HomeMy WebLinkAbout; City of Carlsbad Real Estate Strategic Plan October 2017; Real Estate Strategic Plan; 2017-10-17Attachment A
Real Estate
Strategic Plan
October 2017
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City of Carlsbad
2017 Real Estate Strategic Plan
Table of Contents
Page
I. Introduction .......................................................................................3
II. Source of Funds Analysis ...................................................................4
III. Real Estate Asset Prioritization .........................................................6
1. In Progress ...................................................................................7
Current Lease Implementation
Lot 9 ........................................................................................7
Village Grille/Shorehouse Kitchen ..........................................9
Dove Library Café ..................................................................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 Lots 4 and 5 .............................................................23
Oceanside Properties ..................................................................25
Las Palmas ...................................................................................28
Calavera Waste Water Facility ....................................................31
3. Three-to-Five Year Plan ...............................................................33
Farmers Property ........................................................................33
CMWD Property ..........................................................................36
Village Properties ........................................................................38
Faraday Center ............................................................................41
IV. Appendix ............................................................................................43
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2017 Real Estate Strategic Plan
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.
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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
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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 distributions 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.
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III. Real Estate Asset Prioritization
A Real Estate Strategic Plan (Plan) should include targeted timeframes to keep the city
focused on its real estate assets in a prioritized and strategic manner. The city’s Plan
includes targeted timeframes as follows: 1) a plan for completing real estate
transactions that are in progress (“In Progress”); 2) a one-to-three year strategic plan
for specific properties (“One-to-Three Year Plan”); and, 3) a longer-term plan for
properties which are currently still being utilized for city purposes and are likely to be
needed for the foreseeable future (“Three-to-Five Year Plan”). The overall Plan should
be updated at least every five years; thus keeping the city focused and aligned in
regards to its real estate assets. The Plan should also allow for flexibility due to
changes within the real estate market and city policy. Additionally, the city is likely to
experience external influences, such as unsolicited proposals, that will influence
which properties are prioritized in future years.
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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.
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Current Status
In 2013 (with an amendment in 2016), the city entered into a 65-year ground lease
with Grand Pacific Carlsbad, L.P. on Lot 9, whereby the tenant will develop 71 hotel
rooms branded as a Westin Hotel on the CMWD parcel and 36 time share units to be
included as a part of the existing MarBrisa Resort on the city parcel. The tenant has
obtained all necessary project approvals, has initiated and has reached the 35% point
of construction on the Westin Hotel and the 20% point of construction on the
MarBrisa timeshare units (September, 2017). In addition the tenant is constructing a
new Sheraton Hotel building with 48 rooms on the tenant’s own property, where they
have reached the 40% point of construction. The new Westin Hotel rooms are
expected to be completed in August of 2018, the MarBrisa units in November of 2018,
and the new Sheraton building in August of 2018. When all construction is completed,
the new Westin Hotel will be 200 rooms, the new Sheraton Hotel will be 200 rooms,
and there will be an additional 35 timeshare units incorporated into the overall
MarBrisa Resort project. The city and the district will initially receive $159,965 in total
annual lease revenue from both properties, subject to annual rent increases between
years 6-65. The initial $79,983 in rent received from the 35 timeshare units will be
paid to the City of Carlsbad, while the initial $79,983 in rent received from the 71
Westin hotel rooms will be paid to the Carlsbad Municipal Water District.
Recommendation
It is recommended that city staff continue to implement and monitor the ground
lease agreement with Grand Pacific Carlsbad, L.P. on Lot 9.
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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.
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Dove Library Café
The Dove Library Café consists of a 700 square foot café shell space located adjacent
to the courtyard and the main public entrance into the Dove Library. The shell space
was designed and built as a part of the Dove Library renovation project completed in
June of 2016. The café space was intended to serve library patrons, library personnel,
and events held at the Dove Library campus, including the George and Patricia
Gowland Meeting Room, the Ruby G. Schulman Auditorium, and the William D.
Cannon Art Gallery. The intent was to enliven the library campus and courtyard,
create a great gathering place, connect community members, and provide a
convenient service, rather than to be solely lease revenue motivated.
