Amenities: Equipment: Legal: 000.46AC GARAGE PTN BL 14 Other Rms: ©2008 CB Richard Ellis, Inc. WinWataO Page:2 of 2 1 ATTACHMINT5 SLO LAND ADDENDUM REQUIRED CLIENT INFORMATION 0 2008 CB Richard Ellis, Inc. ,'IG AT'ACHMEN15 SLO LAND ADDENDUM QUALIFICATIONS 0 2008 CB Richard Ellis, Inc. 2 — ! QUALIFICATIONS OF RICHARD JUE,MAi ATTACHMEW J First Vice President CBRE Valuation &Advisory Services 355 South Grand Avenue, Suite 1200 Los Angeles, California 90071-1549 Phone: (213) 613-3217, Fax: (213) 613-3131 EDUCATION California State University, Northridge - Bachelor of Arts 1980 Real Estate Appraisal Courses: SREA course 101 1979 AIREA course lA-1 1986 SREA R-2 Exam 1979 AREA SPP 1987 SREA course 201 1980 AIREA course 1 A-2 1987 SREA course 202 1982 AIREA course 1 B-A 1987 SREA course 301 1984 AIREA course 1 B-B 1987 SREA SPP 1988 AIREA course 2-1 1987 AIREA course 2-2 1988 AI course SPP 430 2004 AI course 510 1995, 2004 USPAP Update 2004 LICENSES/CERTIFICATIONS • Member,Appraisal Institute (MAI) • Member,Appraisal Institute- Senior Residential Appraiser(SRA) • California Certified General Real Estate Appraiser, No.AGO03182 I have met the requirements of the continuing education program of the Appraisal Institute. APPRAISAL INSTRUCTOR Instructor- SREA course 101 1984 - 1990 Instructor- SREA course 102 1986 - 1990 Instructor- SREA course 201 1988 - 1990 Instructor—AIREA course 510 1996 - 1997 EXPERT WITNESS • Bankruptcy Court: Los Angeles County EMPLOYMENT CBRE Valuation&Advisory Services Vice President 1986 - Present National Appraisal Corporation 1978 - 1986 Partner SIGNIFICANT ASSIGNMENTS Dolphin Marina,Marina Del Rey Library Tower, Los Angeles Emery Air Freight Distribution Center, Los Angeles Gas Company Tower, Los Angeles Price Pfister Manufacturing Plant, Pacoima Baldwin Hills Crenshaw Plaza Mall, Los Angeles California Mart, Los Angeles Hughes Corporate Headquarters, Marina Del Rey Water Garden,Santa Monica Soka University, Malibu 0 2008 CB Richard Ellis, Inc. 2 —H-7 H-J ATTACHMENT CBRE CONSULTING CBRE CB RICHARD ELLIS CONFIDENTIAL REUSE VALUATION REPORT on the SALE OF LAND PURSUANT TO A PROPOSED AGREEMENT by and between CITY OF SAN LUIS OBISPO and COPELAND PROPERTIES Prepared by: CBRE CONSULTING Prepared for: CITY OF SAN LUIS OBISPO Date of Report: APRIL 25, 2008 ATTORNEY CLIENT PRIVILEGE 2118 ATTACHMENT CBRE CONSULTING CBRE CB RICHARD ELLIS 355 South Grand Avenue, Suite 1200 Los Angeles, CA 90071.1549 T 213 613 3750 F 213 613 3780 www.cb re.co m CONFIDENTIAL—ATTORNEY CLIENT PRIVILEGE April 25, 2008 Mr. Jonathan Lowell City Attorney City of San Luis Obispo RE: Reuse Valuation—Chinatown Parcels Dear Mr. Lowell: The attached report incorporates the valuation requirements of Section 33433 of the California Health and Safety Code for 58,371 square feet of land (3 parcels) owned by the City and operated as Public Works office building and a 155-space public parking lot. The development program proposed is a high-amenity, mixed-use project designed to maximize the redevelopment objectives for downtown, including the mixed-use residential development and generation of significant public revenues from transient occupancy taxes and sales taxes. The City is evaluating a development proposal for a mixed-use retail, hotel and condominium project called "Chinatown". The site is currently a surface parking lot with several historic buildings. The developer has an option to purchase the site for $2.9 million. The draft EIR has requested the developer retain one historic building and pay approximately$2.5 million in-lieu fee for replacement of the public metered parking spaces. To assist in the negotiations, the City needs o Market Valuation of the land "as is" based on sales comparables, as well as a Reuse Valuation of the proposed development including the cost of complying with the proposed conditions of approval. The conclusions of our analysis are: (1) The economics of the development proposed support a reuse land value for the City property of approximately$1.1 million with what CBRE believes to be industry standard developer profit expectations. This represents the fair reuse value of the land, taking into account all covenants and restrictions including in-lieu fee for 155 parking spaces. (2) The highest and best use value of the City site,without any replacement parking requirements is approximately $8.8 million. The analysis and data that support these conclusions are presented in the accompanying report. Sincerely, c=J � Thomas Jirovsky Senior Managing Director 2 - 119 CONFIDENTIAL-ATTORNEY CLIENT PRIVILEGE ATACHMEN l CBRE CONSULTING CERE CB RICHARD ELLIS I. INTRODUCTION Although San Luis Obispo does not have a Redevelopment Agency, the City has requested that this report be prepared using the valuation requirements of Section 33433 of the California Health and Safety Code. The analysis is with respect to the disposition of City land bounded by Palm Street on the north, Monterey Street on the south and Morro Street on the East in downtown San Luis Obispo to SLO Chinatown LLC (Copeland Properties). The Health and Safety Code calls for the following determinations: • Value of the property based upon its highest and best use; and • Value of the property based upon the terms and conditions of the Development Agreement. Throughout this report,"City" refers to the City of San Luis Obispo and "Developer" refers to SLO Chinatown LLC. This report is divided into four sections following this Introduction: • Description of the property • Summary of business terms • Valuation based upon the Agreement • Valuation at the highest and best use • Reconciliation of value differences COPELAND REUSE VALUATION REPORT 1 APRIL 25,2008 211 CONFIDENTIAL—ATTORNEY CLIENT PRIVILEGE ATTACHMENT CBRE CONSULTING CBRE CB RICHARD ELLIS Ii. DESCRIPTION OF THE PROPERTY SITE AND AREA DESCRIPTION The subject property, generally referred to as Chinatown Parking Lot consists of three irregularly shaped parcels primarily bounded by Palm Street to the north and Monterey Street to the south, in the downtown area of the City of San Luis Obispo. The City site excludes all existing privately owned businesses located on the block. The City property is approximately 58,371 square feet.The Developer has independently acquired several privately-owned parcels comprising the balance of the site. The intention is for the City of San Luis Obispo to transfer the City-owned site pursuant to the terms of a new option agreement. PROPOSED IMPROVEMENTS The Developer anticipates the following elements: • Retail uses of 42,000 square feet facing Monterey; • Restaurant use totaling 6,000 square feet • Office/Other uses totaling 6,050 square feet • Hotel of 85 rooms; and • 30 residential condominium units totaling 40,000 net rentable area. • 122 parking spaces in a parking structure The development concept combines street retail with restaurant, upscale residential and lodging uses. Table 1 summarizes the proposed development program for the subject property. COPELAND REUSE VALUATION REPORT 2 APRIL 25,2008 � - �Z1 I ATTACHMENT(SIT f n CONFIDENTIAL—ATTORNEY CLIENT PRIVILEGEATTAC1 MEN I V CBRE CONSULTING CBRE CB RICHARD ELLIS TABLE 1 SCOPE OF DEVELOPMENT PROPOSED MARKET RATE FOR SALE CONDOMINIUMS,HOTEL&RETAIL CHINATOWN PARKING REUSE VALUATION SAN LUIS OBISPO,CA 1. site size(Sf) 92,351 sf Acres 2.1 Gross Number Unit Sizes Livable Area 11. Residential Unit Mix of Units (Sf) (Sf) Studio Units 0 One-bedroom Units 0 Two-bedroom Units 0 Number of Market Rate Units 26 1,408 36,600 Number of Affordable Units 4 850 3,400 Totals I Averages 30 1,333 40,000 111. Gross Building Area(Sf) A Residential Component Gross Sellable Area 40,000 Lobby 1,400 Circulation 9,000 Residential GRA 50,400 B. Commercial Component Gross Leasable Area 54,050 C. Hotel Component Guest Rooms 85 59,665 702 sf Circulation 5,700 Lobby,Restaurant,Bar,Spa 16,000 Total Hotel Area 61,365 D. Total Gross Building Area 185,815 FAR(GBA Sf/Land Area Sf) 2.01 IV. Parking Component A. Parkina Type Surface Spaces 0 Above-Grade Garage Spaces 122 Subterranean Garage Spaces 0 Total Parking Spaces 122 B. Residential Parking Spaces Resident Spaces 60 Guest Spaces 0 Total Residential Parking Spaces 60 Per Unit 2 C. Commercial Parking Spaces 62 Per 1,000 Sf GLA 1.15 COPELAND REUSE VALUATION REPORT 3 APRIL 25,2008 2 - �ZZ CONFIDENTIAL-ATTORNEY CLIENT PRIVILEGE ATTACK IMENT& CBRE CONSULTING CBRE CS RICHARD ELLIS III. SUMMARY OF BUSINESS TERMS The proposed business terms relating to the development of the project involve a series of actions and responsibilities on the part of both the City and the Developer. This section of our report summarizes those aspects of the business terms that are directly related to the Section 33433 reuse valuation analysis. LAND ASSEMBLY COSTS Developer has an option to acquire the 58,371 square feet of City-owned land for $2.9 million.. The option expires in a few months and the City has requested this analysis to determine an appropriate option price. The developer has separately acquired, but for the purpose of this overall project, 33,980 square feet of land adjacent to the City parcel. PUBLIC PARKING The project will include an approximately 122-car parking structure for the retail, residential condos and hotel guests. COPELAND REUSE VALUATION REPORT 4 APRIL 25,2008 2 -123 ATTACHMENT CONFIDENTIAL—ATTORNEY CLIENT PRIVILEGE CBRE CONSULTING CBRE CB RICHARD ELLIS N. REUSE LAND VALUE BASED UPON PROPOSED TERMS This section of the report presents a pro forma valuation' of the Project. This is the analysis required under Section 33433 calling for a determination of value based upon the proposed terms and conditions of an agreement. Thus it considers the development costs and compares these costs to the present value of the cash flows that the project is likely to produce. As described earlier in this report,the Chinatown project has three major elements: retail, hotel, and condominiums, with related parking. Component Building Area/Units Commercial Retail & Office 54,050 square feet Hotel 81,365 square feet/85 Rooms Condominiums 50,400 gross square feet/30 Units Parking 122 spaces Total Building Area 185,8000 square feet (excluding parking) GENERAL APPROACH All of the input assumptions incorporated in the reuse valuation were scrutinized and compared with standards in the market and CBRE reference materials. The figures presented by the Developer along with their description of the project's physical parameters were used only as a point of departure. The greatest emphasis was placed on assuring that cost projections were not too high and that revenue estimates were not too low. This emphasis is intended specifically to minimize the potential for underestimating the reuse value of the site. DEVELOPMENT COSTS Due to the integrated nature of the proposed development, the prepared project cost estimate. combines the retail, hotel and condominium components. Although independent estimates of development costs for each component are provided in Table 2, these estimates include an allocation of certain costs based on the relative building area. As shown in Table 2,total development costs are estimated to be$65.7 million, or approximately $354 per square foot of building area. This cost estimate includes all direct and indirect costs. COPELAND REUSE VALUATION REPORT 5 APRIL 25,2008 2 -12� CONFIDENTIAL—ATTORNEY CLIENT PRIVILEGE ATTACHMENT'S CBRE CONSULTING CBRE CB RICHARD ELLIS These costs do not include developer profit, but do include $7.1 million for construction interest and fees, $1.1 million for sales commissions, and $2.2 million for project development management fee. For the purposes of this analysis, costs shown in Table 2 are shown in 2008 dollars. The development costs are based upon estimates prepared by the development team, as well as independent investigation by CBRE Consulting. PROJECT OPERATIONS Retail Assumptions The retail portion of the project consists of approximately 42,000 square feet of space for retail, 6,050 for office and 6,000 for restaurant uses. Lease rates are projected to range from $2.00 to $3.50 per square foot per month.These lease rates were projected by the developer and take into account the level of tenant improvement provided in the construction costs. Retail leases are assumed to be true net-net-net (NNN) with most operating costs (with the exception of non-recoverable expenses) passed through to individual tenants. Property taxes are estimated based upon the total development cost of the project including land. It is assumed that all CAM, insurance and property tax expenses, and management fees are recovered from individual tenants, as is customary in this market. This analysis assumes a vacancy rate of 5 percent, applied to rent and expense reimbursement income. Expense ratios, vacancy and collection loss rates, and recoveries are based on review of market trends.All operating assumptions with projected lease rates are presented in Table 3. In addition, stabilized net operating income (NOI) in 2008 dollars based upon a static analysis is calculated. As shown, the retail component of the project is anticipated to generate a NOI of $1,650,000 upon stabilization. Hotel Assumptions Table 3 also highlights the operating assumptions for the hotel component. As indicated,the 85 rooms are anticipated to have an average daily rate (ADR) of$235 per night and a 75 percent occupancy rate, generating an estimated $5.5 million in potential gross room revenue.The ADR and occupancy rates were provided by PKF Consulting. Additional income from a restaurant lease, spa operations and parking income total $4.9 million per year. An operating expense ratio of 75.4% is assumed, which is typical for such hotels, implying that NOI is 24.6% of total hotel revenue. As indicated, these assumptions produce an NOI of $2.5 million to the hotel operator. COPELAND REUSE VALUATION REPORT 6 APRIL 25,2008 2 -125 ATTACHM€NT 4 CONFIDENTIAL-ATTORNEY CLIENT PRIVILEGE CBRE CONSULTING CBRE CIS RICHARD ELLIS TABLE 2 ESTIMATED DEVELOPMENT COSTS MIXED USE-MARKET RATE FOR SALE CONDOMINIUMS&RETAIL CHINATOWN PARKING REUSE VALUATION SAN LUIS OBISPO,CA I. Land Assemblage Costs Land Acquisition 92.351 Sf Land $0.00/Sf $0 Relocation NA Allowance 0 Total Land Assemblage Costs 11. Direct Costs Off-site Improvements Allowance $ - On-site Improvements 92,351 Sf Land $ 25 /Sf 2,308,775 Entitlement Costs 1,000,000 Parking Costs Surface Spaces 0 Spaces $ 3.000 /Space Podium 0 sf $ - Structure Spaces 122 Spaces 35,000 /Space 4,270,000 Building Shell Costs Residential Component 50,400 Sf GBA $ 175.00 /Sf 8,820,000 Plaza Sf GBA $ /Sf 750,000 Hotel Component 81,365 Sf GBA $ 200.00 /Sf 16,273,000 Commercial Component 54,050 Sf GBA $ 135.00 /Sf 7,296,750 Furniture,Fixtures&Equipment 115 Units $ 30,000 /Unit 3.450.000 Tenant Improvements 54,050 Sf GLA $ 50.00 /Sf 2,702,500 Direct Contingency 5.00% Direct Costs 2,343,551 Total Direct Costs 49,214,576 Ill. Indirect Costs Architecture,Engineering&Consulting 5.0% Direct Costs 2,460,729 Public Permits&Fees Units $ /Unit 2,500,000 Art in Public Places %TDC $ Taxes,Legal&Accounting % Direct Costs $ Insurance 30 Units $34,000/Unit 1,020,000 Marketing&Leasing Commissions Residential Promotion 30 Units $ 10,000 /Unit 300,000 Commercial Leasing Commissions 54,050 Sf GLA $ 10 /Sf 540,500 Development Management 4.00% Direct Costs 2,241,432 Indirect Contingency 5.00% Indirect Costs 341,061 Total Indirect Costs 9,403,722 IV. Financing Costs Interest During Construction 24 Month Development Period Land Assemblage Costs 60.00%AOB 7.50% Interest $ 5,400,000 Construction Costs %AOB 7.50% Interest $ Financing Fees Construction Loan 60000000 Loan 1.00% Points 600,000 Permanent Loan $ Loan Points $ Commercial Lease Up Period Reserves Sf GLA $ /Sf $ HOA Subsidy 30,000 Warranties/Closing Costs/Commissions 5.0%Sales Revenue 1,085,500 Total Financing Costs 7,115,500 V. ITotal Development Costs 185,815 Sf GBA $353.76 /Sf GBA $ 65,733,799 COPELAND REUSE VALUATION REPORT 7 APRIL 25,2005 2 —12c� ATTACHMENT CONFIDENTIAL-ATTORNEY CLIENT PRIVILEGE CBRE CONSULTING CBRE CB RICHARD ELLIS TABLE 3 ESTIMATED RESIDENTIAL REVENUE AND COMMERCIAL NET OPERATING INCOME PROPOSED MARKET RATE FOR SALE CONDOMINIUMS,HOTEL&RETAIL CHINATOWN PARKING REUSE VALUATION SAN LUIS OBISPO,CA 1. Residential Gross Sales Revenue Market Rate Units 26 Units $835,000/Unit $21,710,000 Affordable Units 4 Units $242,250/Unit $970,000 Gross Residential Sales Income $ 22,680,000 11. Gross Retail Revenue Tenant Income 42,000 Sf GLA $ 3.25 /Sf GLA $ 1,638,000 Tenant Income 12,050 Sf GLA $ 2.00 /Sf GLA $ 289,200 CAM Reimbursements 270,250 Gross Income 2,197,450 (Less)Vacancy&Collection 5.0% Gross Income (219,745) Effective Gross Income $ 1,977,705 Commercial Operating Expenses CAM Expense 54,050 Sf GLA $ 5.00 /Sf GLA 270,250 Property Management % EGI $ Capitalized Reserves 54,050 Sf GLA $ 1.00 /Sf GLA 54,050 Total Operating Expenses 324,300 Commercial Net Operating Income $ 1,653,405 U. Gross Hotel Revenue Occupancy Room Revenue 85 75.0% $ 235.00 per Room $ 5,468,156 Food&Beverage 85 75.0% $ 165.00 $ 3,839,344 Parking&Other Income 85 75.0% $ 45.00 $ 1,047,094 Effective Gross Income 100.0% $ 10,354,594 Operating Expenses Rooms Dept 85 75.0% $ 58.00 $ 1,349,588 Food&Beverage 85 75.0% $ 125.00 $ 2,908,594 Other Depts 85 75.0% $ 27.00 $ 628,256 Administrative 85 75.0% $ 33.00 $ 767,869 Marketing 85 75.0% $ 20.00 $ 465,375 Operations&Maintenance 85 75.0% $ 23.00 $ 535,181 Management Fee 3.0% $ 310,638 Taxes&Insurance $ 425,000 Reserves 4.0% $ 414,184 Total Operating Expenses 75.4% $ 7,804,684 Hotel Net Operating Income 24.6°h $ 2,549;910 COPELAND REUSE VALUATION REPORT 8 APRIL 25,2008 2 -Iz7 CONFIDENTIAL—ATTORNEY CLIENT PRIVILEGE ATTACHMENT 4' CBRE CONSULTING CBRE CB RICHARD ELLIS Condominium Assumptions The condominium component consists of 30 residential units averaging 1,333 square feet per unit. Condo sales prices have been estimated by the Developer at $567 per square foot. This takes into consideration four affordable units. Parking The site currently functions as a public parking lot with 155 metered spaces. This parking is important to meet the needs of the commercial businesses in downtown Son Luis Obispo. Although the Developer will be paying for the development costs associated with the 122 onsite parking spaces required for the new development, there will be no surplus parking that is available to the public. Combined Project Table 4 presents a stabilized value analysis of the combined residential, retail and hotel components of the project. To solve for the reuse value of the City land, CBREC estimated the supportable private investment for each component as follows: 1. For the residential component,we take gross sales revenues and deduct a conservative developer profit margin of 15% of sales. 