HomeMy WebLinkAboutC-2458 - North Ford Purchasing Agreement & Escrow InstructionsTO:
FROM:
SUBJECT:
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City Council Staff Repot August 13, 1984
Agenda Item No. F -3(c) C30
BY THE CITY COUNCIL
CITY OF NEWPORT BEACH CITY OF NEWPORTABH
eEAC
City Council AUG ! 3 1984
Planning Department `} /� /--I
Suggested Action:
If desired, authorize the City Manager and City Attorney to enter into
escrow with the Irvine Company for the purchase of a 5.67 acre parcel
of land on the North Ford site with $1 million dollars in CDBG funds,
and further authorize the re -sale of this parcel to The Irvine Company
for the sum of $1.00.
Background
For several months, City staff and members of the Planning Commission,
and City Council, have been working with the Irvine Company for the
inclusion of $1 million dollars in Community Development Block Grant
Funds in the Irvine Company's North Ford affordable housing project,
in order to increase the affordability of a number of units. In
addition, staff has been working with the Irvine Company on the
preparation of a development agreement and tentative maps. for the
North Ford site. These items should be coming to the City Council
during the months of September and October of 1984.
The purchase of the site on. North Ford using CDBG funds needs to be
completed by the end of August in order to draw down $1 million
dollars in CDBG funds prior to the September 1, 1984 deadline which
HUD has given the City. At the City Council meeting of July 23, 1984,
the City Council adopted Resolution No. 84 -84 declaring the necessity
to condemn 53 acre portion of the North Ford Development so as to
provide a site for affordable housing development. The next step in
the process of CDBG fund expenditure is to. enter into a purchase
agreement and an escrow with The Irvine Company on the purchase of a
parcel of land.
Discussion
The following are the major provisions of the contemplated purchase
and re-sale of the 5.67 acre.parcel from and to The Irvine Company.
Parcel Size. The parcel is approximately 5.67 acres in area.
Appraised Value. The parcel has been appraised by Charles Wadsworth
with a confirming appraisal by Richard Fuller at $2.5.million.
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Proposed.Density. There will be a total of 99 units on 5.67 acres for
a gross density of 17.5 units per acre. The overall project density
for the 888 unit North Ford project is 311.5 du's per acre, however,
it anticipated that the apartment projects will average higher
densities and the ownership units will average lower densities.
Affordable Units. There are 50 HUD "Lower Income" units proposed on
the site. This constitutes the HUD minimum 518 required to show that
the project "principally benefits" lower income households. These 50
units were originally designated as median income units as part of the
North Ford General Plan Amendment. The total number of affordable
units on the North Ford site remains 222. The following chart
illustrates the increased affordability of the 50 units:
Median (Per GPA) Lower (w /CDBG) Difference
1 BR 931
2 BR 931
540 391
675 256
The 2 bedroom units could be rented to a household earning no more
than $27,000 per year, and the 1 bedroom to a household earning no
more than $21,600 per year, based on current median income. The rents
and income maximums would be adjusted to reflect changes in median
income.
Land Sale. It is proposed that the City purchase the 5.67 acre parcel
for $1.0 million, and sell it back to the Irvine Company (through a
back -to -back escrow) for $1.00. This will effectively "write down"
the cost of the land by $1.0 million in order to provide 50 lower
income rental units.
Bedroom Mix. It is currently anticipated that 25 units will be 1
bedroom and 25 units will be 2 bedroom.
Duration of Agreement. The 50 lower income units would remain
affordable for 10 years. At that time they could be converted to
market rate rental units or sold as condominiums, at the option of the
Irvine Company.
Economic Analysis. Attached is an economic analysis prepared by
Tarantello and Company, which illustrates the benefit derived from the
lower rental rates over 10 years, and discusses the feasibility of the
project with and without the use of CDBG funds.
Conclusion
With the concurrence of the City Council, it is staff's intention to
open escrow for the purchase and re -sale of this parcel on August 14,
1984, draw down $1 million dollars in Community Development Block
Grant funds from HUD on August 31, 1984, and close escrow by September
4, 1984.
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? TO: Ce Council -3.
Attached are copies of the two purchase agreements and escrow
instructions for the initial sale and re -sale of the 5.67 acre parcel.
Respectfully submitted,
PLANNING DEPARTMENT
JAMES D. HEWICKER, Director
By �(XK�'l �P dGrTrMI
Robert P. Lenard
Advance Planning Administrator
RPL:kln
Attachments for City Council Only:
1. Purchase Agreement and Escrow Instructions
(Initial Sale $1 Million Dollars)
2. Purchase Agreement and Escrow Instructions
(Rea-Sale at $1.00 Dollar)
3. Economic Analysis
CCSR 8- 13 -84.
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PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
TO: First American Title Insurance Company
114 East Fifth Street
Santa Ana, California 92701
ESCROW OFFICER: Rosie Frank
ESCROW NO.: 1391376 -RF
SELLER: The Irvine Company, a Michigan corporation
SELLER'S ADDRESS: 550 Newport Center Drive
Newport Beach, California 92660
Attention: Chick C. Willette
BUYER: The City of Newport Beach,
a California Municipal corporation
BUYER'S ADDRESS: 3300 Newport Boulevard
Newport Beach, California 92663
Attention: Robert Burnham, City Attorney
SUBJECT PROPERTY: In the City of Newport Beach, County of Orange,
State of California, described as follows:
A portion of Block 57 of Irvine's Subdivision as shown
on the Map filed in Book 1, Page 88 of Miscellaneous
Record Maps, records of Orange County, California,
described on Exhibit A.
DATE:
1. Purchase and Escrow. Seller agrees to sell to Buyer the Subject Property
subject to the following conditions:
A. The Purchase Price to be paid by Buyer for the Subject Property is One
Million Dollars . . . . . . . . . . . . •
. $1,000,000.00 which shall
be deposited into escrow together with all documents and additional funds
that may be necessary to comply with the provisions of this escrow on or
before the date set for the close of escrow herein.
B. Seller shall deliver title subject to all of the covenants, conditions,
restrictions, easements, reservations, rights, rights -of -way,
'encumbrances, and other items of record which have been approved by Buyer
and to those items shown on Seller's Grant Deed attached hereto as
Exhibit B. Seller shall, at its expense, provide Buyer with a
preliminary report of title for the Subject Property within ten (10) days
of.the opening of escrow as is more fully provided herein. Title
insurance, if any, shall be acquired at Buyer's expense.
2. Other Conditions to Close of Escrow.
A. Prior to the close of escrow, Seller shall deposit a fully executed Grant
Deed in form as attached hereto as Exhibit B.
B. The close of escrow is further conditioned upon the ability of the Escrow
Agent to close Escrow No. 1391377 -RF, by and between the parties hereto,
immediately after the close of escrow.
C. Upon receipt of evidence of satisfaction of Conditions A and B listed
above, receipt from Buyer of the Purchase Price, and satisfaction of all
other conditions as are more fully set forth herein, Escrow Agent shall
record the Grant Deed and shall deposit the Purchase Price in Seller's
account. Notwithstanding the foregoing, Escrow Agent shall perform its
obligations as provided herein without regard to any requirements which
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may be imposed upon Buyer or Seller by the terms and conditions of the
Purchase Agreement and Escrow instructions which extend beyond the close
of escrow.
3. Close of Escrow Date. This escrow shall close not later than December 31,
1984.
