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HomeMy WebLinkAbout2020-02-25; City Council; ; Amendment to the Real Estate Strategic Plan related to the Bauer Lumber/New Village Arts property(i) CITY COUNCIL Staff Report Meeting Date: To: From: Staff Contact: Feb.25,2020 Mayor and City Council Scott Chadwick, City Manager Curtis M. Jackson, Real Estate Manager curtis.jackson@carlsbadca.gov or 760-434-2836 CARevie~ Subject: Amendment to the Real Estate Strategic Plan related to the Bauer Lumber/New Village Arts property. Recommended Action Adopt a resolution approving an amendment to the Real Estate Strategic Plan relating to the Bauer Lumber/New Village Arts property consistent with City Council direction given on Feb. 11, 2020. Executive Summary In October 2017, the City Council approved the Real Estate Strategic Plan (Strategic Plan), which provided strategic direction related to the Bauer Lumber/New Village Arts property (Property). New Village Arts (NVA) is a non-profit theater group who has operated a theater in the city owned Property since 2006. In April 2019, the city entered into a new five-year lease agreement with NVA to continue operating a theater and arts facility. On Feb. 11, 2020, the City Council directed city staff to initiate discussions with NVA on a long-term lease and return to the City Council to discuss price and terms for such a long-term lease. This action before the City Council will amend the Strategic Plan as it relates to the Property, consistent with the City Council's direction on Feb. 11, 2020. Discussion On Oct. 17, 2017, the City Council approved the Strategic Plan (Resolution No. 2017-200), which provided strategic direction related to the Property. On April 9, 2019, the City Council approved a five-year lease agreement with NVA consistent with the Strategic Plan. On Feb. 11, 2020, the City Council directed city staff to initiate discussions with NVA on a long-term lease and return to the City Council to discuss price and terms for such a long-term lease. This action before the City Council will amend the Strategic Plan as it relates to the Property, consistent with the City Council's direction on Feb. 11, 2020. An underline/strikeout version of the recommended text changes to the Strategic Plan are included in this staff report as Exhibit 2, with a clean version included as Attachment A to the Exhibit 1, the City Council resolution. The text specific to the property can be found on page 14 and 15 of Attachment A to Exhibit 1. Fiscal Analysis There is no fiscal impact associated with this update. Feb. 25, 2020 Item #2 Page 1 of 50 Next Steps City staff will initiate discussions with NVA on a long-term lease of the Property and return to the City Council to discuss price and terms for such a long-term lease. Environmental Evaluation (CEQA) Pursuant to Public Resources Code Section 21065, receipt of this update does not constitute a "project" within the meaning of CEQA in that it has no potential to cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, and therefore does not require environmental review Public Notification This item was noticed in accordance with the Ralph M. Brown Act and was available for public viewing at least 72 hours prior to the meeting date and time. Exhibits 1. City Council resolution 2. Underline/strikeout version of recommended text changes to the Real Estate Strategic Plan Feb. 25, 2020 Item #2 Page 2 of 50 RESOLUTION NO. 2020-036 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD APPROVING AN AMENDMENT TO THE REAL ESTATE STRATEGIC PLAN RELATING TO THE BAUER LUMBER/NEW VILLAGE ARTS PROPERTY CONSISTENT WITH CITY COUNCIL DIRECTION GIVEN ON FEB. 11,2020 WHEREAS, New Village Arts (NVA) is a non-profit theater group who has operated a theater in the city owned Bauer Lumber Building (Property) since September 2006; and WHEREAS, on Oct. 17, 2017, the City Council approved the Real Estate Strategic Plan, which provided strategic direction related to the Property by Resolution No. 2017-200; and WHEREAS, on April 9, 2019, the city entered into a new five-year lease agreement with NVA to continue operating a theater and arts facility by Resolution No. 2019-046; and WHEREAS, on Feb. 11, 2020, the City Council directed city staff to initiate discussions with NVA on a long-term lease and return to the City Council to discuss price and terms for such a long-term lease. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. That the City Council approves an amendment to the Real Estate Strategic Plan related to the Bauer Lumber/New Village Arts property, consistent with City Council direction given on Feb. 11, 2020, attached hereto as Attachment A. Feb. 25, 2020 Item #2 Page 3 of 50 PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council ofthe City of Carlsbad on the 25th day of February 2020, by the following vote to wit: AYES: Hall, Blackburn, Bhat-Patel, Schumacher. NAYS: None. ABSENT: None. MATT HALL, Mayor r~~ J.luJa: t,z;,,?to/ Dofj 11/ BARBARA ENGLESON, City Clerk t/!j Cleic Feb. 25, 2020 Item #2 Page 4 of 50 Attachment A {city of Carlsbad Real Estate Strategic Plan October 2017 Feb. 25, 2020 Item #2 Page 5 of 50 Table of Contents Page I. Introduction ................... 3 II. Source of Funds Analysis .................................................................. .4 Ill. Real Estate Asset Prioritization ......................................................... 6 1. In Progress ................. '. ................................................................. 7 Current Lease Implementation Lot 9 ........................................................................................ 7 Village Grille/Shorehouse Kitchen .......................................... 9 Dove Library Cafe .................................................................. 10 Lease Expiration and Renewal Bio, Tech, and Beyond ............................................................ 12 Bauer Lumber/New Village Arts ............................................. 14 Previous City Council Disposition Direction Buena Vista Reservoir ............................................................ 16 2. One-to-Three Year Plan ............................................................... 17 Old Fire Station #3 ...................................................................... 17 Hawthorne .................................................................................. 19 The Shoppes at Carlsbad Parking Lot Properties ........................ 21 Golf Course Lot s 4 and 5 ............................................................. 23 Oceanside Properties .................................................................. 25 Las Palmas ................................................................................... 28 Calavera Waste Water Facility .................................................... 31 3. Three-to-Five Yea r Plan ............................................................... 33 Farmers Property ........................................................................ 33 CMWD Property .......................................................................... 36 Village Properties ........................................................................ 38 Faraday Center ............................................................................ 41 IV. Appendix ............................................................................................ 43 City of Carlsbad 2019 Amended Real Esta.te Strategic Plan 2 Feb. 25, 2020 Item #2 Page 6 of 50 I. Introduction The City of Carlsbad currently owns a diverse portfolio of real estate assets, which includes properties used for city operations, vacant properties and leased properties. Consistent with the city's stewardship role, the City Council has elected to take a more strategic approach to how major real estate assets are managed, both to maximize the return on the investment of public dollars and to leverage. properties for the greatest public benefit and to meet future city facility needs. In 2012, city staff commissioned an initial assessment of some of its real estate holdings from a professional commercial real estate consulting firm (Professional Strategic Plan for Real Property Assets, The Irving Group, June 2012). The city has since carried out a number of recommendations in the resulting report, including consolidating management of the city's real estate assets under a new position in the Office of the City Manager. This real estate manager position has since been filled, enabling the city to take a more holistic and strategic approach to its real estate holdings, with all real estate business now being led and managed through the real estate manager position. Given market fluctuations and evolving city needs, staff has developed this updated Real Estate Strategic Plan, which builds on the 2012 assessment by including: • An analysis of the funding sources utilized to purchase each city owned parcel, including the constraints and opportunities associated with those sources, completed with the assistance of legal counsel. • Updated property valuations completed by an independent professional commercial real estate firm. • Additional properties, beyond those included in the 2012 report. • A five-year planning horizon, with annual progress reports and