HomeMy WebLinkAbout06/28/1993 Item #8CITY COUNCIL AGENDA
ITEM NO. 8
t ?yIHECiI'i
CITY OF NCWP0;-J
CITY OF NEWPORT BEACH
OFFICE OF THE CITY MANAGER JUN 2 81993
JUNE 28,1993
TO: MAYOR AND CITY COUNCIL
FROM: DEPUTY CITY MANAGER
SUBJECT:
ACTION: If desired, approve Resolution No. 93- approving a new
fifty (50) year lease for Beacon Bay subject to minor technical
• revisions and approval by the State Lands Commission.
BACKGROUND: The City Council approved the basic terms and conditions of this
lease in November, 1992 after five years of negotiations. The lease has now been
thoroughly reviewed and redrafted by the City Attorney and the attorney for the
Community Association. The membership of the Association approved the lease on
June 19th by a vote of 56 to 5 with 11 absent.
DISCUSSION: The approximate new lease rates are shown on the attached pages
from the appraisal. These figures are subject to minor adjustments based on the final
lease provision and an updating of the appraisal.
The attachment shows the fee lot value were it sold on the open market, the Fair Market
Rental Value (FMRV) of a new fifty (50) year lease, the existing rent for the lot and what
is called the Effective Net Rent. This is calculated by subtracting from the FMRV the
value of the difference between FMRV and the existing rent for the remainder of the
existing lease.
This difference, called lease advantage, is a substantial sum as shown on the last page
• of the attachment under grand totals. While the FMRV for all Beacon Bay is
$2,185,280, the initial rent to the City will be only $1,068,570. Therefore, the lease
advantage is $1,116,710.
Throughout the negotiations, the City's position was to recoup as much as possible of
that lease advantage as soon as possible. The Association's position was primarily to
limit the initial increase and the annual increases for the many older lessees on fixed
incomes. The proposed lease is a compromise of these positions.
Page 2
Current lessees will pay the Effective Net Rent but will have no increase until they
transfer the property. When the lease is transferred, rent will go to 2.5% of total value
which, experience has shown, closely approximates FMRV. Calculations using
actuarial tables indicate that almost all of the lots with lower rents will be transferred
within 10 to 15 years. Subsequent transfers will also adjust rent equal to 2.5% of the
total consideration. Thus with each transfer, rent will be updated to near FMRV. Also, if
there is no subsequent transfer, rent will be adjusted every 7 years up to 40% based on
recent sales in Beacon Bay. In summary, all current lessees will pay Effective Net Rent
until the lease is transferred. Upon transfer rents will be adjusted to 2.5% of total
consideration and will be further adjusted every 7 years thereafter by no more than
40 %.
Other provisions include payment of back rent if a current lessee fails to sign the new
lease, strict definition of what constitutes a transfer and updated insurance and liability
provisions. The primary provisions of the lease are attached. The complete lease is
available in my office. •
RECOMMENDATION: This lease will increase City revenues while providing the
Beacon Bay community the long term assurances they desire. The rental payment
structure will provide some short term advantage to the many older residents on fixed
incomes, but will provide greater long term financial advantages to the City. The City
Council previously approved the terms of this lease, and adoption of this lease will allow
staff to forward it to the State Lands Commission for their approval.
Kenneth J. Delino
KJD:mb
Attachment
CJ
0 0
RESOLUTION NO. 93-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT
BEACH APPROVING A LEASE FOR THE REAL PROPERTY COMMONLY
• REFERRED TO AS BEACON BAY.