Cost and Prorations. With the exception of the cost of provision of any
title insurance which shall be borne by Buyer, no prorations are to be made
through this escrow. All other costs and fees in connection with the escrow
will be paid by Seller.
5. Notices. Any notices or other communications between the parties hereto
shall be in writing and shall be personally delivered to an agent of any
party or sent by first -class mail, postage prepaid, duly registered or
certified, return receipt requested, addressed.to the parties at the
addresses hereinabove provided.
Any party may, by written notice to the Escrow Agent and to the other party,
designate a different address which shall be substituted for the one above
designated. If any notice is deposited in the United States mail in Orange
County, California, as aforesaid, the same shall be deemed delivered seventy -
two (72) hours after the mailing thereof as provided above.
Restriction of Use of Subject Property. Buyer and Seller acknowledge and
agree that the purpose of Escrow No. 1391377 -RF is to restrict for ten (30)
years at least fifty (50) of the units of a project which shall not exceed
ninety -eight (98) units to be constructed on the Subject Property for
occupancy by individuals or families whose income does not exceed eighty
percent (802) of the annual median income of Orange County, California, as
defined by HUD at rents which do not exceed the rents published annually in
accordance with 24 CFR 888 by the United States Department of Housing and
Urban Development ( "HUD ") in the Federal Register for new construction
section eight housing for Orange County, California. In the event that the
annual income figure increases the rent may be proportionately increased.
Buyer and Seller agree that the annual HUD published maximum income
limitation for a family of four for a two bedroom unit and for a family of
two for a one bedroom unit, will establish the maximum monthly rental which
may be charged in accordance with the following formula (annual income
published by HUD x .30) > 12. For example, if the HUD published figure for a
two person family is $21,600, then .30 times that figure equals $6,480, which
divided by 12 equals $540.00, the maximum rental which may be charged unless
the HUD published figure increases.
Buyer anticipates receiving from HUD funds in an amount sufficient to perform
its obligations stated in this escrow. In the event that Buyer fails to
obtain the aforementioned funds and deposit the same into this escrow within
the time specified herein, then Seller shall be released from its obligation
to convey the Subject Property to Buyer, Buyer shall be relieved from the
obligation to purchase the Subject Property; and the only recourse of either
party shall be to cancel the escrow. In the event that HUD demands the
return of such funds after the close of escrow, Buyer agrees to quitclaim any
interest in the Subject Property obtained pursuant to this escrow upon
receipt of One Million Dollars ($1,000,000) from Seller and Seller and Buyer
agree that the aforementioned units may be rented as median income rental
units, as defined by the North Ford Development Agreement. In no event shall
this escrow continue beyond the close of the escrow date specified herein
except pursuant to a written amendment to this Agreement.
Counterparts. These instructions may be executed in counterparts, each of
which when so executed shall be deemed an original, and said counterparts
together shall constitute one and the same instrument notwithstanding the
date of its execution and delivery.
8. General Escrow Instructions. The General Escrow Instructions attached hereto
as Exhibit C are by reference incorporated herein and made a part hereof. In
the event there is a conflict between the General Escrow Instructions and the
terms and provisions of the Purchase Agreement and Escrow Instructions, this
Agreement shall prevail.
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IN WITNESS WHEREOF, the parties have executed these escrow instructions
upon the day and year first above written.
THE CITY OF NEWPORT BEACH,
a California Municipal corporation
By
Mayor, City of Newport Beach
APPROVED AS TO FORM
By
City Attorney, City of Newport Beach
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THE IRVINE COMPANY,
a Michigan corporation
By
President
By
Assistant Secretary
QID
817/8a
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LEGAL DESCRIPTION
A PORTION OF BLOCK 57 OF IRVINE'S SUBDIVISION AS SHOWN ON THE MAP FILED IN
BOOK 1, PACE 88 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA,
DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHEASTERLY TERMINUS OF THAT COURSE HAVING A BEARING OF
S24 °20'09" W AND A DISTANCE OF 83.56 FEET AS DESCRIBED IN THE DEED TO THE STATE
OF CALIFORNIA RECORDED IN BOOK 12289, PACE 1726 OF OFFICIAL RECORDS (THE BEARING
OF SAID COURSE FOR THE PURPOSE OF THIS DESCRIPTION SHALL BE S24 °19'59" W); THENCE
ALONG SAID COURSE S24'19'59" W, 83.56; THENCE CONTINUING ALONG THE WESTERLY LINE
OF THE LAND DESCRIBED IN SAID DEED S1'43'12" W, 447.12 FEET: THENCE LEAVING SAID
WESTERLY LINE N88'16'48" W, 105.00 FEET TO THE BEGINNING OF NON— TANGENT CURVE
CONCAVE NORTHERLY; THENCE WESTERLY ALONG SAID CURVE HAVING A RADIUS OF 720.00
FEET, A RADIAL LINE TO SAID BEGINNING BEARS S4'09'34" E, THROUGH A CENTRAL ANGLE
OF 9'23'33 ", AN ARC DISTANCE OF 118.03 FEET; THENCE NON — TANGENT N1'43'12" E,
358.84 FEET; THENCE N88016'48" W, 35.00 FEET; THENCE N1'43'12" E, 310.00 FEET;
THENCE NBS'16'48" W, 25.00 FEET; THENCE N1'43'12" E, 260.00 FEET TO THE BEGINNING
OF A NON — TANGENT CURVE CONCAVE SOUTHERLY; THENCE EASTERLY ALONG SAID CURVE HAVING
A RADIUS OF 670.00 FEET, A RADIAL LINE TO SAID BEGINNING BEARS N7'13'05" W,
THROUGH A CENTRAL ANGLE OF 8'01'05 ", AN ARCE DISTANCE OF 93.76 FEET, THENCE
S89'12'00" E, 73.87 FEET TO THE BEGINNING OF A TANGENT CURVE CONCAVE
SOUTHWESTERLY; THENCE EASTERLY AND SOUTHEASTERLY ALONG SAID CURVE HAVING A RADIUS
OF 90.00 FEET, A RADIAL LINE TO SAID BEGINNING BEARS NO'48'00" E, THROUGH A
CENTRAL ANGLE OF 44'24'55 ", AN ARC DISTANCE OF 69.77 FEET TO A POINT OF REVERSE
CURVE CONCAVE NORTHERLY, SAID CURVE BEING TANGENT AT ITS NORTHERLY TERMINUS TO
THE WESTERLY LINE OF THE LAND DESCRIBED IN SAID DEED; THENCE SOUTHEASTERLY,
EASTERLY, NORTHEASTERLY AND NORTHERLY ALONG SAID CURVE HAVING A RADIUS OF 50.00
FEET, A RADIAL LINE TO SAID POINT BEARS S45012'55" W, THROUGH A CENTRAL ANGLE OF
133'29'43 ", AN ARC DISTANCE OF 116.50 FEET TO SAID POINT OF TANGENCY AND SAID
WESTERLY LINE; THENCE ALONG SAID WESTERLY LINE S1'43'12" W, 422.96 FEET TO THE
POINT OF BEGINNING.
CONTAINING 5.67 ACRES, MORE OR LESS.
EXHIBIT A
cp.1751 F. 7,84
WHEN RECORDED MAIL TO:
City of Newport Beach
3300 Newport Boulevard
Newport Beach, CA 92663
Attention: Robert Burnham
City Attorney
MAIL TAX STATEMENTS TO ADDRESS ABOVE
RECORDING REQUESTED BY:
The undersigned grantor declares:
(This property is conveyed to a municipality
and is therefore exempt from any document
transfer tax.)
