6a- Resolution Regarding the Surplus of 1.86 acre parcelPublic Hearing and
Resolution to Surplus
Property4f-or Hotel
Development
city
Council Meeting
July 5, Zoi7
Property Sale Overview
After more than a year of negotiations, the Mayor
entered into a Purchase and Sale Agreement ("PSN') to
sell a 1.86 acre parcel of property (the "Property")
between the PAEC and the former Target store to
Ottone-Salinas, Inc.
Three steps remain to sell the Property:
Council must hold a public hearing to consider
whether to surplus the Property;
Council must pass a resolution to surplus the Property;
and
Council must approve the PSA.
Background
In December aoi4, the City purchased the 7.84 acre TC-3
(former Target store property) for $8.2Million/$25.a per
square foot.
In ZoiS, the City solicited Requests for Proposals to develop
a hotel on the TC-3 Property.
May 4, Zoi6 City received an upper-midscale hotel proposal
for a portion of the site from Cadius Partners.
City staff entered negotiations to sell a portion of TC-3 for
development as a hotel.
The City ordered a real estate appraisal that concluded fair
market value to be $Z7 per square foot.
04V OF
Surplus of the Property
Resolution ii-602 controls the surplus of property
valued at more than $5, 000.
• Determine fair market value;
• Provide notice of public hearing; and
• Hold public hearing to consider whether to surplus the
property.
Resolution to surplus the Property
• Declares that the Property is
public use and retention and
interests of the citizens.
no longer necessary for
does not serve the best
• Declares the Property to be surplus.
M
Purchase and Sale Agreement
A PSA is a contract between the buyer and seller
setting the final sale price and all of the terms of the
property sale.
Sets conditions and requirements that must be
satisfied after signing the agreement and before the
property changes hands, aka, closing.
The buyer must put earnest money into escrow as a
deposit on the property.
TC-3 PSA
June 15, zoi7, the Mayor executed a PSA with Ottone-
Salinas, Inc., subject to Council approval, to sell the
1.86 acre parcel, to be created with the binding site
plan for $z,i87,756 ($27 per square foot).
Ottone-Salinas will contribute the property to a LLC
that will be formed with Cadius Partners and other
investors to build and operate the hotel.
$ioo,000 earnest money deposited into escrow.
$2,o87,756 to be paid at closing.
Closing scheduled for August i, aoi7.
Ottone-Salinasl Inc.
Ottone-Salinas, Inc. is athird-generation family -
owned real estate investment company located in
Salinas, California.
Ottone-Salinas, Inc. will purchase the Property, then
contribute it to an LLC that will be formed with Cadius
Partners and other investors to build and operate the
project in Federal Way.
Cadius Partners will be the lead entity for design and
construction of the project.
nt Line Modifications
To facilitate the sale, the City adjusted the lot lines for the
PAEC and TC-3.
City previously dedicated property for the Grand Staircase.
81,028 square footage needed for hotel site:
68, 58 7. 5 ft3 from TC-3
12,440.5 ft3 from PAEC
City approved a boundary line adjustment to extend PAEC
property onto the TC-3 property.
City is processing a binding site plan application that will
create the 1.86 acre lot from expanded PAEC property.
PAEC and TC-3 Properties
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11
Binding Site Plan — New Lot
-21
New Lot
12
Final Lot Configuration
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TC-3
13
PSA Terms — The Property
The Property consists of 81,028 square feet (1.86 acres)
more or less.
The Property is made up of 68,587.5 square feet from
the TC-3 parcel, and ia,44o.5 from the PAEC parcel.
PSA Terms — Compensation
The purchase price is $z,i87,756 ($27 per square foot),
and the Buyer deposited $ioo,000 into escrow.
As additional consideration, the City also receives the
benefit of restrictive covenants in favor of the City that
will control the uses and development of the Property,
and a concession from the Buyer leaving certain
encumbrances on the Property.
Buyer will pay City $8,08o for 8o hours of staff time.
If the Buyer does not begin construction on time, the
City has the option to purchase the property back at
the same sale price.
Restrictive Covenants
Prior to closing, the Buyer must record restrictive
covenants on the Property that limit the uses and
development of the property.
• Design and construction of the hotel must harmonize with the PAEC.
• Hotel brand must be "upscale" or higher tier and acceptable to the City.
(e.g. Hilton Garden Inn, Hilton Double Tree, Hyatt Place, or Hyatt House).
• Amenities such as a restaurant with lounge, meeting rooms, and fitness
center must be maintained.
• Pedestrian connectivity and vehicle turnaround must be maintained.
• Low income job creation requirements must be met.
• Construction schedule must be adhered to.
16
Design Requirements
STUCCO WOOD
.ri-"I � .
SOUTH ELEVATION
METAL PANEL i GLASS
�v_
SOUTH DINING PATIO &
PLAZA CONNECTS TO PAEC
17
Vehicle Turnaround
1.7
PSA Terms — Requirements
Construction must begin on or before June i, 2oi8.
$25,000 penalty for each week of delay; or
City may purchase property back at its option; or
Agree to modification of construction schedule.
Hotel required to be open and operating by December
i, 2019.
$25,000 penalty for each week of delay.
Construction activities must take place between
Monday and Friday, 7:oo a.m. to 5:30 p.m.
Buyer to pay construction dust clean-up for the PAEC.
PSA Terms — Requirements
Buyer to secure hotel brand within 6o days of mutual
acceptance. Brand must be approved by City.
Buyer must take the property subject to the Operations
and Easement Agreement encumbering the Property.
Questions,,?