2. For the retail component we take net operating income from the 54,300 square feet of net rentable area and capitalize at a 6.50% cap rate. 3. For the hotel component we take the net operating income from the hotel and capitalize it at a 9.5%capitalization rate. Total development costs are deducted from the total supportable investment value, to yield the $5.8 million reuse value of the entire site. The entire site was acquired for a single unitary project and the approvals for the project are based on that concept. Because of this, it is not practical to ascribe separate values to different portions of the overall site on the basis of aspects such as access,visibility,view,etc. Consequently the value for the entire site has been allocated to the City parcel on a pro rata basis based on its percent share of the total square footage of the entire site.Allocating the overall land value to the 58,300 square foot City parcel ($3.7 million) and subtracting the $2.5 million for parking costs yields the $1.1 million reuse value for the City land. COPELAND REUSE VALUATION REPORT 9 APRIL 25,2008 2-12� CONFIDENTIAL-ATTORNEY CLIENT PRIVILEGE ATTACHMENT `T " CBR$ CONSULTING CBRE CEI RICHARD ELLIS TABLE 4 REUSE LAND VALUE CALCULATION PROPOSED MARKET RATE FOR SALE CONDOMINIUMS,HOTEL&RETAIL CHINATOWN PARKING REUSE VALUATION SAN LUIS OBISPO,CA I. Supportable Private Investment A. Residential Component Residential Sales Revenue(TABLE 3) $ 22,680,000 Developers Profit on Sales Revenue 15.0% 3,402,000 B. Commercial Component Net Operating Income(TABLE 3) $ 1,653,405 Developers Threshold Return on Cost 6.5% Supportable Private Investment $ 25,437,000 C. Hotel Component Net Operating Income $ 2,549,910 Developers Threshold Return on Cost 9.5% Supportable Private Investment $ 26,841,155 D. Total Supportable Private Investment $ 74,958,155 11. Reuse Land Value Calculation Total Supportable Investment $ 74,958,155 (Less)Developers Profit on Resid.Sales Revenue 15.0% (3,402,000) (Less)Estimated Development Costs(TABLE 2) (65,733,799) Residual Land Value-Entire Site $ 5,822.356 City Site as a Percent of Entire Site 63.0% Reuse Value For City Site without In Lieu Parkin Fee --$-3,-670,6-1-6-1 Reuse Value with In Lleu Fee($16,400 x 155) $ 1,128,616 COPELAND REUSE VALUATION REPORT 10 APRIL 25,2008 2 -)2� ATTACHMENT CONFIDENTIAL—ATTORNEY CLIENT PRIVILEGE CBRE CONSULTING CBRE CEI RICHARD ELLIS V. VALUE AT THE HIGHEST AND BEST USE The highest and best use value of the City property was determined by an MAI appraisal from CB Richard Ellis Valuation Services. The value conclusion is $8.8 million. See separate appraisal report dated April 11 2008. DISCUSSION OF HIGHEST AND BEST USE The highest and best use of a property is commonly considered to be that use which meets the following criteria: • Physically possible • Legally permissible • Financially feasible • Maximally productive The total site with the City property is approximately 58,371 square feet, fully serviced by municipal infrastructure with a 6,000 square foot fully improved office building. The site would support any type of development reasonably proposed in downtown San Luis Obispo. RECONCILIATION TO REUSE VALUE The value of the subject site as determined in this reuse appraisal assumes that all existing uses will be removed to provide a clear development pad. As such, no value is given to the existing 6,000 square foot office building. Because the highest and best use value was determined using comparable sales of commercial property in San Luis Obispo, no requirement for the replacement of existing public parking was incorporated. Tables 5 through 8 present a separate highest and best use valuation without the limitations in the reuse valuation. COPELAND REUSE VALUATION REPORT 1 1 APRIL 25,2008 Z-130 CONFIDENTIAL-ATTORNEY CLIENT PRIVILEGE ATTAC IMEN i O CBRE CONSULTING CBRE CB RICHARD ELLIS TABLE 5 SCOPE OF DEVELOPMENT MAXIMUM MARKET RATE FOR SALE CONDOMINIUMS&RETAIL CHINATOWN PARKING REUSE VALUATION SAN LUIS OBISPO,CA I. Site Size(Sf) 92,351 sf Acres 2.1 Gross Number Unit Sizes Livable Area II. Residential Unit Mix of Units (Sf) (Sill Studio Units 0 One-bedroom Units 0 Two-bedroom Units 0 Number of Market Rate Units 125 1,100 137,500 Number of Affordable Units 0 0 0 Totals/Averages 125 1,100 137,500 III. Gross Buildina Area(Sf) A. Residential Component Gross Sellable Area 137,500 Lobby 1,500 Circulation 11,000 Residential GBA 150,000 B. Retail Component Gross Leasable Area 35,000 C. Hotel Component Guest Rooms 0 0 0 sf Circulation 0 Lobby,Restaurant,Bar,Spa 0 Total Hotel Area 0 D. Total Gross Building Area 185,000 FAR(GBA Sf/Land Area So 2.00 IV. Parking Comoonent A. Parkins Type Surface Spaces 0 Above-Grade Garage Spaces 287 Subterranean Garage Spaces 0 Total Parking Spaces 287 B. Residential Parkina Spaces Resident Spaces 240 Guest Spaces 12 Total Residential Parking Spaces 252 Per Unit 2.016 C. Commercial Parking Spaces 35 Per 1,000 Sf GLA 1.00 COPELAND REUSE VALUATION REPORT 12 APRIL 25,2008 2-131 I Y CONFIDENTIAL-ATTORNEY CUENT PRIVILEGE ATTACHMENT�V CBRE CONSULTING CBRE CB RICHARD ELLIS TABLE 6 ESTIMATED DEVELOPMENT COSTS MAXIMUM MARKET RATE FOR SALE CONDOMINIUMS&RETAIL CHINATOWN PARICING REUSE VALUATION SAN LUIS OBISPO,CA I. Land Assemblage Costs Land Acquisition 92,351 Sf Land $0.00/Sf $0 Relocation NA Allowance 0 Total Land Assemblage Costs IL Direct Costs Off-site Improvements Allowance $ On-site Improvements 92,351 Sf Land 25/Sf 2,308,775 Entitlement Costs 11000,000 Parking Costs In Lieu Fee 0 Spaces $ 30,000 /Space Podium 0 sf $ - Structure Spaces 287 Spaces 35,000 /Space 10,045,000 Building Shell Costs Residential Component 150,000 Sf GBA $ 175.00 /Sf 26,250,000 Community Space Sf GBA $ /Sf 750,000 Hotel Component 0 Sf GBA $ - /Sf Commercial Component 35,000 Sf GBA $ 135.00 /Sf 4,725,000 Furniture,Fixtures&Equipment 125 Units $ 15,000 /Unit 1,875,000 Tenant Improvements 35,000 Sf GLA $ 50.00 /Sf 1,750,000 Direct Contingency 5.00% Direct Costs 2,435,189 Total Direct Costs 51,138,964 Ill. Indirect Costs Architecture,Engineering&Consulting 5.0% Direct Costs 2,556.948 Public Permits&Fees Units $ /Unit 2,500,000 Art in Public Places %TDC $ Taxes,Legal&Accounting % Direct Costs $ Insurance 125 Units $25,000/Unit 3,125,000 Marketing&Leasing Commissions Residential Promotion 125 Units $ 10,000 /Unit 1,250,000 Commercial Leasing Commissions 35,000 Sf GLA $ 10 /Sf 350,000 Development Management 4.00% Direct Costs 2,436.836 Indirect Contingency 5.00% Indirect Costs 489,097 Total Indirect Costs 12.707,882. IV. Financing Costs Interest During Construction 24 Month Development Period Land Assemblage Costs 60.00%AOB 7.50% Interest $ 6,075,000 Construction Costs %ADS 7.50% Interest $ Financing Fees Construction Loan 67500000 Loan 1.00% Points 675,000 Permanent Loan $ Loan Points $ Commercial Lease Up Period Reserves Sf GLA $ /Sf $ HOA Subsidy 125,000 Warranties/Closing Costs/Commissions 5.0% Sales Revenue 4,125,000 Total Financing Costs 11,000,000 V. ITotal Development Costs 185,000 Sf GBA $404.58 /Sf GBA $ 74,846,846 COPELAND REUSE VALUATION REPORT 13 APRIL 25,2008 2 -137 ATTACHMENTO CONFIDENTIAL-ATTORNEY CLIENT PRMLEGE CBRE CONSULTING CBRE CE1 RICHARD ELLIS TABLE 7 ESTIMATED RESIDENTIAL REVENUE AND COMMERCIAL NET OPERATING INCOME MAXIMUM MARKET RATE FOR SALE CONDOMINIUMS&.RETAIL CHINATOWN PARKING REUSE VALUATION SAN LUIS OBISPO,CA I. Residential Gross Sales Revenue Market Rate Units 125 Units $660,000/Unit $82,500,000 Affordable Units 0 Units 0/Unit 0 Gross Residential Sales Income $ 82,500,000 IL Gross Retail Revenue Tenant Income 35,000 Sf GLA $ 325 /Sf GLA $ 1,365,000 CAM Reimbursements 24,524 Gross Income 1,389,524 (Less)Vacancy&Collection 5.0% Gross Income (138,952) Effective Gross Income $ 1250.572 Commercial Operatina Expenses CAM Expense 35,000 Sf GLA $ 0.70 /Sf GLA 24,524 Property Management % EGI $ Capitalized Reserves 35,000 Sf GLA $ 0.50 /Sf GLA 17,500 Total Operating Expenses 42,024 Commercial Net Operating income $ 1.208,548 IL Gross Hotel Revenue Occupancy Room Revenue 0 78.0% $ 175.00 per Room $ - Spa Revenue 0 15.0% $ 55.00 $ Other Income 0 78.0% $ 10.00 $ - Restaurant Lease Income sf $ 3.00 $ Effective Gross Income 100.0% $ Operatina Expenses Rooms Dept 0 78.0% $ 32.00 $ Spa 0 15.0% $ 44.00 $ - Other Depts 0 78.0% $ 5.00 $ - Administrative 0 78.0% $ 12.29 $ Marketing 0 78.0% $ 17.56 $ Operations&Maintenance 0 78.0% $ 14.63 $ - Management Fee 3.8% $ - Taxes&Insurance $ Reserves 4.0% $ Parking Lot Lease $ Total Operating Expenses 0.0% $ Hotel Net Operating Income 0.0% $ COPELAND REUSE VALUATION REPORT 14 APRIL 25,2008 2 -) 33 ATTACHMENT to CONFIDENTIAL-ATTORNEY CLIENT PRIVILEGE CBRE CONSULTING CBRE CB RICHARD ELLIS TABLE 8 REUSE LAND VALUE CALCULATION MAXIMUM MARKET RATE FOR SALE CONDOMINIUMS&RETAIL CHINATOWN PARKING REUSE VALUATION SAN LUIS OBISPO,CA I.. Supportable Private Investment A Residential Component Residential Sales Revenue(TABLE 3) $ 82,500,000 Developer's Profit on Sales Revenue 15.0% 12,375,000 B. Commercial Component Net Operating Income(TABLE 3) 1,208,548 Developer's Threshold Return on Cost 6.5% Supportable Private Investment $ 18,593,040 C. Hotel Component Net Operating Income $ - Developer's Threshold Return on Cost 10.5% Supportable Private Investment $ _ D. Total Supportable Private Investment $ 101,093,040 ll. Reuse Land Value Calculation Total Supportable Investment $ 101,093,040 (Less)Developers Profit on Resid.Sales Revenue 15.0% (12,375,000) (Less)Estimated Development Costs(TABLE 2) (74,846,846) Residual Land Value-Entire Site $ 13,871,194 City Site as a Percent of Entire Site 63.0% Reuse Value For City Site $ g;744;gg3 COPELAND REUSE VALUATION REPORT 15 APRIL 25,2008 2-13Y CONFIDENTIAL—ATTORNEY CLIENT PRIVILEGE _ ATTACHMENT CBRE CONSULTING CBRE CB RICHARD ELLIS ASSUMPTIONS AND LIMITING CONDITIONS SPECIAL ASSUMPTIONS AND LIMITING CONDITIONS 1. This analysis assumes that a final Agreement will be consistent with the draft terms upon which this analysis is based. 2. Construction costs and lease rates and terms were provided by Copeland. CBRE Consulting checked these figures for reasonableness, but did not obtain independent cost estimates. STANDARD ASSUMPTIONS AND LIMITING CONDITIONS 1. The title to the subject property is assumed to be marketable and the property free and clear of all liens and encumbrances, except as noted. 2. No liability is assumed for matters that are legal or environmental in nature. 3. Ownership and management are assumed to be in competent and responsible hands. 4. No architectural or engineering study, property survey, soil study or environmental investigation has been made, and no liability is assumed in connection with such matters. The described physical condition of the property is based on visual inspection only,and it is assumed that there are no hidden or unapporent physical conditions affecting value. Dimensions and areas are as supplied by others or based upon field measurements and are subject to survey by qualified professional surveyors or architects. 5. The valuation will be prepared for the specific objective stated and shall not be used for any other purpose without the written permission of CBRE Consulting. b. The signatories shall not be required to give further consultation ortestimony,or appear in court or at any public hearing with reference to the property appraised, unless prior arrangements have been made with the client. 7. This report is intended to be read and used as a whole and not in parts. Separation of any section or page from the main body of the report is expressly forbidden and invalidates the report. COPELAND REUSE VALUATION REPORT 16 APRIL 25,2008 2--135 ��I CONFIDENTIAL—ATTORNEY CLIENT PRIVILEGE MAC u IMEN IT CBRE CONSULTING CBRE CB RICHARD ECUS 8. Any estimates of future rents, expenses, net operating income, mortgage debt service, capital outlays, cash flows, inflation, capitalization rates, yield rates or interest rates are intended solely for analytical purposes and are not to be construed as predictions of the appraisers.They represent only the judgment of the authors as to the assumptions likely to be used by purchasers and sellers active in the market place as of the date of value, and their accuracy is in no way guaranteed. 9. It is assumed that all necessary licenses, agreements, franchises,etc., remain in full force and effect in order to continue the operations of the property as a going concern throughout the financial analysis period of this appraisal, unless otherwise noted. 10. Possession of this report does not carry with it the right of publication. It shall be used for its intended purpose only and by the parties to whom it is addressed. Neither all nor any part of the contents of this report shall be conveyed to the public through advertising, public relations, news,sales,or other media without the written consent or approval of the author. This applies particularly to value conclusions and the identity of the appraiser or firm with which it is connected. 11. Property values are influenced by a large number of external factors. The information contained in the report comprises the pertinent data considered necessary to support the value estimate. No pertinent fact has been knowingly withheld, but we do not guarantee that we have knowledge of all factors that might influence the value of the subject property. Due to the rapid changes in the external factors,the value estimate is considered reliable only as of the effective date of the appraisal. 12 The date of value to which the conclusions and opinions expressed in this report apply is set forth in the letter of transmittal and the appraisal document.The dollar amount of any value opinion rendered in this report is based upon the purchase power of the U.S. dollar existing on that date. 13. If this report is placed in the hands of anyone other than the Client,the Client shall make such party aware of all limiting conditions and assumptions of the assignment and related discussions. The Appraiser is in no way to be responsible for any cost incurred to discover or correct any deficiencies of any type present in the property, physically, financially and/or legally. The Client also agrees that, in case of lawsuit(brought by lender, partner or part owner in any form of ownership, tenancy or any other part), Client will hold appraisers completely harmless from and against any liability, loss, cost or expense incurred or suffered by appraiser in such action, regardless of its outcome. COPELAND REUSE VALUATION REPORT 17 APRIL 25,2008 2 3L ATTACHMENT 7 SECOND MODIFICATION TO OPTION TO PURCHASE REAL PROPERTY This Second Modification to Option Agreement is made as of July 1, 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 Tenn ended on May 4, 2007. Copelands exercised the third Additional Option Tenn in a timely manner by paying the applicable Additional Option Price and such Additional Option term ended by its terns on May 4, 2008. The Parties executed aTirst Modification to Option to Purchase Real Property, dated April 4, 2008, in which they agreed to a short extension of the Additional Option Term to accommodate negotiation of this Second Modification, which extension will end July 3, 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 valuation of the Property by C.B. Richard Ellis. C. The parties obtained both fair market and re-use valuations in light of the effects of the certified EIR's findings and mitigation measures, community concerns, and City regulations upon the development potential of the Project, thereby affecting the purchase price. D. Additionally,the City updated its fiscal impact analysis of the proposed Project in light of potential changes to the Project since the Option to Purchase Real Property was first entered into, and said fiscal impact analysis shows a more positive.fiscal effect than previously contemplated. E.. In 2007, Copelands substantially revised their proposed Project in response to public comment and the draft EIR from the concept plan originally submitted to the City in 2005 to substantially reduce the height, bulk and scale of the Project. Additionally, Copelands have submitted a revised site layout in June, 2008, showing a revised Project with the proposed hotel at the corner of Palm and Morro Streets, thereby providing for abetter traffic circulation and mix of uses along Monterey and Chorro Streets, and allowing for more careful consideration of the 2-I 37 1 AnACNMENI` treatment of the historic structures in. the vicinity of that comer. Formal submission of conceptual drawings for the revised Project is expected following the execution of this Agreement. 