Signature of Grantor or Grantor's Agent
Parcel No
G R A N T D E E D
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, THE IRVINE
COMPANY, a Michigan corporation, hereby GRANTS to the City of Newport Beach, a
California Municipal corporation, the following described real property in the
City of Newport Beach, County of Orange, State of California:
A portion of Block 57 of Irvine's Subdivision as
shown on the Map filed in Book.l, Page 88, of
Miscellaneous Record Maps, Records of Orange
County, California, described on Exhibit A
attached hereto.
SUBJECT TO:
All covenants, conditions, restrictions, reservations, rights,
rights -of -way and easements of record and apparent.
IN WITNESS WHEREOF, said corporation has caused its corporate name and seal
to be affixed hereto and this instrument to be executed by its officers thereunto
duly authorized.
Dated:
THE IRVINE COMPANY
a Michigan corporation
By:
President
By:
Assistant Secretary
STATE OF CALIFORNIA )
ss.
COUNTY OF )
On this day of , in the year , before me, the undersigned, a
Notary Public in and for said State, personally appeared
and
personally known to me (or proved to me on the basis of satisfactory evidence ) to
be the persons who executed the within instrument as and
, respectively, on behalf of the corporation therein named
and acknowledged to me that the corporation executed it.
WITNESS my hand and official seal.
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Notary Public in and for saic S..ite
LEGAL DESCRIPTION
A PORTION OF BLOCK 57 OF IRVINE'S SUBDIVISION AS SHOWN ON THE MAP FILED IN
BOOK 1, PACE 88 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA,
DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHEASTERLY TERMINUS OF THAT COURSE HAVING A BEARING OF
S24 °20'09" W AND A DISTANCE OF 83.56 FEET AS DESCRIBED IN THE DEED TO THE STATE
OF CALIFORNIA RECORDED IN BOOK 12289, PAGE 1726 OF OFFICIAL RECORDS (THE BEARING
OF SAID COURSE FOR THE PURPOSE OF THIS DESCRIPTION SHALL BE S24'19'59" W); THENCE
ALONG SAID COURSE S24 °19'59" W, 83.56; THENCE CONTINUING ALONG THE WESTERLY LINE
OF THE LAND DESCRIBED IN SAID DEED S1'43'12" W, 447.12 FEET: THENCE LEAVING SAID
WESTERLY LINE N88'16'48" W, 105.00 FEET TO THE BEGINNING OF NON - TANGENT CURVE
CONCAVE NORTHERLY; THENCE WESTERLY ALONG SAID CURVE HAVING A RADIUS OF 720.00
FEET, A RADIAL LINE TO SAID BEGINNING BEARS S4'09'34" E, THROUGH A CENTRAL ANGLE
OF 9 °23'33 ", AN ARC DISTANCE OF 118.03 FEET; THENCE NON- TANGENT N1'43'12" E,
358.84 FEET; THENCE N88'16'48" W, 35.00 FEET; THENCE N1043'12" E, 310.00 FEET;
THENCE N88'16'48" W, 25.00 FEET; THENCE N1'43'12" E, 260.00 FEET TO THE BEGINNING
OF A NON—TANCENT_CURVE CONCAVE SOUTHERLY; THENCE EASTERLY ALONG SAID CURVE HAVING
A RADIUS OF 670.00 FEET, A RADIAL LINE TO SAID BEGINNING BEARS N7'13'05" W,
THROUGH A CENTRAL ANGLE OF 8'01'05 ", AN ARC DISTANCE OF 93.76 FEET; THENCE
589'12'00" E, 73.87 FEET TO THE BEGINNING OF A TANGENT CURVE CONCAVE
SOUTHWESTERLY; THENCE EASTERLY AND SOUTHEASTERLY ALONG SAID CURVE HAVING A RADIUS
OF 90.00 FEET, A RADIAL LINE TO SAID BEGINNING BEARS NO'48'00" E, THROUGH A
CENTRAL ANGLE OF 44'24'55 ", AN ARC DISTANCE OF 69.77 FEET TO A POINT OF REVERSE
CURVE CONCAVE NORTHERLY, SAID CURVE BEING TANGENT AT ITS NORTHERLY TERMINUS TO
THE WESTERLY LINE OF THE LAND DESCRIBED IN SAID DEED; THENCE SOUTHEASTERLY,
EASTERLY, NORTHEASTERLY AND NORTHERLY ALONG SAID CURVE HAVING A RADIUS OF 50.00
FEET, A RADIAL LINE TO SAID POINT BEARS S45'12'55" W, THROUGH A CENTRAL ANGLE OF
133 °29'43 ", AN ARC DISTANCE OF 116.50 FEET TO SAID POINT OF TANGENCY AND SAID
WESTERLY LINE; THENCE ALONG SAID WESTERLY LINE S1 °43'12" W, 422.96 FEET TO THE
POINT OF BEGINNING.
CONTAINING 5.67 ACRES, MORE OR LESS.
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EXH:�:T A
8/7/84
GENERAL ESCROW INSTRUCTIONS
1. Deposit of Funds. All funds received in this escrow shall be held by
Escrowholder and shall be disbursed only in accordance with these
instructions.
2. Prorations and Adjustments. All prorations and /or adjustments called for
in this escrow are to be made on the basis of a thirty (30) day month
unless otherwise instructed in writing. The phrase "close of escrow " .as
used in this escrow means the date on which documents are recorded and the
obligations stated herein of Seller and Buyer are satisfied.
3. Recordation of Instruments. Recordation of any instruments delivered
through this escrow is authorized if necessary or proper for the issuance
of any policy of title insurance called for in this Purchase Agreement and
Escrow Instructions.
4. Personal Property Taxes. No examination or insurance as to the amount or
payment of personal property taxes is required unless specifically
requested.
S. Termination of A enc Obli a[ion. If there is no action taken on this
escrow within six 6) months after the "rime limit dote" as set forth in
the escrow instructions or written extension thereof, your agency
obligation shell terminate at your option and all documents, monies or
other items held by you shall be returned to the parties depositing same.
In the event of cancellation of this escrow, whether it be at the request
of any of the principals or otherwise, the fee and charges due
Escrowholder, including expenditures incurred and /or authorized shall be
borne equally by the parties hereto (unless otherwise agreed to
specifically).
EXHIBIT C
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PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
TO: First American Title Insurance Company
114 E. Fifth Street
Santa Ana, California 92701
ESCROW OFFICER: Rosie Frank
ESCROW NO.: 1391377 -RF
SELLER: The City of Newport Beach,
a California Municipal corporation
SELLER'S ADDRESS: 3300 Newport Boulevard
Newport Beach, California 92663
Attention: Robert Burnham, City Attorney
BUYER: The Irvine Company, a Michigan corporation
BUYER'S ADDRESS: 550 Newport Center Drive
Newport Beach, California 92660
Attention: Chick C. Gillette
SUBJECT PROPERTY: In the City of Newport Beach, County of Orange, State
of California, described as follows:
A portion of Block 57 of Irvine's Subdivision as shown
on the map filed in Book 1, Page 88 of Miscellaneous
Record Maps, Records of Orange County, California,
described on Exhibit A.
DATE:
1. Purchase and Escrow. Seller agrees to sell to Buyer the Subject Property
subject to the following conditions.