Current Status
In July of 2015, the City Council authorized the release of a Request for Proposals (RFP)
for leasing the Dove Library Café space. The city did not receive any responsive and
responsible proposals from this RFP effort. In July of 2016, the City Council authorized
the release of a second Request for Proposals (RFP) for leasing the Dove Library Café
space. Again, the city did not receive any responsive and responsible proposals from
this RFP effort. Subsequently, the city engaged the professional services of a
café/coffee house advisory consultant. From these three efforts it is now apparent
that the initial business start-up costs and business risk associated with completing
tenant improvements to the café shell space are likely too great to attract a viable
tenant proposal. The city now believes it will be necessary for the city to financially
contribute towards the initial tenant improvement costs. In doing so, the city believes
we would be able to attract a viable café operator and our initial tenant improvement
budget investment would be paid back in under five years through the café rent
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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.
Recommendation
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 Café space that includes a recommended budget amount for a financial
contribution towards the initial tenant improvement costs.
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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.
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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.
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Bauer Lumber/New Village Arts
The Bauer Lumber/New Village Arts property is located on the west side of north State
Street, at the northwest corner of State Street and Christiansen Way, at 2787 State
Street. The property consists of an approximately 10,000 square foot parcel
developed with a 9,400 square foot building originally the location of Bauer Lumber.
In November of 1997, the Carlsbad Redevelopment Agency purchased the property
with proceeds from tax exempt bonds issued in 1993 with the intent of facilitating
redevelopment of the site along with other properties at the corner of Grand Avenue
and State Street. Redevelopment of the properties proved challenging and the
Carlsbad Redevelopment Agency elected to pursue interim uses of the property
through a series of retail leases. The 1993 bonds utilized to purchase the property
will reach their maturity date and be paid off in 2023. Generally, properties purchased
with tax exempt bond proceeds must be used for a governmental purpose throughout
the life of such bonds.
The 9,400 square foot building is currently divided into two suites, a 6,300 square foot
suite in the rear of the building for a performing arts theatre (New Village Arts) and a
3,100 square foot suite in front of the building for an arts incubator (The Foundry). In
2006, New Village Arts (NVA) originally leased the rear 6,300 square foot suite for a
two-year period, with a one-year option, for a performing arts theatre as an interim
use until redevelopment of the site was viable. In 2009, NVA entered into a new two-
year lease agreement that also included the front 3,100 square foot suite for use as
The Foundry. NVA continuously leased all 9,400 square feet of the building until April
2014, when a new lease agreement was executed for a three-year period (retroactive
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to July 2013), with Lessor options for two, one-year lease extensions. NVA and the
city have exercised both one-year lease extension options, with the current lease
expiring on June 30, 2018. The annual lease rate for the current agreement is 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.
Current Status
NVA is in the last year of the current agreement, which expires on June 30, 2018. The
city anticipates that NVA is desirous of negotiating a new lease agreement with the
city.
Recommendation
It is recommended that city staff negotiate two new and separate lease agreements
with NVA, one lease for the 6,300 square foot rear theatre suite and one lease for the
3,100 square foot front arts incubator suite. It is also recommended that the term of
the two new leases run until the bonds utilized to purchase the property reach their
maturity date and will be paid off in 2023.
Finally, it is recommended that city staff negotiate two new leases that include a
nominal 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 exterior
of the property, as well provide the city with some limited financial return on the
property, and return to the City Council with the two new lease agreements for their
review and approval.
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PREVIOUS CITY COUNCIL DISPOSITION DIRECTION
The City Council has previously provided disposition direction for the Buena Vista
Reservoir Property.
Buena Vista Reservoir
The Buena Vista Reservoir property is located on the south side of Buena Vista Way,
east of Highland Drive and west of James Drive/Lido Place. The property is 3.16 acres
in size, is currently vacant, and was the site of a former water reservoir. The property
was acquired by the City of Carlsbad in 1958.
