HomeMy WebLinkAbout07/01/2008, C 10 - AUTHORIZATION TO ENTER OPTION AGREEMENT FOR PURCHASE OF PROPERTY FROM IRISH HILLS PLAZA EAST, LLC - J
Council "`°°` my t,2008
j ac En ba Repoat �N G i o
CITY OF SAN LUIS O B I S P O
FROM: Shelly Stanwyck, ACAO
Prepared By: Neil Havlik, Natural Resources Manager
SUBJECT: AUTHORIZATION TO ENTER OPTION AGREEMENT FOR
PURCHASE OF PROPERTY FROM IRISH HILLS PLAZA EAST, LLC
CAO RECOMMENDATION
1. Approve an Option Agreement with Irish Hills Plaza East, LLC, (Phyllis Madonna,
owner) for the purchase within the next two years of approximately 310 acres adjacent to
the Irish Hills Nature Reserve and authorize the Mayor to execute the Option
Agreement.
2. Direct staff to pursue grant funding and local donations to meet a substantial portion of
the purchase price.
DISCUSSION
Background—Property Information
The serpentine lands in the Irish Hills west of the City of San Luis Obispo have been one of the
City's prime open space acquisition areas. This is due to the rich habitat provided by the area, its
scenic character, and the large number of plant and animal species of concern that are found there
(eight). In recent years the City has acquired approximately 944 acres of land in the Irish Hills
area, including what are now known as the Irish Hills Natural Reserve (702 acres) and the
Johnson Ranch Open Space (242 acres). The Irish Hills are now a popular hiking and biking
destination, and the Johnson Ranch is in the process of trail construction that will lead to its
opening to the public in mid-2009.
City staff have had discussions with the Madonna family regarding a large property within this
area (referred to as the "Froom Ranch backcountry") for several years. Recently the family
responded positively and indicated a family interest in the sale of a sizeable portion of the
property to the City for conservation purposes. This is a desirable acquisition since it would
provide numerous opportunities to expand the popular trail system that already exists on City-
owned lands, would add to the area of species of concern that are protected, and would facilitate
continued restoration work on Froom Creek.
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Option Agreement for Purchase of Open Space in the Irish Hills Page 2
Purchase Price
The Madonna family's interest in a conservation sale led City staff to undertake an appraisal of
that portion of the property earlier this year. The appraisal found that the 310 acre area had a fair
market value of approximately $780,000. Further discussions led to the development of a draft
option agreement with the Madonna family for the sale of this property at a reduced price of
$700,000, with the balance constituting a charitable gift.
Key Features of the Transaction
1. There would be an option payment of$40,000, which would be part of the purchase price
if the transaction is successful;
2. City would describe the property and bear costs of creating the new open space parcel;
3. Sale would be "As Is, Where Is". This is basically a disclaimer that the family does not
have any particular knowledge of conditions there, but to the best of their knowledge
there are no hazardous or toxic conditions. There is an old mine site on the property, but
there is no evidence of any contamination from it, or that it is a source of pollution. City
staff will conduct a Phase I study, and if necessary, any follow-up studies.
4. The City will have up to twenty-four months to complete the transaction; however, we
would agree to close sooner if possible. The purpose of this length of time is to allow a
lengthy fundraising effort, should that prove necessary. However, we have also agreed
that, if our fundraising effort is successful sooner, we would close the transaction sooner.
FISCAL IMPACTS
The purchase price would include City funds up to the amount of $350,000 already existing in
the City's 2007-2009 budget. This will be offset in part by a local fundraising effort and by
aggressive pursuit of several potential State funding sources currently available, and with which
the City has been successful before.
ALTERNATIVE
The Council could decline to enter the Agreement. This is not recommended as it would negate
an excellent opportunity for the City of San Luis Obispo to pursue its Greenbelt goals under a
favorable financial arrangement. The Agreement gives ample time for fundraising to obtain the
purchase price, and there are in fact several available funding programs which staff can
investigate.