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. Section 3 (Term of Option) of the Option to Purchase Real Property is hereby amended by the additions of new subparts (b) and (c)to read as follows: (b) The Term of Option is hereby modified to allow for extension of the Option Term up to three more one year Additional Option Terms, with the first such Additional Option Term commencing on July 2, 2008. The Additional Option Price ($29,500) shall be paid on or before July 2 of each year for each extension of the Option Term, commencing with the Additional Option Term beginning July 2, 2008. (c) Furthermore, in the event that Property has not transferred to Copelands by 5 p.m. July 2, 2011, and Copelands seek to extend the term of this Option further, Copelands shall pay an "Accelerated Additional Option Price" to City. The Accelerated Additional Option Price shall be in the amount of 20% of the remaining balance of the "New Purchase Price" (as described in section 8), factoring in a credit for Additional Option Price and Initial Option Price payments already made and adjusting the New Purchase Price upward using the Purchase Price adjustment ratio as described in section 8. The Accelerated Additional Option Price shall be paid to City every six months thereafter until the Property is transferred from City to Copelands. In the event a sixth Accelerated Additional Option Price payment is made, it shall be for the remaining balance of the New Purchase Price. Such Accelerated Additional Option Price payments shall each be credited toward the New Purchase Price. However, notwithstanding the above; six months after payment of the sixth Accelerated Additional Option Price payment, i.e. by 5 p.m., July 2, 2014, if the Property has not yet transferred to Copelands, the Term of the Option shall end and City is entitled to keep all Accelerated Additional Option Price payments, Initial Option Price payments and Additional Option Price payments, and City shall retain title to the Property. 2. Section 4 (Conditions of Exercise of the Option) of the Option to Purchase Real Property is hereby amended to read as follows: Conditions of Exercise of the Option. The option is to be exercisable on the following conditions: A. The Option must be exercised, if at all, during the Option term or any duly exercised Additional Option Term. During such period, the Copelands shall pursue the z z -r3� AnACHM€9I issuance of building permits and other required regulatory entitlements (if any) ("Permits") for construction of a development on the Property consistent with paragraph 7 below. B. Copelands shall be entitled to exercise the Option only if all of the following conditions have been satisfied: i. the Copelands have obtained permits for construction of the Project (except as otherwise set forth in subsection vi below) and permits have not expired; ii. the Copelands have submitted evidence to City that the Copelands have the financial resources, from lenders and from equity funds and investors as may be necessary, in a sufficient amount to complete the construction and equipping of the Project in accordance with a budget prepared by Copelands; iii. the Copelands have entered into construction contracts for the Project evidencing that the work of construction can be completed within the budget; iv, the Copelands have submitted evidence to City that a binding contract has been entered into between Copelands and a hotel operator demonstrating to City's satisfaction that a hotel will be built on the Property; V. the Copelands have submitted evidence of letters of intent demonstrating a pre-leasing threshold of 25% of the remaining (non-hotel) retail and office space has been achieved; and vi. the Copelands have submitted to City an application for building permits (but such permits need not have been issued) for the Blackstone Hotel, Bellos and Sauer Bakery sites. 3. Section 7 (The Project) of the Option to Purchase Real Property is hereby amended to read as follows: The Proiect. A. The Project shall' incorporate a hotel, retail and office space, as well as a downtown residential component. In connection with the Project, Copelands shall be responsible to comply with all laws and to conform to all land use, building and safety and other regulatory laws, to bear the cost of any compliance with the California Environmental Quality Act or other laws, and to apply for and obtain any variances, zoning changes or other special permits as the Project may require, all of which shall be accomplished and obtained within the time allowed for exercise of this Option. This Option Agreement shall not constitute any agreement by the City to take any action in its regulatory function to implement or favor the Project, to waive or reduce any fees, charges or exactions that are otherwise applicable or to agree to grant or issue any 3 2 -I 3`, ATTACHMENTI entitlement or permits. Copelands understands that it may be required to pay in-lieu parking fees in connection with the Project's parking demand, as required by the City's then applicable ordinances and regulations, without any preference or reduction. B. In conjunction with fulfilling their obligations under CEQA, Copelands are required to conduct a historical structures analysis of the Blackstone Hotel and Sauer Bakery sites. While these sites are not part of the Property, Copelands' development plans are to include development of these sites. City is amenable to the Copelands having their consultant perform the historical structures analysis and City will have its EIR consultant, through a sub-consultant, conduct a peer review of the historical structures analysis, consistent with and as contemplated by CEQA and the CEQA Guidelines. C. The parties acknowledge the EIR finds that the proposed project will result in potentially significant impacts to the public parking supply due to the loss of existing metered public parking on the project site and on streets adjacent to the project site, combined with a substantial increase in demand from the proposed project (which, when combined, will be in excess of proposed on-site parking). The EIR imposes a mitigation measure to address this situation, which mandates the applicant to pay an amount equal to the parking in-lieu fee to the City of San Luis Obispo for the calculated net unmet demand of parking spaces(155 spaces as calculated at the time of entering into this Second Modification, the number of spaces may vary slightly depending upon the final project that is approved) included in table 3.10-10 of the EIR. Additionally, the EIR requires Copelands shall pay a parking in-lieu fee for each on-site parking space provided that is not preserved and maintained available to the intended users including residents, staff and customers. Nothing in this Second Modification to Option to Purchase Real Property shall relieve Copelands of their obligation to pay the parking in-lieu fee as a mitigation measure imposed by the EIR or City regulations. Notwithstanding description of the in- lieu fee or mode of calculation set forth in the EIR, the parties agree that, as it pertains to mitigation of the loss of existing surface level parking described in the EIR(the"Existing Parking Spaces"), the parking in-lieu fee is being used solely as a means to measure and quantify an appropriate mitigation of this specific impact. On July 1, 2008, the parking in-lieu.fee increased to $17,072, and pursuant to the current ordinance, will continue to increase due to an inflation escalator that adjusts the fee every July 1 thereafter. The parties agree that, in the case of the mitigation measure for the loss of Existing Parking Spaces, Copelands shall pay a mitigation amount equivalent to the parking in-lieu fee in effect as of July 1, 2008, adjusted for inflation each July I thereafter until this mitigation measure is satisfied or this Option expires. In addition to the mitigation payment described above for the loss of Existing Parking Spaces, Copelands shall also pay the parking in-lieu fee in effect at the time of building permit issuance where such fee is assessed in accordance with City's regulations 4 2 -ryo MANN I for un-met parking demand for the Project other than resulting from the loss of Existing Parking Spaces. 4. Section 8 (Exercise of the Option) of the Option to Purchase Real Property is hereby amended by the addition of a new subsection A to read as follows: A. New Purchase Price and Mitigation Measure. In light of the April 2008 re-use valuation prepared by C.B. Richard Ellis, the parties have agreed to a revised property exchange price;which consists of two elements: 1) a New Purchase Price of$1,100,000, and 2) an EIR mitigation measure for loss of public parking in the approximate amount of $2,600,000; resulting in a total property exchange price of approximately $3,700,000. Such amount shall be adjusted upward based on agreed upon increases and inflation escalators as set forth herein. The New Purchase Price for the purchase of the Property if the title to the Property is vested in the Copelands, or its designee, as of July 2, 2008, shall be $1;100,000, net of all expenses and costs of such escrow and the transfer of title to the Property; provided that the New Purchase Price shall be increased at the simple interest rate of.0833% of$1,100,000 for each month or part thereof from the effective date of this Second Modification to Option to Purchase Real Property until title is vested in the Copelands pursuant.to the exercise of this Option. At the closing of escrow for the Property, Copelands shall be entitled to a credit against the New Purchase Price for the Initial Option Price plus any Additional Option Price and Accelerated Additional Option Price already paid to the City. In addition to the New Purchase Price, Copelands must satisfy the mitigation measure mandated in the certified EIR stemming from public parking impacts to the public parking supply due to the loss of the Existing Parking Spaces (which is approximately $2,600,000 as of July 1, 2008, but will be adjusted at the time of building permit issuance based on the actual unmet parking demand and the inflation escalators), which payment is more specifically described in Section 7C. In addition, at the time of issuance of the building permits for the Project, Copelands will also have to pay any in-lieu fees based on any unmet parking demand for the Project other than resulting from the loss of Existing.Parking Spaces 5. Section 27 (Notices) of the Option to Purchase Real Property is hereby amended. to read as follows: All notices, requests, demands and other communications under this Option Agreement, except for the Exercise Notice which shall be personally delivered, shall be in writing and shall be deemed to have been duly given on the date of service if served personally, by reliable overnight courier, or by telecopy transmission for receipt during the receiving parties' normal business hours to the party to whom notice is to be given, or on the third (3rd) day after mailing if mailed to the party to whom notice is to be given, by first class mail, registered or certified, return receipt requested, postage prepaid, and properly addressed as follows: 5 2 -111 - ; ATTACHME91 City: City of San Luis Obispo 990 Palm Street San Luis Obispo, California 93401-3249 Attention: City Administrative Officer Facsimile: (805) 781-7109 With a copy to: City Attorney City of San Luis Obispo 990 Palm Street San Luis Obispo, California 93401-3249 Facsimile: (805) 781-7409 Copelands: SLO Chinatown, LLC Post Office Box.12260 San Luis Obispo, Califomia 93406 Attention: Tom Copeland Facsimile: (805) 593-0109 With a copy to: Suzanne Fryer General Counsel, SLO Chinatown, LLC Post Office Box 12260 San Luis Obispo, California. 93406 Facsimile: (805) 593-0109 Any party may change its address for purposes of this Section 27 by giving the other parties written notice of the new address in the manner set forth above. 6. New Section 29 (Force Majeur) is hereby added to the Option to Purchase Real Property to read as follows: Force Maieure. The parties shall use all due diligence and take all necessary measures in good faith to perform, but if completion of performance is delayed by reasons of floods, earthquakes or other acts of God, contamination from any nuclear fuel or from any nuclear waste,.war, civil commotion, riots, embargo, sabotage, terrorism or threat thereof, strikes, picketing, labor disputes, or other substantial cause beyond the reasonable control of the party (financial inability of the Parties excepted), then the specified time for performance shall be extended by the amount of the claimed delay actually so caused. 7. New Section 30 (Third Party Litigation) is hereby added to the Option to Purchase Real Property to read as follows: Third Party Litigation. In the event of litigation brought by a third party and a court order is obtained staying City's and. or Copelands' ability to proceed in the timely prosecution of their 6 2-1q2 CAMEO obligations under the Option to Purchase Real. Property, as amended, and the developmentapplication contemplated under such agreement, then the specified time for performance shall be extended by the amount of the claimed delay actually so caused. 8. Except for the modifications set forth above, the Original Agreement shall remain in full force and effect. 9. 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. [remainder of page intentionally left blank] 2-I�f 2 AAACHMENT 1 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: lir Tom Copel_ 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: ]onathan P. Lowell City Attorney Approved as to Form: By: �C S e F er Gen unsel, SIAt wn,LLC s � � � w a� � td nnnnnnnnnnn nay a � 3 � fJ1 A W N I-+ °� Vi 4 w6 > > j�J'fl II n m n n now 90 cz CD S N O o � rAtz r 0 ~ CD 12 -+ a 0 `fit ep ca C o00 \ o - o m c °a a. � o A � o � CD za z ° d July 1, 2008 The following people left messages on Barbara Ehrbar's phone today regarding item B2. Robert Lyon—do not vote yes on a motion to approve the Copeland purchase of property if it is less than the fair amount of$8.8 million. Will Powers—delay the vote until there is a better deal. Ms. Vietattoni called and asked that the Council delay tonight's vote on the Copeland request until more information is received on why it is offered for such a low amount. Elizabeth and Randy Ball want the Council to delay the vote on Item 2 so that the value of the property can be studied more closely. Opposition to proposed$3.7 million price to sell City-owned property to Copeland Enterprises Council Member Andrew Carter June 25, 2008 I have taken the unusual step of preparing a written statement outlining my current opposition to the proposed$3.7 million price to sell City-owned Chinatown property(former Public Works building and City-owned parking lots)to Copeland Enterprises because I will be out of town during much of the time leading up to the July I'Council meeting and therefore difficult to reach via telephone. Although I remain open to staff presentations,public testimony, and Council discussion to be held at the July I'Council meeting and could theoretically change my mind at that time,that possibility is unlikely given my current strong opposition. Here then are the reasons why I currently oppose the proposed $3.7 million price. 1) I am not comfortable with relying on the reuse appraisal as the sole estimate of the value of the City-owned land. This discomfort hinges on how sensitive the reuse appraisal is to the assumptions being made in it,particularly as regards the estimated cost to develop the property. A 1%variation in the estimated cost to develop the property leads to a$414,000 (11%)variation in the reuse value of the City-owned land. A 5%variation leads to a$2.1 million(561/6)variation. A 10%variation.leads to a$4.1 million (113%)variation. (Explanation of calculation: Page 2-126 of Council packet shows estimated development costs to be$65.7 million. 1%of that is $657,000. The City-owned portion of the entire Chinatown site is 63%. 