WHEREAS, the City of Newport Beach by virtue of a 1978 legislative grant
found in Chapter 74 of the Statues of 1978 (the "Beacon Bay Bill "), hold the right, title
and interest to certain tidelands and uplands commonly known as Beacon Bay; and
WHEREAS, the Beacon Bay Bill frees the westerly portion of the filled
tidelands from the public trust and specifically authorizes the lease of the property for
residential purposes subject to certain expressed statutory conditions; and
WHEREAS, Beacon Bay including the "westerly portion" thereof, has been
divided into individual lots, with each lot leased by the City for residential purposes
until June 30, 2006; and
WHEREAS, on November 3, 1987 a majority of electors of the City approved a
measure which authorized the City Council to enter into new leases of residential lots
in Beacon Bay for a period not to exceed fifty years; and
WHEREAS, on November 3, 1992 a majority of electors of the City approved
Measure M which authorized the City Council to lease tidelands and waterfront
property consistent with the provisions of state law; and
WHEREAS, the City Council pursuant to the authority conferred by the
electors entered into negotiations with current lessees, and the parties have agreed c
the terms and conditions of a new lease with a fifty (50) year term, provision for
adjustments in lease payments to reflect changes in the value of Beacon Bay
leaseholds, and a recalculation of lease payments in the event of a transfer of the
lease by the current lessee or any subsequent lessee (as defined therein); and
WHEREAS, the Beacon Bay Community Association has approved the form
and content of the proposed lease,
NOW THEREFORE BE IT RESOLVED by the City Council of the City of
Newport Beach that the lease attached hereto and made a part hereof is hereby
approved subject to minor technical revisions as may be necessary and subject to
approval by the State Lands Commission.
BE IT FURTHER RESOLVED that the Mayor and City Clerk are authorized
to execute leases in the form of that attached hereto with each of the individual
leaseholders in Beacon Bay.
ADOPTED this date of 1993.
MAYOR
• ATTEST:
CITY CLERK
APPROVED AS TO FORM
CITY ATTORNEY
y
SUJ� RY OF SALIENT FACTS AND CONCLUSIONS - continued
SUMMARY OF VALUE INDICATIONS:
•
Rating of
Existing
(lstyear)
Unencumbered
Fair Market
Market Rent
Contract
Effective
Lot No.
Fee Lot Value
Rental Value
% Pilot Lot
Rent
Net Rent
Water Front Lots
A
$1,398,000
$56,455
107.97%
$23,125.08
$33,095.00
B
$1,300,000
$52,290
Pilot Lot
$12,506.88
$22,720.00
C
$1,150,000
$46,170
88.30%
$16,625.04
$23,220.00
1
$990,000
$39,582
85.26%
$8,020.80
$14,932.00
2
$1,182,000
$47,742
102.84%
$8,825.40
$17,662.00
3
$1,320,000
$53,608
115.47%
$14,875.08
$23,988.00
4
$1,378,000
$56,072
120.78%
$10,458.96
$20,852.00
5
$1,439,000
$58,708
126.46%
$20,012.04
$29,168.00
6
$1,446,000
$58,920
126.91%
$24,999.96
$35,080.00
7
$1,265,000
$51,312
110.53%
$10,631.52
$18,962.00
8
$1,230,000
$49,825
107.32%
$16,250.04
$24,875.00
9
$1,357,000
$54,968
118.40%
$36,252.00
$41,848.00
10
$1,403,000
$56,922
122.61%
$24,999.96
$34,552.00
•
11
$1,173,000
$47,402
102.10%
$9,020.52
$16,742.00
12
$1,150,000
$46,425
Pilot Lot
$14,250.00
$22,245.00
13
$1,150,000
$46,425
100.00%
$23,625.00
$30,445.00
14
$1,300,000
$52,545
113.18%
$10,312.56
$19,455.00
15
$1,322,000
$53,480
115.20%
$10,836.48
$19,990.00
16
$1,116,000
$44,980
96.89%
$8,508.48
$16,250.00
17
$1,116,000
$44,980
96.89%
$16,250.04
$21,900.00
18
$1,116,000
$44,980
96.89%
$8,508.48
$16,250.00
19
$1,300,000
$52,545
113.18%
$10,020.12
$19,245.00
20
$1,199,000
$48,508
104.49%
$8,727.84
$17,598.00
21
$1,107,000
$44,598
96.06%
$13,625.04
$21,228.00
22
$1,084,000
$43,620
93.96%
$41,250.00
$41,960.00
ES 1
$1,084,000
$43,620
93.96%
$28,749.96
$30,190.00
ES 2
$1,084,000
$43,620
93.96%
$24,624.96
$30,310.00
Subtotals: $33,159,000 $1,340,302 $455,892.24 $664,762.00
•
Pilot Lot B is the basis for water front Lots A, B & C.
