Title
Authorization to Enter into Contract with Ironline Partners, LLC, for the Sale and Redevelopment of the Former Human Resources Building (Ordinance S-43138)
Description
Request to authorize the City Manager, or his designee, to enter into a disposition and redevelopment agreement, and other contracts as necessary ("Agreements"), with Ironline Partners, LLC, or its City-approved designee ("Developer"), to sell and redevelop the City-owned property located at 135 N. 2nd Ave. ("HR Building"); and, for the City Controller to accept funds related to this item.
Report
Summary
The 58,382-square-foot HR Building became vacant in June 2016 once the Human Resources Department moved to the Calvin Goode Building. The HR Building is now vacant surplus City property with no future intended City use. The issuance of the Request for Qualifications (RFQ)/Request for Proposals (RFP) in May 2016 focused on disposing and redeveloping the property.
Developer proposes to purchase and then redevelop the HR Building into an office building with two retail tenants on the ground floor and creative office space on the upper floors. Developer estimates investing a total of $7 million into the project. Staff and the Developer have negotiated the following business terms:
1. Developer shall enter into a Disposition and Redevelopment Agreement (DRA) within 30 days of City Council Authorization.
2. Developer shall have a 120-day Due Diligence Period.
3. Developer shall pay a $2,315,000 purchase price.
4. Escrow shall open once Developer has received sufficient permits to commence the project and shall close by June 30, 2017. Developer shall pay all closing costs.
5. City will work with Developer to provide up to 200 parking spaces, at the prevailing market rate, for a term of 10 years at a mutually agreeable nearby parking facility. Should such parking not be located by the conclusion of the Due Diligence Period, Developer may terminate the DRA and receive a refund of its performance deposit.
6. Developer will complete construction of the project by June 20, 2019.
The Agreements will include other terms and conditions as required by the City. Should Developer identify a significant defect during the Due Diligence Period that will make the project not feasible, the performance deposit will be refunded and the Agreements terminated.
Procurement Information
In December 2015, staff received Council authorization to issue a two-step RFQ/RFP to sell and redevelop the HR Building. Through the RFQ portion of the process, there were three prospective buyers who were deemed responsive and qualified to bid via the RFP. The RFP (RFP-CED16-HRB) was issued on May 27, 2016, and closed on July 12, 2016. Two responsive proposals were received for this RFP. An evaluation panel determined Ironline Partners, LLC, as the top proposal, and upon concurrence from the Community and Economic Development Director, staff negotiated business terms.
Contract Term
The Agreement will terminate 24 months following the close of escrow.
Financial Impact
The proceeds of the sale, $2,315,000, will be utilized to pay for existing debt on the building.
Concurrence/Previous Council Action
The Downtown, Aviation, Economy and Innovation Subcommittee recommended City Council approval of this item on Jan. 4, 2017, by a vote of 4-0.
Location
The City-owned property is located at 135 N. 2nd Ave. and is Assessor's Parcel Number (APN) 112-21-050F.
Department
Responsible Department
This item is submitted by Deputy City Manager Paul Blue and the Community and Economic Development Department.