Current Status
In March of 2017, the City Council approved a Community Benefit Agreement
(Agreement) as a part of a solution to settle a lawsuit entitled North County Advocates
v. City of Carlsbad. The lawsuit challenged the city’s certification of the General Plan
EIR and approval of the General Plan Update and Climate Action Plan in 2015. The
Agreement is between the city and North County Advocates, and third parties
including Lennar Homes of California, Preserve Calavera, Friends of Aviara, and
Friends of the Buena Vista Reservoir. The terms of the approved Agreement include
retention and development of the Buena Vista Reservoir property as a new public park
that Lennar Homes will construct. Lennar Homes has received all necessary approvals
for their Poinsettia 61 project and is currently developing construction plans, including
all plans and actions necessary to complete construction of the public park at the
Buena Vista Reservoir site.
Recommendation
It is recommended that city staff continue to implement and monitor the Community
Benefit Agreement and the Poinsettia 61, project approvals.
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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.
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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 used” 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 Plan 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-Is”: 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-is” 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-is” condition.
City staff would return to the City Council for review and approval of documents as
required and as appropriate.
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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 Palmas
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.
Camino Vida Roble Camino Vida Roble
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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 (PI) 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 building 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.
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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 L.P. (“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 L.P. and Rouse Properties L.P. (“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.
Marron Road
Highway 78
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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.
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Golf Course Lots 4 and 5
Golf Course Lots 4 and 5 are located on the south and north sides of College Boulevard
respectively, just west of the intersection of College Boulevard and Palomar Point Way.
The properties are immediately west of and adjacent to the Carlsbad Research Center.
Lot 4 is situated approximately 500 feet north of the western extent of the Palomar-
McClellan Airport property. The property consists of two lots totaling 18.51 gross
acres. Lot 4 is 7.1 gross acres in size (6.9 acres net), while Lot 5 is 11.4 gross acres (6.8
acres net). Both lots are vacant and undeveloped, and have been previously graded.
Both lots offer excellent views of the ocean, the Agua Hedionda lagoon, and The
Crossings golf course.
Acquisition Source of Funds
The city acquired Lots 4 and 5 in 2010 from the Golf Course Fund for $4,229,417 (City
Council Reso. No. 2010-77). There are no known “source of funds used” restrictions
associated with disposition of the property.
Status
Lots 4 and 5 are undeveloped, graded lots. Both properties have a General Plan Land
Use designation of Planned Industrial & Office (PI/O) and a Zoning designation of
Planned Industrial & Office (P-M/O), allowing for the full range of planned industrial
and general office uses, including hotel uses.
Lot 5
Lot 4
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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 50-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 50-year term with minimum 2.5% annual lease
revenue increases, the total estimated revenue over the term of the 50-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 unique
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 50-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.
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Oceanside Properties
The Oceanside Properties, more specifically known as the Foussat & Mission (“F&M”)
and Pajama Drive (“PJ”) properties are both located within the City of Oceanside at the
southeast corner of the Mission Avenue and Foussat Road, and at the southern end of
the Pajama Drive cul-de-sac, south of Mesa Drive, respectively. The F&M property is
2.75 acres in size and is vacant and undeveloped, with the exception of a water well.
The PJ property is .25 acres in size and is vacant. The F&M property was acquired in
1914 by the Oceanside Mutual Water Company, predecessor in interest to the
Carlsbad Mutual Water Company, and thereafter the City of Carlsbad (upon
incorporation in 1952). The F&M property was originally used as a water well site for
the Costa Real Water District and the City of Carlsbad now owns the water rights to the
property. The PJ property was acquired by the City of Carlsbad on October 9, 1979.
Acquisition Source of Funds
The source of acquisition funds used to purchase both properties is unknown.
However, there are no known “source of funds used” restrictions associated with
disposition of the properties.
Status
Foussat & Mission: The property is located in a non-coastal area and is zoned Light
Commercial District (CL). The zoning designation permits a limited range of retail and
service uses that are not allowed to generate significant amounts of traffic or have high
public service demands. CL has a wide range of available uses; however, the following
Foussat & Mission
Property
Pajama Drive Property Pajama Drive October 17, 2017 Item #3 Page 30 of 50
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2017 Real Estate Strategic Plan
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 $4,410,532 (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 15-year amortization value, the city can expect initial annual lease revenues of
$200,842 ($16,737 per month) (September, 2017). Estimating a 50-year term with
minimum 2.5% annual lease revenue increases, the total estimated revenue over the
term of the 50-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.
