City of South.Lake 'tahoe "maktng a positive dtfference now"

City of South.Lake 'tahoe "maktng a positive dtfference now" STAFF REPORT CITY COUNCIL MEETING OF FEBRUARY 16, 2016 NEW BUSINESS a TO: FROM: RE: Honorable Mayor and City Council Nancy Kerry, City Manager Purchase Agreement between the City of South Lake Tahoe and TMPM, LLC for Purchase of Various Parcels In and Around the Knights Inn in the Amount of $6 million dollars Contingent upon Award and Acceptance of Grant from the California Tahoe Conservancy RECOMMENDATION: Authorize Mayor to Execute Purchase Agreement (Attachment 1) with Pradip Patel for $6 Million Dollars for the Potential Acquisition of Knights Inn Contingent upon Award and Acceptance of Grant from the California Tahoe Conservancy BACKGROUND: In November 2010, Lahontan modified their Water Quality Control Plan (Basin Plan) to establish a Total Maximum Daily Load for Sediment and Nutrients, Lake Tahoe, El Dorado and Placer Counties (Tahoe TMDL). The Tahoe TMDL identified a long-term goal to restore deep water transparency to 1967-1971 levels (97.4 feet from current 68 feet) within 65 years. The first 20-year Lake Tahoe TMDL implementation phase requires roughly one-half of the required 65% reduction in average annual fine sediment particle load to occur by 2026 in order to reverse the continuing decline in lake clarity and achieve a 10-foot improvement in lake transparency. On February 5, 2013, the City Council adopted a Pollutant Load Reduction Plan (Resolution 2013-13) to comply with the City's NPDES (National Pollution Discharge Elimination System) Permit (MS4 R6T-0101A1) issued by California Regional Water Quality Control Board, Lahontan Region (Lahontan). In addition to the requirements of the City's MS4 Lahontan Permit, the City Council's adopted Business Plan includes a variety of strategies and initiatives to improve water quality, encourage economic development, reduce the oversupply of tourist accommodation units (hotel rooms) and attract capital investment. Acquisition of the Southwest Corner Parcel The parcels located at the corner of Ski Run Blvd and Highway 50, commonly known as the "Southwest Corner Parcels," are immediately adjacent to the parcels which are the subject of this Purchase Agreement before the City Council for consideration of approval. On July 15, 2014, the City Council authorized the purchase of the Southwest Corner parcels (APNs 027-6910-08&09-100) from the Former Redevelopment Agency for $800,000. Following acquisition, the City solicited Requests for Proposals for development of the Southwest Corner and subsequently

City Council Meeting: February 16, 2016 Page 2 of 3 entered escrow with the Halferty Group for $1.1 M. The increased sale price over what the City paid for the parcels was due to the inclusion of 15,000 square feet of commercial floor area (CFA). Since escrow has opened, the City has been meeting with the Halferty Group to design a project to meet or exceed local design standards, economic goals and regional threshold goals. During discussions, it was learned that the "Knight's Inn" parcels may become available for sale and thus, escrow for Southwest Corner was put on hold. ISSUE AND DISCUSSION: This item is before the City Council to approve a Purchase Agreement (Attachment 1) between the City of South Lake Tahoe and TMPM, LLC (Pradip Patel, Managing Partner) for the purchase of various parcels including the Knights Inn, Mo Place's Restaurant, a residence and conference center in the amount of $6 million dollars. The Purchase Agreement is contingent upon award and acceptance of a grant from the California Tahoe Conservancy, which the City applied for under their Proposition 1 competitive grant application process, award recipients are expected to be announced at the March CTC board meeting. Bijou Park Creek Project: Environmental Redevelopment Approval of the attached Purchase Agreement to acquire the parcels collectively known as the "Knight's Inn,'' (contingent upon a grant award from the California Tahoe Conservancy), combined with the Southwest Corner parcels, will establish a larger project area to be known as the Bijou Park Creek project (see Attachment 2: Bijou Park Creek Project Area Map). Acquisition of the entire project site will provide an opportunity to: redevelop the entire project site in_ a manner to improve water quality through restoration of parcels once located in a Stream Environment Zone, collect and reduce the amount of sediment entering Lake Tahoe, (preliminary modeling estimates the reduction of Fine Sediment Particles (FSP) will be reduced by approximately 8,000 pounds per year), assist the City and local agencies in meeting TMDL goals, (preliminary modeling estimates the project may provide more than 40 Lake Clarity credit or 21 % of the City's TMDP pollutant load reduction obligations (75 lbs/year of Total Nitrogen, 25 lbs/year of Total Phosphorus, and Infiltration of 3.7 acre-feet of water per year for groundwater recharge), improve long-standing water drainage problems in and around Lloyd and Herbert Avenues, improve scenic qualities, develop an environmentally beneficial commercial project on the site, and attract capital development to the site and surrounding locations. Meeting Multiple Agency Goals The Tahoe Regional Planning Agency (TRPA)'s Regional Plan includes nine thresholds goals and standards. Among the thresholds are goals to improve lake clarity, water quality, air quality and scenic quality to preserve natural resources in the Lake Tahoe Basin for generations to come. The City and TRPA adopted Tourist Core Area Plan envisions this area as a central destination that provides full services for tourists and permanent residents and offers unique experiences related to the many outdoor recreation possibilities that surround the core area. Development in the area will achieve this by incorporating active streetscapes, shopping, entertainment and outdoor dining opportunities.