ATTACHMENTS
1. Location Map
2. Proposed Option Agreement
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DRAFT
AGREEMENT OF OPTION FOR PURCHASE AND SALE
OF REAL PROPERTY
This AGREEMENT OF OPTION FOR PURCHASE AND SALE OF REAL PROPERTY is
entered into by and between the CITY OF SAN LUIS OBISPO ("Buyer"), a California Charter
Municipal Corporation, and IRISH HILLS PLAZA EAST, LLC, ("Seller"), pursuant to the following
RECITALS
WHEREAS, Buyer is a California Charter Municipal Corporation; and
WHEREAS, Buyer, acting through its City Council and through adopted public procedures, has
determined that certain lands surrounding the city of San Luis Obispo are important to the scenic
character, healthy natural environment, and economic and social well being of the community and its
citizens; and
WHEREAS, Buyer seeks to preserve and conserve characteristics such as visual quality,
wildlife habitat, and other community attributes where appropriate surrounding the City; and
WHEREAS, Seller is owner of certain lands adjacent to the City which are of scenic,
ecological, and agricultural value to the City of San Luis Obispo; and
WHEREAS, Seller wishes to preserve, protect and restore the scenic and ecological values
which exist or could in the future exist on the Property, and
WHEREAS, the purchase of said land in the judgment of Buyer would act to preserve the
values indicated above and serve an important public purpose; and
WHEREAS, both Buyer and Seller recognize that time will be required to secure the funds
necessary for the transaction; and for other matters related thereto.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. OPTION AND OPTION TERM.
Seller, for valuable consideration, hereby grants to Buyer an exclusive Option to purchase the
certain portions of Real Property identified as San Luis Obispo County APNs 067-241-023 and 067-
241-024 in the County of San Luis Obispo, (shown on Exhibit A attached hereto), together with the
right of access for maintenance purposes by City personnel from Los Osos Valley Road across
remaining lands of Seller on existing, generally used routes. The land to be purchased includes
approximately 310 acres, and shall be referred to hereinafter as "the Property". Buyer and Seller agree
that the term of this Option shall commence on July 1, 2008, and continue for TWO YEARS, to June
30, 2010. Buyer may exercise the Option at any time within that period by sending written notice to
Seller. The Option Agreement may be extended prior to its expiration without additional Option
payment for an additional ninety (90) days (to September 30, 2010) for the express purpose of meeting
ATTACHMENT 2
specific requirements of 'grant programs involving votes of State grantmaking agencies. The
aforementioned notwithstanding, however, Buyer will use its best efforts to complete this transaction
as quickly as possible. Purchase of the property shall be by creation of a government lot. Costs of
preparing the legal description of the Property shall be borne by Buyer.
2. OPTION PAYMENT; RETURN OF OPTION PAYMENT.
(a) In consideration of the Option and Option Term described above, Buyer shall pay Seller
the sum of Forty Thousand Dollars ($40,000) as an Option Payment. This payment shall not be
refundable, except as described in Item 2(b) below. If the Option is exercised as described above, the
full Option Payment shall apply to the purchase price.
(b) In the event that Seller is unable to deliver clear title to the Property to Buyer, or in the
event that hazardous materials are found to exist on the site such that completion of the Purchase and
close of escrow or reasonable extension thereof as described herein cannot take place, then Seller shall
refund the full Option Payment to Buyer.
3. PURCHASE PRICE
If and when the, Option is exercised, the total purchase price for the Property shall be SEVEN
HUNDRED THOUSAND DOLLARS ($700,000.00), payable in cash at the close of escrow.
Buyer and Seller acknowledge that the purchase price is less than the Fair Market Value (FMV) of
Seven Hundred Eighty Thousand Dollars as determined by an independent appraisal, and as such the
discounted value (Eighty Thousand Dollars) may constitute a charitable gift for income tax purposes.
4. CONVEYANCE
Title to the Property shall be conveyed by Grant Deed and shall be
insured by a CLTA (or at Buyer's election and sole additional expense, an ALTA) owners' policy of
title insurance in the amount of the purchase price, showing title vested in Buyer, subject only to those
exceptions listed in the Preliminary Title Report and/or Supplemental Report approved or deemed
approved by Buyer. Title to the Property shall be conveyed by Seller to Buyer by grant deed subject to
no reservations and subject only to the following "Conditions of Title":
(a) A lien to secure payment of real estate taxes and supplemental taxes, not
delinquent;
(b) Matters affecting the condition of title created by or with the written
consent of Buyer; and
C) Printed exceptions and exclusions as specified on the Preliminary Title
Report, including those listed in Schedule B of the Preliminary Title
Report.
