On September 23rd the Agency Board directed staff to proceed with soliciting offers for purchase of the Redevelopment Agency’s 10.2 acre parcel located on the east side of Marina Gateway Drive. Steps in the process include:

• Update the appraisals to establish the property’s fair market value. In a summary appraisal, Reese Perkins of Johnson-Perkins & Associates, Inc. estimates the Property has a market value of $2,250,000 ($5.064 per square foot) as of September 24, 2013. The appraisal also supposes that the buyer would assume special assessments with a current balance of $584,335. The Johnson-Perkins appraisal was reviewed by William G. Kimmel; he concludes that the “value conclusion is reasonable.”

• Market the property. Staff published notice in the Reno Gazette-Journal on October 11 and 23, posted a “for sale” sign on the property, and sent those parties which had recently indicated interest in the property “A Request for Offers”.

• Submittal of buyer offers. The deadline for submittal of offers was November 13th. The Agency’s Request for Offers specified that offers contain all of the buyer’s proposed terms, including sales price and the length of the requested due diligence period. Prospective buyers were also asked to describe their intended use of the property.

• Review of offers. Staff review and clarification of the terms of all offers.

• Presentation of offers to the Agency Board. This is the step occurring at today’s Agency Board meeting (12/9) with the presentation of LandCap’s offer to the Agency Board.

• Public hearings for possible approval of a Purchase and Sale Agreement. If the Agency Board decides to accept LandCap’s offer on December 9th, staff and the LandCap will negotiate a formal “Sale and Purchase Agreement” for consideration at public hearings during the January 13, 2014 Redevelopment Agency and City Council meetings. These public hearings are to comply with the requirements of NRS 279.630(3).

The deadline for submittal of offers to purchase the Redevelopment Agency’s 10.2 acres was November 13th. The Agency received one offer, from LandCap Investment Partners, LLC. The firm’s principals are Stephen Hinckley, Jeffrey Holbrook, and Bruce Degler. David Dahl and Doyle Barker are associates with the firm.

LandCap’s offer includes the following proposed terms.

• Price. A $2,400,000 purchase price; the appraised value of the property is $2,250,000. • Due diligence period. LandCap has requested a 30 day due diligence period that would begin upon approval of a Purchase and Sale Agreement by the Agency Board. If LandCap elects to move forward with the purchase at the end of the due diligence period, the Buyer would be release to the Agency $100,000, which would be creditable to the purchase price.

• Approval of a development plan. Following the due diligence period, LandCap is asking for 90 days to submit a “plan of development” for the City’s approval, presumably in the form of a land use entitlement since no development agreement is contemplated. At this time LandCap anticipates closing on the purchase of the adjacent 9.6 acre parcel in December so their plan would be for the combined parcels, which total about 20 acres.

• Termination. LandCap proposes being able to terminate the escrow if they fail to receive City approval of their plan of development within nine months of its submission.

• Close of escrow. LandCap proposes closing escrow within 60 days of receiving approval of their development plan. They propose paying the Agency $400,000 in cash (in addition to the $100,00 of previous deposits) at close of escrow.

• Seller (i.e., Agency) Carry. LandCap’s offer asks the Agency to carry back a Purchase Money Note and Deed of Trust in the amount of $1,900,000 at an interest rate of 6 percent for three years. LandCap would pay interest on the note on a monthly basis, which would be approximately $9,500, or total interest of $342,000 over three years. LandCap proposes that they be able to pay off the note early and without any prepayment penalty.

LandCap Investment Partners, LLC’s offer, background information and conceptual site plan for the site (in combination with the adjacent 9.7 acre parcel) are attached to this staff report. Regarding LandCap’s potential use of the property, they envision a mix of detached single family homes and apartments (a total of approximately 373 units on 18 acres) plus approximately 1 acre of commercial uses. The conceptual site plan is not binding on either party and LandCap will need to go through the City’s land use entitlement process to fully define their development proposal for the Agency property and, if they conclude their purchase of it, the adjacent 9.7 acre parcel.

On a November 22nd teleconference, City Planner Armando Ornelas discussed the offer with Jeffrey Holbrook, Stephen Hinckley and David Dahl of LandCap. Staff’s intention was to clarify some of the terms in LandCap’s written offer and to communicate to LandCap’s partners key interests that staff anticipate the Agency will be seeking to address in the Purchase and Sale Agreement, if the Agency Board agrees to accept LandCap’s initial offer. The discussion covered:

• Whether the first $100,000 of deposit money ($25,000 with acceptance of offer, $25,000 upon approval of the Purchase and Sale Agreement and $50,000 upon expiration of the due diligence period) was refundable if LandCap’s offer “plan of development” was not approved by the City within nine months. Messrs. Holbrook, Hinckley and Dahl agreed that these monies would be non-refundable in that event. Practically, LandCap would be unlikely to make the $50,000 deposit at the end of the due diligence period if they did not wish to continue pursuing acquisition of the Agency property at that juncture. Staff recommends that the Agency Board stipulate in the Purchase and Sale Agreement that these deposits be non-refundable in exchange for withdrawing the land from the market through the conclusion of the due diligence period.

• That review and approval of LandCap’s plan of development would be the responsibility of the City, through its land use approval process and in its regulatory capacity, and not of the Redevelopment Agency, since a development agreement is not contemplated in this case.

• That if the Agency Board agrees to a seller carry, the transaction documents (Purchase and Sale Agreement, Purchase Money Note and the Deed of Trust) need to include clear language to facilitate the reversion of the property to the Agency in the event of LandCap’s failure to pay off the note or other default. The property will be the primary security for the note so the Agency’s interests are served by minimizing encumbrances on the property during the proposed three year carry period. For example, staff recommends that the documents include provisions, such as requiring full payment (or possibly partial payment, if the project is to be phased and the property can be subdivided) of the note, before construction can commence.

• That after close of escrow, LandCap would assume all maintenance and financial obligations, including responsibility for payment of property taxes and the Special Assessment District No. 2 assessment lien and payments.

With these clarifications and recommendations, staff believes that LandCap’s offer has substantial merit because it provides the Agency a fair price for the land, a fair return on the proposed seller carry of $1,900,000 of the purchase price, and would substantially advance the Agency’s redevelopment objectives for the Marina district. Accordingly, staff recommends that the Agency Board accept the offer and direct staff to negotiate a Purchase and Sale Agreement with Landcap for consideration by the Agency Board in January, subject to the requisite public hearings.