City Council Meeting: February 16, 2016 Page 3 of 3 The City's proposed "Bijou Park Creek" project site will be designed to help achieve TMDL goals, TRPA thresholds goals, the City's MS4 Lahontan Permit requirement, Tourist Core Area Plan goals, and the City Council's economic and environmental goals. FINANCIAL AND/OR POLICY IMPLICATIONS: The Purchase Agreement is in the amount of $6M for the acquisition of the following parcels: the real property located at 3600 Lake Tahoe Boulevard, South Lake Tahoe, California (Assessor's Parcel Numbers 027-040-07, 027-112-18, -19, -20 and -21) (the "Real Property"), buildings, structures and improvements (the "Improvements"), and all development entitlements (the "Entitlements"), including but not limited to tourist accommodation units, sewer units, residential units of use, commercial floor area, land coverage and any other transferable commodities or development rights recognized by the Tahoe Regional Planning Agency or any other regulatory agency as attached or appurtenant to the Real Property (collectively, the Real Property, Improvements, and Entitlements are referred to herein as the "Property"); these parcels are commonly known as the Knight's Inn (110 hotel rooms), a residence on Lloyd Avenue, a commercial building located behind the Knight's Inn, and a restaurant "Mo's Place" and all associated development rights. The California Tahoe Conservancy and owner(s) of the Knight's Inn (TMPM, LLC) solicited an appraisal of the properties identified above. The City has not received a copy of the appraisal, but has been informed the estimated appraised value is approximately $4.5M. The City's Real Property Negotiating Team (which includes the City Manager, City Attorney and City Council Subcommittee Councilmembers Cole and Sass), have met and negotiated with TMPM, LLC (Pradip Patel, Managing Partner) and reached an agreement of $6M to include all development rights, and all of the commercial and residential properties as listed above. In October of 2015, City staff submitted a grant application to the California Tahoe Conservancy for acquisition of the Knights Inn parcels. If granted, the maximum amount the City may receive would be the appraised value (approximately $4.5M). The difference between appraised value and sale's price (approximately $1.5M) would be funded through closure of escrow on the Southwest Corner ($1.1 M) and approximately $400,000 may be required from the City's unassigned excess reserves or alternate sources. SIGNATURE: Attachment 1 : Purchase Agreement Attachment 2: Bijou Park Creek Project Area Map

