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CITY COUNCIL AGENDA ITEM NO. 22


Meeting Date: June 26, 2007

Subject/Title: Adopt a resolution amending the Purchase Agreement for the sale of property located at 2010 Elkins Way in Sunset Industrial Complex to Brentwood Sunset 2010, LLC, and authorize City Manager or her designee to execute the First Amendment to Purchase Agreement.

Prepared by: Gina Rozenski, Redevelopment Manager

Submitted by: Howard Sword, Community Development Director


RECOMMENDATION
Adopt a resolution approving the following actions: (1) amend the Purchase Agreement for the sale of City-owned property at 2010 Elkins Way identified as APN 018-200-020 located in the Sunset Industrial Complex; and (2) authorize the City Manager or her designee to execute the First Amendment to the Purchase Agreement and to execute such other documents as may be needed to complete the transactions.

PREVIOUS ACTIONS
On July 25, 2006, the City Council adopted a resolution authorizing the sale of property located at 2010 Elkins Way at Sunset Industrial Complex and approving the Purchase Agreement and Grant Deed with Kevin Vornhagen.

On June 12, 2007, the City Council adopted a resolution consenting to assignment of Purchase Agreement with Kevin Vornhagen for 2010 Elkins Way to Brentwood Sunset 2010, LLC.

On June 12, 2007, the City Council reconsidered the action of February 13, 2007, and did not waive the good faith deposit for 2010 Elkins Way, thereby keeping the escrow and good faith deposit intact for 2010 Elkins Way.

On June 12, 2007, the City Council approved the cancellation of the escrow for 385 Carrol Court with SSAG, Inc. (Gary and Karen Kendall of Kendall Automotive), and waived the good faith deposit provision of the Purchase Agreement related to the cancellation, thereby returning the deposit of $29,403.00 to SSAG, Inc.

BACKGROUND
The City purchased the 40-acre parcel off Sunset Road in 1999 for the expansion of the adjacent sports complex, and to implement an economic development strategy by zoning the remaining acres for industrial land use. The City intends to sell parcels within the Sunset Industrial Complex to end users. The sale revenues to the City will be then used to reimburse the City for its land and development costs, and to reimburse the Agency for paying a portion of the improvement costs. Therefore, both the City and the Agency expect to receive full reimbursement for their out-of-pocket costs associated with developing the Sunset Industrial Complex as parcels are sold. Any excess receipts from the proceeds of the sales beyond the actual costs shall be shared between the City and Agency in amounts equitable to their contributions.

Mr. Vornhagen assigned his interests, rights and obligations under the Purchase Agreement to Gary and Karen Kendall of Kendall Automotive, the 2nd candidates in the round of proposals for 2010 Elkins Way, and the Kendalls accepted those interests, rights and obligations in their entirety. The escrow with the Kendalls for 385 Carrol Court at Sunset Industrial Complex has been canceled.
To effectuate the assignment, the Kendalls 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. The City Council consented to the assignment on June 12, 2007.
Now, staff recommends that the Purchase Agreement be amended to reflect a new closing date and Purchase Proposal in Exhibit B, as well as other minor modifications.
Staff recommends the City Council adopt a resolution to:
1. Approve the First Amendment to Purchase Agreement for the sale of City-owned property at 2010 Elkins Way identified as APN 018-200-020 located in the Sunset Industrial Complex to extend the closing date and to reflect the specifics of a new development proposal; and

2. Authorize the City Manager or her designee to execute the First Amendment to the Purchase Agreement for 2010 Elkins Way, and to execute such other documents as may be needed to complete the transaction.

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.

Attachments:
1) Resolution
2) First Amendment to Purchase Agreement and Exhibit B

RESOLUTION NO.

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BRENTWOOD APPROVING THE FOLLOWING ACTIONS: (1) APPROVE THE FIRST AMENDMENT TO PURCHASE AGREEMENT FOR THE SALE OF CITY-OWNED PROPERTY KNOWN AS 2010 ELKINS WAY AT SUNSET INDUSTRIAL COMPLEX IDENTIFIED AS APN 018-200-020; AND (2) AUTHORIZE THE CITY MANAGER OR HER DESIGNEE TO EXECUTE THE FIRST AMENDMENT TO PURCHASE AGREEMENT AND SUCH OTHER DOCUMENTS AS MAY BE NEEDED TO COMPLETE THE TRANSACTION.