A. The Purchase Price to be paid by Buyer for the Subject Property is
One Dollar . . . . . . $1.00
. . . . . . . . . . . . . . .
which shall be deposited into escrow together with all documents
and additional funds that may be necessary to comply with the
provisions of this escrow on or before the date set for the close
of escrow herein.
B. Seller shall deliver title subject to all of the covenants,
conditions, restrictions, easements, reservations, rights, rights -
of -way, encumbrances, and other items of record and to those items
shown on Seller's Grant Deed attached hereto as Exhibit B.
Execution of these escrow instructions will be deemed Buyer's
approval of the condition of title and no further approval will be
required. Seller shall not be required to provide a policy of
title insurance for the Subject Property.
2. Other Conditions to Close of Escrow.
A. Prior to the close of escrow Seller shall deposit a fully executed
Crant Deed in the form attached hereto as Exhibit B.
B. The close of escrow is further conditioned upon the ability of
Escrow Agent to close Escrow No. 1391376 -RF by and between the
parties hereto.
C. Upon receipt of evidence of satisfaction of conditions A and B of
this paragraph, the Ceneral Escrow Instructions attached as Exhibit
C, and receipt from Buyer of the Purchase Price, Escrow Agent shall
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record the Crant Deed and shall deposit the Purchase Price in
Seller's Account. Notwithstanding the foregoing, Escrow Agent
shall perform its obligations as provided herein without regard to
any requirements which may be imposed upon Buyer or Seller by the
terms and conditions of the Purchase Agreement and Escrow
Instructions which extend beyond the close of escrow.
3. Close of Escrow Date. This escrow shall close not later than
December 31, 1984.
4. Cost and Proration s. No prorations are to be made through this escrow.
All costs and fees in connection with the escrow will be paid by Buyer.
5. Notices. Any notices or other communications between the parties hereto
shall be in writing and shall be personally delivered to an officer of
any party or sent by first class mail, postage prepaid, duly registered
or certified, return receipt requested, addressed to the parties at the
addresses hereinabove provided.
Any party may, by written notice, to the Escrow Agent and to the other
party, designate a different address which shall be substituted for the
one above designated. If any notice is deposited in the United States
mail in Orange County, California, as aforesaid, the same shall be deemed
delivered seventy -two (72) hours after the mailing thereof as provided
above.
6. Restriction of Use of Subject Property. Buyer and Seiler acknowledge and
agree that the purpose this escrow is to restrict for ten (10) years
fifty (50) of the units of a project which shall not exceed ninety -eight
(98) units to be constructed on the Subject Property for occupancy by
individuals or families whose income does not exceed eighty percent (80X)
of the annual median income of Orange County, California as defined by
HUD at rents which do not exceed the rents published annually in
accordance with 24 CPS 888 by the United States Department of Housing and
Urban Development ( "HUD ") in the Federal Register for new construction
section eight housing for Orange County, California. Buyer and Seller
agree that the annual HUD published maximum income limitation for a
family of four for a two bedroom unit and for a family of two for a one
bedroom unit, will establish the maximum monthly rental which may be
charged in accordance with the following formula, (annual income
published by HUD x .30) + 12. If the HUD published income figure for
Orange County, California increases the rental may be proportionately
increased. For example, if the HUD published figure for a two person
family is $21,600, then .30 times that figure equals $6,480, which
divided by 12 equals $540.00, the maximum rental which may be charged
unless the HUD published figure increases.
Seller anticipates receiving from HUD funds in an amount sufficient to
perform its obligations stated in Escrow No. 1391376 -RF. In the event
that Seller fails to obtain the aforementioned funds and deposit the same
into Escrow No. 1391376 -RF within the time specified therein, then Seller
shall be released from its obligation to convey the Subject Property to
Buyer, Buyer shall be relieved from the obligation to purchase the
Subject Property, and the only recourse of either party shall be to
cancel this escrow. In no event shall this escrow continue beyond the
close of the escrow date specified herein except pursuant to a written
amendment to this Agreement.
The restrictions set forth in the Crant Deed attached hereto as Exhibit
"B" which are not to be accomplished prior to the close of escrow are
intended by the parties to continue thereafter and be binding 'upon Buyer,
its successors and assigns. Buyer agrees that it shall not transfer the
Subject Property except subject to these restrictions and that all
subsequent deeds shall contain the same restrictions set forth in the
deed attached hereto as Exhibit "B ". Seller agrees that the restrictions
shall be released by Seller ten (30) years after issuance by the City of
Newport Beach of a Certificate of Use and Occupancy for fifty units of
housing constructed upon the Subject Property which are to be made
available for said ten (10) year period for occupancy by individuals or
families with incomes which do not exceed eighty percent (80X) of the
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8/8/848
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annual median income of Orange County as defined by HUD during such ten
(10) year period as is more fully described in the Grant Deed attached
hereto as Exhibit "B" and incorporated herein by reference.
7. Counterparts. These instructions may be executed in counterparts, each
of which when so executed shall be deemed an original and said
counterparts, together shall constitute one and the same instrument
notwithstanding the date of its execution and delivery.
B. General Escrow Instructions. The General Escrow Instructions attached
hereto as Exhibit C are by reference incorporated herein and made a
part hereof. In the event there is a conflict between the General Escrow
Instructions and the terms and provisions of this Purchase Agreement and
Escrow Instructions, this agreement shall prevail.
IN WITNESS WHEREOF, the parties have executed these escrow instructions
upon the day and year first above written.
SELLER
BUYER
THE CITY OF NEWPORT BEACH, a California THE IRVINE COMPANY, a Michigan
Municipal corporation corporation
By
APPROVED AS TO FORM
By
City At
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By
s
By
Assistant Secretary
8/8/84B
LEGAL DESCRIPTION
0
A PORTION OF BLOCK 57 OF IRVINE'S SUBDIVISION AS SHOWN ON THE MAP FILED IN
BOOK 1, PACE 88 OF MISCELLANEOUS RECORD MAPS, RECORDS OF ORANGE COUNTY,
CALIFORNIA, DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHEASTERLY TERMINUS OF THAT COURSE HAVING A BEARING OF
S24 °20'09" W AND A DISTANCE OF 83.56 FEET AS DESCRIBED IN THE DEED TO THE
STATE OF CALIFORNIA RECORDED IN BOOK 12289, PACE 1726 OF OFFICIAL RECORDS (THE
BEARING OF SAID COURSE FOR THE PURPOSE OF THIS DESCRIPTION SHALL BE
S24'19'59" W); THENCE ALONG SAID COURSE 524 °19'59" W, 83.56; THENCE CONTINUING
ALONG THE WESTERLY LINE OF THE LAND DESCRIBED IN SAID DEED S1 °43'12" W, 447.12
FEET; THENCE LEAVING SAID WESTERLY LINE N88 °16'48" W, 105.00 FEET TO THE
BEGINNING OF NON - TANGENT CURVE CONCAVE NORTHERLY; THENCE WESTERLY ALONG SAID
CURVE HAVING A RADIUS OF 720.00 FEET, A RADIAL LINE TO SAID BEGINNING BEARS
S4 °09'34" E, THROUGH A CENTRAL ANGLE OF 9 023'33 ", AN ARC DISTANCE OF 118.03
FEET; THENCE NON - TANGENT N1 °43'12" E, 358.84 FEET; THENCE N88 °16'48" W, 35.00
FEET; THENCE N1 °43'12" E, 310.00 FEET; THENCE N88 °16'48" W, 25.00 FEET; THENCE
N1 °43'12" E, 260.00 FEET TO THE BEGINNING OF A NON- TANGENT CURVE CONCAVE
SOUTHERLY; THENCE EASTERLY ALONG SAID CURVE HAVING A RADIUS OF 670.00 FEET, A
RADIAL LINE TO SAID BEGINNING BEARS N7 °13'05" W, THROUGH A CENTRAL ANGLE OF
8'01'05 ", AN ARC DISTANCE OF 93.76 FEET; THENCE S89*12'00" E. 73.87 FEET TO
THE BEGINNING OF A TANGENT CURVE CONCAVE SOUTHWESTERLY; THENCE EASTERLY AND
SOUTHEASTERLY ALONG SAID CURVE HAVING A RADIUS OF 90.00 FEET, A RADIAL LINE TO
SAID BEGINNING BEARS NO °48'00" E, THROUGH A CENTRAL ANGLE OF 44 °24'55 ", AN ARC
DISTANCE OF 69.77 FEET TO A POINT OF REVERSE CURVE CONCAVE NORTHERLY, SAID
CURVE BEING TANGENT AT ITS NORTHERLY TERMINUS TO THE WESTERLY LINE OF THE LAND
DESCRIBED IN SAID DEED; THENCE SOUTHEASTERLY, EASTERLY, NORTHEASTERLY AND
NORTHERLY ALONG SAID CURVE HAVING A RADIUS OF 50.00 FEET, A RADIAL LINE TO
SAID POINT BEARS S45 °12'55" W, THROUGH A CENTRAL ANGLE OF 133 °29'43 ", AN ARC
DISTANCE OF 116.50 FEET TO SAID POINT OF TANCENCY AND SAID WESTERLY LINE;
THENCE ALONG SAID WESTERLY LINE S1 °43'12" W, 422.96 FEET TO THE POINT OF
BEGINNING.