provisions for updates. • A third-party peer review to strengthen and validate this strategic plan, conducted by a professional commercial real estate consulting firm (KMA- Keyser Marston Associates). The development of this strategic plan and the recommendations included in this strategic plan were guided by the following objectives: • Retaining ownership of all non-residential property to create a long term revenue stream for the city, rather than selling non-residential property, which yields only one-time funds. City of Carlsbad 2019 Amended Real Estate Strategic Plan 3 Feb. 25, 2020 Item #2 Page 7 of 50 • Disposing of real estate assets in a fiduciarily responsible manner consistent with the funding source used to acquire the property. • Balancing the city's return on investment of public dollars and leveraging properties for the greatest public benefit. • Disposing of real estate assets through an open and competitive process. • Disposing of real estate assets in a manner that takes into account existing and future city facility needs. • Incorporating the flexibility needed to respond to changing market conditions and unforeseen opportunities. This Real Estate Strategic Plan should be considered a framework for decision-making, understanding that the specific actions identified in this plan will be presented individually to the City Council for discussion and direction. II. Source of Funds Analysis The city, with the assistance of outside legal counsel, completed an analysis of the funding sources utilized to purchase city owned properties, including the constraints and opportunities associated with those sources. The Analysis focused on Community Facility District No. 1 Funds ("CFD No. 1"), Public Facility Funds ("PFF"), and Redevelopment Bond funds. Each of these three funding sources have specific requirements as to the use of said funds. Below is a general overview of each of the funding sources: Community Facility District No. 1 CFD No. 1, established in 1991, is a special development fee created to finance certain public capital facilities to be located throughout the city that were necessary to meet increased demands placed upon the city as a result of new development. To date, most all of the public facilities identified in CFD No. 1 establishment documents have been constructed except for the City Hall complex, a Public Works office and warehouse facility, the expansion of the Cole library, and the construction of Veteran's Park. CFD No. 1 funds cannot be used for projects outside what was described in the initial 1991 CFD No. 1 establishment documents, or for ongoing maintenance or services. CFD No. 1 funds are not considered "general fund" dollars and are not subject to Prop H spending limit restrictions, which require a vote of the registered voters of Carlsbad for expenditures over $1,000,000 of general fund monies used in the acquisition or improvement of real estate. Any property acquired with CFD No. 1 funds must be used for the purpose for which they were acquired and for a purpose consistent with those identified in the CFD No. 1 establishment documents. If it is definitively determined that a property purchased City of Carlsbad 2019 Am ended Real Estate Strategic Plan 4 Feb. 25, 2020 Item #2 Page 8 of 50 with CFD No. 1 funds will not be used for a purpose consistent with those identified in the CFD No. 1 formation documents, the City is required to sell the property within a reasonable, fiduciarily responsible timeframe and the sale funds must be returned to the CFD No. 1 fund account, including any gain on the property. The city is prohibited from leasing properties purchased with CFD No. 1 funds long-term. However, the city is allowed to enter into a short term lease on a property until a final decision regarding the property's use has been determined. Public Facility Fund The Public Facility Fund (PFF), established in 1979, is a special development fee created to finance public facilities. The city is required to maintain public health and safety and the general welfare of the community and all its citizens; as such, PFF ensures that all necessary services and facilities will be available concurrent with need. PFF may be used only for the purpose of acquiring, building, improving, expanding and equipping public property and public improvements and facilities, including but not limited to the following types of capital projects: public buildings (i.e., fire stations, police facilities, maintenance and yard facilities, libraries and general city offices), parks, major streets, traffic signals, storm drains, bridges and other similar projects. PFF funds are not considered "general fund" dollars and are not subject to the Prop H spending limitation restrictions and use of these funds are generally more flexible _than the use of CFD No. 1 funds. The city may sell or lease (short-or long-term) properties acquired with PFF funds so long as those properties are no longer required for city purposes. Redevelopment Bonds In 1988 the Carlsbad Redevelopment Agency ("Agency") issued a $12,000,000 Tax Exempt Bond for redevelopment project purposes. Subsequently, the city refinanced the 1988 Bond in 1993 for $15,495,000, of which $6,030,000 is currently outstanding (June, 2017). Bond payments are financed through redevelopment tax increment, established at the time the Bond is originated. Should the Bond be paid off early, the existing tax increment tied to the Bond will be reallocated and redistributed through the standard property tax protocol, with distr"ibutions going to not only the city, but the county, state and school district. The 1993 outstanding Bond will be completely paid off in 2023. The 1988 and 1993 Bonds were issued as tax-exempt bonds which mean that, as of the date of issuance of each such series of the Bonds, it was expected that the proceeds of such Bonds would be used for a governmental purpose throughout the life of such Bonds. Generally speaking, properties purchased with such Bond proceeds must be purchased for and utilized for a governmental purpose throughout the life of the Bonds. The legal and tax ramifications of the lease or sale of properties acquired from such Bond proceeds must be carefully considered. City of Carlsbad 2019 Amended Real Estate Strategic Plan 5 Feb. 25, 2020 Item #2 Page 9 of 50 1. In Progress The following properties currently have leases underway but are not fully implemented, are currently leased but the lease is expiring in the very near future, or the City Council has previously given direction on the disposition of the property. All of the following properties will require staff efforts and/or city council consideration over the next year. CURRENT LEASE IMPLEMENTATION The following properties currently have lease agreements underway, but they are not fully executed or implemented. Lot 9 Lot 9 is a 3.15 acre property located at the northwest corner of the northern-most reach of The Crossings Drive, north of Palomar Airport Road. The property consists of a 1.6 acre parcel owned by the City of Carlsbad, and a 1.54 acre parcel owned by the Carlsbad Municipal Water District ("CMWD"), which was occupied by a water storage tank that was no longer in service. City of Carlsbad 2019 Amended Real Estate Strategic Plan 7 Feb. 25, 2020 Item #2 Page 11 of 50 Village Grille/Shorehouse Kitchen The Village Grille/Shorehouse Kitchen property is located on the west side of north State Street, just north of Grand Avenue, at 2833 State Street. The site is immediately adjacent to a city-owned parking lot. The property consists of a 5,000 square foot parcel developed with a 1,850 square foot restaurant building. The property, along with the adjacent parking lot, was acquired by the city's redevelopment agency with tax increment funds, and is subject to no restrictions. Current Status In February 2017, the city entered into a 20-year retail lease agreement (initial 10 years, with two, 5-year options) with Shorehouse Kitchen to operate a full service restaurant. The building was leased in an "as-is" condition. Currently, the tenant has obtained their Village Review Permit, obtained their building permit (issued 09/05/17), and construction is underway. Per the lease agreement the tenant will be required to pay rent 120 days from the issuance of the building permit (01/04/18), or upon issuance of a Certificate of Occupancy, whichever comes first. It is anticipated the _restaurant will be open for business in early 2018. The city will initially receive $95,000 in annual lease revenue, subject to 3% annual increases. Recommendation It is recommended that city staff continue to implement and monitor the retail lease agreement with Shorehouse Kitchen. City of Carlsbad 2019 Amended Rea l Estate Strategic Plan 9 Feb. 25, 2020 Item #2 Page 13 of 50 payments. Through this additional new investment, the city could realize its' original goal to enliven the library campus and courtyard, create a great gathering place, connect community members, and provide a convenient service to patrons of the Dove Library campus. Recommf:!ndation It is recommended that city staff return to the City Council with a request for authorization to release a third Request for Proposals (RFP) for leasing the Dove Library Cafe space that includes a recommended budget