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ATTACHMENT 2
5. CONDITIONS PRECEDENT FOR BENEFIT OF BUYER
Buyer's obligation to purchase the Property is expressly conditioned upon the satisfaction,
deemed approval, or Buyer's waiver of each of the following conditions, each of which is deemed
exclusively for the benefit of Buyer:
(a) Title Report. Buyer's approval of the exceptions to title set forth in a preliminary title
report for the Property (the "Preliminary Title Report"). Buyer shall have thirty (30) days after the
receipt of the Preliminary Title Report and copies of all documents referenced therein, to provide to
.Seller and Escrow Holder written notice of Buyer's disapproval of any specific title exception. Any
title exception not so disapproved shall be deemed approved, provided that if a Supplemental Title
Report is issued showing any exception not shown in the Preliminary Title Report, Buyer shall have an
additional ten (10) calendar days after receipt of such Supplemental Report to similarly disapprove any
new title exception. If Buyer disapproves any title exception, Seller shall have no obligation to cure
such disapproval (except that Seller shall be obligated to make reasonable efforts to remove any
financial liens) but Seller may elect, by written notice to Buyer within ten (10) calendar days after
receipt by Seller of such notice of disapproval, to attempt to remove such disapproved items. If Seller
is unable within.a reasonable time to accomplish such cure or removal, or if Seller elects not to attempt
to.so cure or remove (which election shall be communicated to Buyer within thirty (30) calendar days
after receipt by Seller of such notice of disapproval), then Buyer may elect to (i) terminate its
obligations under this Agreement, (ii) waive its objections to such exception, or(iii) elect to correct any
such disapproved exception itself, in which case Seller will provide reasonable non-financial assistance
to Buyer to cure the same.
(b) Inspection and Approval of Property and of An Tia Thereon.
Buyer's inspection and approval of the Property and all improvements thereon, including (at Buyer's
option and expense) any surveys or studies deemed necessary in Buyer's sole judgment. Access to the
Property shall be given to Buyer, its agents and authorized representatives during normal business
hours upon at least three (3) business days' notice to Seller, at Buyer's own cost and risk, for any
purposes relating to Buyer's conditions. Buyer shall indemnify and defend Seller against and hold
Seller harmless from all losses, costs, damages, liabilities, and expenses, including, without limitation,
reasonable attorney fees arising out of Buyer's entry onto the Property or any activity thereon by Buyer
or its agents, or authorized representatives prior to the Close of Escrow, except to the extent any such
losses, costs, damages, liabilities, and expenses arise out of the gross negligence or willful acts of
Seller. In the event a lien is recorded against the Property as a result of Buyer's activities under this
Agreement, Buyer shall immediately take all the necessary action to remove the lien including, without
limitation, providing a surety bond. The indemnification covenants.of this paragraph shall survive the
termination of this Agreement.
If Buyer discovers through its investigations any defects on the Property or improvements thereon
which it reasonably disapproves of, Seller shall have no obligation to cure such disapproval (except
that Seller shall be obligated to make reasonable efforts to remove any financial liens) but Seller may
elect, by written notice to Buyer within twenty (20) calendar days after receipt by Seller of such notice
of disapproval, to attempt to remove such disapproved items. If Seller is unable within a reasonable
time to accomplish such cure or removal, or if Seller elects not to attempt to so cure or remove (which
election shall be communicated to Buyer within thirty (30) calendar days after receipt by Seller of such
notice of disapproval), then Buyer may elect to (i) terminate its obligations under this Agreement, (ii)
waive its objections to such exception, (iii),elect to correct any such disapproved exception itself, in
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which case Seller will provide reasonable non-financial assistance to Buyer to cure the same. The
parties may also enter into additional negotiations, as may be mutually acceptable, concerning
adjustment of the purchase price, allocation of risk, or contribution to the costs to cure or other matters,
and the Escrow shall be extended for a reasonable time, not to exceed ninety (90) days, to effect such
negotiations.