CONTAINING 5.67 ACRES, MORE OR LESS.
Ei.;;:3 ': F.
ac/ BAD792 8i 7f 8-1 .-1
WHEN RECORDED MAIL TO:
The Irvine Company
550 Newport Center Drive
Newport Beach, CA 92663
Attention: Builder and Escrow Services
Community Development Division
MAIL TAX STATEMENTS TO ADDRESS ABOVE
RECORDING REQUESTED BY: DOCUMENTARY TRANSFER TAX $1.00 -with restricted uses
Computer on the consideration or value of
property conveyed; or
Computed on the consideration or value less
liens and encumbrances remaining at time
of sale.
Signature of Declarant or Agent determining tax -
firm name
PARCEL NO.
G R A N T D E E D
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, the
City of Newport Beach, a California municipal corporation, hereinafter
"Grantor," hereby grants to The Irvine Company, a Michigan corporation,
hereinafter "Grantee," the real property in the City of Newport Beach, County
of Orange, State of California, described on Exhibit "A" attached hereco (the
"Subject Property "),
PROVIDED, HOWEVER, that if the Subject Property is not used for the provision
of not more than ninety -eight (98) units of housing, at least fifty (50) of
which are available for rental to lover income families, as that term is
herein defined, at rents as that term is herein defined, for ten (10) years
from the date of issuance by the City of Newport Beach, California of a
certificate of use and occupancy for such units, THEN Crancor, its successors
and assigns reserves the right in its sole and reasonable discretion to re-
encer and terminate the estate hereby granted to Grantee after providing
Grantee prior written notice of any such violation of this restriction and a
sixty (60) day opportunity to cure any such violation. As used herein the
term, "lower income families ", shall mean individuals and families whose
income does not exceed eighty percent (80X) of the median income for Orange
County California as determined by the Secretary of the United States
Department of Housing and Urban Development ( "HUD "). As used herein the term
"rents" shall mean that figure which may be adjusted from time to time by
Grantee in accordance with the following formula (annual income published by
HUD x .30) a 12. As used herein the "annual income published by HUD" shall
mean the figures published at least annually by HUD in the Federal Register in
conjunction with its new Construction Section Eight Program for one bedroom
units to be occupied by two person families and for two bedroom units to be
occupied by four person families in accordance with 24 CFR 888 as it may be
amended. Grantor agrees that upon written request of Crancee delivered ten
(10) years after the issuance by the City of Newport Beach of a certificate of
use and occupancy for the fifty (50) lower income units upon the Subject
Property, Grantor will record a quitclaim deed in a form which is customary at
such time and is acceptable at such time to the Orange County Recorder, in
which Grantor shall release and forever quitclaim any interest it holds in the
Subject Property.
SUBJECT TO:
1. Quitclaim and release by Grantor of any interest in the
Subject Property ten (10) years after issuance by the City of Newport Beach,
California, of Certificate of Use and Occupancy, as provided in the above
described restrictions.
BAD782
8/8/848
0 0
2. All covenants, conditions, restrictions, reservations, rights -
of -way and easements of record and apparent.
3. Grantee, its successors and assigns shall, for ten years, use
at least fifty (50) of the units constructed on the Subject Property conveyed
hereby solely as rental housing which may be occupied by lover income families
at rents as those terms are defined by the above- described restriction as
provided below:
(a) Grantee shall not be in violation of its covenant to
use the Subject Property solely as rental housing which may be occupied by
lower income families if for a period of ten (10) years from the date of
issuance by the the City of Newport Beach, California, of a Certificate of Use
and Occupancy, for no more than ninety-eight (98) units of housing, fifty (50)
of which are rented to lower income families, as that term is herein defined,
at rents as that term is herein defined.
(b) Should Grantee, its successors or assigns violate any
of the foregoing covenants or restrictions on use, Grantor, its successors or
assigns, may, in addition to the right to terminate the estate of Crantee,
seek any remedy available at law or in equity including, without limitation,
the right to seek specific performance or enjoin the continuance of the breach
of any such covenants or restrictions on use. It is specifically understood
that any of the foregoing remedies may be employed at the option of Grantor,
its successors and assigns, and the failure of any such remedies to be
employed upon any one or more of any occurrence giving rise to such remedies
shall not be a waiver of the right to employ such remedies upon the
continuance of such occurrences or any subsequent occurrence. Notwithstanding
the foregoing, a breach of the foregoing covenants and restrictions on use,
shall not defeat or render invalid the lien of a mortgage or deed of trust
made in good faith and for value in furtherance of the project described in
(a) above. In addition to the remedies provided herein and in the event of
any violation of these covenants by Grantee, the obligation of Grantee to
provide fifty (50) lover income units and the obligation of Grantor to
quitclaim its interest in the property, shall be extended beyond 10 years and
for a period of time equal to the length of the violation(s).
(c) Grantee recognizes the reasonableness of the foregoing
covenants and restrictions on use, which recognition shall be binding on
Grantee's successors and assigns, including any owner of the Subject Property
conveyed hereby, or any portion thereof, whose title thereto is acquired
through foreclosure, trustee's sale or otherwise.
(d) The foregoing covenants shall run with the land,
burdening the Subject Project conveyed hereby and benefitting each and every
portion of the real property described on Exhibit B attached hereto and by
this reference made a part hereof (the "Benefitted Property "). Said covenants
shall burden the real property conveyed hereby and every portion into which it
may be divided, and the owners and lessees of any interest therein, as the
servient tenement subject to an equitable servitude, and shall be enforceable
by Grantor and its successors running in favor of the Benefitted Property as
the dominant tenement. Said covenants shall also be enforceable by the
transferees of Grantor's interest in the Benefitted Property if, in the
instrument effecting such transfer, Grantor confers such authority on its
transferees and the transferee accepts the same.
