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Current Council Agenda and Past Meeting Information

 

CITY COUNCIL AGENDA ITEM NO. 2



Meeting Date: June 12, 2007

Subject/Title: Consent to Assignment of Purchase Agreement with Kevin Vornhagen for 2010 Elkins Way to Brentwood Sunset 2010, LLC; reconsider action of February 13, 2007, and not waive the Good Faith Deposit provision of the Purchase Agreement with Kevin Vornhagen; approve cancellation of the real estate escrow for 385 Carrol Court with SSAG, Inc.; and waive the Good Faith Deposit provision of the Purchase Agreement related to the cancellation of the real estate escrow for 385 Carrol Court.

Prepared by: Gina Rozenski, Redevelopment Manager

Submitted by: Howard Sword, Community Development Director



RECOMMENDATION
Adopt a resolution consenting to Assignment of Purchase Agreement with Kevin Vornhagen for 2010 Elkins Way to Brentwood Sunset 2010, LLC; reconsider the Council’s action of February 13, 2007, and not waive the Good Faith Deposit provision of the Purchase Agreement with Kevin Vornhagen; approve cancellation of the real estate escrow for 385 Carrol Court with SSAG, Inc.; and waive the Good Faith Deposit provision of the Purchase Agreement related to the cancellation of the real estate escrow for 385 Carrol Court.

PREVIOUS ACTION

• On July 25, 2006, the City Council approved the Purchase Agreement and Grant Deed for the sale of property located at 2010 Elkins Way at Sunset Industrial Complex to Kevin Vornhagen.

• In August 2006, Kevin Vornhagen’s purchase for 385 Carrol Court was canceled, and a new escrow for 2010 Elkins Way was opened. Mr. Vornhagen deposited $65,340 (10%) into escrow as a good faith deposit for 2010 Elkins Way.

• On July 25, 2006, the Council directed staff to make an offer to sell 385 Carrol Court to Kendall Automotive. The offer was made July 26, and formally accepted by Gary and Karen Kendall on August 27, 2006.

• On October 10, 2006, the City Council approved the Purchase Agreement and Grant Deed for sale of the property located at 385 Carrol Court at Sunset Industrial Complex to SSAG, Inc., (Gary and Karen Kendall). SSAG deposited $29,403.00 (10%) into escrow as a good faith deposit for 385 Carrol Court.

• On February 13, 2007, in response to the request by Kevin Vornhagen to cancel his escrow for 2010 Elkins Way, the City Council approved the waiver of the good faith deposit provision of the Purchase Agreement with Kevin Vornhagen for 2010 Elkins Way.

• On February 24, 2007, the City Council approved to reconsider its action taken on February 13, 2007, to waive the good faith deposit provision of the Purchase Agreement with Kevin Vornhagen for 2010 Elkins Way. To date, no reconsideration has occurred.

BACKGROUND
In January 2007, Mr. Vornhagen advised the City that he wanted to terminate his escrow for 2010 Elkins Way because of the lack of access from Sunset Road that would accommodate retail-fronted businesses and a future subdivision of the property. Section 2.10 of the Purchase Agreement provides that the Purchase Agreement may be assigned with the prior written consent of the City. Mr. Vornhagen desires to assign his interests, rights and obligations under the Purchase Agreement to Gary and Karen Kendall, the 2nd candidates in the round of proposals for 2010 Elkins Way, and the Kendalls desire to accept those interests, rights and obligations in their entirety.

To effectuate this assignment, the Kendalls have formed a limited liability corporation (“LLC”) with John Strauss, Ralph Strauss, and Jeff Potts known as Brentwood Sunset 2010, LLC. The qualifications and identities of the buyers are of particular concern to the City. For that reason, the City selects qualified buyers that meet the economic development objectives of Sunset Industrial Complex. Staff has received and reviewed a copy of the Articles of Incorporation for Brentwood Sunset 2010, LLC, as well as a memorandum of understanding summarizing the LLC’s structure and estimated ownership interest. The Kendalls are estimated to have a 20% interest in the LLC. Staff has determined that the proposal from Brentwood Sunset 2010, LLC, for development of 2010 Elkins Way meets the intention and goals for Sunset Industrial Complex.

As a condition of the consent to the assignment, Kendalls (SSAG, Inc.) have agreed to cancel their current escrow for 385 Carrol Court. The availability of 385 Carrol Court will became another sales opportunity and is addressed in a separate staff report.