6. ESCROW
(a) Escrow Holder. Buyer and Seller will establish an escrow ("Escrow") with Escrow
Holder within ten (10) business days of execution of this Agreement, subject to the provisions of the
standard conditions for acceptance of escrow and the terms and conditions in this Agreement, with a.
signed counterpart of this document to be delivered as escrow instructions to Escrow Holder. In the
event of any conflict between the terms of this Agreement and the standard conditions for acceptance
of escrow, the terms of this Agreement shall control. The Escrow Holder shall be First American Title
Insurance Company, 899 Pacific Street, San Luis Obispo, CA. 93449.
(b) Prorations and Fees.
(i) Real property taxes and any rental income shall be prorated to the close of
escrow.
(ii) Except as set forth herein, all Escrow fees and costs shall be allocated according
to custom in San Luis Obispo County.
(c) Closing Date. Escrow shall close within thirty (30) days of exercise of the Option by
Buyer but Seller shall have the right within this thirty (30) day period to extend the
Closing and additional ninety (90) days to comply with the terms of this Agreement.
7. REPRESENTATIONS, WARRANTIES, AND AGREEMENTS
(a) Authorized Representative. Buyer and Seller hereby represent and warrant to each other
that the persons who sign this agreement and any other documents required to be executed by such
party to perform its obligations hereunder, shall have all requisite power and authority to have entered
into this Agreement, and that all authorizations required to be obtained by or on the part of such party
to execute and perform this Agreement have been obtained.
(b) Proof of Citizenship. Seller is not a foreign person as such term is used in Section 1445
of the Internal Revenue Code. Prior to the Close of Escrow, Seller shall deposit in Escrow a non-
foreign affidavit as provided under said Section 1445. Failure to do so shall entitle Buyer to withhold
from the purchase price such sums as are required by said Section 1445.
(c) Delivery of Property. Possession of the Property shall be delivered by Seller to Buyer
upon the close of Escrow. Seller may remove, at Seller's expense, prior to the Close of Escrow, all
personal property and trade fixtures on the property, provided that the property is left in a safe, sound
and usable condition.
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ATTACHMENT 2
(d) Legal Actions. Seller represents and warrants to Buyer that there are no actions, suits,
or legal proceedings related to the ownership, use, operation or sale of the Property to which Seller is a
party nor has Seller received any notice that any such actions are pending or threatened.
(e) Buyer's Acknowledgment of Condition. The Property is sold to Buyer "AS IS AND
WHERE IS." Buyer hereby acknowledges that Buyer is purchasing the Property solely in reliance on
Buyer's own investigation, and that, except as expressly set forth herein, no representations or
warranties of any kind whatsoever, express or implied, have been made by Seller or Seller's agents,
including, without limitations, rental revenues, carrying capacity, profit potential, zoning or land use
status,.profit potential or conformity of the Property to the law or applicable regulation. Buyer further
hereby acknowledges that as of the Closing, Buyer will be aware of all zoning regulations and other
governmental requirements,.site and physical conditions of the Real Property including the presence or
absence of hazardous or toxic wastes, and other matters affecting the use and condition of the
Property. Buyer agrees to purchase the.Property in the condition that it is in at the Closing. Buyer
hereby acknowledges that certain improvements to the Property may not conform to permit, zoning or
other governmental requirements. Buyer assumes all risk with respect to non-compliance with zoning,
permit or other governmental regulations and all other risks with respect to the Property.
SELLER HEREBY DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE RESPECTING THE PROPERTY.
SELLER DISCLAIMS ANY WARRANTY, EXPRESS OR IMPLIED, THAT THE PROPERTY OR
IMPROVEMENTS THERETO OR USES THEREOF COMPLIES WITH ANY LAW, REGULATION OR
ORDINANCE.