(e) If any term, provision, condition or covenant of this
Deed or the application thereof to any party or circumstances shall, to any
extenc,.be held invalid or unenforceable, the remainder of this Deed or the
application of such term, provision, condition or covenant to persons or
circumstances other than those as to whom or which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Deed shall be valid and enforceable to the fullest extent permitted by
law.
BAD782
,�76
8/8/848
• •
DATED: CITY OF NEWPORT BEACH,
a California municipal corporation
By
By
STATE OF CALIFORNIA )
COUNTY OF ORANCE ) as.
on , 1984 before me, the undersigned, a Notary
Public in and for said State, personally appeared
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person who executed this instrument as
of the City of Newport Beach, and acknowledged to me that
the City of Newport Beach executed it.
WITNESS MY HAND AND OFFICIAL SEAL.
NOTARY PUBLIC
BAD782
c�)7
8/8/848
wi
i
LEGAL DESCRiI',ION
A PORTION OF BLOCK 57 OF IRVINE'S SUBDIVISION AS SHOWN ON THE MAP FILED IN
BOOK 1, PAGE 88 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA,
DESCRIBED AS FOLLOWS.
BEGINNING AT THE NORTHEASTERLY TERMINUS OF THAT COURSE HAVING A BEARING OF
S24 °20'09" W AND A DISTANCE OF 83.56 FEET AS DESCRIBED IN THE DEED TO THE
STATE OF CALIFORNIA RECORDED IN BOOK 12289, PACE 1726 OF OFFICIAL RECORDS (THE
BEARING OF SAID COURSE FOR THE PURPOSE OF THIS DESCRIPTION SHALL BE
S24 °19'59" W); THENCE ALONG SAID COURSE S24 °19'59" W, 83.56; THENCE CONTINUING
ALONG THE WESTERLY LINE OF THE LAND DESCRIBED IN SAID DEED S1 °43'12" W, 447.12
FEET; THENCE LEAVING SAID WESTERLY LINE NBB °16'48" W, 105.00 FEET TO THE
BEGINNING OF NON - TANGENT CURVE CONCAVE NORTHERLY; THENCE WESTERLY ALONG SAID
CURVE HAVING A RADIUS OF 720.00 FEET, A RADIAL LINE TO SAID BEGINNING BEARS
S4 °09'34" E, THROUGH A CENTRAL ANGLE OF 9 °23'33 ", AN ARC DISTANCE OF 118.03
FEET; THENCE NON - TANGENT N1 °43'12" E, 358.84 FEET; THENCE N88016'48" W, 35.00
FEET; THENCE N1 °43'12" E, 310.00 FEET; THENCE N88 °16'48" W, 25.00 FEET; THENCE
N1043'12" E, 260.00 FEET TO THE BEGINNING OF A NON- TANCENT CURVE CONCAVE
SOUTHERLY; THENCE EASTERLY ALONG SAID CURVE HAVING A RADIUS OF 670.00 FEET, A
RADIAL LINE TO SAID BEGINNING BEARS N7 °13'05" W, THROUGH A CENTRAL ANGLE OF
B °01'05 ", AN ARC DISTANCE OF 93.76 FEET; THENCE S89 °12'00" E, 73.87 FEET TO
THE BEGINNING OF A TANGENT CURVE CONCAVE SOUTHWESTERLY; THENCE EASTERLY AND
SOUTHEASTERLY ALONG SAID CURVE HAVING A RADIUS OF 90.00 FEET, A RADIAL LINE TO
SAID BEGINNING BEARS NO °48'00" E, THROUGH A CENTRAL ANGLE OF 44 °24'55 ", AN ARC
DISTANCE OF 69.77 FEET TO A POINT OF REVERSE CURVE CONCAVE NORTHERLY, SAID
CURVE BEING TANGENT AT ITS NORTHERLY TERMINUS TO THE WESTERLY LINE OF THE LAND
DESCRIBED IN SAID DEED; THENCE SOUTHEASTERLY, EASTERLY, NORTHEASTERLY AND
NORTHERLY ALONG SAID CURVE HAVING A RADIUS OF 50.00 FEET, A RADIAL LINE TO
SAID POINT BEARS S45 °12'55" W, THROUGH A CENTRAL ANGLE OF 133 °29'43 ", AN ARC
DISTANCE OF 116.50 FEET TO SAID POINT OF TANGENCY AND SAID WESTERLY LINE;
THENCE ALONG SAID WESTERLY LINE S1 °43'12" W, 422.96 FEET TO THE POINT OF
BEGINNING.
CONTAINING 5.67 ACRES, MORE OR LESS.
BAD?82
EXHIBIT A
8018
BESEFITIED PROPFRTI'
WEST BAY PARE: SITE
0
All that portion of Blocks 4. 5 and 51. Irvine's Subdivision. in the City
of Newport Beach, County of Orange. State of Calitornta. as per map filed in
Book 1, Page 88, Miscellaneous Maps, records of said Cuunt_v. described as
follows:
Beginning at the southwesterly terminus of that certain course in
the southeasterly right-of-way line of Irvine Avenue shown as North
40 °38'10" East 333.39 feet on Sheet 5 of Countv Surveyor's Map 1 -72
on file in the office of the County Surveyor of said County; thence
along said right- of-way line North 40 °38'10" East 303.39 feet;
thence South 49 °22'09" East 160.00 feet to the beginning of a
tangent curve concave to the north and having a radius of 260.00
feet; thence easterly along said curve through a central angle of
64 °14'30" a distance of 291.52 feet; thence nontangent to said
curve South 19 °22'51" West 349.97 feet; thence South 70 °37'09" East
31.97 feet to that certain course having a bearing and length of
South 53 °22'27" West 422.40 feet in the northerly boundary of that
certain parcel of land described in deed to the State of California
recorded in Book 11382, Page 1876 of Official Records of said
County; thence along said boundary South 53 °24'17" West 338.26
feet; thence North 36 °35'43" West 95.87 feet to a point on a
nontangent 175.00 foot radius curve that is concave to the
northeast, a radial to said point bears South 1 °18'21" East; thence
northwesterly along said last mentioned curve, through a central
angle of 72 °11'59 ", a distance of 220.52 feet to the beginning of a
reverse curve concave to the southwest and having a radius of
175.00 feet; thence northwesterly along said last mentioned curve,
through a central angle of 44 °45'00 ", a distance of 136.68 feet; -
thence North 63 °51'22" West 23.07 feet to a point in the
southeasterly right -of -way line of said Irvine Avenue, said point
being in a 725.00 foot radius curve concave to the southeast, a
radial to said point bears North 63 °51'22" West; thence
northeasterly along said last mentioned curve, through a central
angle of 14 029'32 ", a distance of 183.38 feet to the point of
beginning.
E%n1BIT B
"%C/ BAU 7 E 2 _ 8 r7 c
CF.NERAL ESCROW INSTRUCTIONS
1. Deposit of Funds. All funds received in this escrow shall be held by
Escrowholder and shall be disbursed only in accordance with these
instructions.
