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G � ) <br /> � 8.A. - Page 8 <br /> } � <br /> I�EYS�R MAR.�`T'{�N ASSt�C�A`TES.. <br /> ADVISC3RS II�.! PUBLIC/PRIVATE REAL ESTATE QEVELOPMENT <br /> MEMORANDUM <br /> '""'�"'"'' To: Bill Ekern and Dan Zack <br /> [iEAL ES'fAR <br /> ILE[7CVELE}P�,iENI ����/ Qf �Q�WQQ� ����/ <br /> AFFCikf�ralil.F I-{p�.�tiWG <br /> Ei::i73JUhiIC �kVELCII'i4iEN 1 <br /> ,,� t ��.�,ti� �.� , � <br /> From: Tim Kelly <br /> n.lticier KEVSe�<. <br /> � ��t«T��ti' �. �<<�� Date: February 21, 2012 <br /> K.ATC EARLC Fl1NF: <br /> L�Fk�LsIE MI. KElc�u <br /> R�3ise�r I.1�'ernu�r.E Subject: Ground Leases <br /> IiFFI� T. Kq�tiSLfAlt:� <br /> f7.avlf� 17c�Er'.F.tia�� <br /> The Council requested that staff study the possibility of leasing the land to the chosen <br /> I.Uti:1'�cll I F � <br /> ,c, �,�ttN H. �,«,�, developer, rather than selling it. The following comments are a brief overview of the <br /> �""'t"` """` issues and key business terms in ground leases. <br /> I'AU � C:�. A N n[ as nn <br /> GRFac�itr D. Sca�a Hnc� <br /> KEVIN L ENGSTRi?h�i Ground leases tend to work best in active real estate markets in desirable locations; <br /> �VLIE L RCihSl1' <br /> [7kN14E 131CK4RSTAFf Block 2 has the potential to fit that opportunity. The ground lease rent creates a long <br /> �,�., �,��,, , term revenue source to the City, although there would not be a large initial payment, <br /> �,���� ��+. � R��+��� � which could be used for offsite improvements or other purposes. Also, with a ground <br /> `��"` `"�'`�"�� lease, the City has long term control over the property and benefits from the future value <br /> of the site. At the end of the lease term, the land and improvements revert to the City. A <br /> ground lease also benefits a developer by reducing the initial capital required for <br /> development. <br /> Drawbacks to a ground lease include that developers often are not willing to entertain a <br /> lease. Developers decline because projects do not have the same value as those on fee <br /> ownership land and projects can be more challenging to finance as there are fewer <br /> lenders willing to finance a project on a ground lease; but given the upward trends in the <br /> local market, it is possible that a developer would be willing to entertain a lease option. <br /> Other drawbacks include: Ground lease documents are lengthy and complex. Also, <br /> ground leases require on-going management to ensure that the lessee is meeting the <br /> obligations under the lease. Parcelization of the leasehold into more than one parcel <br /> needs to be carefully evaluated to ensure the long term asset value of the lessor (the <br /> City) is protected. <br /> 55PACIFICAVENU[MALL r S�,N FRANLISCC�,CALIFORNin`)�#lii > PFI[7NC:4953�$3050 A�=A�:�1a3973�}t7J <br /> 007-001.doc, jf <br /> W W�N. KEYSER MA RSTON.CUM 18610.005 <br />