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HomeMy WebLinkAbout2024-05-21; City Council; Resolution 2024-111Attachment A PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (Chestnut Apartments-945 Chestnut Avenue, Carlsbad, CA) THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS ("Agreement") is dated as of the 23..~ay of ~ , 2024, by and between Solutions Chestnut, LLC, a California limited liability companyfeUer"), and the City of Carlsbad, a chartered city ("Purchaser"). This Ag~eement shall also constitute the joint escrow instructions of Purchaser and Seller to Chicago Title Company ("Escrow Holder" or "Title Company"). RECITALS A. The Seller owns that certain real property improved with a 16-unit multifamily apartment building generally located at 945 Chestnut Avenue, Carlsbad, California 92008 (APN: 204-191-22-00), which is legally described on Exhibit A attached hereto and made a part hereof ("Real Property"). B. The Purchaser previously made a loan to the Seller (see the definition of Existing Debt set forth in Section 2, below). The Existing Debt is secured by the Existing Security (as defined below) which encumbers the Real Property. The Seller acknowledges it has not been able to adhere to the loan conditions outlined in loan documents with respect to the Existing Debt. Without admitting liability or fault and provided the various conditions to Closing (as defined below) set forth in this Agreement are timely satisfied, the Seller agrees to sell the Property (as defined below) to the Purchaser and the Purchaser agrees to purchase the Property from the Seller as set forth in this Agreement to extinguish the Existing Debt. AGREEMENT FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which are acknowledged, the Seller and the Purchaser hereby agree as follows: 1. Purchase and Sale. In consideration of the mutual covenants set forth in this Agreement, the Seller wil1 convey all of the Property to the Purchaser, on the terms and conditions set forth herein, provided the various conditions to Closing set forth in this Agreement are satisfied or waived as provided herein. (a) Sale. The Seller agrees to sell the Property to the Purchaser, and the Purchaser agrees to purchase the Property from Seller, on the terms and conditions set forth herein. At Closing, the Seller shall convey the fee interest in the Real Property to the Purchaser by recordation of the Grant Deed (as defined below). The Escrow Holder shall issue the Title Policy (as defined below) to the Purchaser at Closing. (b) Possession. The Seller shall deliver possession of the Property to Purchaser at Closing. Possession of the Property shall be delivered to Purchaser subject only to the Property Documents, Tenant Agreements and the Permitted Exceptions. 1 (f) Maintenance of Property During Due Diligence Period. Until the Closing, Seller shall maintain the Property and the Improvements in a decent, safe and sanitary condition, and in good repair. The Seller shall promptly make all repairs reasonably necessary to maintain the Property and the Improvements in a decent, safe and sanitary condition, and in good repair, and shall promptly make all repairs requested by the Purchaser. To the extent the cost of any necessary repairs to or maintenance of the Property or the Improvements exceeds the income derived from the Property, the Seller shall immediately notify the Purchaser and the parties shall meet and confer in good faith to determine which maintenance and repairs shall be completed and the deadlines for completion of the same. On or before Aug. 31, 2024, the Seller shall cause all balconies at the Property to be inspected in accordance with the California Balcony Inspection Law and inspected by a licensed architect, licensed civil or structmal engineer, a building contractor holding any or all of the "A," "B," or "C-5" license c1assifications issued by the Contractors' State License Board, with a minimum of five years' experience, or an individual certified as a building inspector or building official from a recognized state, national, or international association. A copy of the written inspection report performed in compliance with the California Balcony Inspection Law shall be provided by the Seller to the Purchaser within three (3) business days of the inspector's completion of such report. The Seller shall cause all deficiencies and damage disclosed by such report shall be repaired and rectified on or before Nov. 30, 2024. 