63%of$657,000 equals $414,000. $414,000 is 11%of the $3.7 million reuse value of the City-owned land.) Given the sensitivity of the reuse appraisal,I believe we also need to rely on the $8.8 million market rate appraisal in informing our negotiations with Copeland Enterprises. That appraisal is based on six.recent comparable parcel sales in the downtown and is independently supported by four local brokers. At a minimum,we should be seeking to negotiate a final price somewhere between the reuse and market rate figures. 2) It concerns me that the market rate appraisal says the 6,000 sq. & City-owned Public Works building and the land on which it sits is worth$2.9 million by itself. Compare that to the $3.7 million reuse value for the entire 58,370 sq. ft.property. In essence,the reuse appraisal values the 52,370 sq. 8. City-owned parking lots at just$800,000. Since there are 155 parking spaces in those lots, that's a value of$5200 per space. I note that under the terms of the Garden Street Terrace agreement with Hamish Marshall,the City will receive$30,000 per space for the lost parking there. 3) It bothers me that the$177,000 in option payments already paid by Copeland Enterprises for the original 4-1/2 year lease-purchase agreement will be rolled over to the new agreement and counted against the new purchase price,even though that money should have been forfeited Andrew Carter,06/25/08 Page 1 of 4 1 J to the City under the terms of the original agreement. (Those terms required Copelands to obtain a building permit from the City for the project before the original agreement expired.) It also bothers me that the new agreement continues to use the tiny I%per year land cost escalator found in the original agreement. 4) Finally, it troubles me that in all our prior negotiations with Copeland Enterprises,the City always seems to give Copelands too good a deal. I've talked many times about my belief that it was a mistake to charge a reduced parking in- lieu fee several years ago on Court Street instead of the then current rate. The difference between the two rates resulted in a$900,000 savings for Copelands. Also in the Court Street agreement, the City assumed the risk for contamination on the former Court Street parking lot, site of the Obispo Theatre fire. During development, contamination was found. The City had to pay for containment. So the price actually realized for the Court Street lot was reduced. I continue to believe the Council majority made a mistake with respect to allowing Copeland Enterprises to brick-over and glass-over the Morro Street side of the new Apple store. The benefit we provided Apple and Copelands created a dead zone on Morro Street to the detriment of across-the-street property owners and the Cityy as a whole. Without that dead zone, it is easy to imagine that block having the ambiance of Garden Street. Finally,thanks to a 40-year lease negotiated with Riley's Department Store in 1989 and the decisions of various bankruptcy courts since,we currently rent first floor space in the Marsh Street Parking Garage to Copeland Enterprises for just 69¢per sq. ft. Copelands then subleases that space to Sports Authority for some higher figure,presumably something more in line with the current$3 to $4 per sq. ft. going retail rate downtown. Most likely, Copelands is making more money on that space than we are,yet the City as property owner is responsible for long-term maintenance. Wouldn't it be nice to negotiate a hard-nosed deal with Copelands this time? I might add that given the fact we didn't consider other developers for the Chinatown project when we negotiated the original lease-purchase agreement,the need to negotiate a hard-nosed deal should be higher. Comment on two points.raised in the Council packet 1) On page 2 of the Council packet,staff writes that the reuse value of$3.7 million is$600,000 more than the$3.0 million agreed-upon price in the original lease-purchase arrangement. That is an incorrect statement. The original lease-purchase agreement was very clear in saying the $3.0 million price did not include parking in lieu fees. (See bottom of page 2-13 of the Council packet.) Andrew Carter,06/25/08 Page 2 of 4 'w At the time the original lease-purchase agreement was signed,there was no way of knowing what those in lieu fees would be since there was no specific project to evaluate. But under the terms of the original lease-purchase agreement, the agreed-upon price would be $5.6 million($3.0 million+ $2.6 million in parking in lieu fees). Thus,the new lease-purchase agreement actually lowers the price for the City-owned land by$1.9 million. This is yet another reason why I believe the City should,.at a minimum, keep the $177,000 in option payments received under the original agreement as additional City income. 2) Staff discussion on page 8 and 9 of the Council packet leads to some confusion between the $8.8 million market rate appraisal done on the City-owned property and an$8.8 million reuse appraisal done on a potential Copelands condominium project. These are two separate calculations. The market rate appraisal was developed by comparing the City-owned Chinatown property (Public Works building and City-owned parking lots)to six other pieces of office and commercial property in the downtown which had recently changed hands. Using the actual sale prices for those six parcels, an assumed $8.8 million sale price for the City-owned property was determined. It.should be noted that all comparison property is currently zoned office or commercial. Some of the comparison parcels were vacant,some were not. It was assumed that all would be redeveloped office, commercial, or mixed use. It was not assumed that any would be redeveloped exclusively residential. Both the $8.8 million market rate appraisal and the alternate $8.8 million reuse appraisal assume"highest.and best use,"but the alternate reuse appraisal is subject to same potential for error as the $3.6 million reuse appraisal, since both rely on estimated development costs and are highly sensitive to the assumptions made. We therefore have a situation where either the market"knows"something the reuse appraisers don't or the reuse appraisers"know" something the market doesn't. The"market" in this case means six sets of buyers and sellers and is corroborated independently by four different local brokers. This is yet another reason why I believe both the $8.8 million market appraisal and the$3.6 million reuse appraisal should have been used in negotiating the final price for the City- owned land. Support for project but not. rice I do want to make clear that my objections to the Chinatown deal only have to do with the negotiated price on the City-owned land. I believe the project itself will bring long-term benefits to the City,including$1 million in net new tax revenue,and will help assure the on-going Andrew Carter,06/25/08 Page 3 of 4 economic vitality of our downtown. I believe,however, we could have negotiated a better price for the City-owned land and still have achieved these same long-term benefits. How to reach me I am in town today, Wednesday. On Thursday and Friday,I will be in Boulder, CO on a Chamber-sponsored trip. On Saturday, I will be traveling to North Carolina to attend a family reunion. I will be in North Carolina all next week and will be participating in the July Is' City Council meeting via teleconference. My cellphone number is 805-471-8103. In North Carolina, I can be reached on a landline, 252453-6812. During most of the next ten days, I will have access to City e-mail, ancarter@slocity.org Andrew Carter,06/25/08 Page 4 of 4 To the San Luis Obispo City Council and City staff July 1, 2008 Subject: Inaccurate parts of the City Staff report on Public Access Television must be corrected now My name is Kim Hams and I've been on the Board of the Sharing The Dream nonprofit for many years. I spoke last year here on the important issues of Public Access TV. With 65,000 subscribers to Charter cable and how important Channel 2 has been to so many people, you need to make sure the cable company is following its contract with the City of San Luis Obispo. Sharing the Dream joins the SLO Chamber of Commerce and many other nonprofits to support banned producers and fix this now. Our diverse Board works each year to educate and involve the public in Martin Luther King's dream of all people living together in peace. What kind of city and county do we live in? How this issue is handled will determine a lot of that. And we can bring even more top leaders here to tell you more about this. Sadly, despite what the staff report stated, there is almost no diversity left on Channel 2 Public Access. Our Board members such as our President Carlton Brown and Vice President Patrick Germany have been banned by Charter Communications and the few special-interest producers who sided with Charter starting over a year ago. Almost all the minorities who used to appear on Channel 2 are gone, including me. Even new producers in 2007 and 2008 have found it too hard. Public Access is gone. There is only private promotion by a few people if you watch the channel. Almost all the rules are broken. Those who break the rules get rewarded with more air time. The few people who helped all new producers such as Leslie Bearce and Ron Bearce have had so many untrue and hurtful things said about them 1 have to admire them still working against what is wrong and for the community. They are still banned without any hearings or real reasons given, other than they were whistleblowers about unfair treatment of minorities. The City reports on this must be changed to be accurate. None of the accused producers were ever present at any hearings. Charter has never met with those banned or heard the truth. None of those reporting discrimination ever reported any other disagreements with the Charter-supported new Board members in 2007. For the report to say staff couldn't NOT find discrimination doesn't make sense. It's documented and clear to everyone else. Our officers were banned this last.March election from voting and running against Charter's producers.Then Charter ran for two months a slanderous video against good people until told to stop it. Your Franchise Agreement has been broken. The annual audit needs to be done, not exempted for 2 years. The questions producers have asked the City Clerk finally have to be 1 " i answered. Also, there is no free speech still. Guam dogs have been hired for meetings and private security when minorities are treated badly, as if we are the ones who are dangerous. Innocent producers have been physically hit or restrained. The police have been called several times against people who are now friends of mine. When the only non-minorities who helped everyone are the ones being hurt, how can the City of San Luis Obispo's report be so inaccurate and not mention most of what has happened? There are reports of documented actions that the city needs to officially acknowledge as soon as possible. Order Charter staff and their few producers to come out into the open and debate the issues. If you do, they will stop this and allow the community back on Public Access television. Dear Audrey, Again, many producers and community leaders following Public Access appreciate the interest the San Luis Obispo City Council has shown to look into and help supervise Charter's Channel 2 Public Access nonprofit, SLOCOPA, or San Luis Obispo County Public Access. I was a Founding Board member in 2005 and elected to a two-year term in 2006, then removed "illegally" in 2007 for being a "whistelblower" and standing up for the minorities targeted as "ghost producers" by others wanting to keep their low-priority time slots. As you know, the City has the contract or "Franchise Agreement" with Charter Communications plus a contract with the nonprofit that advises Charter on how to run Public Access. "Equal access", non-discrimination on sex, race, religion, etc. are included in contracts like these. In addition to the positive effects your letter to the SLOCOPA Board have had — and the 5-0 vote last year against much of what has been going on in Public Access for years -- many are worried that with the major errors still in the City Staff report that more wrongs will be done using that report. Please consider that Staff may have been providedinaccurate information that can now be easily looked into and corrected. Banned producers have heard nothing from the current Board, meetings aren't announced like they used to be or are moved from month to month to different days of the week, and more. You were there when Acting Chair Sal Espana used vulgarities and hand gesters to producers who stood up to this so far just before the March 2008 Election.Meeting. You saw how he changed his list of who was given ballots or even who could vote, and how he spent 20 minutes trying to get the SLO City Police to come in and remove law-abiding members of the public. Lots of documentation or proof is available for you to answer the below the questions or others in the two reports given to City officials over the last month at City Public Comment. People are waiting your answeres. Here are some of the key questions from the City Clerk's report: Regarding the SLOCOPA Board actions over two years or more: 1) When were any banned or accused producers present at a 2007 or 2008 SLOCOPA Board meeting in which they or others accused of serious actions. Who was present when they were banned?What motion was made and what Board members voted to ban other producers? 2) What evidence was ever presented in video records or witnesses against those accused producers in 2007 and 2008? 3) Were any of the 2007 or 2008 Board members on video record or other records doing exactly what they accused others of doing that they then would ban or warn or put on "probation"? 4) Were rules put in placed and enforced only against 2007 and 2008 Board opposition members that changed the outcome of the Board election this year and last? 5) Weren't there more than one unnamed producer with documentation proving the 2008 and, of course, the 2007 Board elections were not fair, "fixed" or fraudulent? 6) How can the City of San Luis Obispo recognize this nonprofit if those claiming to control it haven't followed the Bylaws in years? How can the City of San Luis Obispo recognize this nonprofit Board if it was told July 3, 2007 to rewrite the convaluted Bylaws, and as of April 2008 announced Bylaws will be rewritten "in six months"to make them more legal? Aren't the Bylaws being rewritten by some of the same people who originally wrote them in secret meetings, banning even producers who were spouses of Board members from knowing what was going on? Regarding Charter Communications local staff: 1) Who is it that the Charter staff you interviewed and referred to in your report were "disruptive" by their"presence"?What occurred and when? Is it true that Charter is on record against only the minorities banned as to being "disruptive" or not welcome at Charter vs. the non-minorities on record WITH CHARTER of never being a problem for Charter? 2) Wasn't Charter staff involved in influencing Public Access elections in recent years? Didn't Charter staff"support 100%" the producers you and mediation have shown to be in violation of the City of San Luis Obispo contract, SLOCOPA Bylaws, "censorship" of free speech about Charter on Charter shows or in public", etc.? Did such rules have to be taken back by the 2007 or 2008 Boards? 3) Do shows misplay maybe on a daily basis from what is scheduled? Why is that? \ 4) Did Charter staff put up signs at Charter banning minorities and others from the telethon for j Martin Luther King's birthday celebration, and put in other restrictions or made special statements against producers when many minorities were involved? The answer to that and many other questions is "yes", and is proven in the documentation available to you. 5) What authority does SLOCOPA Boards have to order Charter to do anything?They have no contract with Charter, so doesn't Charter staff just do what they want regarding SLOCOPA's rules or "directives", other than when Charter banned members of the "public" from "Public Access" shows, also with no hearings or meeting with Charter staff? 6) Considering Charter staff is on record stating things like, "I'm not going to mediate this.", or "I'm just trying to keep my job", or similar to that (see the records), is it possible that Charter Communications has put a lot of pressure on local staff to cut local costs, including Public Access costs, especially making sure it never has to provide the additional Public Access channels it agreed to provide under circumstances similar to those by late 2006? Regarding documented "discrimination": 1) Isn't it known by now to the City Clerk that no female technicians have been included in paid SLOCOPA contracts or projects, even banned or personally attacked by SLOCOPA 2007 and 2008 Board members, all unfoundedly? Isn't that sexual discrimination? 2) Who are the minorities mentioned in your report who allegedly had disagreements with the Board BEFORE they reported discrimination about them or others? Isn't what the City of San Luis Obispo now saying is they MADE UP their allegations because they thought it would help them win some other fight, that they claimed "racism" falsely, despite all the documentation that the City has or should know about by, now? 3) Is it true that the City Clerk met for only 15 minutes with the Founder of the "Cultural Collective" and Vice President of Martin Luther King's "Dream" nonprofit of"Sharing The Dream" in her office? Didn't he have more proof to go over before the report was written, and wouldn't City Staff like to hear what that is from him and other minority producers, or others? 