Pilot Lot 12 is the basis for water front Lots 1 through 22, ES 1 & ES 2.
-3-
K, s
Ry OF SALIENT FACTS
SAW
AND CONCLUSIONS - continued
•°
Rating of
Existing
(lstyear)
Unencumbered
Fair Market
Market Rent
Contract
Effective
Lot No.
Fee Lot Value
Rental Value
% Pilot Lot
Rent
Net Rent
Interior Lots
23
$496,000
$16,488
89.30%
$2,782.32
$6,188.00
24
$526,000
$17,590
95.27%
$6,125.04
$9,000.00
25
$534,000
$17,894
96.91%
$3,399.12
$6,924.00
Y6
$535,000
$17,932
97.12%
$3,417.72
$6,872.00
27
$542,000
$18,198
98.56%
$3,436.44
$7,008.00
28
$565,000
$19,072
103.29%
$4,137.72
$7,682.00
29
$550,000
$18,388
99.59%
$15,375.00
$16,278.00
30
$542,000
$18,160
98.35%
$3,551.16
$7,130.00
31
$548,000
$18,388
99.59%
$8,750.04
$10,778.00
32
$550,000
$18,464
Pilot Lot
$3,588.48
$7,224.00
33
$557,000
$18,730
101.44%
$3,607.08
$7,290.00
34
$620,000
$21,010
113.79%
$4,454.64
$8,430.00
35
$588,000
$19,756
107.00%
$3,776.28
$7,776.00
36
$583,000
$19,604
106.17%
$3,795.00
$7,714.00
`
37
$548,000
$18,388
99.59%
$14,625.00
$15,748.00
38
$550,000
$18,464
100.00%
$3,780.36
$8,174.00
39
$557,000
$18,730
101.44%
$9,125.04
$12,000.00
40
$620,000
$21,010
113.79%
$11,I33.60
$14,090.00
41
$546,000
$18,274
98.97%
$3,719.64
$7,364.00
42
$583,000
$19,604
106.17%
$3,795.00
$7,714.00
43
$589,000
$19,832
107.41%
$11,250.00
$13,822.00
44
$590,000
$19,870
107.61%
$3,832.20
$7,800.00
45
$597,000
$20,136
109.06%
$4,056.84
$71996.00
.. >. -- :..'..
46
$620,000
$21,010
113.79%
$4,454.64
$8,470.00
47
$558,000
$18,730
101.44%
$3,459.36
$7,260.00
48
$588,000
$19,794
107.20%
$6,249.96
$9,474.00
49
$553,000
$18,578
100.62%
$3,551.16
$7,218.00
50
$554,000
$18,616
100.82%
$3,569.76
$7,236.00
31
$550,000
$18,464
100.0046
$3,780.36
$8,174.00
).f
52
$557,000
$18,730
101.44%
$12,750.00
$14,540.00
53
$620,000
$21,010
113.7990
$4,479.00
$8,470.00
54
$575,000
$19,300
104.53%
$3,344.88
$7,360.00
55
$598,000
$20,174
109.26%
$10,625.04
$13,484.00
56
$604,000
$20,402
110.50%
$3,603.96
$7,942.00
57
$581,000
$19,604
106.17%
$3,551.16
$7,434.00
58
$559,000
$18,806
101.85%
$6,750.00
$10,196.00
59
$556,000
$18,692
101.23%
$10,125.00
$11,852.00
$562,000
$18,920
102.47%
$3,533.88
$7,280.00
Pilot Lot 32 is the basis for interior Lots 23 through 61.
Pilot Lot ES 5 is the basis for interior Lots ES 3
through ES 8.
