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Staff Report PREPARED BY: ROBERT SCHULTZ Town Attorney Reviewed by: Town Manager, Assistant Town Manager, and Finance Director 110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832 www.losgatosca.gov TOWN OF LOS GATOS TOWN COUNCIL REPORT MEETING DATE: 04/02/2019 ITEM NO: 5 DATE: MARCH 27, 2019 TO: MAYOR AND TOWN COUNCIL FROM: ROBERT SCHULTZ, TOWN ATTORNEY SUBJECT: APPROVAL OF AN EXCLUSIVE NEGOTIATING AGREEMENT (ENA) WITH IMWALLE ASSET MANAGEMENT COMPANY TO LEASE AND DEVELOP COMMERICAL PROPERTIES LOCATED AT 4 TAIT AVENUE AND 75 CHURCH STREET IN THE TOWN OF LOS GATOS RECOMMENDATION: Staff recommends that the Town Council authorize the Town Manager to execute an Exclusive Negotiating Agreement (ENA) with Imwalle Asset Management Company to Lease and develop the commercial properties located 4 Tait Avenue and 75 Church Street in the Town of Los Gatos. BACKGROUND: The Town has been actively searching for potential tenants for the properties located at 4 Tait Avenue and 75 Church Street since the Museum vacated in 2016. Imwalle Asset Management Company (Developer) has approached the Town and is requesting that negotiations take place regarding the potential leasing of these properties. The Developer is proposing to lease the properties for a long term and be 100% responsible for all costs related to the project of rehabilitation, build out, leasing and ongoing management and maintenance of the properties. Payments to Los Gatos would be a hybrid of fixed base monthly payments and profit participation. The Developer has completed almost 100 small scale projects over the last 40 years and has experience with ground leases, Master leases, and public private partnerships in San Jose and Morgan Hill PAGE 2 OF 2 SUBJECT: APPROVAL OF ENA WITH IMWALLE DATE: MARCH 27, 2019 DISCUSSION: Both properties need significant improvements easily in excess of $1,000,000 to be brought to a leasable market condition. Care would be taken to restore the historic aspects of both properties while delivering modern upgrades expected in the market. Leasing instead of selling the properties would provide consistent long-term cash flow to the Town and maintain the Town’s ownership over the properties. The Town may legally enter into an Exclusive Negotiating Agreement and staff recommends that the Town Council authorize the Town Manager to sign the ENA (Attachment 1). The purpose of the ENA is to set the parameters between the Town and the Developer that will guide the negotiations of a Lease Agreement. The Lease Agreement will set the contractual relationship between the Town and the Developer, and define the project to be developed, the financial relationships, and the performance milestones for both parties. The Developer has informed Town staff that it is comfortable with the terms of the ENA. The ENA does not remove the Developer from the Town’s normal planning and development application requirements and process, and all financial parameters and obligations of the Town and Developer will be fully discussed with the Town Council. Upon entering into exclusive negotiations, the parties will begin to meet regularly to discuss the various issues described above, as well as new issues not yet identified. CONCLUSION: Council should authorize the Town Manager to sign an Exclusive Negotiating Agreement (ENA) with Imwalle Asset Management Company to Lease and develop the commercial propert ies located 4 Tait Avenue and 75 Church Street in the Town of Los Gatos. COORDINATION: This report was coordinated with the Town Manager’s Office. FISCAL IMPACT: No fiscal impact at this time but there will be additional staff time required. ENVIRONMENTAL ASSESSMENT: This is not a project defined under CEQA, and no further action is required. Attachment: 1. Exclusive Negotiating Agreement