4) To report that there "appears"to be "diversity" on the channel or Board leaves out the facts that Channel 2 has only on Hispanic on-air host left, correct?That all the African-American and Asian hosts and nearly all the guests are now gone, other than one or two black preachers. Does the City Clerk believe that is "diversity"? Of all the dozens of Latino people who used to be on Channel 2 regularly, only two are on the Board, yet both first appeared on Channel 2 or started on the air on shows now banned by them. Does that seem odd to the City Staff? Both also are on record not following SLOCOPA rules or their own new rules, including not playing old shows after 30 days of airing or"imporf material that also is old, or not allowing one producer to host another's show, as current Chair Sal Espana accused banned Carlton Brown and Patrick Germany of doing. 5) Isn't City Staff concemed about the "establishment" of a religion when almost all religious people preach almost one religion? Is Staff concemed about the diversity of religious expression before the bans but during the time the City of San Luis Obispo funded SLOCOPA and had a contract with Charter itself? These are serious questions that judges and "the court of public opinion" or even the Los Angeles Times or others greater than any of us may have to decide. But they are easy questions for anyone to answer, thanks to the tremendous work by many to DOCUMENT all that has happened. Please consider a revision to your initial report to make sure all the facts available are inlcuded, Audrey. Also, thank you for the time you have spent meeting with me or others, coming to meetings recently and for the City Council showing such interest in this issue. Over 65,000 homes get Charter and Channel 2 is one of the first on the listings. Thousands used to be on the channel and many are determined to restore what was lost and put justice and faimess back in place. I still would like to meet with you as do others to help answer these key questions as soon as possible. Thank you, Leslie Bearce Founding SLOCOPA Board member 2005 Elected to two-year term 2006-2008 Producer of two shows, still banned by Charter without any hearings or meetings 1 1\ I WARREN A. SINSHEE%IER 1745 Tiburon Way RECE�V RED FILE San Luis Obispo,California 93401 ED MEETING AGENDA JUN 1 9 2008 DATE I` i �i)�ITEM #� June 18, 2008 S�0 CITy CpUN C1L, Mayor Dave Romero and Members of the City Council Lf COUNCIL $ CDD DIR City of San Luis Obispo Z CAO 29 FIN DIR ®ACAO Z FIRE CHIEF San Luis Obispo, California 93401 25 ATTORNEY' 9 PW DIR ® CLERK/ORIG 19 POLICE CHF Re: Monterey Street/Chinatown Project 13 DEPT RADS IC REC DIR 15g ?Tr T!4 UTIL DIR � HR DIR Dear Mayor Romero and Members of the City Council: x cownc, x c A!> x �tcrp I write as an individual, one of the owners of property located at 849 Monterey Street in downtown San Luis Obispo. Press reports indicate that you will be considering extending the agreement to sell the City parking lots across the street from our property to the Copelands. I express no view of the financial arrangement between the City and the Copelands;I trust that you and your staff will protect the financial interests of the City. My concern is that you make every effort not to derail this process. The 800 block of Monterey Street is in transition. Our retail space is vacant, awaiting retrofit. The buildings on either side of us, the former Wickenden Building on the corner and Forden's across Rose Alley, are empty. Forden's is in the midst of retrofit and the Wickenden Building, now owned by the Copelands, is empty and awaiting retrofit. Across the street, the old Blackstone Hotel and Sauer Market buildings are empty, awaiting the development of the Copelands' Chinatown project. The Bello Building is empty. Across Chorro Street,the Mission is in the midst of its retrofit, and other buildings on Chorro are still occupied but awaiting retrofit. The combination of retrofits,remodels and the new construction promise to make this end of Monterey Street one of the most vibrant areas of San Luis Obispo. The actual work of these projects will take time,but that time will be rewarded by a new spirit,beyond just new paint and new construction. Key to all of this is staying the course with the Copelands. Both the City and the Copelands have considerable time and resources invested in reaching the point where we are today. There have been differences,there have been delays,and there have been changes. But here we are, very close to realizing a new heart of downtown. If the City does not extend the time to work with the Copelands, there will inevitably be great uncertainty, and many projects will be back to the drawing board. Nobody but the Copelands can utilize the current parking lots as the Copelands can for the obvious reason that nobody else owns the surrounding properties. The Copelands do. i Mayor Dave Romero and Members of the City Council June 18, 2008 Page 2 Beyond the practical concern for keeping the overall project on track is the fact that the Copelands have a fine track record with their downtown projects. They took a failing project on Higuera Street and turned it into Downtown Center, one of the real magnets for downtown. They took the Obispo Theatre site which had lain fallow for thirty years and created the Court Street Project.They facilitated the City's new Parking/Office Structure on Palm Street. Less dramatically, but no less importantly, they kept the former Riley's building from being an empty shell, and they have brought new life to many other downtown properties. I for one am confident that they will create a project with equal or better results on the Chinatown site. We have looked out from our property at the awkwardly refaced Sauer Building and the empty,unsafe upper floors of the Blackstone Hotel for many decades. We look forward to being the revived neighbor to many renewed properties in our "neighborhood". This letter is written solely because of my concern for that neighborhood. Jim and Tom Copeland are friends of long standing, and I have done work for them on other matters. However,this letter is on my behalf, not theirs. I will be out of the country in early July when I understand you will be considering the extension of the Copeland agreement. Please do whatever you can to make that happen. espectfully, WAS:rtu F:\GENERAUPERS WAS\MayorCityCounCopelandProj-061808.wpd cc: Anne Sinsheimer Tom and Jim Copeland RED FILE - M ING AGENDA ,lune 26, 2008 DA 7 ITEM #�� San Luis Obispo City Council 990 Palm Street 7 RECEIVED San Luis Obispo, CA 93401 JUN 2 6 2008 SLO CITY CLERK Project No.: I have been following the Chinatown Project for some time now since I first learned of the project two years ago. The reason for my interest is simply, I want to live there. The concept of a mixed use project in downtown San Luis Obispo is long overdue. I have eagerly awaited the final design and have actually done some financial planning in anticipation of the projects ground breaking. However, as we all know, the project Architecture continues through redesign and public hearings. San Luis Obispo My interest in this particular project is enhanced, because of the Copelands history of Bakersfield successful, ggg&projects completed in San Luis Obispo's downtown core. Our city is San Jose better because of their vision and commitment to our hometown. As soon as I heard the Copelands were doing a mixed use project downtown, I wanted to be a part of it. This is a unique retirement opportunity for us"Baby Boomers". The time is now! The location is superb! The concept is overdue! I wholeheartedly support the Chinatown Project and urge your support. William R. Tuculet,A.1A Lu 0 COUNCIL CDD DIR EW CAO P4 FIN DIR ®ACAO 9 FIRE CHIEF 18 ATTORNEY ® PW DIR 19 CLERK/ORIG 59 POLICE CHF ❑ DEPT EADS W REC DIR 19. P1 ® HR DIR IFJ JYl _® HR DIR K Cauv�cc� X CGI X C(Wk, 4115 Broad St.Suite B6 San Luis Obispo.CA 93401 805.546,0433 805.546.0504 www.bfac.com L062608 _ Page 1 of I Council,SloCity From: Stephanie Hicks[stephanie@theridecoalition.com] Sent: Wed 6/25/2008 8:06 PM To: Council,SloCity Cc: Subject Revised Chinatown Project-VOTE YES Attachments: Dear City Council Members: As a new business owner on Monterey St. I want to send my overwhelming support in favor of the proposed Chinatown project.This new project not only enhances an underutilized area of town and allows for the re-establishment of Monterey Street's historic position as a main retail commercial block but it also incorporates hotel, retail, office, and residential uses—a smart growth principal of mixing uses for better more active development. This project will continue the revitalization and enhancement of the downtown and acts as a catalyst that provides an incentive for other property owners to enhance and upgrade surrounding properties. I know we all want to keeps the downtown strong and competitive with other outlying retail areas in the city but this is especially important to me as a local, small business owner who is not. only trying to make a living in San Luis Obispo but also raise a family and be a part of the community. Thank you for your time. Please vote YES on the Chinatown project. Sincerely, Stephanie Hicks COALITION 947 Monterey St. San Luis Obispo, CA 93401 PH: 805-595-1010 _ FX: 805-595-1011 https://mail.slocity.org/exchange/slocitycotincil/Inbox/Revised%2OChinatown%20Proj ect... 6/26/2008 Page 1 of 1 Council,SloCity From: Kevin Dye[kdye@adlerbelmontdye.com] Sent: Wed 6/25/2008 9:45 AM To: Council, SloCity Cc: Subject: CHINATOWN PROJECT Attachments: Council Members, Please accept my support for the proposed Chinatown project The project,with its re-design,will be a great addition to the downtown area. The project will enhance and revitalize a historic part of the downtown area that is tremendously underutilized at the moment The Copeland family has shown their stewardship of the downtown area with each of their projects and this projects re-design continues the process of updating and revitalizing our beautiful downtown area. I urge your support of continuing to work with the Copeland family to bring this project to completion. Sincerely, Kevin Dye, Principal Adler Belmont Dye Insurance Services,Inc. 369 Marsh Street-Suite 200 San Luis Obispo,California 93401 (805)540-3900(t) (805)540-3901 (f) It's about the Client. This E-mail message and any attachments are for the.sole use of the intended recipient(s)and may contain confidential and privileged information. It is intended only for the use of the individual(s) named above. Any unauthorized review, use, dissemination or distribution is prohibited. If you are not the intended recipient, please notify the sender and delete all copies of the E-mail and any attachments. Thank you. https://mail.slocity.org/exchange/slocitycouncil/Inbox/CHINATO WN%20PROJECT.EML... 6/26/2008 Ehrbar, Barbara From: Beverly Hensel [bhensel2311 @charter.net] Sent: Thursday, June 26, 2008 12:32 PM To: Ehrbar, Barbara Subject: Copelandia I am firmly against any more favors for the Copeland family - enough is enough - If the property is appraised at 8 million theN wait till we have a buyer who is willing to pay that the city can use the money and not have to raise the excise tax AGAIN. Too many businesses are leaving downtown because of high rents - let THE cOPELANDS pay what the area is worth - (8 million) --NO MORE FAVORITISM FOR THE COPELANDS........... i Page 1 of I Council, SloCity From: Javier Cadena Daviercadena@yahoo.com] Sent: Thu 6/26/2008 12:47 PM To: Council,SloCity Cc: Subject: Chinatown Project Attachments: RED FILE Dear Council Members, MEETING AGENDA I am writing this letter in support to the Chinatown Project. I am native of San Luis obispo and have DATF,�. ITEM #-62,, enjoyed raising my family in this beautiful city. I believe this project will show our cities ability to grow and keep up with residence demands without effecting our historic doowntown beauty and preservation. The Copelands along with the city council have done an outstanding job at keeping RECEIVED downtown thriving, modern and upscale. Please consider this project to be the next great addition to JUN 2 7 26GO our community. SLO CITY CLERK Sincerely, Javier Cadena a� ® COUNCIL i V CDD DIR ® CAO [$ FIN DIR ®ACAO Axl FIRE CHIEF ®ATTORNEY ;J PW DIR 0 CLERK/ORIG p POLICE CHF ❑ DEPT HEADS Gd REC DIR 1 ® UTIL DIR Tri * Lz HR DIR X CDAnpl X r-AV X http s://mail.slocity.org/exchange/slo citycounci l/Inbox/Chinatown%2OProj ect-2.ENfL?Cmd... 6/27/2008 uvd •- Wendy Eidson ® COUNCIL GQ CDD DIR ®CAO t� FIN DIR ACAO It FIRE CHIEF ®ATTORNEY fA PW DIR June 26, 2008 ® CLERK/ORIG a POLICE CHF 0 DEPT FADS G REC DIR ® 11 UTIL DIR Dear San Luis Obispo City Council, - N HR DIR_ X COAK ci I I have been a resident of San Luis Obispo since 1989,when my husband and I moved x U�k, here to start a business and a family. We owned a gourmet food company, Mo Hotta— Mo Betta for 12 years and sold it in 2000. Since then I have been the director of two thriving arts.organizations in downtown San Luis Obispo: the San Luis Obispo Little Theatre and the San Luis Obispo International Film Festival. I have also been a downtown resident since 1994,when we bought an historic home on Buchon Street, a half-block from Mitchell Park. In 20 years, I have watched San Luis Obispo's downtown develop from a sleepy little town that rolled up the sidewalks at sunset, to a thriving, exciting and unique area that I am not only proud of, but feel comfortable letting my teenage son and daughter walk around, day and night. The Copeland Family has had a major positive impact on the downtown I know and love. The Downtown Center development was a big hole in the ground when we first moved here, but since has become the center of town where people of all ages meet for movies, shopping, dining and socializing. It's attractive and vibrant, and houses public art, stores and restaurants that fit the Central Coast lifestyle. The Downtown Cinemas have been a huge addition to the town and recently have become an important new venue for the SLO International Film Festival. Similarly, the Court Street Shopping area has also dressed up our downtown, with stores that appeal to both locals and visitors, a charming walkway and some great local restaurants and wine bars. It is a tribute to the Copelands, the Downtown Association and the City that we can boast of an award-winning main street. The Copeland Family has also made important contributions to our community by giving generously to non-profit organizations in the community like French Hospital, The SLO Children's Museum and even donating very useful office space to the SLOIFF for the past three years. The Copeland's have been consistently thoughtful, tasteful and respectful in the development and maintenance of their projects in our downtown. I feel confident that the proposed Chinatown Project will follow suit. They have a good feel for what it takes to keep our downtown vital, successful and unique. I, for one, applaud their efforts and hope to see the Chinatown Project built. What a wonderful way to pay tribute to the history and ancestors of our town as well. _ Sincerely, RED FILE RECEIVED MEETING AGENDA Wendy Eidson DATE�I 0i ITEM # JUN 2 7 20198, SLO CITY CLERK 1170 Suchon St. San Luis Obispo, CA 93401 • 805-542-0672 wendyeidson@charter.net .. V June 30, 2008 RED FILE - CA MEETING AGENDA L� OOUNCIL CDD DIR Mayor David Romero IN CAO FIN DIR y I�/4TE ITEM # ®ACAO 4Z FIRE CHIEF 990 Palm Street ®ATTORNEY PW DIP San Luis Obispo, CA 93401 ®CLERK/ORIG POLICE CHF ❑ DE EADS f$ AEC DI ® E/7 RE: Copeland Chinatown Project UTIL DIP i OR 90 Dear Dave: X uvwEl I x cAo x claw I am writing this letter in support of the present Copeland Chinatown Project and request your approval of the extension at the upcoming July 1 meeting. The Copelands have successfully partnered with the City in building a parking garage and offices and have addressed the many issues that have come up over the past few years dealing with the Chinatown Project including changes in the height codes and addressing various concerns by neighbors and the citizens of San Luis Obispo. The Copelands have willingly complied with the City requirements for the design of the project and due to various unpredictable issues, have been delayed beyond their control. The Copelands not only have a history of successful projects in the downtown district but have the dedication, commitment, and economic clout to carry this project to its completion in this difficult economic environment. They have been sensitive to the historical nature of the district and in dealing with the CHC, and as an example, are currently relocating the hotel to the Palm Street side of the project. There are many reasons for continuing the project as it presently exists. San Luis Obispo needs to continue to upgrade our downtown district and to provide centralized housing especially