K, s
SUjv�1ARY OF SALIENT FACTS AND CONCLUSIONS - continued
Rating of Existing
Unencumbered Fair Market Market Rent Contract
Lot No Fee Lot Value Rental Value % Pilot Lot Rent
Interior Lou - continued
61
$620,000
ES 3
$502,000
FS 4
$496,000
FS 5
$500,000
ES 6
$499,000
ES 7
$493,000
ES 8
$503,000
SubtotalInt.:
$25,164,000
Subtotal W.F.:
$33,159,000
Grand Totals:
$58,323,000
(1st year)
Effective
Net Rent
$21,010
113.79%
$4,436.16
$8,450.00
$16,640
100.46%
$8,750.04
$10,610.00
$16,412
99.08%
$3,021.96
$6,352.00
$16,564
Pilot Lot
$10,000.08
$11,964.00
$16,564
100.00%
$2,982.96
$6,364.00
$16,336
98.62%
$2,966.04
$6,116.00
$16,640
100.46%
$3,118.08
$6,560.00
$844,978
Interior
$254,617.20
$403,808.00
$1,340,302
Water Front
$455,892.24
$664,762.00
$2,185,280
All Lots
$710,509.44
$1,068,570.00
Pilot Lot 32 is the basis for interior Lots 23 through 61.
Pilot Lot ES 5 is the basis for interior Lots ES 3 through ES 8.
-5-
r �
�J
0
•
i
EXHIBIT C - 1 OF 2
CITY COUNCIL AGENDA
_ ITEM NO. b
CITY OF NEWPORT BEACH
OFFICE OF THE CITY MANAGER
JUNE 28,1993
TO: MAYOR AND CITY COUNCIL
FROM: DEPUTY CITY MANAGER
SUBJECT: BEACON BAY
ACTION: If desired, approve Resolution No. 9,3 approving a new
fifty (50) year lease for Beacon Bay subject to minor technical
revisions and approval by the State Lands Commission.
BACKGROUND: The City Council approved the basic terms and conditions of this
lease In November, 1992 after five years of negotiations. The lease has now been
thoroughly reviewed and redrafted by the City Attorney and the attorney,for the
Community Association. The membership of the Association approved the lease on
. June 19th by a vote of 56 to 5 with 11 absent.
DISCUSSION: The approximate new lease rates are shown on the attached pages
from the appraisal.. These figures are subject to minor adjustments based on the final -
lease provision and an updating of the appraisal.
The attachment shows the fee lot value were It sold on the open market, the Fair Market
Rental Value (FMRV) of a new fifty (50) year-lease, the existing rent for the lot and what
Is called the Effective Net Rent. This Is calculated by subtracting from the FMRV the
value of the difference between FMRV and the existing rent for the remainder of the
existing lease.
This difference, called lease advantage, Is a substantial sum as shown on the last page
the attachment under grand totals. White the FMRV for all Beacon Bay is
2,185,280, the Initial rent to the City will be only 61,068,570. Therefore, the lease
advantage is 61,116,710.
Throughout the negotiations, the City's position was to recoup as much as possible of
that lease advantage as soon as possible. The Association's position was primarily to
limit the Initial Increase and the annual Increases for the many older lessees on fixed
incomes. The proposed lease is a compromise of these positions.
CALENDAR PAGE 192.6
MINUTE PAGE
. EXHIBIT C - 2 OF 2 •
Page 2
Current lessees will pay the Effective Net Rent but will have no Increase until they
transfer the property. When the lease Is transferred, rem will go to 2.5% of total value
which, experience has shown, closely approximates FMRV. Calculations using
actuarial tables Indices that almost all of the lots with lower rents will be transferred
within 10 to 15 years. Subsequent transfers will also adjust rent equal to-2.5% of the
total oohslderatlon. Thus with each transfer, rent will be updated to near FMRV. Also, if
there is no subsequent transfer, rent will be adjusted every 7 years up to 40% based on
recent sales in Beacon Bay. In summary, all current lessees will pay Effective Not Rent
until the lease to transferred. Upon transfer rents will be adjusted to 2.5% of total
oonsidetatlon and will be further Adjusted every 7.years thereafter by no more than
40%.
Other provisions Include payment of back rem If a current lessee falls to sign the new
lease, strict definition of what constitutes a transfer and updated Insurance and liability
provislopa. The primary provisions of the lease are attached. The complete lease Is
avallabtA in my office.