5. Conditions Precedent for the Benefit of the Seller. The Seller's obligation to Close shall be conditioned upon the satisfaction or emailed or written waiver by the Seller of all of the conditions precedent ("Conditions Precedent for the Benefit of the Seller") set forth in this Section 5. Any of the Conditions Precedent for the Benefit of the Seller may be waived by the Seller unilaterally; and if so waived, such conditions shall be of no further effect hereunder. Any such waiver shall be effective only if the same is expressly waived (i) by email from the Seller to the Purchaser and Escrow Holder; or (ii) in a writing signed by the Seller and delivered to the Purchaser and Escrow Holder. If the Conditions Precedent for the Benefit of the Seller are not satisfied by the deadlines set forth in this Section 5 or expressly waived, the Seller (provided the Seller is not in default hereunder) may provide emailed or written notice of the Seller's conditional tern1ination of this Agreement to the Purchaser and Escrow Holder. After receipt of such notice of conditional termination, the Purchaser shall have ten (10) Business Days to cme any non- satisfaction of a condition or other default specified in the notice of conditional termination. If such matter remains unsatisfied or the default remains uncured after the expiration of such ten ( 10) Business Day period, then this Agreement shall terminate at the close of business on such tenth (10th) Business Day. In the event of termination of this Agreement ( and by operation of law the Escrow) pursuant to this Section 5, then: (x) all rights and liabilities of the Purchaser and the Seller with respect to this Agreement shall immediately tenninate except those which specifically survive such termination; (y) Escrow Holder shall retmn to the Seller all funds or other things deposited in Escrow by the Seller; and (z) Escrow Holder shall return to the Purchaser all funds or other things deposited in Escrow by the Purchaser, less all fees and costs charged by the Escrow Holder. Notwithstanding the preceding clause (x) of this Section 5, in the event of termination of this Agreement pursuant to this Section 5, the Seller and the Purchaser shall cooperate with one another, execute all documents reasonably necessary and take all reasonable steps as maybe required by Escrow Holder in order to accomplish the purposes of this Section 5. The Conditions Precedent for the Benefit of the Seller are: 7 (b) The deposit by the Seller into Escrow, at least one (1) Business Day prior to Closing, of the Assignment, duly executed, conveying title to the Personal Property to the Purchaser. (c) The deposit by the Seller into Escrow, at least one (1) Business Day prior to Closing, of a duly executed affidavit in the form prescribed by federal regulations that Seller is not a foreign person and is a "United States Person" as such term is defined in Section 7761(a)(30) of the Internal Revenue Code of 1986, as amended. (d) The deposit by the Seller into Escrow, at least one (1) Business Day prior to Closing, of a duly executed California Form 593(c) or other evidence that withholding of any amounts is not required by the Revenue and Taxation Code of California. (e) The deposit by the Seller into Escrow, at least one (1) Business Day prior to Closing, of all additional documents and instruments as are reasonably required by the Escrow Holder to complete the Closing. (f) As of the Closing Date, no lease, tenancy or occupancy agreement exists which affects the Property, except for the Tenant Agreements, Property Documents and the Permitted Exceptions. (g) As of the Closing Date, there is no pending, or threatened to be pending, action or proceeding by any person or before any government authority, the outcome of which could prohibit the use of the Property as intended by the Purchaser. (h) The Escrow Holder is prepared and obligated to issue the Title Policy in Purchaser's favor, upon the recordation of the Grant Deed and there are no exceptions to the Title Policy, except for the Permitted Exceptions. (i) As of the Closing Date, Seller is not in default of any of its representations or warranties under this Agreement, or any other material terms or conditions related to Seller, and all of Seller's representations and warranties under this Agreement are true and correct as of the Closing Date. 7. Representations, Warranties and Covenants; Waivers and Releases; Seller Default. When making the representations and warranties set forth in this Section 7, each party making a representation and/or warranty represents that the same are true, correct and complete as of the date hereof and shall be and are true, correct and complete as of the Closing Date. The representations and warranties shall survive the Closing. (a) Representations and Warranties Regarding Authority. The Seller and the Purchaser each hereby represents and warrants to the other that this Agreement and all documents or instruments executed by them which are to be delivered at or prior to the Closing are, or on the Closing Date will be, duly authorized, executed and delivered by the Seller or the Purchaser, as applicable. 9 (a) Condemnation. If between the Effective Date and the Closing Date, any condemnation or eminent domain proceeding is commenced by any party other than the Purchaser that will result in the taking of the entire Property or any part of the Property, Purchaser may, at Purchaser's election, either: (1 ) Terminate this Agreement by giving written or emailed notice to the Seller and the Escrow Holder, in which event all remaining funds or other things deposited in Escrow by Purchaser shall be returned to the Purchaser immediately from Escrow, together with any interest earned thereon and all fees and costs charged by the Escrow Holder shall be paid one-half (1/2) by the Purchaser and one-half (1/2) by the Seller; or (2) Give written or emailed notice to the Seller and the Escrow Holder that Purchaser will proceed with the Closing, in which event the Seller shall assign to the Purchaser all of the Seller's rights, titles and interests to any award made for the condemnation or eminent domain action. (b) Notice. If the Seller obtains notice of the commencement of or the threatened commencement of eminent domain or condemnation proceedings with respect to all of any portion of the Property, the Seller shall notify the Purchaser in writing. 