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Home My WebLink AboutCOW 2025-01-13 Item 4C - Update - Sale of Newporter ParcelCOUNCIL AGENDA SYNOPSIS Initials Meeting Date Prepared by Mayor's review Council review 1/13/25 DCS ITEM INFORMATION ITEM NO. 4.C. STAFF SPONSOR: DEREK SPECK ORIGINAL AGENDA DATE: 1/13/25 AGENDA ITEM TITLE Sale of Newporter Property CATEGORY ® Discussion Mtg Date 01/13/25 ❑ Motion Mtg Date ❑ Resolution Mtg Date ❑ Ordinance Mtg Date ❑ Bid Award Mtg Date ❑ Public Hearing Mtg Date ❑ Other Altg Date SPONSOR ❑ Council ® Mayor ❑ Admin Svcs ❑ DCD Finance ❑ Fire ❑ P&R ❑ Police ❑ PW SPONSOR'S SUMMARY The Council is being asked to provide feedback on the process to sell the City's property at 14840 Tukwila International Boulevard. No action is requested at this time. REVIEWED BY ❑ Trans&Infrastructure Svcs ❑ Community Svcs/Safety ❑ Finance & Governance ❑ Planning & Community Dev. ❑ LTAC DATE: ❑ Arts Comm. ❑ Parks Comm. ❑ Planning Comm. COMMITTEE CHAIR: RECOMMENDATIONS: SPONsoR/ADMIN. Mayor's Office/Economic Development COMMITTEE Not applicable COST IMPACT / FUND SOURCE EXPENDITURE REQUIRED AMOUNT BUDGETED APPROPRIATION REQUIRED Fund Source: Comments: MTG. DATE RECORD OF COUNCIL ACTION 1/13/25 MTG. DATE ATTACHMENTS 1/13/25 Informational Memorandum dated 1/6/25 Map of city property at 14840 Tukwila International Boulevard Aspire 11 Images Resume for Jagpal Basra 61 62 City of Tukwila Thomas McLeod, Mayor INFORMATIONAL MEMORANDUM TO: City Council FROM: Derek Speck, Economic Development Administrator CC: Mayor McLeod DATE: January 6, 2025 SUBJECT: Sale of Newporter Property (14840 Tukwila International Boulevard) ISSUE Staff requests Council feedback on the process to sell the City's property at 14840 Tukwila International Boulevard. BACKGROUND The City owns a 35,000 square foot vacant lot located at 14840 Tukwila International Boulevard as shown on the attached map (assessor parcel number 004100-0130). The City purchased the property in 2000 in order to relocate a business from the site of the future Tukwila Village development. At the time it was occupied by the Newporter Motel, which the City later demolished. When that business did not relocate to the former Newporter parcel, the City planned to sell the property. Over the years staff responded to inquiries from interested buyers but has not actively marketed the site. Currently, the site is zoned Regional Commercial, which has a height limit of three stories or 35 feet. In recent years, the Department of Community Development (DCD) coordinated changes to the zoning in this neighborhood, primarily around allowed uses. In 2025 DCD plans to propose some additional zoning changes for the area, which may include increasing heights and reducing parking requirements. DISCUSSION In October 2024 the City received an offer from Jagpal Basra, who would like to purchase and develop the property. In staff's opinion, the proposal presents a good opportunity for the City. Staff would like Council feedback on the proposal, especially the questions listed at the end of this memo. If the Council is generally open to the concepts presented in the proposal, staff will return with a recommended process to sell the property. The Proposal The potential buyer is Jag Basra and/or assigns. Mr. Basra's plan is to construct a mixed -use building with approximately 5 floors of studio, one, and two -bedroom apartments over approximately two floors of commercial space and parking. In addition to standard contingencies, Mr. Basra's proposed deal terms are as follows: (1) Price: $1,400,000 (2) Deposit: 5% of purchase price; non-refundable; payable within 30 days of receiving development entitlements. (3) Buyer Contingencies (prior to closing): a. City agreement or zoning changes to allow approximately 85 feet height. 63 INFORMATIONAL MEMO Page 2 b. City agreement or zoning changes to reduce on -site minimum parking requirement to one parking stall per residential unit. c. City to expand the multi -family property tax exemption program (MFTE) to an geographic area that includes this site. d. Buyer's ability to complete a successful federal 1031 tax deferral exchange. (4) City Contingencies (prior to closing): a. Buyer to acquire rights to develop an adjacent property (either "Property 1" or "Property 2") within six months of effective date of PSA. b. Buyer to submit a complete building permit application for at least 100 residential units to be constructed on City parcel and/or Property 1 or Property 2. (5) Additional Provisions a. Closing within two years after effective date of PSA. b. Jagpal Basra to retain majority control of property ownership entity until certificate of occupancy. Considerations Proposed Development. Staff believes the proposed development (approximately seven stories including five floors of multi -family residential and two floors of commercial and parking) is a good use for this site since the site is within a few blocks of a light rail station, served by frequent bus service, and walkable to local restaurants, stores, schools, library, and more. Although the proposed height and parking reductions do not meet the current zoning, they do meet the vision in the City's