amount for a financial contribution towards the initial tenant improvement costs. City of Carlsbad 2019 Amended Real Estate Strategic Plan 11 Feb. 25, 2020 Item #2 Page 15 of 50 LEASE EXPIRATION AND RENEWAL The following properties are currently leased but the lease is expiring in the very near future. Bio, Tech, and Beyond The Bio, Tech, and Beyond property is located at the southwest corner of El Camino Real and Faraday Avenue, at 2351 Faraday Avenue. The site is 1.46 acres in size and is a part of the overall 13.51 acre Farmers property. The site is developed with a 6,100 square foot building that was originally occupied by Farmers Insurance and utilized as a drive-thru claims assessment building. The entire Farmers property was purchased by the city in 2002, with the intent to utilize the property as the location of a new city hall. The city is currently working on a plan to develop a new city hall, as a part of a larger civic center campus. It is anticipated that the location for a new city hall will be selected by the City Council, in consultation with the community, in the near future. In January of 2013, the City Council approved a five-year lease agreement with Bio, Tech, and Beyond to utilize the building as life sciences incubator, community laboratory, and science education center. The annual lease rate for the five years of the agreement is one dollar ($1.00) per year, with the city assuming certain first year utility and maintenance expenses, and with the city assuming landscape maintenance (not capped) and trash charges (capped at $100.00 per month) for the remaining four years of the initial lease agreement period. The five-year lease agreement included two (2), one (1) year Lessee options to renew the lease upon the city's written consent, with the city reserving the right to modify the rent rate for each renewal year at the City Council's discretion. City of Ca rlsbad 2019 Amended Real Estate Strategic Plan 12 Feb. 25, 2020 Item #2 Page 16 of 50 Current Status Bio, Tech, and Beyond is in the last year of the initial five-year lease agreement, and must provide written notice to the city of Lessee's intent to exercise the first of their two (2), one (1) year Lessee lease options. The city anticipates that Bio, Tech, and Beyond will deliver written notice to the city of their intent to exercise the first one- year lease option. Recommendation Execution of the Lessee's request to exercise the first one-year lease option requires the city's written consent. In addition, the city reserves the right to modify the rent rate for each of the two (2), one (1) year lease renewal option years at the City Council's discretion. It is recommended that city staff negotiate a nominal annual rent increase that covers all or at least some of the city's actual landscape maintenance costs and all of the trash charges for the property and return to the City Council with the new one-year lease agreement for their review and approval. City of Carlsbad 2019 Amended Real Estate Strategic Plan 13 Feb. 25, 2020 Item #2 Page 17 of 50 city exercised both one-year lease extension options, with the last extension expiring on June 30, 2018. The annual lease rate for this agreement was one dollar ($1.00) per year, with a seventy-five cent ($0.75) surcharge per ticket sold (estimated annual surcharge revenue of $7,500) to help defray some of the city's maintenance, repair and improvement costs associated with owning the building. On April 9, 2019, the City Council authorized a new five-year lease agreement with NVA at a rate of $500 per month with no annual rental rate increases. This lease also included new annual "Performance Standards" that NVA is required to complete, which include hours of operations, and an itemized list of performance and educational events to be conducted annually, with the goal of increasing the utility and vitality of the property over the five-year lease term. Current Status NVA currently occupies the property under the current five-year lease that expires in June 2024. Recommendation On Feb. 11, 2020, the City Council directed city staff to initiate discussions with NVA on a long-term lease and return to the City Council to discuss price and terms for such a long-term lease. City of Carlsbad 2019 Amended Real Estate Strategic Plan 15 Feb. 25, 2020 Item #2 Page 19 of 50 2. One-to-Three Year Plan The following properties are scheduled to be addressed within the initial one-to-three year period of the five year plan horizon. These properties were previously identified in the 2012 The Irving Group Report as real estate assets that the city should be taking a more strategic approach to how they are managed, both to maximize the return on the investment of public dollars and to leverage properties for the greatest public benefit. Old Fire Station No. 3 The Old Fire Station No. 3 property is located at the southeast corner of El Camino Real and Chestnut Avenue, at 3701 Catalina Drive. The property is 9,200 square feet in size and is developed with a 2,151 square foot building, formerly used by the City as a fire station. The property was acquired in 1966, with Old Fire Station No. 3 being built in 1976 where it operated uninterrupted until the recent opening of the new Fire Station No. 3. The building is a two story structure located in a residential neighborhood. The building has two bedrooms and two and a half bathrooms, with two large roll-up garage doors in the front and rear of the property that allow fire truck access to and through the garage. City of Carlsbad 2019 Amended Real Estate Strategic Plan 17 Feb. 25, 2020 Item #2 Page 21 of 50 Acquisition Source of Funds The property was acquired with general funds and is not subject to any known restrictions. The station structure was constructed with 1974 Revenue Sharing Funds in the amount of $94,850. There are no known "source of funds used11 restrictions associated with disposition of the property. Status Carlsbad Fire Department personnel have officially moved from the Old Fire Station No. 3 property to their new Station No. 3 location off of Cannon Road, east of El Camino Real, within the Robertson Ranch East development area. The Old Fire Station No. 3 property is now completely vacant. The property has a General Plah Land Use · designation of Residential 0-4 du/ac (R-4) and a Zoning designation of One Family Residential (R-1-8000). Highest and Best Use The highest and best use of the Old Fire Station No. 3 property is to sell the property for use as a single-family home, generating revenue not just through the disposition, but also by returning the property to the Assessor's property tax roll. Value Based on Highest and Best Use Sell "As-ls11 : The unique nature of the over-sized garage at the Old Fire Station No. 3 property could either impair the disposition of the property at market value or drive demand by interested parties with motor-homes, car collections, or other large vehicles. As such, if the city were to sell the property in an "as-is11 condition, the city could realize proceeds estimated to be around $645,000 (April, 2016). Sell After Renovating: If the city elected to spend an estimated $50,000 on renovations to the building, the city could realize proceeds estimated to be between $695,000 and $774,500 (April, 2016); however, there would be no guarantee of realizing a return on the renovation investment. Recommendation It is recommended that city staff complete an appraisal of the property to establish the minimum asking price and list the property for sale by owner in an "as-is11 condition. City staff would return to the City Council for review and approval of documents as required and as appropriate. City of Carlsbad 2019 Amended Real Estate Strategic Plan 18 Feb. 25, 2020 Item #2 Page 22 of 50 Hawthorne The Hawthorne property is located at the southwest corner of Camino Vida Roble and Las Palmas Drive, at 2065 Camino Vida Roble. It is immediately adjacent to the city- owned Las Palmas property at 2075 Las Palmas Drive. The property consists of two parcels totaling 3.52 acres (3 .08 acres and .44 acres). The property is developed with a freestanding 5,000 square foot concrete block building comprised of 1,100 square feet of office space and 3,900 square feet for truck bays. The property was acquired by the City in 2010, with the intent that the property, along with the adjacent Las Pal mas office building, would serve as a new central location for the city's maintenance and operations center. However, the city now believes that the two properties are not large enough to accommodate the city's current operational needs. Since its acquisition in 2010, the property has not been occupied and the property is in need of capital investment to address deferred maintenance issues. The property is also constrained by a 200 foot-wide SDG&E easement traversing the rear portion of the property. Acquisition Source of Funds The Hawthorne property was acquired in 2010 for $2,487,000, utilizing CFD No. 1 funds. The property was purchased with CFD No. 1 funds with the intent that the property would serve as the location, in conjunction with the Las Palmas property, for the city's maintenance and operations center. At the time it is definitively determined that the property will not be used for this purpose, the City