Attachment 1 Purchase Agreement

CITY OF SOUTH LAKE TAHOE Purchase and Sale Agreement This Agreement is made and entered into as of the date of the last signature below ("Effective Date") by and between the City of South Lake Tahoe. a municipal corporation ("City") and TMPM, LLC. a California limited liability company ("Seller"). RECITALS A. Seller is the owner of that certain real property located at 3600 Lake Tahoe Boulevard, South Lake Tahoe. California (Assessor's Parcel Numbers 027-040-07, 027-112-18. -19. -20 and -21) (the "Real Property"), buildings, structures and improvements (the "Improvements"), and all development entitlements (the "Entitlements"), including but not limited to tourist accommodation units. sewer units. residential units of use. commercial floor area. land coverage and any other transferable commodities or development rights recognized by the Tahoe Regional Planning Agency or any other regulatory agency as attached or appurtenant to the Real Property (collectively, the Real Property. Improvements, and Entitlements are referred to herein as the "Property"); B. Seller desires to sell the Property to the City, and the City desires to purchase the Property from Seller at the below purchase price and on the terms and conditions set forth in this Agreement. For good and valuable consideration the receipt and adequacy of which are acknowledged, the parties hereto agree as follows: AGREEMENT Purchase Price. The total purchase price for the Property shall be of Six Million Dollars ($6.000.000.00) payable in cash or equally available funds. TERMS AND CONDITIONS l. Contingency. This purchase price is contingent upon the City receiving from the California Tahoe Conservancy ("CTC") grant monies in an amount of the appraised value (Four Million Six Hundred and Fifty Thousand Dollars) set forth in the appraisal prepared by Steve Johnson in November 2015. In the event the CTC does not approve (or conditionally approve) the grant on or

before June 2016, this Agreement shall terminate without any action necessary by either party. This Agreement is subject to approval by the City Council of the City at a regular or special meeting and is not effective until such approval is made by the City Council. 2. Escrow. The Property shall be transferred to the City through a standard escrow with Deb Landerkin at Placer ntle Company in South Lake Tahoe, California ("Title Company") upon deposit of the full amount of the agreed upon purchase price. 3. Closing. (a) Closing Date. Closing shall occur on the later of August l, 2016, or thirty (30) days following the date CTC delivers to the City of the grant monies referenced in Paragraph 1 above ("Closing Date"). (b) Tenancies. Seller shall deliver the Real Property to the City free and clear of commercial tenancies on the Closing Date. The City acknowledges that there are employees of Seller who reside at the Real Property, and the City agrees that such employees shall have up to forty-five (45) days following the Closing Date to vacate the Property. Seller shall use its best efforts to terminate all tenancies on the Real Property and remove all tenants from the Real Property in accordance with the terms of this Section 3(b) at Seller's sole cost and expense. In connection therewith, Seller shall use its best efforts to resolve, be responsible for, pay for and diligently prosecute and/or defend any legal proceeding arising from the termination of such tenancies. 4. Allocation of costs. The City and Seller agree to each pay one half ( l /2) of the costs of escrow and title (including title insurance, taxes and other customary and required expenses). 5. Condition of the Real Property and Improvements. The City acknowledges and agrees that the Real Property and Improvements are to be sold and conveyed to, and accepted by the City, in an "AS IS" condition with all faults, if any. City has investigated and has knowledge of operative and proposed governmental laws and regulations, including, without limitation, zoning, environmental and land use laws and regulations, to which the Real Property and Improvements are or may be subject and accepts the Real Property and Improvements solely upon the basis of its review and determination of the applicability and effect of such laws and regulations. City further acknowledges it is entering into this Agreement on the basis of City's own investigation of the physical and environmental conditions of the Real Property and Improvements, including subsurface conditions, and City 2