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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.
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Las Palmas
The Las Palmas property is located on south side of Las Palmas Drive, just east of the
intersection of Camino Vida Roble and Las Palmas Drive, at 2075 Las Palmas 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
Camino Vida Roble
October 17, 2017 Item #3 Page 33 of 50
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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 (PI) 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-Is”: 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 repairs, 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.
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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 of the 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 exterior 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.
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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.
Property
N
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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 Avenue 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 $50 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.
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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
5.1
Acres
1.46
Acres
6.95
Acres
October 17, 2017 Item #3 Page 38 of 50
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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
(PI) 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”.
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Value Based on Highest & Best Use
Sell “As-Is”: 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 parcel.
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.
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CMWD Property
The Carlsbad Municipal Water District (“CMWD”) property is located at the northeast
corner of El Camino Real and Orion Street, at 5950 El Camino Real. The property is
6.09 acres in size and is developed with a 13,000 square foot administrative office
building, a 5,000 square foot warehouse building, and an open-air maintenance yard.
The administrative office building was constructed in 1990 and the warehouse building
was constructed in 1963. Both buildings and the maintenance yard are currently
occupied by the CMWD and city utility administrative and field staff. The CMWD
acquired the property on August 3, 1973.
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.
Acquisition Source of Funds
The property was acquired in 1973. There is no information available as to the source
of funds used for the acquisition of the property; however, it is assumed that CMWD
funds were used. If CMWD funds were used for the acquisition, proceeds from the
lease or sale of the property would be required to stay within the funds of the district.
5.1
Acres
1.46
Acres
6.95
Acres
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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 (PI) 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-Is”: 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.
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City of Carlsbad
2017 Real Estate Strategic Plan
Village Properties
The Village Properties consist of four former Carlsbad Redevelopment Agency (“RDA”)
properties located throughout the Carlsbad Village area. They include three public
parking lots (State and Grand, South State Street, and Roosevelt Street parking lots)
and a municipal maintenance yard (Oak Yard). All former RDA properties were
transferred to the city pursuant to the Redevelopment Agency’s dissolution on
February 1, 2012, at which point the city became the Successor Agency for the RDA.
At the request of the California Department of Finance (“DOF”), the city then drafted
a Long Range Management Plan (“LRPMP”). Per the LRMP, the transferred RDA
properties were not scheduled for disposition, as all properties were deemed to have
a continuing governmental purpose. The LRMP was subsequently approved by the
DOF, giving the Oversight Board direction to approve the property transfers to the
city.
State and Grand parking lot: The State and Grand parking lot is located at the
northwest corner of State Street and Grand Avenue. The property is .23 acres in size
and contains 14 public parking spaces.
South State Street parking lot: The South State Street parking lot is located on the west
side of South State Street, generally mid-block between Carlsbad Village Drive and Oak
Avenue. The property is .37 acres in size and contains 48 public parking spaces.
State and Grand Parking Lot Roosevelt Street Parking Lots
Oak Yard South State Street Parking Lot
October 17, 2017 Item #3 Page 43 of 50
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City of Carlsbad
2017 Real Estate Strategic Plan
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
October 17, 2017 Item #3 Page 44 of 50
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City of Carlsbad
2017 Real Estate Strategic Plan
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 return to the City Council for review and approval of documents as
required and as appropriate.
October 17, 2017 Item #3 Page 45 of 50
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City of Carlsbad
2017 Real Estate Strategic Plan
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 Palmas property could be greatly influenced by
future City Council decisions on a new city hall. The Faraday Center property has a
October 17, 2017 Item #3 Page 46 of 50
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City of Carlsbad
2017 Real Estate Strategic Plan
General Plan Land Use designation of Planned Industrial (PI)/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-Is”: 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.
