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4\ CITY OF RIVERSIDE REDEVELOPMENT AGENCY MEMORANDUM Honorable Mayor & Agency Members Date: Item No.: November 21, 2000 3 Subject: Request Authorization to Enter Into a Memorandum of Understanding with Riverside Community College for Negotiation of a Lease of Real Property Located at 3845 Market Street, Assessor's Parcel Numbers 215-032-002, 215-032-003,215-032-005, 215-022-012 located in the Downtown! Airport Merged Project Area Background A key component of the Mission Village Downtown Revitalization Project is the Joint Riverside Community College-University of California School of the Arts. The School of the Arts project is conceptually planned to encompass the blocks of Market Street to Brockton Avenue, and 10th Street to University Avenue. In cooperation with Riverside Community College (RCC), Agency staff conducted negotiations with the property owners, Mr. and Mrs. James O. Heiting concerning the acquisition of a commercial building. The project financing structure requires that RCC will execute a lease with the Agency to provide lease revenue adequate to debt service the building acquisition, relocation costs, miscellaneous due diligence, legal and some of the anticipated seismic retrofit costs. A specific loan source has not yet been identified, but staff is currently exploring both private and internal borrowing options. The security for the financing is expected to be the building and the fifteen-year lease between the Agency and RCC. The college would use the building for RCC campus administrative purposes and School of the Arts classroom facilities. Current Issue A Memorandum of Understanding between RCC and the Agency has been prepared that outlines the proposed structure of the lease, financing assistance towards seismic retrofit costs and sets out operative provisions that call for RCC to reimburse the Agency for its out of pocket costs for due diligence and option payments to the seller. Below is a brief bullet of the key terms of the Memorandum of Understanding: Agency Obligations: Acquisition: the Agency will use its best efforts to acquire the property located at 3845 and 3855 Market Street consisting of approximately 23,693 square feet of office space, 5,355 square feet of basement feet and an adjacent parking lot as depicted on Exhibit A. Lease Terms: The Agency will lease the above premises to RCC for a period of 15 years for an annual amount of $386,856 payable monthly, quarterly or annually in advance, plus receive a biannual payment (estimated at $8,000 annually) from RCC equal to the Net Tax Increment the Agency received from the property when it was on the commercial tax roll. The lease will commence concurrent with the closing of the Agency's acquisition escrow with the property seller. Landlord Assistance for Seismic Retrofit Costs: The Agency will provide $700,000 to RCC for use towards the remedy of all required seismic retrofit requirements. Landlord Assistance for Historic Facade Rehabilitation: The Agency will provide RCC $200,000 towards restoration of the exterior historic fac;ade. 3-1