in light of the recent national energy crises which has no end in sight. The city needs to realize the potential revenue from this district which would,oventhe long term, dwarf any current perceived differences in values of the downtown property. The Chinatown district needs to re-establish its identity and this development would go a long way towards accomplishing this goal. Historically, the area around the Mission and Monterey Street was the epicenter of the downtown district, and this would reestablish that area as the center. We all know that the real estate market is falling nationally. There is no sign of a bottom, and like in past recessions, could last for many years in which values would keep declining. In addition, the actual costs for the land to the Copelands have also significantly increased during the past few years. It Would only be fair to all parties to sustain the current agreement and allow the project to go ahead to its fruition for the good of the City. I would urge you to support the Copeland Chinatown project and continue our vision for a more successful downtown San Luis Obispo. Yours truly, RECEIVED William J. Watson, MD JUN 3 n 2008 Owner, Ah Louis Store SLO CITY CLERK f 06,30/2008 09:31 8055445F` KING VENTURES PAGE 04/04 RED FILE MEETING AGENDA LCOUNCIL $CDD DIR DATE ITEM # �JZi 69 CAO � FIN DIR ®ACAO 2 FIRE CHIEF V E N T U R E S 19 ATTORNEY '14 PW DIR ® CLERK/ORIG M POLICE CHF ® DEPj yEADS K REC DIR tP'�5 ® UTIL DIR a r� 9 HT#DIF; FAX MEMORANDUM Y Gatincl uCAC x GI�rIG TO: Councilmernber Andrew Carter CITY OF SAN LUIS OBISPO 805.781.7109 FROM: John E. King RE: CHINATOWN PROJECT DATE: June 30, 2008 TOTAL PAGES: ONE I recognize that you have in the past supported the Copeland Project and I want to encourage your continued support. They have demonstrated their ability to develop high quality and well designed projects that hove been appreciated and supported by our community. The concern of some regarding value can always be challenged the same as the comps in any appraisal; but it is of far more worth to this community that the project be designed and built as proposed and as soon as possible. Andrew, i thought your recent letter in the Tribute was right on. The method of establishing the value seems inappropriate but it was done by others some time ago and, unless you can convince the council majority to start over, I would encourage you to support the project. It will be good for the community and, as a well respected Councilmemeber, I believe your support is very meaningful. Good luck! RECEIVED JUN 3 0 2008 SLO CITY CLERK King Ventures 285 Bridge Street San Luis Obispo, CA 93401 8b5 544-4444 805 544-5637 FAX i Page 1 of 1 Council, SloCity From: Morris,Greg [GMorris@MorrisGarritano.coml Sent: Mon 6/30/2008 8:28 AM To: Council,SloCity Cc: Tomcope@aol.com Subject: Chinatown Attachments: Good Morning. I am writing in strong support of the Copeland Family's Chinatown Project. The Copelands not only have a proven track record creating beautiful buildings downtown and attracting the very best retailers, but think of where we would be and what the downtown would look like if not for their vision and commitment to our City. We all remember the big"hole in the ground"between Higuera and Marsh Streets. The Chinatown Project greatly enhances that part of downtown, preserves the historical Chinatown feel of that part of town, creates a needed draw to tourists to be able to stay downtown in the lovely hotel and creates residential living space while attracting more of the best retailers to our fair City. And the BEST PART of it is that the Copelands are doing it... people we can rely on! And as to the issue of the price being paid for the City land, we should be pleased to sell them the property at any reasonable price to allow them to move on this beautiful project. The current price is MORE than enough! Let's let them get on with it and we will all benefit. All the best, Greg Greg Morris Xforris&Garritano Insurance GMorris@D4orrisGarritano.com 805-543-6887 This email message i<for the sole use of rhe int.nded recipient;jai and nrav con lain eonfr cruel Incl p6%ileged Information. Any unauth:oimcd reeim,use,or disclustue a dutributiun is pn,hibited. 1f sou arc not the intended recipient,please convict the sends br reply. email and destroy all copies of the oriyznal message. If you am the inLLuded rccipicut,please be advised that the content id this messal;c i?stioicct o�access,remw andisclosure by the senders Emaii Jestem Administrator. https://mail.slocity.org/exchange/slocitycouncil/Inbox/Chinatown.EML?Cmd=open 6/30/2008 1 Page 1 of 2 Council, SloCity From: Tom Swem [tcs@swem.com] Sent: Fri 6/27/2008 9:55 AM To: Council,SloCity Cc: Subject: Copeland's Chinatown Project Attachments: Mayor Romero and Council Members, Just a note to let you know that I am,personally, supportive of the new version of the Copeland's Chinatown Project. I have been in the loop hearing from Mark Rawson over the past few months that they have accomplished many things including; the inclusion of retail and housing at Monterey and Chorro, having the hotel up on Palm Street and increasing the number of available hotel rooms while decreasing the overall project height. The inclusion of the meeting and conference rooms is a great use of space. As you remember the"Forum On Marsh"was a fantastic venue that was unfortunately underutilized due to the lack of"sleeping rooms"that would facilitate the downtown conference trade. On the residential condominiums:This was the first of the 3-4 downtown projects to offer this concept almost 10 years ago and even at that time there was a pent up demand and a list that was started for those with interest in purchasing these units. I am very much in favor of the densification of our downtown but with this comes the absolute need for providing the parking necessary to accommodate all facets of this use.Timely construction of new perimeter garages and 24/7 use of all garages is inherent in the overall success of residential in the downtown. We can design this to work or design it to be dramatically impacted and visually and functionally dysfunctional. I know this is"on the table"at this time and I thank you for considering this issue. The Copeland family has shown that they can"Pull Off'large scale development in the downtown and do it in a fashion that we all see as very positive. Their commitment to our downtown is unparalleled and their vision has had a more "global"view of how our downtown can be redeveloped with outstanding architecture, historic flavor as well as keeping the personal investment and sales tax returns favorable for both the investors and the City of San Luis Obispo. Thank you for your consideration on this matter and I request your support to continue to move this project forward in a timely manner. Tom Swem,CCIM Real Property Investments 570 Marsh Street San Luis Obispo, CA 93401 1-805-544-4422 1-800-549-4422 https://mail.slocity.org/exchange/slocitycouncil/lnbox/Copeland%27s%2OChinatown%20... 6/30/2008 c J �Iillllllll�����ll Illi RED FILE RECEIVED -- MEETING AGENDA JUL 01 2008 ®ATE_-_ I�Irk_ ITEM # SLO CITY CLERK MEMORANDUM From the Office of the City Attorney June 30, 2008 [COED UNCIL ��I '9 CDD DIR TO: Mayor and City Council O FIN DIR ORNEY � FIRE CHIEF RPVORI(3 ® PW DIRFROM: Jonathan P. Lowell, City Attorney ® POLICE CHFEADS ® REC DIRSUBJECT: Business Item 2, Chinatown Pro ect r(OKO 3 UTIL DIR1 —�---_ �l HR DIR " u - 1 Council member Mulholland sought clarification regarding what the proposed Chinatown x cA 0 project's parking obligations are stemming from its latest proposal. I posed her question to staff<< as follows: Christine M.just called me saying that it is her understanding that the Chinatown project as now proposed will only provide panting for hotel and residential uses, but not commercial. She believes we have parking requirements applicable to retail in the downtown, but Copeland not providing it in this instance. My understanding is that Copeland expects to be"fully parked" and if not, will pay in parking in lieu fee applicable at time of building permit issuance. What I am not clear on is whether retail triggers parking, and what Copeland intends to do about it in this instance. The response I received from Pam Ricci was as follows, and the attachment she sent is on the back of this memorandum. I wanted to start the response to Jonathan's question by stating that we have not done a parking analysis of the revised project as it has not been formally submitted yet. I'm assuming we would be following the same guiding principles in analyzing the revised project as we did with the version of the project discussed in the Final EIR and reviewed by the Council last December. I've attached a parking summary from the Council report to refresh everyone's memories. Actually,both Jonathan and Christine are correct. Jonathan is correct in that all of the uses in the project, including the retail; count toward the overall project parking requirement. Christine is right in that the applicant did not intend to have public parking on-site for the retail uses. There would be parking set aside on-site for the residential units and hotel. Any additional parking spaces available in the garage would be allocated amongst other uses on the site such as shop owners and some office workers. Per the attached excerpt describing the project parking requirement, the applicant would be required to pay additional in-lieu fees if more of the on-site spaces were allocated for either the residential or hotel component beyond the base City requirement. JP1Jcp Attachment Parking Summary (for Chinatown Project reviewed in December of 2007) Net Project Project Parking Net Unmet Factors Influencing Parking Parking Demand Provided& Parking Calculations Credits Demand Parking Demand Per City Code(includes 206 all uses in project—see Table 3.2-2 in the EIR Update document on Page 3-9) Displaced Surface Parking 155 Existing Use Credit Per City Code 95 Proposed Spaces 122 Totals 361 217 144 The resulting net unmet project demand is 144 parking spaces. To offset impacts of the loss of parking and added demand, Mitigation Measure TT-7a is included that would require the payment of in-lieu fees for the net project parking requirement of 144 spaces. The number of in-lieu fees required could increase depending on how the applicant chooses to allocate the 122 parking spaces provided on-site for different uses. The idea is that the privately owned and managed spaces would be available for the range of different uses on the site in accordance with City requirements for.those uses. The EIR uses the example of the residential parking requirement of 44 spaces to illustrate this concept. If the applicant chose to allocate more on-site spaces toward residential uses, then it would be required to pay additional in-lieu fees for every space beyond the City requirement of 44 spaces. Mitigation Measure TT-7b calls for the applicant to submit a parking demand reduction and management plan which would outline how parking is allocated and managed. Page 1 of 2 RED FILE RECEIVED Cano, Elaina MEETING AGENDA From: Cano, Elaina DATE ITEM # R�- - JUL 0 2_111R Sent: Tuesday, July 01, 2008 4:58 PM SLO CITY CLERK To: Cano, Elaina Subject: July 1, 2008 Agenda Comment From: Susan Ellenbogen [ma.ilto:pelican@onepost.net] &� L+_ DIRSent: Tuesday, July 01, 2008 4:45 PM OUNTo: O'Connor, Julie AOIRSubject: July 1, 2008 Agenda Comment �'ACAOCR IEF�'AT708°CLERE CHFTo: City Councilmembers of San Luis Obispo ❑ DEPTDIRCC��- DIRRe: Comments on Proposed Chinatown Contract C,k IR .� L+oune..rC Date: July 1, 2008 �-i r. Conflict Between Public and Private Interests As councilmembers, you have the duty to represent the public interest in making responsible decisions with respect to property that is owned by the public. The decision that you have before you tonight is whether it is in the public's interest to sell certain of our valuable public land at one-eighth its appraised fair market value. Part of this decision has to do with whether the public will get good and fair value as a result of this sale. And part of this decision is whether the proposed sale will have positive consequences for our community's downtown for generations to come. In making this decision, it is your fiduciary duty as our elected representatives to consider only the public's interest,rather than any private interest. The public's interest must take precedence over the developer's interest in making a profit,.and over any council member's private interest. A council member who owns a downtown business was recently quoted in our local newspaper for his belief that the Chinatown development will create a synergy, or economic momentum; for our downtown. It is natural and obvious that a local business owner would want development that would increase the value of his business. But such an interest is a private interest, and one that cannot help but influence that councilmember's vote. There are rules that govern such a conflict of public and private interests, and they require members with such a conflict to abstain from voting. As a local resident, I cannot see how it is in our public interest to give away our public land at a mere one-eighth of its appraised value. The expected income to the city will not begin to approach the value of this land for many years, if the development is built at all. There appears to be little incentive built into the proposed contract to ensure that the development will, in fact;be built. Rather, it would seem that the contract is nothing more than an option agreement that leaves the property available to the developer for three years at one-eighth of the property's present value. And I would like to know what value the city is receiving for this option during the first three years of the contract period. Too Important a Decision for a 3-2 Vote The city council of Atascadero has decided that the development of a Wal-Mart store in their town is an important enough decision to warrant a vote by its residents. The Chinatown development would have 7/1/2008 Page 2 of 2. even greater consequences for the town of San Luis Obispo, and should be decided by a vote of all of our residents. If all of the councilmembers do vote, despite one member's apparent conflict of interest, and if the vote is 3 to 2 in favor of the proposed contract as predicted by our local newspaper, our downtown will be completely transformed based on the slimmest of margins. I think all of you know, in your hearts,how the vote would turn out if the proposed Chinatown development was put to a popular vote of the residents of San Luis Obispo. If you insist on disregarding the wishes of your constituents, and decide to foist this terrible decision upon us by the narrowest margin of votes, you will be acting against the public interest, in violation of your fiduciary duty as our representatives and guardians of our public lands, and in malfeasance of your duty as public officials. I urge you to consider very carefully what action.you take here this evening--whether that action is in the best interest of all of the residents of San Luis Obispo, and whether that action is morally and legally defensible. Respectfully submitted, Susan Ellenbogen Attorney at Law 1312 Carmel St. San Luis Obispo, CA 93401 7/1/2008 w ' CBRE CONSULTING RE CBRE EIVED CB RICHARD ELLIS Jul_ 0 12008 pr �'a Cnnq� ( SLO CITY CLERK 355 South Grand Avenue, Suite 1200 1549 COUNCIL f'DD DIR Los Angeles,'CA 3 613 3750 count enc T 213 CAO .� IN DIR Ic CA+a F 213 613 3780 WACAOq..-IRE CHIEF ycLCEiLPC. www.cbre.com ATTORNEY �IPW DIR M E M O R A N D U M CLERK-ORIG oFOLICE CHF DEFT HEADSr REC DIR 15f p1� '= UTIL DIR �a CCj uWE :` City of San Luis Obispo Copy: Allan D. Kotin Co vhd I I uWVk_ From: Thomas Jirovsky RED FILEL MEETING AGENDA Date: July 1, 2008 DATEY le ITEM #_.2L2_, SUBJECT: CHINATOWN ASSESSED VALUES At the request of Allan Kotin, in response to an e-mail from Councilman Andrew Carter, CBRE Consulting has reviewed the assessed value data relative to Copeland's acquisition of various parcels within the Chinatown project boundaries. Councilman Carter suggests Ahat the $8.8 million market rate appraised value of the City- owned parcels is too low, since the per acre value of the parcels acquired by Copeland over the past few years totals $13.5 million and would indicate a pro rata value for the City-parcels of'$23 million. In his e-mail Councilman Carter opined that a 60% reduction in value reflecting the lack of Monterey frontage would result in the City land being worth $13.8 million. Actually, a 60% reduction from $23 million would yield a value of $9.2 million ($23 million x 0.40 = $9.2 million), which is within 5 percent of the appraised value. Other Comments Not wanting to argue over how much of a discount should be appried for Palm Street frontage, it is important to note that the per square foot of land value attributable to previous parcels acquired by Copeland are not directly comparable to the City property for several additional reasons: I) The properties purchased by Copeland were for income producing buildings on small parcels of land,,making a direct per square foot land value comparison impossible. 