Comprehensive Plan and a long history of community desire for more development along Tukwila International Boulevard. The proposed development would also help the City achieve its housing growth target of 6,500 net new housing units by 2044 and would serve as a catalyst for additional development in the neighborhood. Buyer Experience and Capacity. Staff toured the mixed -use, residential development the potential buyer is currently constructing in Tacoma called Aspire 11 (www.aspirel 1.com). In staff's opinion, Aspire will be a quality development and a project of similar quality would be good for this site. Staff has not started detailed research to confirm the potential buyer's legal entity, financial capacity, and experience but, based on initial impressions, staff believes the potential buyer has the experience, financial capacity, and relationships to carry out their proposed development. Price: The potential buyer's offer price is $1.4 million. The offer price per square foot is slightly higher than the $39.00 per square foot of land value estimated by the King County Assessor for the other commercial properties on that block. Assessor values are not always equal to market values and it is possible the market value is higher than the assessed value. The best way to know a market value is to actively and openly market the property, which the City has not yet done. Market values can be approximated by appraisals. The City contracted for an appraisal in 2013 that estimated the fair market value to be $1,760,000 (or $50 per square foot) based on developing the site for a single -story retail store or a drive -through restaurant. As comparables, in 2011 Taco Time purchased a nearby property for approximately $51.00 per square foot. In 2020 the City sold nearby property to HealthPoint for $52.00 per square foot. If the City could sell the Newporter property at a similar $52.00 per square foot, the price would be approximately $1.8 million. It's possible that proposed mixed -use, market -rate, multi -family residential property is not the "highest and best use" for the site and that a fair price for the proposed development would be similar to the assessed value. Buyer Contingencies. Staff believes that the buyer's proposed contingencies for the height and parking changes as described above are reasonable because they would be requested and required by any developer with the same mixed -use concept. 64 INFORMATIONAL MEMO Page 3 City Contingencies. The City's contingencies described above are intended to allow the developer flexibility to adjust to market conditions but to ensure a minimum amount of development and timely progress. Including the adjacent property in the contingency is particularly important because that scale is needed for this development to serve as a catalyst for additional development in the neighborhood and a justification for selecting this proposal. Additional Provisions. The extended closing date (two years) is not standard but is reasonable for this site if the city wants this type of development because it will take time to meet the buyer's contingencies for zoning and MFTE. Options for Selling the Property Tukwila Municipal Code 2.64 provides for disposition of surplus City property. If the Council is generally open to the concepts presented in the proposal, staff will return with a recommended process to sell the property. The City has three main options in terms of next steps. A. Negotiate with Mr. Basra within the general terms described above. If negotiations proceed well, staff would return to Council with specific deal terms and requesting approval to enter into a purchase and sale agreement. B. Actively market the site. The City could hire a broker and actively market the site. After approximately six months, staff would return to Council to consider next steps. C. Status Quo. The city could continue to respond to inquiries but would wait to actively market the site after the zoning changes have been decided. Questions for Council Staff would like Council feedback on the following questions: (1) Are you interested in multi -family apartments over commercial at this site? (2) Are you open to considering increased height, decreased parking, and expanding the multi -family property tax exemption program to this area? (3) Do you have a preference for the City's options for selling the property (see A, B, and C above)? Staff will consider the Council feedback and return to a future meeting as appropriate. FINANCIAL IMPACT Due to the uncertainty of when the property will be sold and when closing will occur, revenue from this sale is not currently reflected in the City's six -year financial plan. Based on the potential buyer's proposal the City would receive $1.4 million in 2027, if the sale is completed. RECOMMENDATION The Council is being asked to discuss this item at the January 13, 2025 Committee of the Whole meeting. ATTACHMENTS Map of City Property at 14840 Tukwila International Boulevard Aspire 11 Images Jagpal Basra Resume 65 66 City Property at 14840 Tukwila International Boulevard City Parcel r le./..:corker The information ncluded on this map has been compiled by King County staff from a variety