HomeMy WebLinkAbout27 - Income Properties Disposition('7.3
54jj4 Newport Beach City Council
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` AGENDA ITEM 27
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. _ June 22, 1998 Council Meeting
TO MAYOR AND CITY COUNCIL :aY THE ciT`r COUNCIL
FROM: KEVIN J. MURPHY, CITY MANAGER CITY OF NEVJPORT BEACH
BY4 DAVE KIFF, ASSISTANT TO THE CITY MANAGER 221098
SUBJECT: INCOME PROPERTIES DISPOSITION
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ISSUE:
A request for City Council direction on three specific properties under City
ownership and/or management.
BACKGROUND:
The City holds title to or holds in trust about 22 properties that generate income
for the City. The City leases each property to a tenant who has varying responsibilities
relating to the property — including paying rent and addressing the terms of the
respective leases.
The City Council's Policy F-7 (Income Properties) directs the City to
.,continually evaluate the potential of all City owned property to produce revenue. This
may include leasing unused land, renting vacant space, establishing concessions in
recreation areas or other similar techniques." The Policy further directs the City that
"whenever possible the City shall conduct an open bid or proposal process to insure the
highest financial return..." in order to help "...determine the highest and best use of the
property."
DISCUSSION:
Staff requests City Council direction on three specific properties that the City
either owns or manages. These properties are:
• 204 44th Street. This duplex adjacent to Balboa Boulevard has been under City
ownership since July 1987. The City acquired the duplex after an oil well accident
beneath the sidewalk adjacent to the property. Mr. A. J. Delany drilled the well in
November 1924 and later sold it to the South Basin Oil Company. South Basin was
then purchased by Orange County Refining Company. In May 1946, Orange County
Refining Company transferred the well to the City of Newport Beach.
On August 2, 1985, the well "blew out" underneath a casing when utilities workers were
maintaining the well equipment. As the well blew out, the well gas caught fire. After
working with the State Department of Conservation's Division of Oil and Gas to cap the
well, the City formally abandoned it on August 16, 1985. To settle a disputed claim
made by the then -owners of 204 44'h Street, Dean and Marcella Phillips, the City
purchased the property from the Phillips' for $357,500.
Newport Beach City Council
Agenda Item 27
Page 2
The front unit of the duplex is currently rented out via a month -to -month lease to a
tenant who pays $1,600 per month, The tenant (Eric A. Fertig), a resident of the duplex
since h:Aarch 1995, is current on his rent.
The rear unit, a two bedroom, one bath unit, was rented in February 1994 for $1,000
per month (again on a month -to -month lease) to two tenants who were evicted by the
City for unpaid rent in October, 1997. The unit has been vacant since the tenants'
departure. A review of the unit by City staff determined that it needs significant repairs
prior to any rental re -marketing. The property could, however, be sold "as is" without
completing any repairs or by completing on a portion of the needed repairs.
Bids on the suggested repairs to the rear unit are as follows:
Interior F'.inting
$6,000
New Carpet/Tile
$2,000
Dishwasher, Water Heater, and Bathroom Repairs
$3,000
Electrical Repairs
$2,000
New Furnace
$3,200
Replace Window Coverings
750
Total Suggested Repairs
$16,950
Given the state of the real estate market in Summer 1998, City officials have proposed
selling the 204 441h Street duplex. In early 1998, Deputy City Manager Peggy Ducey
contacted the Division of Oil and Gas and determined verbally that the City can market
and sell the property without any additional clearances from the Division given the
status of the capped and abandoned well.
City staff suggests (a) directing staff to accept low bids on re -carpeting and re -painting
the interior of the rear duplex, (b) listing the property with a real estate agent; (c)
directing staff to return to the City Council with a reasonable and viable offer of
purchase; and (d) offering the current tenants not less than 60 days notice of the City's
acceptance of any offer, if applicable.
Lot behind 205 and 207 34th Street. The City acquired this 1,500 square foot parcel
(zoned R-2) as a part of the widening of Balboa Boulevard. A portion of the parcel as
previously configured became part of the Boulevard and sidewalk during the widening.
The City used gas tax revenues to purchase the property.
