CC 03-30-2021 Item No. 1 Purchase of Property at 10455 Torre Ave _ Staff Report Desk Item
CITY COUNCIL STAFF REPORT
RegularSpecial Meeting: March 30, 2021
SUBJECT
Adopt a resolution approvingAn increased budget appropriation of $4,450,000 in
the General Fund‐Non Departmental program for the purchase of property at
10455 Torre Avenue, Cupertino (APN 369‐40‐009).
RECOMMENDED ACTION
The following actions areaction is recommended:
1. Adopt the draft resolution, approving purchase of the property at 10455
Torre Avenue, Assessors’ Parcel Number 369‐40‐009, from Rudd Charitab Stephen
Unitrust (Seller), in the amount of $4,450,000, authorizing the City Manager to
execute all necessary documents and related steps to complete the acquisition.
2. Approve increasean increased budget appropriationsappropriation of
$4,450,000 in the General Fund‐Non Departmental program for the purchase of
the property.
DISCUSSION
Background
The property located at 10455 Torre Avenue, Cupertino (APN 369‐40‐009) hashad
been offered for sale. On March 8, 2021, the City Council met in closed session to
give direction to its negotiators regarding price and terms of payment for potential
acquisition of the property. The City retained Patty Steele of Newmark Knight
Frank as the City’s broker to represent it in the negotiations. On March 9 the City
tendered a letter of intent to the seller in the amount of $4,100,000. Seller received
multiple offers. On March 10 seller sent a counter to multiple parties, including
the City, of $4,350,000 or greater, 21 days due diligence, and close of escrow in 30
days; seller gave one day to respond. On March 11theassist with negotiations. On
March 11, the City tendered an offer of $4,450,000 and the offer was accepted.
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The City and seller negotiated the Purchase and Sale Agreement (PSA).) between
March 11 and March 16, 2021. On March 16, the Planning Commission convened
a special meeting to adopt a resolution finding that the City’s potential acquisition
and use of the property is in conformance with the General Plan pursuant to
Government Code 65402(a), and that the acquisition and use is exempt under
CEQA. On March 16, at a special closed session hearing, the City Council
authorized the Mayor to execute the Purchase and Sale Agreement (PSA)
consistent with direction given on price/terms of payment and authorized the
Mayor and City Manager to take all actions consistent with the PSA as necessary
to close escrow, so long as due diligence does not reveal an issue that the Mayor
and City Manager deem material.
Description of the Property
The property being purchased is located at
the northwest corner of Torre Avenue and
Pacifica Drive, across the street from
Library Field, and near the Civic Center
(see Figure 1). County records show the lot
size to be approximately 20,909 sq. ft. (0.48
acres) and the existing freestanding one‐
story building (built in 1979) is
approximately 4,715 sq. ft. The project was
approved as an office building in 1977 with
permit no. 26‐U‐76. The property has 20
unisize parking spaces as well as one ADA
accessible space.
The Tract Map No. 5220 (Attachment B)
indicates there is a 10 foot Public Utility
Easement (PUE) that runs along the
easterly and southern property lines (adjacent to the public streets) with a 5 foot
wide Private Storm Drain Easement that runs parallel and is adjacent to the PUE.
An approximately 15‐foot‐wide Private Drive Easement runs along the north and
west property lines (on the interior of the block). These easements allow for shared
access between the properties to the north and west (see Figure 2 below). The
building and the parking stalls are situated within the property and do not appear
to encroach within the easement areas.
Figure 1: Site Location
City
Hall
Library
Library Field
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The site is within the Heart of the City Special Area. It is specifically located in the
City Center node of the City Center
subarea. The uses envisioned in this
subarea are identified in Policy LU‐16.1.1.
They include: A mix of uses including,
office, hotel, retail, residential and civic
uses. The ground floor of buildings along
the street should be activated with
pedestrian‐oriented, active uses including
retail, restaurants, and entries. The
General Plan land use designation of the
site is: Commercial / Office / Residential.
The zoning for the site is P(OP) (Planned
Development zoning district with
Professional Office uses).
Currently, recordsRecords indicate the building to be fully tenanted and the
occupants of the building appear to be law offices. The property is surrounded by
other professional office uses such as dentists, lawyers and doctors offices.
The City’s Potential Uses of the Property
City Hall was constructed in 1966 and has many building systems that are at the
end of their useful life. Prior to COVID19COVID‐19, the regular occupancy of the
building was at maximum whileand also did not offeringoffer adequate
community spaces. The FY21FY20/21 City workplan has a project to “Investigate
Alternatives to City Hall”,” with the objective to find alternatives to building a
new City Hall at its present location. As properties have become available, the City
Manager and staff have reviewed the sitesthem, with no good alternatives found
to date. Finding a location close to the Civic Center and, of an appropriate size
havehas been challengesa challenge. The proximity of this property to the Civic
Center, and its central location within the city, lends itself for City uses, including
a satellite City Hall facility, potentially reducing capacity concerns at the existing
City Hall.
Due diligence work is currently underway and is scheduled to be completed prior
to the due diligence period end date of April 6, 2021.