2. Prorations and Adjustments. All prorations and /or adjustments called for
in this escrow are to be made on the basis of a thirty (30) day month
unless otherwise instructed in writing. The phrase "close of escrow" as
used in this escrow means the date on which documents are recorded and the
obligations stated herein of Seller and Buyer are satisfied.
3. Recordation of Instruments. Recordation of any instruments delivered
through this escrow is authorized if necessary or proper for the issuance
of any policy of title insurance called for in this Purchase Agreement and
Escrow Instructions.
4. Personal Property Taxes. No examination or insurance as to the amount or
payment of personal property taxes is required unless specifically
requested.
S. Termination of Agency Obligation. If there is no action taken on this
escrow within six (6) months after the "time limit date" as set forth in
the escrow instructions or written extension thereof, your agency
obligation shall terminate at your option and all documents, monies or
other items held by you shall be returned to the parties depositing same.
In the event of cancellation of this escrow, whether it be at the request
of any of the principals or otherwise, the fee and charges due
Escrowholder, including expenditures incurred and /or authorized shall be -
borne equally by the parties hereto (unless otherwise agreed to
specifically). - -
EXHIBIT C
30
August 8, 1984
Mr. Robert P. Lenard
Advance Planning Administrator
Community Development Department
CITY OF NEWPORT BEACH
3300 Newport Beach Blvd.
Newport Beach, California 92663
ATTACHMENT 10 3 - Economic Analysis
CORPORATE OFFICES
3931 -\ki / 1'v.r Rot•i,r ird
-102
Newl u.0 bPeU. ('1\ 2: dd1.;In.
2650
RE: Consultation Services for 50 affordable units - North Ford CDBG
Dear Mr. Lenard:
REGIONAL OFFICE
�i nl: ?ISK
az 86018
15071 gate -3fi5a
In accordance with your request and authorization, Tarantella & Company
has prepared an analysis of the City of Newport Beach's involvement in the
above cited affordable housing project.
Specifically, the analysis includes a rent benefit analysis and a feasibility
analysis. The appropriate rental level for housing as determined by H.U.U.
standard - lower income and Orange County standards for median income
were assumed and compared. Additionally, the appropriate price level has
been estimated for the units at the end of the 10 -year period and a
determination made as to the "fair return" to the developer was addressed.
We thank you for this opportunity to be of service and look forward to your
continued patronage in the future.
Respectfully submitted,
TARANTELLO & COMPANY
R. Tarantello, C.R.E.
President
-70 alf
Diana M. Hoard
Senior Project Coordinator
:ug
STATEMENT OF ASSUMPTIONS
(1) Project Characteristics:
Number of affordable units = 50
Unit Mix
25 one - bedrooms at 700 sq. ft.
25 two - bedrooms at 1,000 sq. ft.
(2) Land Ownership: It is assumed that the developer will own the land in fee.
(3) Land Cost: Based upon an appraisal of the entire 5.67 acre site of which 2.86
acres will be used for the 50 affordable units. Total appraised value of the
land is $2.5 million. That portion allocated to the affordable units is
$1,262,626.
(4) Construction Period: A one -year construction period has been assumed from
commencement of construction to completion of units.
(5) Construction Costs: Based upon the construction Cost Estimates of Marshall
and Swift Publication Company for similar structures as follows (see Table C):
Construction Cost $2,157,013
plus contingency
less land and
financing
The construction costs are assumed to be incurred evenly over the entire
construction period.
(6) Financing/Prime Bate: The rate charged against the construction loan is 1
percent over prime; prime is assumed to average 13 percent. Long term take-
out financing is assumed to be available through revenue sharing bonds at 11
percent, fully amortized over 30 years.
- 1 -
0
(7) Repayment of Take-out Loan: Assumed to occur in year 10 when units are sold
at market rate.
(8) Absorption: All rental units absorbed at completion; all sale units absorbed
just prior to end of year 10.
(9) Pricing of Units: Pricing was estimated based on average per square foot cost
in current dollars, and includes developers profit and overhead at 15 percent.
Initial land value estimated at $1,262,626, prior to the City of Newport Beach
1 million buy -down. 1984 average per square foot cost were assumed to be
$100.00 for the following values:
s
ESTIMATE OF MARKET VALUE OF UN]TS
Project cost $ 3,250,000
City of Newport Beach Land 1,000,000
Total project cost $ 4,250,000
Average square foot price /1984 = $100.00
Fair Market Value -1984
1- bedroom - 700 sq. ft.$ 70,000
2- bedroom - 1,000 sq. ft.100,000
Fair Market Value -1993
1- bedroom - 700 sq.ft.$103,600
2- bedroom - 1,000 sq. ft.148,024
The value of the units was assumed to increase at a 4 percent rate over the
next 10 years. This was based upon data collected by the Real Estate
Research Council of Southern California. The annual rate of change in home
prices is contain in tabular form within this report.
(10) Income Levels: Incomes were determined to increase at a rate of 6 percent
per year over the next 10 years. This was based upon data collected from the
U.C.L.A. Business Forecast, June 1984, indicating increase as follows-
-2 -
3
(11)
0 0
U.S. A.: 1985 -5.5
1986 -6.0
California: 1985 -5.6
1986 -6.0
The Orange County median income used was $37,256. The H.U.D. median
income was $33,750.
Affordable Rental Rates: Rental Rates were based upon the following
formulas:
Median Income Rental Rate /One - and Two - Bedroom Units. Orange County
median income (as published periodically by the County of Orange) x 30% t 12
($931 per month as of August, 1984).
Lower Income Rental Rate /One - Bedroom Unit. H.U.D. Anaheim/Santa Ana
P.M.S.A. Orange County "lower income" standard for family of two (as
updated annually) x 30% t 12 as a monthly rent maximum ($540 per month s of
May 1984).
Lower Income Rental Rate /Two - Bedroom. H.U.D. Anaheim/Santa Ana
P.M.S.A. Orange County 'lower income" standard for a familv of four (as
updated annually) x 30% t 12 as a monthly rent maximum ($675 per month as
of May 1984).
(12) Estimate of Expenses and Vacancy: Expenses were estimated based upon data
provided by the Institute of Real Estate Management of the National
Association of Realtors. 1983 costs for low rise units of 25 or more in Orange
County were as follows:
Median
$1.89
OPERATING EXPENSE
Dollars Per Square Foot, Per Annum
Low
$1.69
High
$2.32
For purposes of this analysis $2.40 was used. This figure allows for the higher
operating cost of Newport Beach and for time adjustment to 1984. Cost were
calculated to rise at the same rate as income - 6 percent.
-3-
y
0 0
The superior location of the project and projected rental rates lead to the
conclusion that the project would not have a vacancy factor as a defacto
subsidized rental unit.
(13) Residual Value: The residual value of the project at the end of the 10th year is
based upon an annual 4.0 percent escalation factor less the following cost:
Full Sales Prices $ 6,290,000
Less: Selling Costs at 3% of future sale price (188,700)
Net Sales Price $ 6,101,300
Less: Loan Balance at end of year 10 (2,248,900)
Pre -tax Net Equity $ 3,852,400
(14) City of Newport Beach Involvement: It is assumed that the City will provide
the developer with $1.0 million dollars to buydown the price of the land. In
exchange, the developer agrees to provide 50 units for rent, for 10 years, under
H.U.D.'s standards for lower income housing as oppose to Orange County
median income standards.
