REPORT TO COUNCIL
SUBJECT
Title
Authorize the Sale of City-Owned Condominium Located at 715 San Conrado Terrace, #6
BACKGROUND
On July 20, 2010, Council approved the purchase of a two-bedroom condominium (property) from the former Director of Parks and Recreation, located at 715 San Conrado Terrace # 6 (RTC 10-192). The former director purchased the property through a loan from the City as part of his employment package. The City purchased the property in lieu of foreclosure for the outstanding principal balance of $389,167. Council directed staff to sell the property at such point in the future when it could be sold without loss.
The 996 square foot, two-bedroom unit is located on the third floor and includes a two-car tandem garage, community pool, and green space. The property has not been used for city operations and has been leased at market rate since the City acquired it in 2010. The property was vacated in September of 2013.
On June 25, 2013, during a study session regarding city-owned properties, Council expressed interest in selling the condominium since it cannot be used to provide city services.
Staff contacted multiple local real estate agents and requested quotes for real estate brokerage services to sell the property. Based on compensation and experience, staff contracted the services of Dave Clark of Coldwell Banker in January 2014. Clark is Sunnyvale's top listing agent per local Multiple Listing Service (MLS) statistics. Should Council approve an offer on the property, Clark's compensation would be five percent commission of the final proceeds. Clark and the agent representing the buyer would split the commission evenly. The City is not required to pay any commission if the property is not sold.
The property was given an appraised value of $458,000 (Attachment 1) and was listed on the real estate market on Friday, January 24, 2014. The total size of the property is less than 5,000 square feet, which exempts the sale from the public notification requirement under California Government Code Sections 54221.
EXISTING POLICY
Fiscal Policies - 7.1D Land PoliciesD.1.4
The purchase, sale or lease of real property where the purchase or sale price or lease cost is more than $75,000, per the Sunnyvale Municipal Code, shall be approved by the City Council.
ENVIRONMENTAL REVIEW
The project is exempt from CEQA because it does not have the potential for causing a significant effect on the environment and can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment. (Guideline 15061(b)(3).)
DISCUSSION
On February 7, 2014 Clark presented staff with five offers. All offers came in above the appraised value.
Based on price and terms favorable to the City, staff recommends entering into a purchase and sales agreement with the highest bidder represented by Reality One Group. The highest bidder has offered a purchase price of $530,000, which is $140,833 above the original purchase price of $389,167.
Once the agreement is signed, the buyer will have a 21-day due-diligence period to complete all necessary inspections and arrange financing. If Council approves this offer, the anticipated close of escrow date is Tuesday, March 28, 2014. The bidder has provided confidential documentation to demonstrate their financial ability to close at the price offered.
Should negotiations or offer with the highest bidder fall through, staff recommends that Council authorize the City Manager to negotiate the sale with the next highest bidder.
FISCAL IMPACT
The total sale price for the property is estimated to be $530,000; however, real estate agent fees and costs related to the sale are expected to total approximately $36,822, resulting in sale proceeds of $493,178. Proceeds would be returned to the General Fund. The FY 2013/14 Adopted Budget did not anticipate selling the property until after FY 2015/16 and therefore included rental income of approximately $20,000 annually for three years. Staff estimates that the net profit after subtracting the City's initial $389,167 investment will be $104,011. After considering the budgeted rental income revenue, approximately $44,000 of this amount is revenue unanticipated in the FY 2013/14 Adopted Budget.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City's official-notice bulletin board outside City Hall, at the Sunnyvale Senior Center, Community Center and Department of Public Safety; and by making the agenda and report available at the Sunnyvale Public Library, the Office of the City Clerk and on the City's website.
RECOMMENDATION
Recommendation
Approve the sale of 715 San Conrado Terrace #6, and authorize the City Manager to enter into an exclusive Purchase and Sales Agreement with Reality One Group; and, should the transaction with Reality One Group not go through, Council authorize the City Manager to negotiate with the next highest bidder.
Staff
Prepared by: Amy Fonseca, Administrative Analyst
Reviewed by: Kent Steffens, Director, Department of Public Works
Approved by: Robert A. Walker, Interim City Manager
Attachments
ATTACHMENTS
1. Appraisal of 715 San Conrado Terrace
2. Offer to Purchase from Reality One Group