2) The properties were purchased as early as 2005, when the real estate market was substantially stronger than 2008. 3) The City parcel is an irregularly shaped parcel that would make most high-density mixed-use development plans infeasible without acquiring the adjacent parcels. According to the Reuse analysis CBRE Consulting prepared, the maximum value that could be supported by legal uses is less than $9 million. Utilizing the pro forma models,we can calculate CBRE CONSULTING CBRE CB RICHARD ELLIS that the only way in which the City parcel could be worth substantially more than $8.8 million, would be if a high-rise condominium project were allowed. It is also important to note that the reuse analysis prepared by CBRE Consulting valued the entire project area and then allocated the City's 63% share pro rata. If we had utilized Copeland's actual cost for the 37% portion -the remainder value for the City parcel would be substantially negative. Conclusion The CBRE market rate appraisal of $8.8 million represents the April 2008 fair market value of the City parcel under its highest and best use, considering recent land sales in San Luis Obispo adjusted for time, location,size,shape, frontage and zoning. Councilman Carter also raised the issue of why the assessed value of the Copeland parcels was not included in the market rate appraisal. In speaking with the appraisers, they indicated that they only rely on the most similar land sales data that can be confirmed from the buyer/seller. They do not examine assessed values of parcels in a market 'area since those values change from the date of sale due to various factors. From: ancarter@aol.com [mailto:ancarter@aol.com] Sent: Monday, June 30, 2008 10:30 PM To: Settle,Allen; Mulholland, Christine; Brown, Paul; Romero, Dave; Hampian, Ken; Lowell,Jonathan P; Clark, Claire; Carter,Andrew Cc: sconnell@thebibunenews.rom; dsneed@thetribunenews.cvm; sduerr@thetribunenews.mm; cvisd@thetribunenews.com; sfinucane@thetribunenews.com; phowe@newtimessio.com; davecongaiton@edbmadcasters.com; kingharris@edbroadcasters.mm; graham@tolosapress.com; dschermer@ksby.com Subject: Chinatown Assessed Values I received an e-mail today from a local broker who strongly believes the$8.8 million market rate appraisal for the Chinatown property is too low. This broker told me he "knew" the Copelands had spent at least$12 million accumulating the Blackstone, Sauer, Muzio,and Bello property. I asked him how he knew this. He said check the assessed values at the County Assessor's Office. I did that. The current assessed value for those properties is $12,716,880. Add the small building on Palm which the Copelands also own,and you get an assessed value of$13,523,397 for their Chinatown property. That property equals 37%of the entire Chinatown project. The City parking lots and.Public Works building equal 63%. Using a straight-line projection,this would make the City's property worth$23 million. Even discounting that value by 60%to account for the smaller frontage on Monterey would make the City's property worth$13.8 million. It seems to me the market rate appraisal is too low. Given this new information, I would ask the Council majority to once again consider whether $3.7 million is fair value for our property. 63%of the property is ours,yet we're prepared to sell it for not even.30%of what Copelands has already paid.for the rest? Does that make sense? Please see attached for details. Incidentally, I am very disappointed that.1 am discovering this information now when the information is a matter of public record. I question why this information was not part of the market rate appraisal prepared by our consultant,CB Richard Ellis. Andrew Carter 1283 Woodside Drive San Luis Obispo, CA 93401 805-594-1906(home) 805-235-0015 (cell) ancarter@aol.com . n = I _ ■ ® © ■ ° \ \ \ k W qCLVCL , ■ E ' - cm 0 CD ED ° 2 - E E » cr 00 00 00 0 00 ■ 2 3 a 7 2 E m 7? ¢ eD 3 t § k / ƒ / ƒ � k / g \ / \ ( (ID _ ƒ c \ w / w / / J & fA o n § % . ww k k Go wo E b 2 eDtA _ fD r" _ 7 / f q 3 W S 3 v S k 2 ft 0000 v i ■ \ -D. k k \ m 2 fD , CL E E ■ � ■ w k w s rA o ■ W # &. - Z # 7 ? § 7 a 7 k § W m ON ON g k ; . mth \ & \ k \ \ \ k 2 e to . � E § 464) 6m w � « f 605 3 . . ■ ® w o 9 k k 3 E ; ON w _ » # > � / ■ E I k ■ $ / -4 - o o c o 0 0 § . 2 Fr . e e w RED FILE RECEIVED Mayor Dave Romero MEETING AGENDA JUL 01 1008 990 Palm Street DATE ITEM # SLO CITY CLERK San Luis Obispo, CA 93401 June 26, 2008 Dear Mayor, I am writing in support of the Chinatown Project and the previously negotiated transaction with the Copelands. Copelands has singlehandedly added to the economic viability of the downtown area. 15 years ago Downtown Center was a hole in the ground and the economy was similar to the current economic climate. The headline this morning announced that American Eagle and Delta are terminating air services to San Luis Obispo. I recognize the council must consider what is best for the long term integrity of the City as well as the economic benefits to the City and the current economic climate. My fundamental reasons for recommending your approval are: • The City critically needs a quality downtown hotel. This is included in the project. • A restaurant on Palm Street will add a new energy to that area of the City. • Downtown Meeting Rooms and Downtown Conference Rooms have long been required. At this time meetings of any size are required to go out of the Downtown Area. • This is a mixed use development that will provide 24 hour synergy. • Copelands have met their commitments to the City. i.e. look at the current planning and building department locations in the new parking structure. • Copelands have had a long term commitment to the integrity of the Downtown. • No project is perfect and the benefits to the community of this project far out way any negatives. Thanks for your consideration. -t +41....... ® COUNCIL i CDD DIP ® CAO R� FIN DIF ESI ACAO S FIRE CHIT; 91 ATTORNEY SCJ PW DIR Charles L. Senn ® CLERK/ORIG Z POLICE C.� ❑ DEPFADS RTC DIR �i ---Yl� I UTIL DIf? �(✓ &9 I HR DIR Y CaAW11 V Mo Y- clepre, R.H. PORTER CO. RED FILE RECEIVED MEETING AGENDA JUL 01 2008 DATE ITEM #�'�, SLO CITY CLERK June 27, 2008 roc.L Mayor Dave Romero and City Council MembersO INCIL %CDD DIR City of San Luis Obispo ACRO FIN DIR �FIRE CHIEF 990 Palm Street ATTORNEY PW DIR San Luis Obispo, CA 93401 CLERK/CRId POLICE CHF ❑ DEK HEAos l REC DIR UTIL DIR HR DIR Re: The proposed Chinatown Project Development and Developers _ `P 00U-*%Jee C y � Dear Sirs and Madame, I would like to express my sincerest desire that you, as the elected representatives of our wonderful town, will see the clear benefits of the current proposed Chinatown project and the current developers and approve this development. The project will continue to improve our downtown and attract both new businesses and visitors as well as provide additional services and conveniences to our current businesses, employees, visitors and residents. The project is exceptionally well planned and will provide desired downtown residential housing and a hotel with much needed meeting and conference facilities. It is sensitive to the charm of San Luis Obispo and will maintain its feel and charm. The developers, Tom and Jim Copeland, are also local residents well proven in both their character and their desire to provide a quality downtown project. As a local downtown business and property owner I fully support this project and ask that you do as well. Thank you. Sincerely, Richard H. Porter 846 Higuera Street, Suite 8 • San Luis Obispo, CA 93401 • (805) 543-5408 Page 1 of 1 1 Council, SloCity From: Paul Marcotte[pau]93401@yahoo.com] Sent: Tue 7/1/2008 4:25 PM To: Council,SloCity Cc: Subject: Proposed sale of land to Copeland family Attachments: Please postpone your vote at tonight's council meeting on the proposed sale of parking lots, etc., to the Copeland Family until more appraisal information can be obtained. Councilman Andrew Carter this date presented relevant information that should be investigated further before a final vote. Paul & Jean Marcotte San Luis Obispo https://mail.slocity.org/exchange/slocitycouncil/Inbox/Proposed%20sale%20of%20land%20... 7/1/2008 Page 1 of 1 From: Linda Seeley[lindaseeley@gmail.com] Sent: Tue 7/1/2008 1:40 PM To: Settle,Allen; Carter,Andrew; Mulholland,Christine; Romero,Dave; Brown,Paul Cc: Subject: Chinatown Giveaway Attachments: Dear City Council Members, Though I am unable to attend the meeting this evening,I want to join with others who object strenuously to the"giveaway"of city land to the Copeland Corporation. You need to have the property independently appraised and then sell It at the market value.Your deal smells of corruption. Sincerely, Linda Seeley 217 Westmont Ave San Luis Obispo 93405 https://mail.slocity.org/exchange:i - ' -'Chinatown%20Giveaway.EML?Cmd=open 7/1/2008 Page 1 of 2 J Attachments can contain viruses that may harm your computer.Attachments may not display correctly. Council, SloCity From: Barry Goyette(bgoyette@pacbell.net] Sent: Tue 7/1/2008 3:15 PM To: Council,SloCity Cc: Subject: In Support of the Chinatown project Attachments: D Sunport.Govette.pdf(MB) June 30, 2008 San Luis Obispo City Council Dave Romero, Mayor Paul Brown, Vice Mayor Christine Mulholland, Council Member Allen Settle, Council Member Andrew Carter, Council Member To All it may concern: I am writing in support of the proposed Chinatown Development, and the Copeland Family as developers of the project. It is rare in this day and age that we see.informed, intelligent, thoughtful development in the retail sector. Since the 1970's, retail development has focused its sights on creating enclosed malls, freeway corridors, big box and strip centers which have lead to the dissolution of the american small town, and to the communities they serve. Having grown up in Santa Maria, I witnessed first-hand a community that had its heart ripped out for the sake of commercial development, a community that is still struggling to pull itself back together. Yet the blame for this calamity lies not with development itself, for all towns and cities must move forward and grow to survive. It's the approach that matters most Projects like Chinatown,The Downtown Center, Court Street, and others succeed best when they encourage the citizens and visitors to partake in the community that San Luis Obispo has become: vital, social, energetic, and, although we may be afraid to say it, urban. I support the Copelands because their track record is unblemished when it comes to this type of development. In their planning to build commercially viable retail centers in downtown San Luis Obispo, they consistently take the high road and present ideas for a community that they themselves would want to live in.Their existing developments have improved the reality of downtown,just as I am quite sure Chinatown will when it is complete. In every step of the process they have accepted community feedback and adapted these projects in ways that were most likely not in their personal best interest, yet added to the character of the project and benefited the downtown. https://mail.slocity.org/exchange/slocitycounciL/Inbox/In%20Support%20of%20the%20Chi... 7/1/2008 _ Page 2 of 2 Additionally, they have actively maintained and enhanced their centers over time. When compared to other centers on the periphery of town, that have needed to be tom down and rebuilt to remain viable, the Downtown Centre has withstood the test of time,and is as vital and attractive today as it was when it was built quite a few years ago. This speaks volumes to the kind of commitment the Copeland's have made to this community. Chinatown, with its mix of hotel, retail, office and housing makes great sense for this part of downtown. It's positioning near the Mission Plaza will make it a magnet for visitors and residents alike, and the increased retail presence will provide a better balance to the retail character of downtown, providing a new"anchor"to improve retail traffic along Monterey and Chorro, and creating a new link between Monterey and Higuera. I strongly urge the council to vote in favor of the Chinatown project and the Copeland Family as Developers. Sincerely Barry Goyette Resident, San Luis Obispo https://mail.slocity.org/exchange/slocitycounciL'Inbox/In%20Support%20of%20the%20Chi... 7/1/2008 PLUMBING 8e HEATING INC _ 6O ZACA LAME • SAN LutS OBIsPO,CA. 93401 • 805-544-5118 • FAX:805-544-7860 • CA LIC#373936 June 30,2008 SLO City Council 990 Palm Street San Luis Obispo,CA 93401 Re:Chinatown Project We would like to show our support for the Copelands & the Chinatown Project. The Copelands have u consistently created successful downtown projects which have been thoughtfully integrated into the existing downtown fabric. They have been able to incorporate not only national tenants, but the locals as well. They have dedicated many years to get the project through to this point&they have the ability required to see it through to completion. The Chinatown Project will bring San Luis Downtown some of the following benefits: •The elimination of the vehicular entry at Monterey Street resolves the pedestrian conflict with vehicles along Historic Monterey Street. This was a primary concern raised by both planning and public works throughout the review process. • The new design allows for the re-establishment of Monterey Street's historic position as a main retail commercial block. A more pedestrian oriented layout along Monterey Street and a better retail presence is now possible due to the elimination of the driveway at Monterey Street. • By placing retail and housing at Monterey and Chorro rather than the hotel, we now have greater flexibility in how the design can be completed with respect to the historic concerns, because hotels have much less flexibility in how they can be laid out. • The hotel at Palm Street can now include a vehicular drop off/ motor court which will address the concerns of how hotel patrons are received at the hotel.This was an issue in the previous design where concerns were raised about arrival of guests and loading/unloading. • The hotel is now able to accommodate a larger number of rooms — approximately 85 rooms as currently conceived - which has a much better fiscal/ TOT benefit to the City. The 85 room layout is possible in a 3 story configuration, where previously the hotel was 4 stories and yet was only able to accommodate 67 rooms. • The hotel has a larger site area which will allow for a better utilization of outside amenities.This will better serve the proposed uses including the ability to accommodate meetings, conferences, wedding parties,etc. • A restaurant proposed as part of the hotel is located at Palm Street, adjacent to the Palm Theatre, which includes al fresco dining along the sidewalk frontage. This will help enliven Palm Street and provide an exciting addition to this area of the Palm Street block. • The hotel lounge at the corner of Palm and Morro streets will enliven this corner and provide an exciting use at this location of the block. •A multi level spa proposed as part of the hotel has been relocated to Morro Street providing an active and exciting use along Morro Street. PLUMBING • HEATING • AIR CONDITIONING • SHEET METAL • CONTROLS • RESIDENTIAL • COMMERCIAL • INDUSTRIAL •The hotel meeting rooms and conference areas open to a central courtyard and Landscape area. • Enhances an underutilized area of town and allows for the re-establishment of Monterey Street's historic position as a main retail commercial block. • Incorporates hotel, retail, office, and residential uses — a smart growth principal of mixing uses for better more active development. • Provides a residential component downtown, a much sought after city goal, which will promote a 24 hour downtown-a benefit which is proven to create a safer,and more desirable downtown. • Creates demand for better utilization of the surrounding city owned parking structures. • Continues the revitalization and enhancement of the downtown. • Acts as a catalyst and provides an Incentive for other property owners to enhance and upgrade surrounding properties. • Keeps the downtown strong and competitive with other outlying retail areas in the city. In short, The Copelands are local and have a long term commitment to keeping downtown vital & successful. They are concerned with the input & comments from the public. As a direct result of this willingness, they substantially reduced the height, bulk, and scale of the project originally proposed, r removing 2 full floors from the original 5 story proposal. Tha o for your time and consideration to the Chinatown Project. k Jack echt Pre dent, Knecht's Plumbing&Heating Inc. RED FILE RECEIVED MEETING AGENDA JUL 01 2008 1 July 2008 DATF�► )J ITEM #�� SLO CITY CLERK To: Mayor ero and Council members ALFrom: Doug , President-Elect Bl COUNCIL CDD DIR San Luis Obispo San Luis Obispo Downtown Association Q CAO (� FIN DIR 4%ACAO [Z FIRE CHIEF Downtown prepared by�borah Cash, Executive Director ®ATTORNEY X PW DIR Association San Luis Obispo Downtown Association ®DEERHEA0S ® POLICE CHF PO Box 1402 I± UTIL DIR San Luis Obispo Re: Chinatown Project ® KnG HR DIR California 93406 x �` Phone 805-541-0286 The Executive