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 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 assigned his interests, rights and obligations under the Purchase Agreement to Brentwood Sunset 2010, LLC, which accepted Vornhagen’s interests, rights and obligations; and

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

WHEREAS, on June 12, 2007, the City Council by Resolution 2007-131 consented 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; and

WHEREAS, a First Amendment to Purchase Agreement between the City of Brentwood and Brentwood Sunset 2010, LLC, has been developed to extend the closing date and modify the development proposal.





NOW, THEREFORE BE IT RESOLVED that the City Council of the City of Brentwood:

1. Approves the First Amendment to the Purchase Agreement for the sale of City-owned property at 2010 Elkins Way at Sunset Industrial Complex identified as APN 018-200-020 to Brentwood Sunset 2010, LLC.

2. Authorizes the City Manager or her designee to execute the First Amendment to Purchase Agreement and to execute such other documents as may be needed to complete the transactions, including the previously approved Grant Deed.

PASSED, APPROVED AND ADOPTED by the City Council of the City of Brentwood at a regular meeting held on the 26th day of June 2007 by the following vote:


Amendment No. 1 to Purchase Agreement and City’s Option to Repurchase
(Brentwood Sunset 2010, LLC)

This Amendment No. 1 is entered into and effective as of the ____ day of ___________ 2007, amending the Purchase Agreement and City’s Option to Repurchase dated July 25, 2006 (the “Agreement”) by and between the City of Brentwood, (“City”) and Brentwood Sunset 2010, LLC (“Purchaser”) (collectively, the “Parties”) for the purchase and option to repurchase certain real property identified as 2010 Elkins Way, APN 018-200-020, (the “Property”) situated in the City of Brentwood.

RECITALS

A. Kevin Vornhagen assigned his interests, rights and obligations under the Agreement for the sale of Property to Purchaser, which accepted Kevin Vornhagen’s interests, rights and obligations.

B. The City consented to the assignment of Purchase Agreement by Kevin Vornhagen for the sale of Property to Purchaser.

C. The Parties desire to amend the original Purchase Agreement to modify the closing date, the Purchase Proposal and other facts.

Now, therefore it is agreed as follows:

1. That the first paragraph of Section 1.03 is hereby amended in its entirety as follows:

1.03 Escrow. The City has opened an escrow with North American Title Company, as escrow agent (the “Escrow Agent”) in Brentwood, California. The date of opening of escrow (“Opening Date”) is the date the City deposited the Deposit with the Escrow Agent. The close of escrow shall mean the recordation of the grant deed (“Closing Date”). The Closing Date shall occur on or before March 30, 2008.

2. That the subparagraph 2 of the sixth paragraph of Section 1.03 is hereby amended in its entirety as follows:

2. Collect and disburse funds, deliver the Purchase Price to the City, deliver a title insurance policy to the Purchaser, and deliver the deed and other documents to the parties entitled thereto when the conditions of this escrow have been fulfilled by the City and the Purchaser: and

3. That Section 2.11 shall be amended in its entirety as follows:

2.11 Use of Site. Purchaser covenants and agrees for itself that during construction and for a period of three (3) years from the date of issuance of the Certificate of Completion, the Purchaser shall devote the Site to the Business Operation and uses(s) specified in the Purchaser’s Purchase Proposal dated May 3, 2007, attached hereto as Exhibit B and incorporated herein by this reference. Purchaser further covenants and agrees that Business Operation shall not be re-established at or operated from 205 Oak Street during the period of three (3) years from the date of issuance of the Certificate of Completion.

4. Purchaser’s address for the purpose of notice provisions in Section 7 is:

Puchaser: Brentwood Sunset 2010, LLC
3361 Walnut Boulevard, Suite 120
Brentwood, CA 94513

5. Exhibit B is deleted in its entirety and replaced with Exhibit B dated May 3, 2007, attached hereto and incorporated herein by reference.

6. Except as amended herein, all other provisions of the Agreement will remain in full force and effect.

7. The individuals executing this Amendment No. 1 and the instruments referenced in it on behalf of Purchaser represent and warrant that they have the legal power, right and actual authority to bind Purchaser to the terms and conditions of this Amendment No. 1.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be executed by their respective representatives thereunto duly authorized.
CITY OF BRENTWOOD PURCHASER:
BRENTWOOD SUNSET 2010, LLC.


Donna Landeros, City Manager
Gary Kendall, Member

_____________________________
ATTEST: Karen Kendall, Member

_____________________________
Jonathan Strauss, Member
Margaret Wimberly, City Clerk
_____________________________
Ralph Strauss, Member

APPROVED AS TO FORM: _____________________________
Jeffry Potts, Member


Damien B. Brower, City Attorney


Attachment: Exhibit B, Purchase Proposal
 

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