9. Broker's Commission. The Purchaser and the Seller each represents to the other that it does not have any contact or binding agreement with respect to any real estate broker or other person who can claim a right to a commission or finder 's fee. The Purchaser and the Seller each agree that to the extent any real estate commission, brokerage commission or finder's fee shall be earned or claimed in connection with this Agreement or the Closing, the payment of such fee or commission, and the defense of any action in connection therewith, shall be the sole and exclusive obligation of the party who requested ( or is alleged to have requested) the services of the broker or finder. In the event that any claim, demand or cause of action for any such commission or finder's fee is asserted against the party to this Agreement who did not request such services ( or is not alleged to have requested such services), the party tlu-ough whom the broker or finder is making the claim shall indemnify, defend (with an attorney of the indemnitee 's choice) and hold harmless the other from and against any and all such claims, demands and causes of action and expenses related thereto, including, without limitation, attorneys ' fees and costs. The provisions of this Section 9 shall survive the Closing or termination of this Agreement. 10. Assignment. The Seller acknowledges that during the Due Diligence Period, the Purchaser intends to issue a request for proposals seeking a third-party to acquire and operate the Property. The Purchaser may assign this Agreement without the prior written consent of the Seller to any entity selected by Purchaser via the request for proposal process. 11. Notices. All notices under this Agreement shall be in writing and sent (a) overnight by a nationally recognized overnight courier such as UPS Overnight, or FedEx, (b) by personal delivery, or (c) by email. All notices shall be effective upon receipt (or refusal to accept delivery). All notices shall be delivered to the following addresses or such other addresses as changed by any party from time to time by written notice to the other parties hereto: 11 If to Seller: If to Purchaser: Copy to: If to Escrow Holder: 12. Risk of Loss. Solutions Chestnut, LLC Attn: President/CEO 722 West California Avenue Vista, CA 92083 Email: Cluis@solutionsforchange.org City of Carlsbad Attn: City Manager 1200 Carlsbad Village Drive Carlsbad, California 92008 Email: manager@carlsbadca.gov City of Carlsbad Attn: City Attorney 1200 Carlsbad Village Drive Carlsbad, California 92008 Email: attorney@carls badca. gov Christensen & Spath LLP Attn: Walter F. Spath III, Esq. 401 West A Street, Suite 2250 San Diego, CA 92101 Email: wfs@candslaw.net Fidelity National Title Company Attn: Jasmine Corado 7565 Mission Valley Road, Ste 100 San Diego, CA 92108 Email: Jasmine.Corado@fnf.com (a) Subject to the provisions of this Section 12(a), the risk of loss or damage to the Property until the Closing will be borne by Seller. Upon the occurrence of any damage to or destruction of the Property, Seller shall within five ( 5) days after the occurrence of such damage or destruction give written notice to Purchaser ("Damage Notice") specifying the estimated cost to repair or restore the Property and an estimate of the insurance proceeds, if any, that will be available with respect to such damage or destruction. The Closing shalJ be appropriately delayed to provide adequate time for Seller to give the Damage Notice and Purchaser to make its election provided for below. (b) If prior to the Closing there is damage to or destruction of the Property that wilJ cost in excess of One Hundred Thousand Dollars ($100,000.00) to repair or restore, Purchaser shall have the right by written notice given to Seller within ten (10) days of Purchaser receiving the Damage Notice, to elect to: (i) close Escrow in such damaged condition, in which event the Purchase Consideration shall not be reduced and Seller shall not be obligated to repair or restore the Property and all insurance proceeds shall be assigned and payable to Purchaser, and if Seller 12 (e) Modifications; Waiver. No waiver, modification, amendment, discharge or change of this Agreement shall be valid unless it is in writing and signed by the party against which the enforcement of the modification, waiver, an1endment, discharge or change is sought. (f) Entire Agreement. This Agreement contains the entire agreement between the parties relating to Purchaser's acquisition of the Property from the Seller and all prior or contemporaneous agreements, understandings, representations or statements, oral or written, are superseded. (g) Partial Invalidity. Any prov1S1on of this Agreement which is unenforceable, invalid, or the inclusion of which would adversely affect the validity, legality, or enforcement of this Agreement shall have no effect, but all the remaining provisions of this Agreement shall remain in full effect. (h) Survival; No Merger. This Agreement, including, without limitation, all representations, warranties, covenants, agreements, indemnities and other obligations of the Purchaser and the Seller in this Agreement, shall survive the Closing as provided for in this Agreement and will not be merged into the Grant Deed or any other document. (i) No Third-Party Rights. Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties to this Agreement and their respective successors and assigns, any rights or remedies. (j) Time of Essence. Time is of the essence in this Agreement. (k) Relationship. Nothing contained in this Agreement shall be deemed or construed by the parties or by any third person to create a relationship of principal and agent or partnership or a joint venture between the Purchaser and the Seller or between any of them and any third party. (1) Recording. This Agreement shall not be recorded. (m) Purchaser Approval. Where this Agreement refers to an action or approval of the Purchaser, it shall mean the approval of the City Manager, or designee. (n) Exhibits and Recitals Incorporated. All exhibits referred to in this Agreement are hereby incorporated in this Agreement by this reference, regardless of whether or not the exhibits are actually attached to this Agreement. The Recitals to this Agreement are hereby incorporated in this Agreement by this reference. (o) Independent Counsel. Seller and Purchaser each acknowledge that: (a) they have been given the opportunity to be represented by independent counsel in connection with this Agreement; (b) they have executed this Agreement with the advice of such counsel, if such counsel was retained; and ( c) this Agreement is the result of negotiations between the parties hereto and the advice and assistance of their respective counsel, if such counsel was retained. The fact that this Agreement was prepared or negotiated by Purchaser's or Seller's counsel as a matter of convenience shall have no import or significance. Any uncertainty or ambiguity in this Agreement 14 Exhibit B ASSIGNMENT OF PERSONAL PROPERTY AND ASSIGNMENT AND ASSUMPTION OF LEASES AND CONTRACTS FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby expressly acknowledged, Solutions Chestnut, LLC, a California limited liability company ("Assignor"), hereby grants, conveys, transfers and assigns to the City of Carlsbad, a chartered city ("Assignee"), all of Assignor's right, title and interest in ~d to: (a) all leases ("Leases") of space in the real property more particularly described in Exhibit "1" attached hereto and by this reference made a part hereof ("Real Property"), together with all prepaid rents from tenants under the leases; (b) the Contracts, as defined in that certain Purchase and Sale Agreement between the parties dated as of ____ , 2024 (the "PSA"), attached as Exhibit D to the PSA; and (c) the Personal Property, Tenant Deposits and Appurtenant Rights and Interests, as defined in the PSA. The Personal Property is being transferred to Assignee without any representation or warranty of any kind or nature whatsoever, including, without limitation, as to any representations or warranties as to merchantability or fitness for a particular purpose. Assignee agrees to perform or cause to be performed Assignor's obligations, if any, under the Leases and the Contracts from and after the date of this instrument. Each of Assignor and Assignee hereby covenants that they will, at any time and from time to time upon written request therefor, execute and deliver to the other, its nominees, successors and/or assigns, any new or confirmatory instruments and do and perform any other acts which the other, its successors and/or assigns, may reasonably request in order to fully assign and transfer to and vest in Assignee, its nominees, successors and/or assigns, and protect its and/or their rights, title and interest in and enjoyment of, all of the assets of Assignor intended to be transferred and assigned hereby, or to enable Assignee, its successors and/or assigns, to realize upon or otherwise enjoy any such assets, or to effect the allocation of responsibility for performance under the Leases and the Contracts. The provisions of this Assignment of Personal Property and Assignment and Assumption of Leases and Contracts shall be binding upon and inure to the benefit of Assignor, Assignee and their successors and assigns. 18 Exhibit C Property Documents Rent Roll Operating Statements: • Year Ending 2023 • Year Ending 2022 • Year Ending 2021 Year-to-Date Operating Statements Natural Hazard Zone Disclosure Report Property Tax Bill History (2021-Present) Major Capital Contracts (2021-Present) Site Map and Floorplans HVAC Count Insurance Loss Reports Current Salary Schedule (Monthly) Business License and Permits Certificate of Occupancy All active Contracts, including Service Contracts, management contracts, franchise contracts, and all contracts for which payments are owed, will be owed at or after the Closing. Gas and Electric Utility History (2021-Present) Utility Bills (2021-Present) Capital Expenditures (2021-Present)-General Ledger Detail Drawings, Plans and Specifications, including as-builts 20 PROVIDER Exhibit D Contracts 21 SERVICE