RECOMMENDATION: This lease will Increase City revenues while providing the
Beacon'Be community the long term assurances they desire. The rental payment
structure will provide some short term advantage to the many older residents on ilxed
Incomes, but wilt provide greater long term financial adv�nt�pes to the Clty. The City
Council previously approved the terms of this lease, and adoption of this lease will allow
staff to forward k to the State Lands Commission for their approval.
i
Kenneth 4. Del no
IWD:mb.
Attachment
CALENDAR PAGE 192.9
KINQTE PAGE
�i
Beam Bay 5/18194 - Page 1
CALENDAR: PAGE 192.10
MINME PAGE
EXHIBIT D - 1
OF 6
•
Dumbutton of Rem and Tax Advantage between Tidelaodc and Uplands•
.
(lstyear)
Proportionate Prapotdonae
Annual AMM
Ttdelaids
Effective
%
%
Rent
Rent
of PV of Tax
Tax
Lot No.
Net Rent
Txkbnds
Uplands
Tidelatb
Uplands
Advantage
Advanuge
Waterfront Lots
A
$31,940
100%
0%
$31,940
$0
$0
$0
B
$22,270
100%
0%
$22,270
$0
$930
$930
c
$22,480
100%
0%
$22,480
$0
$1,410
$1,410
1
$15,030
100%
0%
$15,030
$0
$2,080
$2,080
2
$17,950
100%
0%
$17,950
$0
$2,260
$2,260
3
$24,110
100%
0%
$24,110
$0
$1,890
$1,890
4
$21,260
100%
0%
$21,260
$0
$2,610
$2,610
5
$28,840
100%
0%
$28,840
$0
$1,620
$1,620
6
$34,260
100%
0%
$34,260
$0
$0
$0
7
$19,260
95%
5%
$18,297
$963
$3,230
$3,068
8
$43,480
50%
50%
$21,740
$21,740
$0
$0
9
$44,350
5%
95%
$2,217
$42,132
$0
$0
10
$33,540
0%
100%
$0
$33,540
$0
$0
11
$17,020
0%
100%
$0
$17,020
$3,200
$0
12
$22,190
0%
100%
$0
$22,190
$1,130
$0
13
$29,450
0%
100%
$0
$29,450
$0
$0
14
$19,690
0%
100%
$0
$19,690
$2,880
$0
15
$20,240
20%
80%
$4,048
$16,192
$2,980
$596
i 16
$16,480
95%
5%
$15,656
$824
$2,640
$2,508
17
$21,750
100%
0%
$21,750
$0
$2,420
$2,420
. 18
$16,480
100%
0%
$16,480
$0
$2,640
$2,640
19
$19,500
100%
0%
$19,500
$0
$2,880
$2,880
20
$17,47 -.
100%
0%
�- ;17,910
$0
$2,470
$2,470
21
$21,170
100%
0%
$21.170
$0
$1,180
$1,180
22
$37,880
100%
0%
$37,880
$0
$0
$0
ES 1
$31,920
100%
0%
$31,920
$0
$0
$0
ES 2
$29,220
100%
0%
$29,220
$0
$0
$0
Waterfront
-
Subtotal:
$679,670
$475,928
$203,742
$40,450
$30.562
�i
Beam Bay 5/18194 - Page 1
CALENDAR: PAGE 192.10
MINME PAGE
. EXHIBIT D - 2 OF
Distribution of Rents and Tax Advantage between Tidelands and Uplata3s•
(Ist year)
Proportionate Proportionate
Annual Amnrt.
Txdelands
Effective
%
%
Rent
Rent
of PV of Tax
Tax
Lot No.