is required to sell the property within a reasonable, fiduciarily responsible timeframe and the sale funds must be returned to the CFD No. 1 fund account. City of Carlsbad 2019 Amended Real Estate Strategic Plan 19 Feb. 25, 2020 Item #2 Page 23 of 50 Status The Hawthorne property has remained vacant since it was acquired in 2010 as a possible location for a new maintenance & operations center. On several occasions, the city has utilized the property for interim uses such as construction staging, materials storage, and temporary parking. The property has a General Plan Land Use designation of Planned Industrial (Pl) and a Zoning designation of Planned Industrial (P-M). Highest and Best Use The property's location within the central portion of the city and the design and configuration of the current bui lding on the property presents an opportunity to attract unique tenants and/or purchasers. As such, the highest and best use for the Hawthorn property is to lease the property in the near-term (three to five years) and then sell the property with the sale proceeds returned to the CFD No. 1 fund account. Value Based on Highest and Best Use Lease: The Hawthorne property was purchased utilizing CFD No. 1 funds and, as such, the city is prohibited from leasing the property long-term. However, the city is allowed to enter into a short term lease on the property until a final decision regarding the property's use has been determined. Lease rates as of May 2017 in the area around the Hawthorne property are approximately $0.95 per square foot, or $4,750 per month; however, due to the properties unique characteristics and open areas, lease rates could be as high as $12,000 per month depending on the use. Sale: When the city sells the Hawthorne property, it should be sold "as-is". It is estimated that the sales price would be between $2,250,500 and $3,100,000 (April, 2016). Recommendation It is recommended that the city should issue a competitive Request for Proposals (RFP) for a short term (maximum three-to-five year) lease that includes a right of first refusal option to purchase the property. If, at the end of the initial lease period, the city has definitively determined that the property will not be used for a CFD No. 1 fund eligible use, then the city should issue a competitive RFP for offers to purchase the property. If, at that time, the tenant elects to not exercise their right of first refusal and chooses to not match or exceed the highest and most responsive and responsible purchase offer proposal and acquire the property, then the city would sell the property to the RFP respondent with the highest and most responsive and responsible purchase offer proposal. City staff would return to the City Council for review and approval of documents as required and as appropriate. City of Carlsbad 2019 Amended Real Estate Strategic Plan 20 Feb. 25, 2020 Item #2 Page 24 of 50 The Shoppes at Carlsbad Parking Lot Properties The Shoppes at Carlsbad Parking Lot properties surround the regional shopping center, now known as The Shoppes at Carlsbad, located south of Highway 78, north of Marron Road, east Monroe Street, and west of El Camino Real, including the southwest corner of El Camino Real and Marron Road. The properties consist of numerous parcels totaling 56.9 acres. The Carlsbad Parking Authority ("Parking Authority") acquired the 56.9 acres to financially assist Plaza Camino Real LP. ("PCR") in developing a regional shopping center within the city. The first phase of the center was constructed in 1969 and the center was subsequently expanded in 1975. The Parking Authority entered into a lease agreement with the city for control over the parking lots, and repayment of the bonds used to acquire the property; the city and Parking Authority subsequently entered into a Public Parking Lot Agreement ("Agreement") with PCR in 1981 whereby PCR was required to maintain the parking lots. In 1996, the city dissolved the Parking Authority (Resolution 96-294), leaving the city and PCR as the sole parties to the Agreement. PCR has since sold their interests in the mall to Westfield, LLC, predecessor in interest to RPI Carlsbad LP. and Rouse Properties LP. ("Rouse Properties") as of December 2015. The properties have .been utilized as parking lots for the regional shopping center since 1969 and 1975 respectively. Acquisition Source of Funds The parking lot properties were acquired from the proceeds of a 1969 Parking Revenue Bond ("Bond") for a total of $1,535,000 on October 1, 1969. The Bonds held tax exempt status, thus the parking lots had to be used for a public purpose and the city could not profit from the parking lot properties until the Bonds were completely paid off. The Parking Authority leased the parking lot properties to the city at an initial lease rate of $142,250, which was subject to adjustment until the Bonds were retired in full, which occurred in 1995. The city will need to continue its due diligence to confirm whether or not a long-term lease or sale of the properties is viable. City of Carlsbad 2019 Amended Real Estate Strategic Plan 21 Feb. 25, 2020 Item #2 Page 25 of 50 Status The parking lot properties are currently managed and maintained by Rouse Properties pursuant to the Agreement. The parking lot properties have a General Plan Land Use designation of Regional Commercial (R)/Open Space (OS) and a Zoning designation of General Commercial (C-2)/Open Space (OS), and are subject to the Westfield Carlsbad Specific Plan (CS-219, approved July 23, 2013). Highest and Best Use The current highest and best use and only use allowed under the Agreement is the continued use of the properties as a parking lot to be utilized by customers of the regional shopping center. Setting aside the Agreement, the only practical potential long-term lessee or owner of the properties other than the city, would be the regional shopping center owner and operator, Rouse Properties. Rouse Properties has formally expressed an interest in a long-term lease or purchase of the properties. Value Based on Highest and Best Use .Lease: The city could retain ownership of the properties and elect to pursue entering into a long-term lease agreement (55-99 years) with Rouse Properties. A formal appraisal or valuation would be required to ascertain the fair market long-term lease value of the properties. Entering into a long-term lease agreement for the properties would provide additional development and financing flexibility for Rouse Properties. In addition, with a long-term lease agreement in place the properties would be returned to the Assessor's property tax roll. The city will need to continue its due diligence to confirm whether or not a long-term lease is viable. Sale: The city's general preference is to retain ownership of our properties and lease them out long-term, rather than sell a particular property. However, the city could elect to pursue the sale of the properties to Rouse Properties. A formal appraisal or valuation would be required to ascertain the fair market value of the properties. The city should, at a minimum, receive sale proceeds that exceed the $3,133,275 spent on the Bonds. The sale of the properties would provide additional development and financing flexibility for Rouse Properties. In addition, with the sale of the properties they would be returned to the Assessor's property tax roll. The city will need to continue its due diligence to confirm whether or not a sale of the properties is viable. Recommendation It is recommended that the city should initiate exploration of options for entering into a long-term lease agreement for the parking lot properties with Rouse Properties. City staff would return to the City Council for review and approval of documents as required and as appropriate. City of Carl sbad 2019 Amended Real Estate Strategic Plan 22 Feb. 25, 2020 Item #2 Page 26 of 50 Highest and Best Use The site is one of the best locations in Carlsbad with nearly 360 degree views of the city and close proximity to major arterial roadways. The highest and best use of the property is most likely either a hotel or multi-tenant or corporate headquarters office use. Value Based on Highest and Best Use Lease: If the city elects to enter into a long-term ground lease (at least SO-years) for either a hotel or multi-tenant or corporate headquarters office use, the city would realize the highest return on the properties. Combining the expected revenues from ground leases for both Lots 4 and 5, and assuming a 15-year amortization value, the city can expect initial annual lease revenues of $1,032,739 ($86,062 per month) (September, 2017). Estimating a SO-year term with minimum 2.5% annual lease revenue increases, the total estimated revenue over the term of the SO-year lease comes to $100,675,888 {September, 2017). Sale: If the city elects to sell the properties, the city could expect to receive between $10,454,589 and $15,491,075 {September 2017). Considering the un ique characteristics of Lots 4 and 5, the minimum value should be at the mid to high end of comparable sales within the region. Using the highest estimated sale valuation, if the city invested the proceeds over the same SO-year term of a possible lease scenario, with the city's current portfolio interest rate of 1.174%, the city would