assumes the risk that adverse physical and environmental conditions may not have been revealed by its own investigation. City further acknowledges that Seller, its agents and employees and other persons acting on behalf of Seller, have made no representation or warranty of any kind in connection with any matter relating to the condition. value, fitness, or zoning of the Real Property or Improvements upon which Buyer has relied directly or indirectly for any purpose, and City hereby disclaims any such warranty. City hereby waives, releases, and forever discharges Seller, Seller's members, managers, successors, assigns, and any other person acting on behalf of Seller, of and from any claims, actions, causes of action, demands, rights, damages, costs, expenses or compensation whatsoever, direct or indirect, known or unknown, foreseen or unforeseen, which City now has or which may arise in the future on the account of or in any way growing out of or connected with the physical or environmental condition of the Real Property and Improvements or any law or regulation applicable thereto. City further agrees to indemnify, defend and hold harmless Seller, its members, managers, successors, agents and assigns, from and against any and all loss, damage, liability, claim, cost or expense including, without limitation, attorney's fees and court costs, arising from and adverse physical or environmental condition of the Real Property and Improvements or any law or regulation applicable thereto. 6. Business Entity. The City is not purchasing the Seller business entity (TMPM, LLC) not the motel business, but only the real property and assumes no liability or responsibility for any aspects of the Seller's business entity. 7. Title. (a) Within fifteen ( 15) days after the Effective Date of this Agreement, the City shall obtain a preliminary report issued by Title Company ("Preliminary Report") on the Real Property, together with copies of all exceptions reflected in the Preliminary Report. Within fifteen ( 15) days after the receipt by the City of the Preliminary Report. the City shall notify Seller of any exceptions shown in the Preliminary Report disapproved of by the City ("Disapproved Exceptions"). Within ten (10) days of the City's notice setting forth the Disapproved Exceptions, Seller shall notify the City in writing whether it intends to eliminate the Disapproved Exceptions by the Closing Date. If Seller notifies the City that it intends to eliminate the Disapproved Exceptions, Seller shall use commercially reasonable efforts to eliminate the Disapproved Exceptions on or before the Closing Date, but Seller's failure to do so shall constitute only a failure of a condition precedent to Purchaser's obligation to purchase the Real Property, and not a default by Seller under this Agreement. If Seller notifies the City that it does not intend to eliminate 3

some or all of the Disapproved Exceptions prior to the Closing Date, the City may terminate this Agreement. It the City elects to terminate this Agreement, the City shall give written notice of termination to Seller within three (3) days following receipt of Seller's notice of its intent not to remove some or all of the Disapproved Exceptions. Failure of the City to give written notice within the three (3) day period shall be deemed a waiver by the City of its right to terminate the Agreement pursuant to this Section and the City agrees to accept title subject to such unremoved Disapproved Exceptions. (b) At the close of escrow, it shall be a condition precedent to the City's obligation to purchase the Property that Seller convey to the City good and marketable title to the Real Property, subject only to the following permitted exceptions ("Permitted Exceptions"): (i) A lien tor real estate taxes and assessments on the Real Property and Improvements not yet due or payable; (ii) All liens, easements, encumbrances or other title exceptions identified in the Preliminary Report and such state of facts as an accurate survey of the Real Property would disclose, other than the Disapproved Exceptions; and (iii) Such other exceptions as may be approved in writing by Purchaser prior to the Closing. Evidence of good and marketable title to the real property shall be the willingness of Title Company to issue, as of the Closing Date, a CLTA Owner's Policy of Title Insurance with extended coverage insuring that fee title to the real property is vested in the City subject only to the Permitted Exceptions ('Title Policy"). The Title Policy may contain such endorsements as reasonably required by the City provided that the issuance of such endorsements shall not be a condition to the City's obligations hereunder. The City shall pay the costs for all such endorsements. Seller shall have no obligation to provide any indemnity or agreement to the Title Company or the City to support the issuance of the Title Policy or any such endorsements 8. Seller's right to cancel. The Seller agrees that the City is incurring considerable expense in reliance on this Agreement and specifically agrees that it will has no right to cancel this Agreement except as to the failure of the contingency in Paragraph 2. 9. Prorations of Property Taxes and other expenses. The Seller agrees to pay all property taxes, utility expenses, assessments, mortgages. premiums on insurance and all other expenses for the period up to the close of escrow. 4