Recommendations

1. Adopt a resolution consenting to the assignment of the Purchase Agreement for 2010 Elkins Way from Kevin Vornhagen to Brentwood Sunset 2010, LLC.

2. Reconsider the action of February 13, 2007, and not waive the good faith deposit for 2010 Elkins Way, thereby keeping the escrow and good faith deposit intact for 2010 Elkins Way.

3. Approve the cancellation of the escrow for 385 Carrol Court with SSAG, Inc.

4. Waive the good faith deposit provision of the Purchase Agreement related to the cancellation of escrow for 385 Carrol Court, thereby returning the deposit of $29,403.00 to SSAG, Inc.

Should the City Council consent to the assignment of the Purchase Agreement for 2010 Elkins Way (No. 1 above), staff shall return an item to the Council at its next meeting revising the Purchase Agreement as appropriate.



FISCAL IMPACT
Upon close of escrow of 2010 Elkins Way with Brentwood Sunset 2010, LLC, the sale proceeds of $653,400, less escrow fees, will first be distributed to the Redevelopment Agency to reimburse it for costs associated with the repurchase of 2010 Elkins Way from Pottery World in 2006, including but not limited to the purchase price, appraisal, and escrow fees. The remaining sale proceeds will then be shared between the City and Agency in accordance with their Reimbursement Agreement.

There will be no fiscal impact associated with the retention of the good faith deposit for 2010 Elkins Way; the escrow and good faith deposit shall remain intact and applicable to the Brentwood Sunset 2010, LLC, the assignee.

The cancellation of the escrow for 385 Carrol Court and the return of the good faith deposit to SSAG, Inc., will provide a new sales opportunity for the City. The fiscal impacts associated with the cancellation of 385 Carrol Court are addressed in a separate staff report.

Attachments:

1) Resolution
2) Assignment of Purchase Agreement
3) MOU of LLC with Articles of Incorporation filed with Secretary of State


RESOLUTION NO.

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BRENTWOOD CONSENTING TO ASSIGNMENT OF PURCHASE AGREEMENT BY KEVIN VORNHAGEN FOR 2010 ELKINS WAY TO BRENTWOOD SUNSET 2010, LLC.

WHEREAS, City Council of the City of Brentwood (“City Council”) authorized the purchase of approximately 40 acres (±) of property located at the northeast corner of Tresch and Sunset Roads (“Site”) to master-plan an expansion of the Sunset Sports Park and to create the Sunset Industrial Complex; and

WHEREAS, the City Council implemented an economic development strategy by rezoning a portion of the Site for industrial land uses to encourage expansion of local industrial opportunities, to create high-paying jobs within the community, to achieve the greatest return on the City investment, and to maximize the leveraging of tax increment; and

WHEREAS, on July 11, 2006, the City Council selected Kevin Vornhagen, owner of Vornhagen Body & Paint (“Vornhagen”), as the buyer for 2010 Elkins Way, APN 018-200-020; and

WHEREAS, on July 25, 2006, the City Council adopted Resolution 2006-177 authorizing the sale of the property at 2010 Elkins Way to Vornhagen, approved the Purchase Agreement and Grant Deed for the sale of 2010 Elkins Way, and authorized the City Manager or her designee to execute the Purchase Agreement and Grant Deed for 2010 Elkins Way conveying real property on behalf of the City of Brentwood to Vornhagen, or his designee and to execute such other documents as may be needed to complete the transaction; and

WHEREAS, the Section 2.10 of the Purchase Agreement provides the authority for Vornhagen to assign the Purchase Agreement with prior written consent of the City; and

WHEREAS, Vornhagen desires to assign his interests, rights and obligations under the Purchase Agreement to Brentwood Sunset 2010, LLC, which desires to accept Vornhagen’s interests, rights and obligations; and

WHEREAS, City staff has examined the assignment documents and proposal from Brentwood Sunset 2010, LLC, for the development of 2010 Elkins Way and finds that it meets the intention and goals for Sunset Industrial Complex.

NOW, THEREFORE BE IT RESOLVED that the City Council of the City of Brentwood consents to assignment of the Purchase Agreement by Kevin Vornhagen for the sale of City-owned property at 2010 Elkins Way, APN 018-200-020, to Brentwood Sunset 2010, LLC.

PASSED, APPROVED AND ADOPTED by the City Council of the City of Brentwood at a regular meeting held on the 12th day of June 2007 by the following vote:

 

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