(f) Seller's Actual Knowledge of Environmental Conditions of the Property. Except as set
forth herein to the best of Seller's current actual knowledge without investigation, there are not now
nor have there been any hazardous or toxic wastes (as said terms are defined in applicable Federal,
State, or County laws or regulations) located on or within any portion of the property; nor have there
been any enforcement, cleanup, removal or other governmental or regulatory actions instituted,
contemplated, or threatened pursuant to any applicable Federal, State, or local laws or regulations
relating to any hazardous materials and affecting the property; nor have there been any claims made or
threatened by any third party against Seller or the property, relating to damage, contribution, cost
recovery, compensation, loss or injury resulting from any hazardous materials. Notwithstanding the
above, Buyer and Seller acknowledge the existence of a former surface mine on a portion of the site,
known as the Froom Mine, which operated prior to 1945 but has been idle since then. To the best of
Seller's actual current knowledge without investigation there are no current issues of hazardous or
toxic wastes associated with said mine. Buyer and Seller further acknowledge that the Property has
been used for agricultural purposes for a number of years. To the best of Seller's actual current
knowledge without investigation there are no current issues of hazardous or toxic wastes associated
with said agricultural uses.
8. LEASES.
(a). Property to be Transferred Free of Leases. Seller warrants, and Buyer acknowledges that
the Property has no existing leases except a livestock grazing lease which applies to the Property and
adjacent lands owned by Seller. Seller warrants that it will amend said grazing lease to exclude the
Property prior to close of escrow.
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ATTACHMENT 2
(b). No New Leases. Seller shall not enter into any new leases or modifications to existing
leases on the property during the option period, except as described in 8(a)above.
9. NOTICES
All notices, communications, consents, approvals and disapprovals required or permitted
hereunder.must be in writing and shall be delivered by personal delivery, facsimile, or deposited in the
United States mail, postage prepaid and addressed as follows:
TO BUYER: City of San Luis Obispo
Dr. Neil Havlik, Natural Resources Manager
990 Palm Street
San Luis Obispo, CA 93401
Telephone (805) 781-7211
TO SELLER: IRISH HILLS PLAZA EAST, LLC
c/o Madonna Enterprises LLC
284 Higuera Street
San Luis Obispo, CA 93401-4215
Attn:. Clint Pearce
Telephone (805) 543-0300
The foregoing may be changed by written notice. If served personally, or by facsimile, service
shall be conclusively deemed made at the time of service. If served by mail, service shall be
conclusively deemed made seventy-two (72) hours after deposit thereof in the United States mail.
10. BROKERS
In the event a commission is payable to any real estate brokers as a result of the transaction herein, the
Sellers will be responsible for the payment of said commission..
11. SURVIVAL
The warranties, representations, and agreements made in this Agreement shall survive the close of.
escrow.
12. 1031 EXCHANGE
Buyer acknowledges that Seller may wish to sell the Property by way of a 1031 exchange.
Buyer agrees to cooperate in any such 1031 exchange, provided it shall be at Seller's sole cost and risk,
and shall not unreasonably delay the close of escrow.
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13. MISCELLANEOUS
MACHO
(a) Entire Agreement. This Agreement, and the exhibits hereto, contains. the entire
agreement between.the parties hereto. No modification or addition to any term or provision hereof
shall be effective unless made in writing and signed by both parties hereto. The captions and headings
in this Agreement are for reference only and shall not be deemed to define or limit the scope or intent
of any of the terms, covenants, conditions or agreements contained herein.
(b) Attorneys' Fees. If litigation is commenced between the parties, the prevailing party in
that litigation shall be entitled to recover from the non-prevailing party all reasonable attorney fees and
costs.
(c) Successors. This Agreement shall inure to the benefit of and shall be binding upon the
parties to this Agreement and their respective heirs, successors, and assigns.
(d) Governing Law. This Agreement shall be governed and construed in accordance with
California law.
(e) Time of Essence. Time is of the essence in this Agreement.
(f) Offer and Acceptance. This Agreement shall be of no force or effect whatsoever until
signed by authorized representatives of both Buyer and Seller.
(g) Signature in Counterparts. This Agreement may be signed in counterparts, each of
which shall be deemed an original.
"Seller"
IRISH HILLS PLAZA EAST, LLC
by: DATE:
PHYLLIS V. MADONNA, OWNER
Buyer»
CITY OF SAN LUIS OBISPO
by: DATE:
DAVID F. ROMERO, MAYOR
ATTEST: APPROVED AS TO FORM:.
Audrey Hooper Jonath Lowell,Esq.
City Clerk y Attorney
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