The Seller agrees to maintain liability and fire insurance on the property until close of escrow. l 0. Covenants Pending Close of Escrow. During the period from the Effective Date of this Agreement until the Closing Date: (a) Encumbrances. Seller shall not subject the Property or any portion of the Property to any lien, encumbrance, or charge not in existence as of the date of this Agreement and which shall not be eliminated prior to the Closing Date at Seller's expense, without the prior written consent of the City. (b) Insurance. Seller shall use its best efforts to maintain in full force and effect all insurance policies carried on the Property at the same level of coverage as is in effect on the date of this Agreement. (c) Entitlements. Seller shall not sell, transfer, convey, assign, encumber or pledge any of the Entitlements from and after the Effective Date of this Agreement without the prior written consent of the City. l l. Notices. Any notice required to be given under this Agreement shall be in writing and either served personally or sent prepaid, first class mail. Any such notice shall be addressed to the other party at the address set forth below. Notice shall be deemed communicated within 48 hours from the time of mailing if mailed as provided in this section. If to City: City of South Lake Tahoe 1901 Airport Rd. South Lake Tahoe, CA 96150 Provide a copy to:city Attorney's Office City of South Lake Tahoe 1901 Airport Road, Suite 300 South Lake Tahoe, CA 96150 If to Seller: With copy to: TMPM, LLC Attn: Pradip Patel 3600 Lake Tahoe Boulevard South Lake Tahoe, California 96150 Michael Mclaughlin Feldman Mclaughlin Thiel LLP 178 Highway 50, Suite B P.O. Box 1309 Zephyr Cove, NV 89448 5

12. Amendments. This Agreement may be modified or amended only by a written document executed by both Seller and City and approved as to form by the City Attorney. 13. Severability. If any term or portion of this Agreement is held to be invalid, illegal, or otherwise unenforceable by a court of competent jurisdiction. the remaining provisions of this Agreement shall continue in full force and effect. 14. Entire Agreement. This Agreement constitutes the complete and exclusive statement of Agreement between City and Seller. All prior written and oral communications. including correspondence, drafts. memoranda, and representations, are superseded in total by this Agreement. 15. Time is of the Essence. Time is of the essence for this Agreement. 16. Authority to Enter Agreement. Both parties have all requisite power and authority to conduct its business and to execute, deliver, and perform the Agreement. Each party warrants that the individuals who have signed this Agreement have the legal power, right, and authority to make this Agreement and to bind each respective party. 17. Damage and Destruction. In the event of damage or destruction of the Property or any portion of the Property prior to the Closing Date. the City shall have no right to terminate this Agreement, but instead Seller shall assign to the City any and all rights of Seller to the related insurance proceeds, and there shall be no reduction in the Purchase Price. 18. Venue; Attorney Fees. In the event of a dispute regarding the interpretation, performance or enforcement of this Agreement, venue for the resolution of any such dispute or disputes shall be in South Lake Tahoe. El Dorado County, California. If any legal action or any other proceeding, including an action for declaratory relief, is brought for the enforcement of this Agreement or because of an alleged dispute. breach, default. or misrepresentation in connection with any provision of this Agreement. the prevailing party shall be entitled to recover reasonable attorney fees and other costs incurred in that action or proceeding. in addition to any other relief to which the prevailing party may be entitled. 19. No Third Party Beneficiaries. No person not a party hereto, including, without limitation, lessees, employees. clients, customers, creditors, or suppliers shall derive any rights hereunder or be construed to be a third party beneficiary hereof. 6

20. Condemnation. The sale of the Property to the City hereunder is under the "threat of condemnation" within the meaning of Section 1033 of the Internal Revenue Code. 21. Tax Deferred Exchange. The City agrees to cooperate with Seller in any tax deferred exchange. including, but not limited to, the execution of any additional documentation reasonably necessary to facilitate an exchange transaction so as to comply with Section 1031 of the Internal Revenue Code, as amended. together with any and all regulations promulgated pursuant to that Section. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the date first written above. CITY OF SOUTH LAKE TAHOE: ACCEPTED BY TMPM. LLC BY~--~~----~ Nancy Kerry, City Manager Dated:. Dated: ~~- 2( '20 '=' 7

Attachment 2 Bijou Creek Park Project Area Map