receive $27,444,711, which is $73,231,177 less than the $100,675,888 the city could earn by entering into a long-term ground lease on the property. Recommendation It is recommended that the city should issue a competitive Request for Proposals (RFP) for offers for a long-term ground lease of the properties for either a hotel or Class A multi-tenant or corporate office building. City staff would return to the City Council for review and approval of documents as required and as appropriate. City of Carlsbad 2019 Amended Real Estate Strategic Plan 24 Feb. 25, 2020 Item #2 Page 28 of 50 are prohibited: RV Parks, convalescent facilities, emergency health care, heliports, hospitals, park and recreation facilities, adult businesses, ambulance services, communication facilities, drive-though and drive-up services, funeral services, internet services, laboratories, marines sales and services, nurseries, pawn shops, research and development services, swap meets, hotels, warehousing, industry, wholesaling, distribution, and storage. The property is currently involved in litigation in which the city is attempting to perfect its ground water rights. At this time there is no certainty when litigation will be concluded. However, the on-going litigation does not preclude the city from pursuing either a long~term grounds lease or sale of the property. Pajama Drive: The property is located in a non-coastal area and is zoned Residential Estate - B (RE-B). The zoning designation allows for residential estate development at a density of 1.0 dwelling unit per acre. Highest and Best Use Foussat & Mission: The best use of the property for the city includes retaining the ground water rights for the entire property and some small portion of the property to maintain access to the water well located onsite, and either long-term ground leasing or selling the remainder of the property through a competitive, market-rate process such as a RFP. Pajama Drive: The city has no continuing use of the property. As such, the best use of the property is to sell the property through a competitive, market-rate process. Value Based on Highest and Best Use Foussat & Mission-Sale: If the city elects to sell the property, the city could expect to receive between $1,399,104 and $4,410,S32 (September 2017). Considering the unique ground water rights and water well site constraints, the maximum value estimated to be received should be the average comparable sales within the region, or approximately $3,012,626 (September 2017). Lease: The city could enter into a long-term ground lease on the property. Assuming a lS-year amortization value, the city can expect initial annual lease revenues of $200,842 ($16,737 per month) (September, 2017). Estimating a SO-year term with minimum 2.S% annual lease revenue increases, the total estimated revenue over the term of the SO-year lease comes to $19,578,928 (September, 2017). Pajama Drive-Sale: If the city elects to sell the property, the city could expect to receive between $98,019 and $119,801 (April, 2016). The value estimated to be received should be the median comparable sales within the region, or approximately $109,000. City of Carlsbad 2019 Amended Real Estate Strategic Plan 26 Feb. 25, 2020 Item #2 Page 30 of 50 Recommendation Foussat & Mission: It is recommended that the city should issue a competitive Request for Proposals {RFP) for offers for a long-term ground lease of the property, in a manner that includes retaining the city's ground water rights for the entire property. City staff would return to the City Council for review and approval of documents as required and as appropriate. Pajama Drive: It is recommended that city staff complete an appraisal of the property to establish the minimum asking price and list the property for sale by owner in an "as is" condition. City staff would return to the City Council for review and approval of documents as required and as appropriate. City of Carlsbad 2019 Amended Real Estate Strategic Plan 27 Feb. 25, 2020 Item #2 Page 31 of 50 Las Palmas The Las Pal mas property is located on south side of Las Palmas Drive, just east of the intersection of Camino Vida Roble and Las Pal mas Drive, at 2075 Las Pal mas Drive. The property is adjacent to and just east of the city-owned Hawthorne property. The Las Palmas property is 2.29 acres in size and is developed with a freestanding fully- improved 22,627 square foot office building. Originally built in 1985, the property served as the city's development services center from 1986 until 2001 when city staff moved to the larger Faraday Center building. The property is currently leased to the Mira Costa Community College District for use as a Technology Career Institute and Small Business Development Center. Acquisition Source of Funds The Las Palmas property was originally leased by the city in 1986 with an option to purchase. In 1987, the city exercised the purchase option and acquired the property for $1,602,000 using Public Facilities Funds ("PFF"). The city may sell or lease facilities acquired with PFF funds so long as those properties and facilities are no longer required for city purposes. Status In July 2014, the city entered into a six-year lease agreement with the Mira Costa Community College District to operate a Technology Career Institute and Small Business Development Center at the Las Palmas property. The lease term is set to expire on July 16, 2020. The lease does include an option to renew that must be mutually agreed upon. Mira Costa must provide written notice to city of their intent City of Carlsbad 2019 Amended Real Estate Strategic Plan 28 Feb. 25, 2020 Item #2 Page 32 of 50 to renew the lease not less than sixty {60) days prior to the expiration of the initial lease term, and the city must respond to the renewal request in writing within thirty {30) days of receiving such notice. The city reserves the right to modify the rent rate for each renewal year at the City Council's discretion. The city anticipates that Mira Costa is desirous of negotiating a lease renewal agreement. The Las Palmas property has a General Plan Land Use designation of Planned Industrial (Pl) and a Zoning designation of Planned Industrial (P-M). Highest and Best Use Given the property's central location and the current physical characteristics of the building, the highest and best use of this property is to continue to lease the property to users ranging from laboratories, office, and light manufacturing, to the current technical training and educational uses currently conducted onsite. The use of the facility as a technology career institute and small business development center continues to be consistent with the city's desire to become a hub for higher education and research within northern San Diego County. Value Based on Highest and Best Use Lease -"As-ls": The current lease term ends on July 16, 2020. The lease specifies a flat lease rate of $5,656.75 per month ($.25 per foot, per month; or $67,881 total per year), with no cost of living adjustment or rent increase over the six year term of the lease agreement. At the time of entering into the lease agreement (July 2014), average market rent rates for similar property types were estimated at $.70 per square foot per month. The $.70 per square foot per month average market rent rate reflected properties with little or no deferred maintenance and took into consideration the condition of existing tenant improvements. Prior to occupancy by Mira Costa, the Las Palmas property was in need of a significant amount of deferred maintenance repairs. These repa irs, all of which were completed by the city, were estimated at $450,000 and included roof replacement, HVAC repairs, parking lot resealing, and building power washing. In addition, the interior improvements to the building were substandard and in need of upgrading. Mira Costa completed the significant and necessary tenant improvements at their expense. Finally, at the time of the lease agreement the City Council was strategically focused on creating quality jobs and becoming a hub for higher education and research and the use of the property as a Technology Career Institute and Small Business Development Center provided public benefit and aligned with the City Council's focus. The current average market rent rate for Class B buildings at a triple-net rate is $2.43 per square foot (July 2017), or approximately $54,984 per month ($659,803 annually). Beginning in 2020, if the city entered a 5-year lease at today's market rents of $2.43 per square foot with a minimum 2% CPI increase, the city could expect to generate over $3,433,643. City of Carlsbad 2019 Amended Real Estate Strategic Plan 29 Feb. 25, 2020 Item #2 Page 33 of 50 Sale: The city's general preference is to retain ownership of our properties and lease them out, rather than sell a particular property. If, at the end ofthe current lease term, the city elects to sell the Las Palmas property, the sale should be conducted in an "as- is" manner, with an estimated sales price between $2,899,142 and $7,772,391 (April, 2016). The Median estimated sales price is $4,600,479 and the property's value should appreciate over the next three years to warrant expected sales proceeds near the higher end of this range. The longer term decision to lease or sell the