October 17, 2017 Item #3 Page 47 of 50
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City of Carlsbad
2017 Real Estate Strategic Plan
IV. Appendix
Property APN SF Acres Acquisition
Date
Acquisition
Price
Source of
Funds
Estimated
Sale Price
Estimated
Lease Price
Lot 9 137,214 3.15 1952 NA NA NA $159,965/Yr
Village Grille/
Shorehouse Kitchen
2833 State Street
203-294-02
203-294-03
5,000
0.11
1977
$118,000
General Funds
NA
$95,000/Yr
3% Annual Inc.
Dove Library Café 215-050-70 750 0.017 1999 NA General Funds NA $18,000/Yr
Bio, Tech, and Beyond
5815 El Camino Real
213-062-13
6,000
(Bldg. SF)
1.46
2002
$1,699,909
10% of Total
Price
CFD No. 1
NA
$1/Yr
Bauer Lumber/
New Village Arts
203-295-01
203-295-02
10,019
0.23
1997
$498,944
Redevelopment
Tax Bonds
$1,376,310
NA
Buena Vista Reservoir
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
2065 Camino Vida Roble
213-061-28 114,409
*5,000
(Bldg. SF)
2.63 2010 $2,487,000 CFD No. 1 $2,250,000
To
$3,100,000
Up to
$144,000/Yr
The Shoppes
at Carlsbad
Parking Lot Properties
(Rouse Properties)
156-301-06
156-301-10
156-301-11
156-302-24
165-120-59
69,260
63,162
1,033,679
39,204
1,273,259
1.58
1.45
23.73
0.90
29.23
1969
1969
1969
1969
1992
$1,535,000 1969 Parking
Revenue Bonds
(paid off in
1995)
Unknown
Unknown
Golf Course Lots 4 & 5
College Blvd.
& Palomar Point Way
212-270-04
212-270-05
217,800
304,920
18.51
2010
$4,229,417
General Fund
Up to
$15,109,875
Up to
$1,032,739/Yr
Oceanside Properties
Foussat & Mission
Pajama Drive
160-550-01
149-070-47
119,790
10,891
2.75
0.25
1952
1952
Unknown
Unknown
NA
NA
Up to
$3,012,626
$109,000
Up to
$200,842/Yr
NA
Las Palmas
2075 Las Palmas Drive
213-061-19
22,627
2.29
1987
$1,602,000
PFF
$4,600,479
$659,803/Yr
Calavera Waste Water
Facility
167-101-09 198,198 4.55 1982 Unknown Unknown NA NA
Farmers Property
5815 El Camino Real
213-062-12
(Building)
213-062-13
(Claims
Center)
213-062-14
(Land)
588,496
*133,922
(Bldg. SF)
13.51 2002 $15,730,000 CFD No. 1 $25,206,000
To
$38,493,843
*As-Is
vs.
Renovated
NA
CMWD Property
5950 El Camino Real
209-050-19
265,280
6.09
1973
$18,000
Enterprise Fund
$5,500,000
Up to
$379,080/Yr
October 17, 2017 Item #3 Page 48 of 50
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City of Carlsbad
2017 Real Estate Strategic Plan
Property APN SF Acres Acquisition
Date
Acquisition
Price
Source of
Funds
Estimated
Sale Price
Estimated
Lease Price
Village Properties
State and Grand
Parking Lot
2829-2897 State St.
South State Street
Parking Lot
3045 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
16,117
14,375
10,890
39,204
0.11
.37
0.33
0.25
0.90
1977
2009
1985
1995
1965
$1,260,000
$1,150,000
$990,000
$765,000
Unknown
General Fund
Parking In-Lieu
Redevelopment
Tax Bonds
Redevelopment
Tax Bonds
General Fund
$1,376,310
$2,213,992
$1,974,694
$1,495,959
$5,385,453
NA
NA
NA
NA
NA
Faraday Center
1635 Faraday Avenue
212-130-31
315,810
7.25
2001
$9,100,000
PFF
$11,667,500
$1,982,880/Yr
October 17, 2017 Item #3 Page 49 of 50