The subject Property consists of a vacant 17,210 square foot auto-dealership building on an approximately 1.45 acre site.  The City of Garden Grove (City) acquired the Property in 2011.  Prior to that time, the Property had been the site of a used auto-dealership.

In September 2011, the City acquired the former auto-dealership with the intent to transition the property into a Vietnam War Museum.  A non-profit group was formed to raise money for the museum, but due to limited donations, the City Council directed staff to sell the property.  In January 2016, a Request for Proposal (RFP) to dispose of the property was released.  Three proposals were submitted and considered. In May 2016, the City Council directed staff to negotiate terms of a PSA with BN Group.  BN Group has over 35 years of experience in hotel development and is acknowledged as an innovative leader in the hotel management and development industry. Negotiations have been finalized, and the proposed terms are summarized below:

Purchase Price:  The Buyer shall acquire the property at its full appraised value of $2,800,000, which is consistent with the Fair Market Value determined pursuant to an appraisal prepared by Lidgard and Associates, Inc. on behalf of the City in August 2016.

Closing Date:  The PSA provides for a thirty (30) day due diligence period and an outside closing date of November 30, 2016.

Development:  The Buyer is required to plan, design and develop a Hotel development on the Property, subject to the City’s future approval of conceptual plans and all required land use entitlements.  In the event the Buyer does not develop the Property with a hotel project approved by the City within the specified time frame, the City will have an option to repurchase the Property.   

After pay-off of the existing liens on the Property, the City will receive net proceeds to the General Fund of approximately $1.2 million. In addition, the anticipated future use of the Property in conjunction with operation of the hotel is anticipated to generate future additional property, sales, and transient occupancy tax revenues to the City. 

It is recommended that the City Council:

• Adopt the attached Resolution approving, and authorizing the City Manager to execute, the Purchase and Sale Agreement and Joint Escrow Instructions between the City and BN Group, LLC for the real property located at 13650 Harbor Boulevard for the full appraised market value of $2,800,000.