of sources and is subject to change without notice. King County makes no representations or warranties, express or implied, as to accuracy, completeness, timeliness, or rights to the use of such nformation. This document is not intended br use as a survey product. Kng County shall nct be liable for any general, special, indirect incidental, or consequential damages including, but not limited to, bst revenues or Icet profits resulting from the use or misuse cf the informaton cortained on this map. My sale of this nep or information on this map is prohibted except by writen permission of King County. Date: 1 /6/2025 Notes: King County �7 68 Aspire 11 1011 South 11thSt, Tacoma, WA 98405 Aspire11.com The image is a rendering from Aspire.com The image is a rendering from Aspire.com 1 69 Aspire 11 The image is a rendering from Aspire.com The image is a rendering from Aspire.com 70 2 Aspire 11 Construction Photos „°' Illllum l uni n nmilllll11,,„„,„ • 1IIIIIIIIIIIII 111 Photo taken December2024 Photo taken December 2024 72 Jagpal Basra PO Box 2127 Kirkland, WA 98083•Cell: (206) 235-9000 •jag@jilnw.com Real Estate Developer, Owner, and Operator History of developing, owning, and operating the highest quality real estate properties. Have developed, owned, and operated residential homes/communities, apartments, office buildings, warehouses, hotels, strip centers, and parking lots. Core Competencies • Land Acquisitions • Project Timelines • Development Expansion • Real Estate Operations • Real Estate Operations • Municipality/Zoning expertise • Real Estate Finance • Infrastructure Improvements • Airport Parking expertise • Quality Assurance • Strategic Planning • Budget Control Professional Experience Owned and operated general contracting and investment firms since 1988. These firms have focused on a number of areas including residential, multi -family, industrial, airport parking and commercial development. Effectively manage and strengthen relationships with clients, architects, engineers, city officials, building officials, and bank representatives. Consistently outperform industry wide benchmarks for IRR on all investments under management. As a developer I oversee daily operations, sub -contractor arrangements, quality control, job site coordination, and client meetings, payroll, budgeting, and job safety. Also develop designs, build drawings, and obtain permits. Read and lay out blueprints, produce cost/price estimates, and order materials. Additionally, I have had long term success as an operator of commercial real estate. Over the last several years I have developed the best airport parking management platform in the business. I have implemented a level of software, surveillance, and customer service that is unparalleled in the airport parking industry. Key Experience Commercial Have substantial experience in multi -family, commercial, and hotel real estate: • Aspire 11— 289-unit modern apartment community, with 12,000 SF of ground floor retail. Market rate project financed via HUD's 221(d)4 program. • Al Doors Warehouse — 20,000 SF Inudstrial/Office building, 8711 S 222nd ST Kent, WA 98031 • 77 room Aberdeen Inn - 1860 Rogers PL Kamloops, BC, Canada • 76 room Ramada Inn - 10410 158th ST Surrey, BC, Canada • 32 unit apartment complex - 15342 20th Ave Surrey, BC, Canada • 30 unit town home project- 11950 232nd ST Maple Ridge, BC, Canada 73 • 34 unit apartment complex with underground parking — 827 Roderick Ave Coquitlam, BC, Canada • 65 unit apartment complex — 15988 32nd Ave Surrey, BC, Canada • 52 unit apartment complex — 30748 Cardinal Ave Abbotsford, BC, Canada • 35 unit apartment complex — 5889 152nd ST Surrey, BC, Canada • 55 unit apartment complex — 12589 72nd Ave Surrey, BC, Canada • 48 unit apartment complex — 22476 North Ave Maple Ridge, BC, Canada Airport Parking • Park N Jet 2 Expansion II — acquired additional 6 acres to which are in the process of being developed to expand capacity of parking lot to 2,100 stalls. • Park N Jet 1 Expansion — permits are ready to develop 3 additional acres and project will be started soon • Park N Jet 2 Expansion - currently developing an additional 5 acres. • Park N Jet 2 - Brand new 4 acre state of the art airport parking facility at SeaTac International Airport. Purchased raw land, worked with city officials for permits and licensing, completed land and structural development with improvements. • Park N Jet 1 - Significant expansion and redevelopment of 3 acre airport parking facility at SeaTac International Airport. Redesigned and constructed the office building, and lot layout. Single Family Have significant experience in residential home development. Top to bottom development experience from purchasing raw land, developing into short plats, participating in engineering/architectural work, to completing construction of luxury single family homes: • 16 lot subdivision - 98th Ave & 237th ST Kent, WA 98031 • 12 lot subdivision - 132nd Ave & NE 104th ST Kirkland, WA 98033 • 8 lot subdivision - S Ainsworth Ave & S 84th ST Tacoma, WA 98444 • 8 single family homes - Kirkland, Kent, Newcastle, and Renton Also developed 100+ single family homes in British Columbia, Canada from 1988 - 2000. 74