In general terms, this transaction will proceed in the following manner:
1. The City will sell its interest in the Hotel Land to Alena Hospitality SSL, LLC (“Alena”) in accordance with an Agreement for Purchase and Sale, a true copy of which is attached (“Purchase Agreement”).
2. Under separate agreement, Alena will purchase the Hotel building from Expo Associates.
3. The current Expo Ground Lease will be terminated. Alena will thereby become the sole owner of the Hotel and Hotel Land, except for the Parking Lot Land.
4. The City will enter into a ground lease (“Parking Lot Ground Lease”) with Alena for the Parking Lot Land to be used for parking.
5. The City will retain a right to terminate the Parking Lot Ground Lease, at such time that the City elects to redevelop the Parking Lot Land. When that happens, the City will provide Alena temporary parking at a location close to the Hotel while the Parking Lot Land is being redeveloped. Upon completion of the redevelopment of the Parking Lot Land, Alena will have a right to park in the new structure on redeveloped Parking Lot Land or adjacent thereto, for the remainder of the term of the Parking Lot Ground Lease at fair market rent, pursuant to a new parking lease entered into at that time.
6. Upon completion of the realignment of Livingston Street adjacent to the Hotel Land, the City will also sell to Alena the land fronting the Hotel Land no longer needed for Livingston Street, as described in the Purchase Agreement (“Additional Property”). In order to facilitate the realignment until the work is completed, the City will hold a construction easement, which will encumber a small portion of the Hotel Land fronting Livingston.
The agreements which will implement the foregoing transactions are the Purchase Agreement and the Parking Lot Ground Lease, both of which are attached.
AGREEMENT FOR PURCHASE AND SALE.
The Hotel Land will contain approximately 2.132 acres or approximately 92,872 square feet as identified in Exhibit “A” to the Purchase Agreement. The City will sell its ownership interest in the Hotel Land to Alena for the appraised market value of Thirty-five Dollars ($35) per square foot, or Three Million Two Hundred Fifty Thousand Four Hundred Forty-seven and 20/100 Dollars ($3,250,447.20).
As a material inducement for the City to sell the Hotel Land, Alena has agreed to completely remodel the Hotel exterior and interior, re-branding the Hotel with the four-star Renaissance name. The Hotel property improvement plan with costs is attached as Exhibit “B” to the Purchase Agreement.
The total cost is approximately $17 million for hotel remodel and replacement of the furniture, fixtures & equipment.
At closing, Alena will be responsible for payment to the City of the current and past-due Expo Associates Lease and catering obligations. Calculated through the end of January 2014, past due rent is One Million Three Hundred Seventy-four Thousand One Hundred Ten and 50/100 Dollars ($1,374,110.50). Monthly rent accrues at the rate of Four Thousand Four Hundred Thirty-seven and 50/100 Dollars ($4,437.50). The City will also be paid Three Hundred Eleven Thousand One Hundred Five and 92/100 Dollars ($311,105.92) for catering services owed to the Venues Department.
Upon completion of the realignment of Livingston Street in front of the Hotel Land, the City will sell to Alena the Additional Property, which is described generally in the Map of Property attached. A survey has not been prepared to date, but the area is estimated at four thousand four hundred (4,400) square feet. The City will sell the Additional Property for the same appraised market value of Thirty-five and No/100 Dollars ($35) per square foot, applied to the final surveyed land area.
At no cost, Alena will grant the City a construction easement for two years at the closing on the purchase, which will encumber approximately four thousand two hundred (4,200) square feet for reconfigured driveway improvements.
PARKING LOT GROUND LEASE.
At the time of closing on the Purchase Agreement, the City will retain ownership of the adjacent Parking Lot Land, which contains approximately 1.447 acres as described in Exhibit “B” to the Parking Lot Ground Lease. The City will enter into the Parking Lot Ground Lease with Alena for hotel parking. During the period of time while the hotel is being redeveloped or eighteen (18) months, whichever comes first, rent will accrue at the rate of Two Thousand Three Hundred and No/100 Dollars ($2,300) plus tax per month. Thereafter rent will accrue at an annual rate of One Hundred Ten Thousand and No/100 Dollars ($110,000.00) plus sales tax for use of 141 spaces. Rent will increase five percent (5%) at the commencement of years four (4), seven (7), ten (10) and every five (5) years thereafter, while the lease remains in effect.
The initial term of the lease is 20 years with four (4) options to renew for five (5) years each. The City retains the right to terminate the lease for redevelopment as described above. Either the City or a new owner may redevelop the Parking Lot Land, as the City may elect.
Since Alena must conduct a closing with Expo Associates and it is uncertain exactly what date that may occur, authority is requested to allow the Real Estate Division Manager to modify the closing date on the Purchase Agreement for this transaction as well as the commencement and termination dates of the lease, without further City Council approval.