The vacant parcel is now used illegally for parking by neighboring residents and/or
visitors to the area. At various times in recent years, the property owners of 205 and/or
207 34th Street (the parcels which back up to the City's parcel) have proposed
purchasing the City's parcel. Last summer, the City contracted with Fuller and Hansen
to appraise the property in anticipation of a sale.
The Appraiser, William R. Hansen (of Fuller and Hansen), reports that "it is reasonable
to conclude that the subject site could be developed with single family residence" of up
to 560 square feet of livable area (excluding garages), Hansen uses a sales
comparison 2DDroach (inrludinn locatinn and cmmnnrinn "cmmnc" to arrive at a vaii 1P fnr
the subject property) in his August 1997 valuation of the property. Hansen values the
property at $160,000.
The owner of 207 34th Street (Ms. Joan Spaulding) and the owner of 205 34th Street
(Mr. Robert Reinhardt) have each offered $40,000 for the respective portions of the
City's parcel directly behind their properties. Should the City decide to sell at the
property owners' asking price, the City would receive $80,000.
City .staff recommends that Ms. Spaulding's and Mr. Rienhardt's offers be rejected and
that the City formally list the property for sale, with right of first refusal given to
Spaulding and/or Reinhardt should the City receive a viable offer approaching the
property's appraised value. ,
Agenda Item 27
Pane 3
• 381h and Lake Triangle. The City acquired a 780 square foot lot at the corner of Lake
and 38th Street in March of 1959. The lot is the residual property left over from the
City's purchase of an adjacent property to provide the access road to the Newport
Island Bridge. The property is zoned R-2. According to Patty Temple, the lot "has land
area sufficient for a single family dwelling only." Temple also calls it "tough to design
for, since it is triangular in shape..."
Since the City's purchase of the property, the City has leased the lot as private, off-
street parking to Ms Beulah Doyle and Ms. Beverly Borchers. The City receives $200
per month for the lease — the lessees are current with their payments. The lease is
month -to -month and can be terminated with 30 days' notice.
In 1993, then -Deputy City Manager Ken Delino asked the Council to approve selling
the property at $68/square foot (total price = $50,048) given "the limited utility of the
parcel." The prospective buyer at the time was the prospective buyer of 3711 '/2 Lake
Street. When the sale fell through, the City continued its lease with Doyle/Borchers.
In May 1998, the new property owner at 3711-1/2 Lake Street (Mr. Bruce Simurda)
offered to purchase the property for $55 per square foot (total price = $40,480).
Simurda has proposed meeting the terms of a recommendation by the Public Works
Department to "swap" 44 square feet of Simurda's current property for 44 square feet of
the Triangle to allow for a wider sidewalk and to preserve sight distances at the
intersection.
Staff requests permission to counter Mr. Simurda's offer and to return to the City
Council with a final agreement, if reached. If agreement can be reached, the City will
offer notice of termination to Ms. Doyle and Ms. Borchers.
FISCAL IMPACT:
Potential one-time income of from $477,000 to $700,000, depending upon sale
prices. Potential loss of ongoing revenue of $2,400/year (38th Street Parking lease)
and $31,200/year (rental of both units at 204 44th Street). Potential expense of $8,000
to repair rear unit at 204 44th Street.
PAST ACTIONS/HISTORY:
This item has not gone through any city committees.
RECOMMENDED ACTIONS:
(1) Direct staff to prepare 204 44th Street property for sale (via re -carpeting and
re -painting rear unit), to list the property with a real estate agent, to return to
City Council with a reasonable and viable offer, and to provide 60-day notice
to current tenants upon Council acceptance of any offer, if applicable.
(2) Direct staff to reject offers for lot behind 205 and 207 34th Street from Ms.
Spaulding and Mr. Reinhardt, to list property for sale with a real estate agent,
and to offer Spaulding and Reinhardt right of first refusal should the City
receive a viable offer on the City's property; and
(3) Direct staff to counter Mr. Bruce Simurda's offer over property at 38th and
Lake and to return to City Council with final agreement, if reached.
Agenda Item 27
Page 4
ATTACHMENT:
Maps of subject properties;
• 204 44Ih Street
• Lot behind 205 and 207 34' Street
• 38th and Lake Triangle
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