Las Palmas property could be greatly influenced by future City Council decisions on a new city hall. Recommendation The current lease term ends on July 16, 2020. While it is anticipated that Mira Costa is desirous of negotiating a lease renewal agreement with the city, such a request requires the city's written response and the city reserves the right to modify the rent rate for each renewal year at the City Council's discretion. If the city agrees to consider a lease renewal agreement, it is recommended that the city negotiate a rent increase with an annual minimum rent adjustment percentage that would cover all of the city's actual costs to maintain, repair, or improve the ex.terior of the property, as well provide the city with some additional financial return on the property that is at, or closer to, current market rates. If Mira Costa declines to request a lease renewal agreement or the city declines such a request, then it is recommended that the city should issue a competitive Request for Proposals (RFP) for offers for leasing the property. The city will need to choose which approach to pursue during the 2019-2020 fiscal year. City staff would return to the City Council for review and approval of documents as required and as appropriate. City of Carlsbad 2019 Amended Real Estate Strategic Plan 30 Feb. 25, 2020 Item #2 Page 34 of 50 Calavera Waste Water Facility The former Calavera Sewage Facility property ("Calavera") is located on northwest side of Tamarack Avenue, midway between Carlsbad Village Drive and El Camino Real. The property is 4.55 acres in size and is currently vacant. The property was previously developed with a waste water treatment facility that was built by the original developer of the surrounding neighborhood. The property and facility were granted to the City in 1982. The waste water treatment facility became obsolete and was demolished by the City in 2012. Acquisition Source of Funds The source of acquisition funds used to purchase the property is unknown. However, there are no known "source of funds used" restrictions associated with disposition of the properties. Status The Calavera property has remained vacant since the waste water treatment plant was demolished in 2012. On several occasions, the city has utilized the property for interim uses such as construction staging and materials storage. The property has a General Plan Land Use designation of Public (P) and a Zoning designation of Public Utility (P-U. The intent and purpose of the P-U Zoning designation is to provide for certain public utility and related uses, including governmental maintenance and service facilities, and public utility district maintenance, storage and operating facilities. City of Carlsbad 2019 Amended Real Estate Strategic Plan 31 Feb. 25, 2020 Item #2 Page 35 of 50 Highest and Best Use The city is currently using the large building on the Farmers property for public works storage purposes. The Farmers property was purchased by the city in 2002, with the intent to utilize the property as the location of a new city hall. The city is currently working on a plan to develop a new city hall, as a part of a larger civic center campus. It is anticipated that the location for a new city hall will be selected by the City Council, in consultation with the community, in the near future. The Farmers property was purchased with CFD No. 1 funds with the intent that the property would serve as the location for a new city hall. If the Farmers property is chosen as the site for a new city hall, it is possible that municipal storage needs could be a part of the larger civic center campus project. If, however, it is definitively determined that the property will not be used for city hall, the city is required to sell the property within a reasonable, fiduciarily responsible timeframe and the sale funds must be returned to the CFD No. 1 fund account. If, at some point in time, the city is no longer able to utilize the Farmers property to meet its public works storage needs, the city will need to identify a new storage solution. Thus, the highest and best use of the Calavera property at this time is to retain ownership of the property, while the city explores and identifies a long-term solution that addresses the city's storage needs. The Calavera property could be a possible location for a public works storage facility. The use would be allowable in the Public Utility (P-U) zone, the property is large enough to accommodate a municipal storage facility, and the property is isolated and is generally not visible to the public from either Tamarack Aven.ue or the surrounding residential neighborhoods. The City will likely need to complete a storage space needs and locational analysis to determine the extent of the city's municipal storage needs and to identify a preferred location. CFD No. 1 funds can be utilized to build a public works storage facility. Value Based on Highest and Best Use Storage Facility: Based on the outcome of a storage space needs analysis, the city will determine the required size of a new public works storage facility. Costs for Single Story Self Storage Construction range between $SO to $100 per square foot. Multi- Story Self Storage Construction costs range from $85 to $150 per square foot. Complexity of design and architectural features can significantly affect costs. Recommendation It is recommended that the city retain ownership of the Calavera property until the city explores and identifies a long-term solution that addresses the city's storage needs. The Calavera property could be a possible location for a public works storage facility. City of Carlsbad 2019 Amended Real Estate Strategic Plan 32 Feb. 25, 2020 Item #2 Page 36 of 50 3. Three-to-Five Year Plan The following properties addressed in the three-to-five year section of the Plan are currently still utilized for city purposes and are likely to be needed for the foreseeable future. The goal is to strategically consider and address how these properties should be managed in the longer-term, both to maximize the return on the investment of public dollars and to leverage properties for the greatest public benefit. Farmers Property The Farmers property is located at the southwest corner of El Camino Real and Faraday Avenue, at 5815 El Camino Real and 2351 Faraday Avenue. The entire property consists of three parcels totaling 13.51 acres (6.95 acres, 1.46 acres, and 5.1 acres). The 6.95 acre · parcel is developed with a 128,846 square foot, three-story office building built in 1986 for a Farmers Insurance claims center, and is currently being used by the city for public works storage purposes. The 1.46 acre parcel is developed with a 6,100 square foot building that was formerly a drive-thru insurance claims center and is now occupied by Bio, Tech, and Beyond. The 5.1 acre parcel is undeveloped land and fronts on both Faraday Avenue and Priestly Drive. The Farmers property was acquired by the city in 2002, with the intent that the property would serve as the location for a new city hall. The city is currently working City of Carlsbad 2019 Amended Real Estate Strategic Plan 33 Feb. 25, 2020 Item #2 Page 37 of 50 on a plan to develop a new city hall, as a part of a larger civic center campus. It is anticipated that the location for a new city hall will be selected by the City Council, in consultation with the community, in the near future. The Farmers property remains as one of the sites that the City Council is considering as a possible location for a new city hall. Acquisition Source of Funds The Farmers Property was acquired in 2002 for $15,730,000, utilizing CFD No. 1 funds. The property was purchased with CFD No. 1 funds with the intent that the property would serve as the location for a new city hall. If, at any time it is definitively determined that the Farmers property will not be used for this purpose, the city is required to sell the property within a reasonable, fiduciarily responsible timeframe and the sale funds must be returned to the CFD No. 1 fund account. The city is allowed to enter into short-term leases on the property until a final decision regarding the property's use has been determined. Status The two buildings on the Farmers property are currently utilized for public works storage purposes (128,846 square foot building) and as a life sciences incubator, community laboratory, and science education center (Bio, Tech, and Beyond; 6,100 square foot building). These uses are expected to continue for the foreseeable future. The city is currently working on a plan to develop a new city hall, as a part of a larger civic center campus. It is anticipated that the location for a new city hall will be selected by the City Council, in consultation with the community, in the near future. If the Farmers property is not the location chosen for a new city hall, the city is required to sell the property. In the interim, short-term leases of the property are allowable. The Farmers property has a General Plan Land Use designation of Planned Industrial (Pl) and a Zoning designation of Heavy Commercial (C-M). The property is located in the Carlsbad Research Center ("CRC") and is subject to the standards in CRC Specific Plan (SP-180). Highest & Best Use Currently the highest and best use is to continue to utilize