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Home My WebLink About1977-10-18; City Council; 5170-2; Purchase of Master Lease & Improvements, I I Initial: e CITY OF r * RLSBAD 0, I I* - . I ;P AGENDA BILL No. Dept. Hd. DATE : OCTOBER 18, 1977 City Atty DEPARTMENT: CITY MANAGER City Mgr. SUBJECT : 1 PURCHASE OF MASTER ,nLEASE AND IMPROVEMENTS STATE AND GRAND PKOPERTY. STATEMENT OF THE MATTER REQUEST: At its meeting of August 16, 1977, Council directed staff to investigate the feasibility of acquiring the master lease on the property at State and Grand. Staff has contacted the leaseholder who has indicated his willingness to sell the lease and improvements for a total of $5,000. (See attached report to the City Manager). Based upon the analysis and discussion presented in the attachei report, staff has concluded that it would be advantageous to acquire the lease and improvements. EXHIBITS: Report to City Manager dated, 10/12/77 Resolution No.SgVO RECOMMENDATION: If Council concurs with the staff recommendation it should adop the attached resolution appropriating funds,directing staff to acquire the lease and authorizing the Mayor to execute necessart documents. Council Action: 10-18-77 Council adopted Resolution Uo. 5240, authorizing the purchase of Master Lease and Improvements, State and 61 FORM PLANNING 73 0’ 0 MEMORANDUM DATE : OCTOBER 12, 1977 TO: PAUL BUSSEY, CITY MANAGER FROM: JACK E. HENTHORN, REDEVELOPMENT COORDINATO SUBJECT: PURCHASE OF LEASE - STATE AND GRAND INTRODUCTION At its meeting of August 16, 1977, Council directed staff to in- vestigate the purchase of the master lease on the property at ti corner of State and Grand. Dave Minnich and I met with Mr. Graf, the master leaseholder, ai his home in San Diego on September 30, 1977 to discuss the follc items: 1. Purchase of his leasehold interest in the subject property. 2. Purchase of existing improvements. Mr. Graf indicated a willingness to sell his leasehold interest a total of $4,000 and offered the improvements for $1,000. DISCUSSION - LEASE The existing lease is set up so that Mr. Graf leases the land a, and owns the existing improvements. Mr. Graf in turn subleases land area and improvements to the operators of Dave‘s Radiator ! and Helton Construction, with Helton subleasing to the Village ( Mr. Graf realizes a net income of approximately $165.00 per moni from the existing leaseholds. In an effort to determine the value of the remainder of the lea: the present value was calculated to be $4,455.00 with 27 months remaining on the lease. This figure was adjusted to reflect “pa day value of future return” by applying a factor of -873439. Ti factor basically represents the value of one present day dollar a point 24 months in the future after applying a 7% discount re, tive of return offered by other investment opportunities. The ( culations resulted in current dollar value of approximately $3,! being assigned to the lease. The City’s position on the leasehold was calculated in a simila, manner. The gross income to the City in the event it purchased the lease would be $490 per month, assuming total occupancy ove; the remainder of the lease term. This would result in a total ~ over 27 months of $13,230. Current value however computes to 01 I 0 0 MEMORANDUM CITY MANAGER PAGE TWO (2) $11,555 when calculated on a "present day value of future return basis. Since it is known that Dave's Radiator is in the process of con- structing new facilities it is unlikely that full occupancy woul occur over the remaining life of the lease. Therefore it has bE assumed that the radiator shop would remain for another six mont generating $1500 in gross revenue. This would reduce total incc to $7,980 in future value, or $6,970 current value. DISCUSSION - IMPROVEMENTS Mr. Graf feels that the value of the improvements on the properi is related to salvage value only. He indicated that he recentl! received an estimate of salvage value from a salvage contractor $1,000. He indicates that this is the basis of his offering pr. to the City. Salvaged material value is very difficult to measure due to the number of variables affecting value. It is reasonable to assumt that there is some value to the existing improvements, and in 1- of current material costs the $1,000 figure appears reasona .le. GENERAL DISCUSSION Under the terms of the lease if the City did not purchase the 1( and improvements, it would realize $175 per month over the next months for a total future value of $4,725 which computes to $4,. in current value. However, the City would not be in total control of land and imp; ments until the lease expires on December 31, 1979. This is si? icant from the standpoint of being in a position to react to fi development proposals. If the corner proves to have this poten cited by the appraiser, it is doubtful that an interested party be willing to wait 27 months for this property to be made avail In addition, the existence of the master lease could complicate City's ability to put the property to interim use in the event it became totally or partially vacant. CONCLUSION If the City desires to bring about a nearterm change is the cha of this corner, i.e., prior to January 1980, then consideration should be given to acquiring the leasehold and improvements. Although short term return to the City is reduced by acquiring master lease and improvements (when partial occupancy is assume the increased control of the property offsets the reduced retur by opening future options to the City. * 0 0 MEMORANDUM PAUL BUSSEY PAGE THREE (3) RECOMMENDATION It is recommended that this item be placed on the Council agendz for its meeting of October 18, 1977 with a recommendation to acc the master lease and improvements at a total cost of $4,900. - JEH:ar @, 1 2 3 4 5 6 7 8 9 20 11 12 13 14 15 16 17 18 . 19 20 23. 22 23 24 25 26 27 is 0 0 I RESOLUTION NO. 5240 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, AUTHORIZING THE PURCHASE OF MASTER LEASE AND IiYPROVE- MENTS, STATE AND GRAND WHEREAS, the City Council of the City of Carlsbad has acquired certain property at the northwest corner of this intersection of State andSGrand; and WHEREAS, the master lessee, improvement owner has expr a desire to sell his leasehold interest and improvements to I City of Carlsbad; and 4 WHEREAS, the City Council desires to facilitate subjec property's transition to interim public use and ultimate hi and best use; and ZHFREAS, the acquisition of said leasehold and improve would expedite the attainment of the aforementioned desire. NOW, THEREFORE, BE IT RESOLVED by the City Council of " City of Carlsbad as follows: 1) That the sum of $4,900 is hereby appropriate from the L appropriated surplus of the general fund for the purpos noted above. 2) That the City Manager is hereby directed and authorize( negotiate the acquisition of the lease and improvement. a cost not to exceed $4,900. 3) That the Mayor of the City .of Carlsbad is hereby autho. and directed to execute all documents necessary to corn, the purchase and reassignment of subject lease and imp ments. u PASSED, APPROVED AND ADOPTED at a regular meeting Of Carlsbad City Council held on the 18th day of October, 197 the following vote, to wit: xxx q xxx + *, s‘ 1 2 3 4 5 6 7 8 9 io 0 0 .I AYES: Councilmen Frazee, Lewis, Packard and Skotnick. NOES: None ABSENT: Councilwoman Casler ABSTAIN: None a&L /Y /W& ROBERT e. FRAZEE ,a,hayor ATTEST: I ”‘ 12 93 14 15 16 X? 18 19 20 21 22 23 24 25 26 27 28 (SEAL) I c -2 I