Moreover, theThe City may be interested in continuing the existing month‐to‐
month private office leases of the property on an interim basis while the City
completes its use plans for the property. While City staff do not yet have access to
Figure 2: Subject Site
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the terms of the existing leases, it is assumed that the existing leases would
generate at least adequate rental income to offset the City’s management and
maintenance costs for the property. The City would need to arrange adequate
management of the property and its occupants to begin at closing and until the
City occupies the property.
Purchase Price; Closing and Other Costs
As described above, the negotiated purchase price for the property is $4,450,000.
The purchase amount is compatible with appraisal work completed for the
property.
Per the PSA, the City completed a $100,000 deposit into escrow. If the City closes
on the purchase of the property, the deposit will be applied to the purchase price.
If the City elects to terminate the transaction during the 21‐day due diligence
period, the deposit will be returnsreturned to the City. If the City defaults under
the purchase and sale agreementPSA after the due diligence period, the seller may
claim the deposit as liquidated damages.
The City will be responsible for a share of the closing costs, which are expected to
be less than $2,500. The City will also be responsible for the costs of its consultants
performing due diligence (as discussed below).
As Is Acquisition; Condition of the Property
The City will purchase the property on an “as is” basis, solely in reliance on the
City’s own investigations of the condition of the property. The seller will not make
any representations or warranties regarding the condition of the property. The
City will have a 21‐day period to conduct all due diligence it deems necessary and
appropriate to inform itself about the condition of the property and decide
whether to proceed with the transaction.
As part of the City’s due diligence, City staff plan to conduct the following
investigations:
‐ Appraisal. As described above, staff have ordered an appraisal to confirm
whether the offered below, a budget appropriation is required for the
purchase price is consistent with the property’s fair market value.
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‐ Building Inspection. The condition of the existing building is not yet known
and a full inspection will occur to assess the structure and public access as
part of the due diligence. The scope is expected to include items such as
building systems (e.g., roof, plumbing, electrical, HVAC), fire/life safety,
seismic, and ADA.
‐ Environmental. The environmental condition of the property and the
building are not yet known. City staff plan to have a Phase 1 environmental
survey report prepared.
‐ Lease/Tenants/Occupancy. City staff have been told that that property is
leased and that the leases are on a month‐to‐month basis; it appears that the
tenants are primarily law offices. While City staff do not yet have access to
the terms of the existing leases, it is assumed that the existing leases would
generate at least adequate rental income to offset the City’s management
and maintenance costs for the property. It is also assumed that if the
tenancies are month‐to‐month, the City will have wide discretion to
terminate the leases when it is ready to occupy the property for its own uses
but there is some risk that the tenants could dispute the City’s right to
terminate the leases and/or claim entitlement to relocation assistance
benefits. As part of the City’s due diligence, staff plans to review all of the
existing leases, and confirm their terms and the City’s rights and obligations
as landlord. The purchase and sale agreement requires seller to deliver to
City tenant estoppel certificates.
‐ Title. The title condition of the property has not yet been fully‐vetted but
the staff has received a preliminary title report and will complete its review
prior to the end of the City’s due diligence period.
‐ Operations/Use. As described above, City staff have not yet conducted a
thorough assessment of uses and configurations of the property for the
City’s purposes. This assessment could begin during the City’s due
diligence period but may extend until after closing.
. Staff recommends that the City Council adopt the resolution and authorize the
City Manager to execute all necessary documents and related steps to complete
the purchaseapproving an increased budget appropriation of $4,450,000 in the
General Fund‐Non Departmental program for this purpose.
Environmental Review
Pursuant to the provisions ofAs described above, on March 16, the Planning
Commission concluded that the City’s acquisition and use of the property is
exempt under the California Environmental Quality Act of 1970 (Public Resources
Code section 21000 et seq.) (“CEQA”), together with the State CEQA Guidelines
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(California Code of Regulations, Title 14, Section 15000 et seq.) (ʺCEQA
Guidelinesʺ), the proposed acquisition of the Property is exempt from
environmental review pursuant to the categorical exemption in CEQA Guidelines
section 15301 (Existing Facilities) since the proposed acquisition does will not
revise the existing use of the property or footprint of the existing structure.
Additionally, the acquisition would be exempt from CEQA pursuant to, and
section 15061(b)(3) because it can be seen with certainty that there is no possibility
that the proposed acquisition will have a significant effect on the environment. The
recommended action here to make budget appropriations to accomplish the
purchase is within the scope of that determination.
Sustainability Impact
No sustainability impact.
Fiscal Impact
The agreed upon purchase price is four million, four hundred fifty thousand
dollars ($4,450,000.00). Certain costs related to escrow and consultants to perform
due diligence are described above.will also be incurred. The City’s unassigned
fund balance (savings) in the General Fund will fund the purchase of the property.
Unassigned fund balance was most recently estimated at $33.9 million in the City’s
Fiscal Year 2020‐21 Mid‐Year Financial Report.
_____________________________________
Prepared by: Angela Tsui, Economic Development Manager
Reviewed by: Piu Ghosh, Planning Manager
Roger Lee, Director of Public Works
Kristina Alfaro, Director of Administrative Services
Approved for Submission by: Dianne Thompson, Assistant City Manager
Attachment:
A – Draft Resolution