the Farmers property for its current uses. If the Farmers property is not the location chosen for a new city hall, the city is required to sell the property within a reasonable, fiduciarily responsible timeframe and the sale funds must be returned to the CFD No. 1 fund account. At that point in time the highest and best use of the property would be for the city to release a competitive Request for Proposals to sell the property "as-is". City of Carlsbad 2019 Amended Real Estate Strategic Plan 34 Feb. 25, 2020 Item #2 Page 38 of 50 Value Based on Highest & Best Use Sell "As-ls": If the city were to sell the property in an "as-is" condition, the city could realize proceeds estimated to be between $25,206,000 and $38,493,843 (December, 2016). This would include the disposition of the entire 13.51 acre property, including the undeveloped 5.1 vacant ~arcel. Sell After Renovating: The cost to bring the 128,846 square foot building up to current standards is estimated at $12,000,000 (February, 2016). If the city elected to spend approximately $12,000,000 to renovate the 128,846 square foot building, the city could realize sale proceeds estimated to be between $38,493,843 and $59,471,772 (December, 2016); again, this would include the disposition of the entire 13.51 acre property, including the 5.1 acre vacant parcel. There is no guarantee that the city would recoup the $12,000,000 spent to renovate the building. Lease: The property was purchased with CFD No. 1 funds with the intent that the property would serve as the location for a new city hall. If, at any time it is definitively determined that the Farmers property will not be used for this purpose, the city is required to sell the property within a reasonable, fiduciarily responsible timeframe and the sale funds must be returned to the CFD No. 1 fund account. As such, long-term leases of the property are prohibited. In the interim, the city is allowed to enter into short-term leases of the property. Recommendation It is recommended that the best course of action is to continue to utilize the Farmers property for its current uses for the foreseeable future. If the Farmers property is not the location chosen for a new city hall, the city is required to sell the property within a reasonable, fiduciarily responsible timeframe and the sale funds must be returned to the CFD No. 1 fund account. At that point in time, the city should release a competitive Request for Proposals (RFP) to sell the property "as-is". Prior to the sale of the Farmers property, the city will need to identify a new location to serve the city's public works storage needs. It is also recommended that the city initiate efforts to complete a storage space needs and locational analysis to determine the extent of the city's municipal storage needs and to identify a preferred new location. CFD No. 1 funds can be utilized to build a public works storage facility. City staff would return to the City Council for review and approval of documents as required and as appropriate. City of Carlsbad 2019 Amended Real Estate Strategic Plan 35 Feb. 25, 2020 Item #2 Page 39 of 50 Status The CMWD property is currently utilized by CMWD and city utility administrative and field staff. This use is expected to continue for the foreseeable future. The City is currently working on a plan to develop a new maintenance and operations center that would include sufficient maintenance yard space to serve the needs of the city and district. The current plan is locate the new facility at the larger Safety Center campus on Orion Way. It is anticipated that all personnel currently working out of the CMWD campus would be relocated to the new maintenance and operations center. At that time, the CMWD property would no longer be needed and could be sold or land leased long-term. The CMWD property has a General Plan Land Use designation of Planned Industrial (Pl) and a Zoning designation of Industrial, with a Qualified Development Overlay (M-Q). Highest and Best Use: Currently the highest and best use is to continue to utilize the CMWD property for its current use. It is anticipated that all personnel currently working out of the CMWD campus would eventually be relocated to the new maintenance and operations center. At that time, the CMWD property would no longer be needed and the highest and best use of the property would be for the city to release a competitive Request for Proposals (RFP) and enter into a long-term land lease of the property. Value Based on Highest & Best Use: Sell "As-ls": If the district were to sell the 6.9 acre property in an "as-is" condition, the district could realize proceeds of $5,550,000 (October, 2016). Lease: The city should charge no less than the current average Class B NNN rate for San Diego of $2.43 per square foot for the office building, or approximately $31,590 per month, {$379,080 annually). Should the city enter into a 5-year lease at today's market rate rents of $2.43 per square foot with a minimum 2% CPI increase, the city could expect to generate over $1,972,747.54 (September, 2017); however, due to the properties unique characteristics (5,000 SF warehouse building) and open areas, the above lease rates should be considered the base rents the city should expect depending on the use of the property. Recommendation It is recommended that the best course of action is to continue to utilize the CMWD property for its current uses for the foreseeable future. At the time the CMWD property if no longer needed due to the completion of a new maintenance and operations center, it is recommended that the city release a competitive Request for Proposals (RFP) and enter into a long-term lease of the property. City staff would return to the City Council for review and approval of documents as required and as appropriate. City of Carlsbad 2019 Amended Real Estate Strategic Plan 37 Feb. 25, 2020 Item #2 Page 41 of 50 Roosevelt Street parking lots: The Roosevelt Street parking lots consist of two sites located on the east side of Roosevelt Street, generally mid-block between Grand Avenue and Carlsbad Village Drive. The two properties total .9 acres and contain 110 public parking spaces. Oak Yard: The Oak Yard is located on the south side of Oak Avenue and south of the southern terminus of State Street. The property is 1.35 acres in size and is currently utilized by the city as a public works maintenance and operations yard. Acquisition Source of Funds The State and Grand parking lot property was acquired in 1977 for $118,000 utilizing general funds. The South State Street parking lot property was acquired in 2009 for $1,150,000 utilizing parking in-lieu fee funds and must be used for public parking purposes. The Roosevelt Street parking lot properties were acquired in 1985 utilizing a loan from the city's general fund until the Carlsbad Redevelopment Agency ("Agency") could pay back the city with Redevelopment Tax Exempt Bond proceeds. In 1988 the Agency issued a $12,000,000 Tax Exempt Bond for redevelopment project purposes, and reimbursed the city in full on the previously acquired parcels and acquired the remaining parcels in fee. Subsequently, the city refinanced the 1988 Bond in 1993 for $15,495,000, of which $6,030,000 is currently outstanding. The 1993 outstanding Bond will be completely paid off in 2023. The Roosevelt Street parking lot properties must be utilized for a governmental purpose, such as public parking, throughout the life of the Bonds. The Oak Yard property was acquired and built in 1965 utilizing general funds. Status State and Grand parking lot: The State and Grand parking lot is currently utilized as a public parking lot. As parking (public and private) is at a premium in the Village area, it is likely that the State and Grand property will be needed for public parking purposes for the foreseeable future. South State Street parking lot: The South State Street parking lot is currently utilized as a public parking lot. As the property was acquired with parking in-lieu fees it must continue to be utilized as a public parking lot. Roosevelt Street parking lots: The Roosevelt Street parking lots are currently utilized as public parking lots. As the properties were acquired with Redevelopment Tax City of Carlsbad 2019 Amended Real Estate Strategic Plan 39 Feb. 25, 2020 Item #2 Page 43 of 50 Exempt Bond proceeds they must continue to be utilized for a governmental purpose, such as public parking lots, throughout the life of the Bonds. The 1993 outstanding Bond used to acquire the properties will be completely paid off in 2023. , Oak Yard: The Oak Yard is currently being utilized by the city as a public works maintenance and operations yard. The city is currently working on a plan to develop a new maintenance and operations center that would include sufficient maintenance yard space to serve the needs of the city and district. The current plan is locate the new facility at the larger Safety Center campus on Orion Way. It is anticipated that all personnel currently working out of the Oak Yard site would be relocated to the new maintenance and operations center. At that time, the Oak Yard property would no longer be needed for its current purpose. All four Village properties have a General Plan Land Use designation of Village (V) and a Zoning designation of Village