Committee of the Board of Directors today voted to uphold the K Far 805-781-2647 Economic Activities' committee recommendation to support the Chinatown www.downrownsio.com project, that project now coming before Council seeking a modified option agreement. That recommendation will be forwarded to the Board for its approval at its 8 July 2008 meeting. Anticipating the Board's approval, we ask in advance that you move forward with the staff s recommendation to approve a second modification to option to purchase real property and allow the project to move forward so that the benefits it will deliver to Downtown and the community can be enjoyed sooner rather than later. Since its inception, the Chinatown project has been highly regarded and supported by the Downtown Association for the contributions it will deliver. Among these include: historic references and revitalization, economic stimulation,much- needed housing and hotel facilities and converting what is now single use property (parking lot) into multi-use property thereby upholding the Downtown Design Concept Plan. As well, the revised plan works in accordance with the Downtown Association's Strategic Plan, adopted by the Council in June, 2007. For example, the plan acknowledges the"changing uses of Downtown" including a shift from retail and dining to adding more office, residential and hotel uses—bringing along the opportunity to serve those markets. And, while housing in Downtown slowed over the past decades, the City's own General Plan Land Use Element says, "Downtown residential uses contribute to the character of the area, allow a 24- hour presence which enhances security and help the balance between jobs and housing in the community" Other areas of the Strategic Plan satisfied by the Chinatown project include: 4.1 Support higher density projects as appropriate 4.2 Balance housing with commercial uses 4.3 Identify locations that are best for residents / V 4.4 Support improvements that will appeal to overnight visitors and hotel developers 5.1 Maintain a high level of cleanliness and maintenance (The developer has a proven track record of building and maintaining projects that are attractive and well cared for.) 5.3 Advocate for continued implementation of General Plan and Physical Plan design policies as appropriate 5.5 Protect Downtown's historic resources In all these areas, the project has one or more components that are certain to further the Association's goals of having a healthy,viable and attractive Downtown. Moreover, in the current economic climate, the City is fortunate to have investors and developers willing to take risks that several years ago did not seem to exist. A project of this magnitude is subject to the same factors as other areas of the economy and while the developers are proven successful business managers, they face the possibility of less-than-anticipated returns yet are still willing to move forward with a project that will ultimately benefit Downtown in a variety of ways. There are many downtowns across the nation that would be grateful to have this project at their doorstep. Finally, over eight-plus years that this project has been presented to the community, the developers have shown a willingness to redesign and work with the community and the city to develop the best possible product. This long-term commitment and community spirit deserve the consideration of the Council and we urge you to approve this evening's CAO recommendation. - Page 1 of 1 From: rschmidt@rain.org[rschmidt@rain.orgl Sent Tue 7/1/2008 10:12 AM To: Romero,Dave;Settle,Allen;Brown,Paul; Mulholland,Christine;Carter,Andrew cc Subject Chinatown Attachments: Dear Council Members: In all my years of close association with the government of the city of San Luis Obispo— dating back to 1970— I've never seen such a corrupt act as this contemplated by the Council. I urge you to back off, and not to proceed with this deal. If it's the best the Copelands will agree to,then you need to have the honesty and courage to pull the plug on their project. You, not they, should be the determinors of the worth of city property. By law,you guard this property for the value and benefit of the citizens of this city, not for the Copelands.There are lots of other developers who'd love to get their hands on this property and pay a fair price for it. What is being proposed --the giveaway of city property worth nearly$9 million for considerably less than the city has invested in purchasing and retrofitting its office building on Morro Street(which is included in this giveaway) — is a criminal dereliction of your fiduciary responsibilities to the citizens of San Luis Obispo. No collection of emperor-has-no-clothes rationalizations and excuses concocted for the council by staff can change the.fact that this"deal" represents a corrupt act by yourselves and staff. You cannot hide behind non-existent emperor's clothes,for the world can see right through them. There is no excuse for this sort of corrupt action. It would constitute dereliction of your duties if you approve it. No elected official who votes for such a corrupt scheme deserves to sit on the Council,and such votes will be remembered later this year when two of your terms are up. If this giveaway does proceed, I do hope and pray that some citizen files a malfeasance lawsuit against you as individuals who have voted to make this happen,and gets a court order that you must pay back out of your own pockets the millions of dollars of public value you've squandered. As you know, in general the law protects public officials from lawsuits, but you may be unaware that there is an exception where fiduciary irresponsibility is as brazen as it is here. Forcing the three council members who vote for this to cough up the $7+ million they fleeced from the taxpayers would be a very salutory remedy for the corrpution of the relationships the city has developed of late between itself and a few select crony developers whose plans have never been judged side-by-side against proposals from others due.to.the secretive back-room process you've chosen to use to select and advance the interests of your cronies. The process from beginning to this point stinks. Do the right thing, and end the stink NOW. Richard Schmidt https://mail.slocity.org/exchang, x/Chinatown.EML?Cmd=open 7/1/2008 Page 1 of 1 Council,SloCity From: Tony Briaolara [tonybria@yahoo.com] Sent: Mon 6/30/2008 7:24 PM To: Council,SloCity Cc: Subject: Chinatown Project Attachments: Dear Mayor Romero and Council, First, I would like to acknowledge and thank Jim and Tom Copeland, and their organization, for their contributions to the city of San Luis Obispo. Second, I would like to voice my full support for the Chinatown Project. My hope is the Council will approve the sale of the property and ultimately approve the Copeland's Chinatown Project. Thank you, Tony Brizzolara 1737 Sydney St San Luis Obispo CA 93401 805-550-6463 RED FILE MEETING AGENDA DATE'1 I ITEM #,>Z ISII COUNCIL EZ CDD DIR RECEIVED IE CAO 50 FIN DIR 12 ACAO lZ FIRE CHIEF JE ATTORNEY 56 PW DIR JUL 01 2008 E0 CLERK/CRIG 2 POLICE CHF ❑ DEPT HEADS 5t REG DIR SIA CITY CLERK CA PI d 9:, UTIL DIR rg� :riloutPIC, 9 HR DIR 'A CwtvlU I `L CAD x Glww https://mail.slocity.org/exchange/slocitycouncil/Inbox/Chinatown%2OProj ect-5.EML?Cmd... 7/1/2008 Page 1 of I Council,SloCity_ From: Mtbdesign@aol.com [Mtbdesign@aol.com] Sent: Mon 6/30/2008 3:52 PM To: Council,SloCity Cc: Subject: Support our Core-Chinatown Attachments: June 30, 2008 Dear Council Members: I am writing to express my support for the downtown core. Most agree, density is better than sprawl. City policy encourages (and hopefully streamlines)development in the city core, rather than make it easier and more cost effective to develop our perimeter. The Chinatown project needs Council leadership and action.As a former member of the ARC I have followed the Chinatown project for almost 8 years. I have watched how challenging it is to respond to the wishes and "processes"of many well intended citizens and agencies. This local developer has demonstrated their commitment to the community in many ways. Their patience and response to community, council and agency input has been admirable. Real projects are not built by committees or agencies. Good ideas don't dilute themselves into bland attempts to satisfy the needs and wants of everyone. Quality projects are built by risk takers who earn the support of an inventive City staff led by a bold City Council that can recognize an opportunity to invest in the future. It is time to finalize the"process"— move forward toward construction and realize the general plan goals of San Luis Obispo. Sincerely, Michael Boudreau 1009 Morro Street, Suite 205 San Luis Obispo, CA Gas prices getting you down? Search AOL Autos for fuel-efficient used cars. https://mail.slocity.org/exchange/slocitycouncil/Inbox/Support%20our%20Core%20-%20C... 7/1/2008 Page 1 of 1 Council, SloCity From: Matt Quaglino[mq@quaglino.com] Sent: Mon 6/30/2008 3:38 PM To: Coundl,SloCity Cc: Subject: China Town Project Attachments: Mayor Romero and City Council: I see the China Town project is on the agenda for Tomorrow July first. I can only imagine the response is overwhelming on this project so I will be brief. For the most part I support the project, it will be a great addition to our downtown, a motel and residential units can only enhance what we already have. I am not to concerned about the historical argument, I think the architect has adequately address those concerns. I firmly believe the buildings of today such as this project will become the historic buildings of tomorrow. In addition if the city truly wants to add to our downtown and this is the spot none of us will find a better developer like the Copeland's, they care about San Luis Obispo, they are not going anywhere and they will do it right. With that said I support the project and encourage approval of the same. Thanks for your time and please contact me with any questions. Matt Quaglino https://mail.slocity.org/exchange/slocitycouncil/Inbox/China%20Town%20Proj ect.EML?C... 7/1/2008 Page 1 of l Council, SloCity From: Greg Notley[greg@powercomengineering.com] Sent: Mon 6/30/2008 3:24 PM To: Council,SloCity Cc: Subject: Chinatown Attachments: Counsel members, The issue of land value cannot and must not be dealt with in a vacuum. Particularly in light of the delays that have been no fault of the developer's desire to move forward. Speculating about how much the city can get for that land in a different scenario is fine and prudent. When I do that speculation I have to consider alternative scenarios such as dealing with individual developments for each area, generating interest and educating possible developers about the site(s) and including the possible scenario that it could be 20 years before all of this area is developed cohesively. In the end, I cannot envision a more desirable scenario than the one we are looking at. The proposed Chinatown project is not Mac Big Box or strip mall development. It is high density, mixed use, smart urban planning. This is a project proposed by a long established local family. Not an outside developer. It is designed by a local architect and other local design professionals and embodies both a sense of place and history while utilizing modern fire and seismic safety standards as well as time honored construction materials. This is home grown, progressive and optimistic development that I believe builds on the very dream of this city's early visionaries. It's long term value in both direct and indirect economic terms simply swamps this issue of negotiating for more up-front money. I urge you to honor the original deal and let's bring a great project into reality. Thank you. Greg A. Notley (805)550-5027 https://mail.slocity.org/exchange/slocitycounciVInbox/Chinatown-2.EML?Cmd=open 7/1/2008 Page 1 of 1 Council, SloCity From: Hayley Townley[HayleyTownley@charter.net] Sent: Mon 6/30/2008 1:25 PM To: Council,sloCity Cc: Therese Cron;Tim Townley Subjecfi CHINATOWN PROJECT Attachments: June 30,2008 Dave Romero,Mayor Paul Brown,Vice Mayor Allen Settle,Council Member Christine Mulholland,Council Member Andrew Carter,Council Member Via email slocitycouncil@sloci .or RE:Chinatown Project Dear SLO City Council Members, Please do your best to support Tom&Jim Copeland's Chinatown Project.They have already proven they have the very best interest of the city of San Luis Obispo at the heart of their projects.We have personally known them since the early 1980's.The Copeland's are successful businessmen that recognize what it takes to get a project done,and done correctly. As a former employee of Copeland's Sports(for 24 years),Tim has been privy to their dreams of making downtown San Luis Obispo a place that is not only a great place to shop, but a thriving urban center with a great downtown hotel, as well as some unique and wonderful condos that will allow people to have a home downtown -within walking distance of their work. As successful Real Estate Brokers in San Luis Obispo, Hayley and Tim both know the projects that Tom &Jim have designed and implemented are among the many things that continue to make San Luis Obispo one of the top 10 rated places to live in America. You may recall that before the original Downtown Center,the comer of Morro and Higuera,was an unsightly hole in the ground. I'd imagine that the tax revenue generated by their projects have lined the city coffers nicely over the last decade. There is no doubt that their new Chinatown Projectwill bring in substantially more revenue than the existing parking lot and empty buildings! It seems many people think that entrepreneurs are the typical 'Ebenezer Scrooge" types—simply out to make a buck. The Copeland brothers are anything but that.Throughout Tim's career at Copeland's Sports,we were both treated like part of the family.They went out of their way to help their employees through tough times.Tom and Jim were the reason we moved to this great town,and it is nice to see them making our hometown,San Luis Obispo,a better place to live. We've followed the Chinatown Project,and it seems that the Copeland's have responded to every thing that the public,and city,have wanted.Please continue to support them in their dream of making San Luis Obispo a better town for generations to come.We certainly do. Thanks for your time, g4V4 & n4m Hayley Townley,BCS,FSCRE,Broker/Owner Tim Townley,FSCRE,Broker/Owner COMET REALTY 1574 Fredericks Street San Luis Obispo,CA 93405 805.546.9925 www.CometRealty.com. https://mail.slocity.org/exchange/slocitycouncil/Inbox/CHINATOWN%20PROJECT-4.EM... 7/1/2008 - . Page 1 of 1 u From: Ken Broomfield[kbomfield@post.harvard.edu] Sent: Wed 7/2/2008 9:40 AM To: Romero, Dave; Settle,Allen;Carter,Andrew; Mulholland,Christine; Brown, PaulERECEIVED Cc: Subject: Chinatown property sale Attachments: 209 LERK Dear City Council Members-- The most troubling thing about the low sale price for the Chinatown property is that economic studies show that subsidies or tax breaks for private ventures in the expectation of tax revenues and jobs rarely pay. It usually just amounts to corporate welfare. Would Copeland or another developer proceed if they paid market value for the property? If they would, why sell for a bargain price (58% off)? If they wouldn't, does the project make economic sense? It'd be interesting to know how the $1M/year revenue figure was calculated. And a bigger question: Does the Copeland family own too much property downtown, and does this raise anticompetitive questions? Many downtown tenants and former tenants have unpleasant things to say about how Tom Copeland treated them, including former tenants of the building at Chorro and Monterey Streets. With rent pressures forcing some retailers out, these issues must have a.big effect on the downtown. And what will we end up with on the Chinatown property? More plastic faux-charm displacing genuine charm that's rapidly vanishing from downtown? [Also posted to the Tribune website, under their article on the sale.] Ken Broomfield kbroomfield C&post.ha rva rd.ed u A J+� https://mail.slor,ity.org/exchanE ` " ox/Chinatown%20property%20sale.EML?Cmd... 7/2/2008 Page 1 of 1 From: Michael Wollman [mwollman@calpoly.edul Sent: Tue 7/1/2008 5:37 PM To: Settle,Allen; cmullholl@slocity.org; Carter,Andrew; Romero, Dave; Brown, Paul Cc: RECEIVED Subject: Chinatown Scandal Attachments: JUL 0 2 2008 Dear City Council Members, SLO CITY CLERK Though I am unable to attend the meeting this evening, I want to join with others who object strenuously to the virtual "giveaway" of city land to the Copeland Corporation. You need to have the property ( (�.. �d)(yZ.C1,4—,C independently appraised and then sell it at the market value. Your deal is not in the best interest of the people of SLO. Excuses such as possible future tax revenue looks like a bogus justification for a sweetheart deal with Copeland. If it isn't illegal, it is certainly /� unethical and scandalous. The people will remember this during A CA v re-election time if it goes through.This is not New Jersey. y Sincerely, ��/ Michael Wollman San Luis Obispo https://mail.slocity.org/exchangt " ' -✓Chinatown%20Scandal.EML?Cmd=open 7/2/2008