Net Rent
Tidelands
Uplands
Tidelands
Uplands
Advantage
Advantage
Interior Lots
23
$6,297
0%
100%
$0
$6,297
$550
$0
24
$8,897
0%
10096
$0
$8,897
$390
s0
25
$6,977
5%
95%
$349
$6,628
$630
$31
26
$6,942
99%
1%
$6,873
$69
$710
$703
27
$7,102
100%
0%
$7,102
s0
$660
$660
28
$7,785
100%
0%
$7,785
$0
$740
$740
29
$15,470
0%
100%
$0
$15,470
s0
s0
30
$7,102
0%
100%
$0
$7,102
$580
$0
31
$10,515
30%
70%
$3,154
$7,361
$660
$198
32
$7,217
100%
0%
$7,217
$0
$620
$620
33
$7,307
100%
0%
$7,307
s0
$650
$650
34
$8,490
100%
0%
$8,490
$0
$730
$730
35
$7,780
0%
100%
$0
$7,780
$580
s0
36
$7,672
0%
100%
$0
$7,672
$590
$0
37
$15,005
5%
95%
$750
$14,255
s0
$0
38
$7,967
99%
1%
67,887
$80
$0
$0
39
$11,557
100%
0%
$11,557
$0
s0
s0
40
$13,572
100%
0%
$13,572
$0
$0
$0
41
$7,300
0%
100%
$0
$7,300
$510
s0
42
$7,672
0%
10D%
$0
$7,672
$590
$0
43
$13,232
0%
100%
$0
$13,232
$0
so
44
$7,787
0%
10096
$0
$7,787
$630
$0
e 45
$7,99Q_.
15%
85%
711,198
$6,792
$660
$99
46
$8,492
0%
10D%
$0
$8,492
$720
s0
47
$7,365
0%
IOD%
$0
$7,365
$610
s0
48
$9,305
0%
100%
$0
$9,305
$600
$0
49
$7,197
0%
100%
$0
$7,197
$620
$0
50
$7,240
0%
10096
$0
$7,240
$630
$0
51
$7,857
0%
100%
$0
$7,857
$110
SD
52
$13,927
0%
10D%
$0
$13,927
$0
$0
53
58,492
0%
10046
$0
$8,492
$730
s0
54
$7,227
0%
100%
$0
$7,227
$500
$0
55
$12,865
0%
100%
$0
$12,865
so
$0
56
$7,915
0%
100%
$0
$7,915
$470
$0
57
$7,427
0%
100%
s0
$7,427
$700
$0
58
$10,007
0%
100%
$0
$10,007
$0
$0
59
$12,175
0%
100%
$0
$12,175
$0
$0
60
$7,315
0%
100%
$0
$7,315
$660
SD
'
CALENDAR PAGE 182.11
Beacon Bay 5/18/94 - Page 2
MINUTE PAGE
• *Effective Net Rents consider tax advantage. Discount rate for present value of annual
advantage is 6%. Rate for amortization of advantage was 7 %. Rent and advantage
figures are from 1018 /93 appraisal.
• CALENDAR PAGE 192.12
Beacon Bay 5/18/94 - Page 3 MINUTE PAGE
•
EXHIBIT D - 3
OF46
Distribution of Rents and Tax Advantage between Tidelands and
Uplands*
•
(1st yea)
Proportionate
Proportionate
Annual Amon.
Tidelands
Effective
%
%
Rent •
Rent
of PV of Tax
Tax
Lot No.
Net Rent
Tidelands
Uplands
Tndeiaods
Uplands
Advantage
Advantage
Interior Lots - continued
61
$8,482
0%
100%
$0
$8,482
$720
$o
ES 3
$10,325
100%
0%
$10,325
s0
$320
$320
ES 4
$6,322
100%
0%
$6,322
$0
$500
$500
ES 5
$11,415
85%
15%
$9,703
$1,712
$0
SO
ES 6
$6,310
0%
100%
SO
$6,310
$500
so
ES 7
$6,057
0%
100%
$0
$6,057
$650
s0
ES 8
$6,455
0%
100%
$0
56,455
$410
$0
Interior Lou
Subtotal:
$397,807
$109,592
$288,215
$19,930
$5,251
Add Waterfront
$679,670
$475,928
$203,742
$40,450
$30,562
Grand Totak
$1,077,477
$585,520
$491,957
$60,380
$35,814
% of Total:
100%
54%
46%
100%
59%
• *Effective Net Rents consider tax advantage. Discount rate for present value of annual
advantage is 6%. Rate for amortization of advantage was 7 %. Rent and advantage
figures are from 1018 /93 appraisal.
• CALENDAR PAGE 192.12
Beacon Bay 5/18/94 - Page 3 MINUTE PAGE