Review (V-R), and are subject to the standards of the Village Master Plan. Recommendation State and Grand parking lot: It is recommended that the State and Grand parking lot continue to be utilized as a public parking lot for the foreseeable future. South State Street parking lot: It is recommended that the South State Street parking lot continue to be utilized as a public parking lot. As the property was acquired with parking in-lieu fees it must continue to be utilized as a public parking lot. Roosevelt Street parking lots: It is recommended that the Roosevelt Street parking lots continue to be utilized as public parking lots. As the properties were acquired with Redevelopment Tax Exempt Bond proceeds they must continue to be utilized for a governmental purpose, such as public parking lots, throughout the life of the Bonds. The 1993 outstanding Bond used to acquire the properties will be completely paid off in 2023. Oak Yard: It is recommended that the best course of action is to continue to utilize the Oak Yard property for its current use for the foreseeable future. At the time the Oak Yard property is no longer needed for its current use due to the completion of a new maintenance and operations center, it is recommended that the city release a competitive Request for Proposals (RFP)and enter into a long-term land lease of the property . . City staff would ~eturn to the City Council for review and approval of documents as required and as appropriate. City of Carlsbad 20.19 Amended Real Estate Strategic Plan 40 Feb. 25, 2020 Item #2 Page 44 of 50 Faraday Center The Faraday Center property is located on the south side of Faraday Avenue, just east of the intersection of Faraday Avenue and Camino Hills Drive, at 1635 Faraday Avenue. The .property is situated within the Carlsbad Research Center Business Park. The 7.24 acre property is developed with a 68,000 square foot Class-B office building constructed of concrete tilt-up and glass. Originally built in 1999, the city acquired the property in 2001. The property was acquired for use as city administrative offices and has been continuously occupied by the city since its purchase. Acquisition Source of Funds The Faraday Center property was purchased by the city in 2001 for $9,100,000 using Public Facilities Funds ("PFF"). The city may sell or lease properties acquired with PFF funds so long as those properties are no longer required for city purposes. Status The Faraday Center is currently utilized for city administrative offices and this use is expected to continue for the foreseeable future. The city is currently working on a plan to develop a new city hall, as a part of a larger civic center campus. It is anticipated that the location for a new city hall will be selected by the City Council, in consultation with the community, in the near future. If the Faraday Center property is not the location chosen for a new city hall, it is expected that the city administrative personnel occupying the Faraday Center would relocate to the new city hall location and the property would no longer be needed by the city for administrative offices. The longer term decision to lease or sell the Las Palm as property could be greatly influenced by future City Council decisions on a new city hall. The Faraday Center property has a City of Carlsbad 2019 Amended Real Estate Strategic Plan 41 Feb. 25, 2020 Item #2 Page 45 of 50 General Plan Land Use designation of Planned Industrial {Pl)/Open Space {OS) and a Zoning designation of Heavy Commercial {C-M) and Open Space (OS). The property is located in the Carlsbad Research Center ("CRC") and subject to the CRC Specific Plan. Highest and Best Use Currently the highest and best use is to continue to utilize the Faraday Center property for city administrative offices. At the point in time the Faraday Center property is no longer needed by the city for administrative offices, the highest and best use will likely be to enter into a long-term lease of the property with a corporate office tenant or to sell the property. Value Based on Highest and Best Use Lease -"As-ls": The city should charge no less than the current average Class B NNN rate for San Diego of $2.43 per square foot, or approximately $165,240 per month, {$1,982,880 annually). Should the city enter into a 5-year lease at today's market rate rents of $2.43 per square foot with a minimum 2% CPI increase, the city could expect to generate over $10,318,987 (September, 2017). Sale: The city's general preference is to retain ownership of our properties and lease them out long-term, rather than sell a particular property. However, if the city elects to sell the Faraday Center property, the sale should be conducted in an "as-is" manner, with an estimated sales price between $9,800,050 and $17,798,950. The Median estimated sales price is $11,667,500 (August, 2016). The longer term decision to lease or sell the Faraday Center property will be greatly influenced by future City Council decisions on a new city hall. Recommendation It is recommended that the best course of action is to continue utilizing the Faraday Center property for city administrative offices for the foreseeable future. If a new city hall is developed and the Faraday Center property is not the location of the new city hall, it is expected that the current city administrative personnel occupying the Faraday Center would relocate to the new city hall location and the Faraday Center property would no longer be needed by the city for administrative offices. The decision to lease or sell the Faraday Center property should be made at that point in time. City staff would return to the City Council for review and approval of documents as required and as appropriate. City of Carlsbad 2019 Amended Real Estate Strategic Plan 42 Feb. 25, 2020 Item #2 Page 46 of 50 IV. Appendix Property APN SF Acres Acquisition Acquisition Source of Estimated Estimated Date Price Funds Sale Price Lease Price Lot 9 137,214 ~:~t 1952 NA NA NA $159,965/Yr -~-r--- Village Grille/ Shorehouse Kitchen 2833 State Street 203-294-02 5,000 1977 $118,000 General Funds NA $95,000/Yr 203-294-03 1 3% Annual Inc. Dove Library Cafe 215-050-70 750 0.017 i 1999 NA General Funds NA $18,000/Yr Bio, Tech, and Beyond 5815 El Camino Real 213-062-13 6,000 1.46 2002 $1,699,909 CFD No.1 NA $1/Yr (Bldg. SF) 10% ofTotal Price - Bauer Lumber/ New Village Arts 203-295-01 10,019 0.23 1997 $498,944 Redevelopment $1,376,310 NA 203-295-02 Tax Bonds l---- Buena Vista Reservoir i I L 156-200-16 119,339 2.74 1958 Unknown General Fund NA NA -~--·----·-·----------·-------- Old Fire Station #3 3701 Catalina Drive 167-154-20 9,200 0.21 1966 $94,850 General Fund $644,450 NA Hawthorne 213-061-28 114,409 2.63 2010 $2,487,000 CFD No.1 I $2,250,000 Upto 2065 Camino Vida Roble *5,000 To $144,000/Yr (Bldg. SF) $3,100,000 The Shoppes 156-301-06 69,260 i 1.58 1969 $1,535,000 1969 Parking at Carlsbad 156-301-10 63,162 1.45 1969 Revenue Bonds Parking Lot Properties 156-301-11 1,033,679 23.73 1969 (paid off in ' Unknown Unknown (Rouse Properties) 156-302-24 39,204 0.90 1969 1995) 165-120-59 _ 1,?~3,259 29.23 1992 Golf Course Lots 4 & 5 Upto Up to College Blvd. 212-270-04 217,800 18.51 2010 $4,229,417 General Fund $15,109,875 $1,032, 739/Yr & Palomar Point Way 212-270-05 304,920 Oceanside Properties Upto Upto Foussat & Mission 160-550-01 119,790 I 2.75 1952 Unknown NA $3,012,626 $200,842/Yr Pajama Drive 149-070-47 10,891 0.25 1952 Unknown NA I $109,000 NA -------·-----~~-.-- - -2.29 1-- --------r Las Palmas 2075 Las Palmas Drive 213-061-19 22,627 1987 $1,602,000 PFF $4,600,479 $659,803/Yr Calavera Waste Water 167-101-09 198,198 4.55 1982 Unknown Unknown NA NA Facility Farmers Property 213-062-12 588,496 13.51 2002 $15,730,000 CFD No. 1 $25,206,000 NA 5815 El Camino Real (Building) To 213-062-13 *133,922 $38,493,843 (Claims (Bldg. SF) *As-ls Center) vs . 213-062-14 Renovated (Land) --------------- CMWD Property Upto 5950 El Camino Real 209-050-19 265,280 6.09 1973 $18,000 Enterprise Fund $5,500,000 $379,080/Yr ·-- City of Carlsbad 2019 Amended Real Estate Strategic Plan 43 Feb. 25, 2020 Item #2 Page 47 of 50 Propert_y ___ l ___ A_P_N __ -SF - I Acres Acquisition Date Acquisition Source of Price Funds Estimated Sale Price Estimated Lease Price --------~-------+-----;------+----------~-------~----~----·-····--- Village Properties State and Grand Parking Lot 2829-2897 State St. South State Street Parking Lot 304S State Street Roosevelt Street Parking Lots 2922, 2936-2944 Roosevelt St. 2992 Roosevelt St. Oak Yard 405 Oak St. 203-294-02 203-294-03 203-296-06 203-304-02 203-304-05 203-296-06 204-010-05 204-010-06 5,000 0.11 16,117 .37 14,375 0.33 10,890 0.25 39,204 0.90 e•••-••••----•--••'""" •-•···•-----···••••·•·-• • • ----•·•---•••--•••·••••"•"-"_"_'""" •••.,-•••••••••••••• Faraday Center 1635 Faraday Avenue 212-130-31 315,810 I 7.25 1977 $1,260,000 2009 $1,150,000 1985 $990,000 1995 $765,000 1965 Unknown 2001 $9,100,000 General Fund Parking In-Lieu Redevelopment Tax Bonds Redevelopment Tax Bonds General Fund PFF $1,376,310 NA $2,213,992 NA $1,974,694 NA $1,495,959 NA $5,385,453 NA I I $11,667,500 $1,982,880/Yr I ---------------~---~---~--------------····--·---~----------- City of C,::irlsbad 2019 Amended Real Estate Strategic Plan 44 Feb. 25, 2020 Item #2 Page 48 of 50