-4-
u
c°
6
YC
O m
C
Y
Y C
am t
TABLE B
CITY OF NEWPORT
Rent Benefit Analysis
0
AVERAGE ANNUAL BENEFIT ON ORIGINAL INVESTMENT
Internal rate of return: 19.63%
1) Based upon the net difference in rent, Orange County Standards vs.
N.U.D. Standards, Table A.
7
Annual
Year Cash Outlay
Rent Benefit'
-0- ($1,000,000)
-0-
1
194,100
2
205,800
3
218,700
4
231,300
5
245,400
6
259,800
7
275,400
8
291,900
9
309,300
10
328,800
AVERAGE ANNUAL BENEFIT ON ORIGINAL INVESTMENT
Internal rate of return: 19.63%
1) Based upon the net difference in rent, Orange County Standards vs.
N.U.D. Standards, Table A.
7
LI
TABLE C
ESTIMATE OF INVESTMENT COST
Land (2.86 ac.) $
1,262,626
Less: City's buy -down
1, 000, On
$
262,626
Construction cost less land and
financing
1,960,921
Contingency at 10%
196,092
$
2,419,639
Construction financing (1% over
prime)
336,749
Total construction cost
$
2,758,368
Overhead and profit (15 %)
491,612
Total cost
f
3,250,C00
Amount financed _ 75% of project
cost
2,437,500
(revenue bonds at 11 %11
Developer Equity
$
812,500
i
0
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W t
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W
9
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al M °I n
2
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h '
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N
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TABLE E
FEASIBILITY ANALYSIS
Developer
Internal rate of return: 19.6%
1) Reference Table C
21 Includes Pre -Tax Net Equity of $3,852,400, Assumption f13
/0
Initial
Project
Year
Est. Equity
Cash Flow
-0-
($812,50G)l
-0-
1
(16,055)
2
(275.)
3
16,338
4
34,061
5
52,872
6
72,746
7
93,956
8
116,175
9
139,973
10
4,017,1182
Internal rate of return: 19.6%
1) Reference Table C
21 Includes Pre -Tax Net Equity of $3,852,400, Assumption f13
/0
TABLE F
ANNUAL RATE OF CHANGE IN HOME PRICES
By Six Month Periods
SOUTHERN
8 BEACH AREAS OF ORANGE COUNTY
October 178 -
April '79
13%
April 179 -
October '79
13%
October 179 -
April '80
13%
April 180 -
October 180
20%
October 180 -
April 181
16%
April 181 -
October 181
2%
October 181 -
April 082
3.7%
April 182 -
October 182
1.8%
October 082 -
April 183
0.4%
April 183 -
October 183
-3.6%
October 183 -
April '84
1.06%
Source: Real Estate Research Council of Southern California
SUMMARY AND CONCLUSIONS
As evidenced by the preceeding analysis and as summarized below, the estimated rate
of return to the City of Newport Beach and to the Developer is virtually the same.
From this it is concluded that both parties are receiving a fair return on their
investment without compromising the investment of the other party. In other words,
both parties are sharing proportinally in the cost and benefit of the project
undertaken.
ESTIMATED RATE OF RETURN
Using ILU.D. Standards for Lower Income
City of Newport Beach
Developer
19.63
19.60
It should be noted that these rates of return reflect point estimates based upon a
series of assumptions detailed earlier in this report. The actual rate of return
achieved by the North Ford CDBG development will depend upon to what degree
variances from these assumptions are experienced and in what direction (i.e., positive
or negative) they occur. It is the opinion of Tarantello be Company that if variances
do occur, they are more likely to occur in a negative direction resulting in a reduction
of the rate of return. The more significant factors which could cause such a result
are as follows:
(1) a more lengthly absorption period;
(2) an increase in construction costs; and
(3) a reduction in achievable sale prices.
There are several more downside risks than upside potential. For example, it is far
more probable that in the midst of an economic recovery period that interest rates,
labor costs and construction materials are all likely to rise in price; thereby, further
reducing potential profit. Yet at the same time, recently ruing interest rates have
substantially slowed housing sales (with a predictable increase in absorption period for
- 11 -
11
new construction), and substantially suppressed real estate appreciation rates to
below current estimated cost of living price levels. Any anticipated iccrease in
potential sales prices is extremely unlikely.
The analysis of the benefit to the City of this project utilized the rent differencial
between the achievable rents - Orange County standard for median income vs. H.U.D.
standards for lower income, as a positive benefit and hence return to the City on its
investment.
This analysis, which concludes a fair and reasonable return for both parties would
change if the price of the land were to be altered. Based upon this, the implied value
of that portion of the site located to the affordable project of $262,626. Where the
City not to be involved in this project and therefore not buy down the cost of the
land, the rate of return to the developer would drop below an acceptable level.
Similarly, the rate of return to the City would increase to a point where they receive
a benefit at the financial disadvantage of the developer. Under this scenario, a
mutually beneficial partnership is not achieved and the likelyhood of the project is
lessened.
- 12 -
13
TARANnuo&COMtoY
August 8, 1984
Mr. Robert P. Lenard
Advance Planning Administrator
Community Development Department.
CITY OF NEWPORT BEACH
3300 Newport Beach Blvd.
Newport Beach, California 92663
0
CORPORATE Ors 1CiLS
Nnwlu iii H,
RE: Conwltattan Services for SO affordable units - North Ford CDBG
Additional scenario
Dear Mr. Lenard:
REGh)NAI. Cr FIC,P
! : "flt _0..a...
In accordance with your request and authorization, Tarantello & Company
has prepared an additional analysis of the above cited project without the
City's bury -down of the land.
As you can see, this scenario substantially reduces the "fair return" to the
developer. In our opinion, the reduction would make the project question-
able from the developer point of view.
We thank you for this opportunity to be of service and look forward to your
continued patronage in the future.
Respectfully submitted,
TARANTELLO & COMPANY
,
R. Tarantella, C.R.E.
President
4 n
Diana M. Hoard
Senior Project Coordinator
UN
WIVA
REVISED ASSUMPTION # 13
Full Sales Prices
Less: Selling Costs at 3% of future sale price
Net Sales Price
Less: Loan Balance at end of year 10
Pre -tax Net Equity
-1-
1-3-6
$ 6,290,000
(188,700)
$ 6,101,300
(3,102,199)
$ 2,999,101
ESTIMATE OF INVESTMENT COST
Land (2.86 ac.)
$
1,262,626
Construction cost less land and
financing
1,960,921
Contingency at 10%
196,092
$
3,419,639
Construction financing (1% over
prime)
478,749
Total construction cost
$
3,898,388
Overhea, and profit (15 %)
584,758
Total cost
$
4,483,146
Amount financed - 75% of project
cost
3,362,360
(revenue bonds at 11 %)
Developer Equity
$
1,120,786
1 3 -C_
i
0
0
a
0 5
N
Y �
W t
H
W
i3 -D
! •
W
O
m C
P N 4
L
I Y
O p
O r
0
H
H 6
r , m
N
D q
m m 0
13-F
•
Year
- G-
1
2
3
4
5
6
7
6
9
10
0
TABLE E -1
FEASIBILITY ANALYSIS
Developer
In;tlal
Est. Equity
($1,120,786)1
Internal rate of return: 7.341
Project
Cash Flow
-0-
(121,746)
(105,966)
(89,353)
(71,630)
(52, 819)
(32,945)
(11,735)
(10,484)
34,282
3,058,1282
1) Reference Table C
2) Includes Pre -Tax Net Equity of $2,999,101, Assumption !13
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