22-1114_26874 ORTEGA HWY LLC_Agenda Report_D1City of San Juan Capistrano
Agenda Report
TO: Honorable Mayor and Members of the City Council
FROM: Benjamin Siegel, City Manager
SUBMITTED BY: Charlie View, Project Manager
DATE: November 14, 2022
SUBJECT: Proposed Sale of Approximately 1.2-acres of City-owned Property
Located at 31776 El Camino Real and 26874 Old Mission Road
(formerly Ortega Highway) (Assessor Parcel Numbers: 124-160-55,
124-160-56, and 124-160-57) to 26874 Ortega Highway LLC,
Approval of Disposition and Development Agreements, Master
Agreement for Taxing Entity Compensation, and Finding the Actions
Exempt Under CEQA Guidelines Exemption Class 32 for Infill
Development
RECOMMENDATION:
1.Adopt resolutions approving Disposition and Development Agreements,
substantially in the form attached, to sell 1.2-acres of City-owned property
located at 31776 El Camino Real and 26874 Old Mission Road (formerly
Ortega Highway) to 26874 Ortega Highway LLC.
2.Approve and authorize the City Manager to execute the Master Agreement
for Taxing Entity Compensation, substantially in the form attached, with all
taxing entities who receive a share of the Playhouse Property sale
proceeds.
3.Find the Actions Exempt Under CEQA Guidelines Exemption Class 32 for
Infill Development.
EXECUTIVE SUMMARY:
On October 18, 2022, the City Council adopted a resolution declaring the City’s intent to
sell 1.2-acres of City-owned property located at 31776 El Camino Real and 26874 Old
Mission Road (formerly Ortega Highway) to 26874 Ortega Highway LLC, and set a public
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November 14, 2022
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hearing date of November 1, 2022, to consider Disposition and Development Agreements
for the properties. A graphic of the two City-owned properties is provided below.
To allow additional time to finalize the terms of the proposed agreements, on November
1, 2022, the public hearing was continued to November 14, 2022. The sale of these
properties fulfills the intention of the Long Range Property Management Plan adopted as
part of the State-required dissolution of the San Juan Capistrano Community
Redevelopment Agency. Further, the property sale will facilitate construction of the
recently approved El Camino Specific Plan mixed-use project, consisting of an
approximately 27,457 square foot retail, restaurant, and office building, and an
approximately 196 space, four-story parking structure with approximately 2,600 square
feet of retail space.
DISCUSSION/ANALYSIS:
The San Juan Capistrano Community Redevelopment Agency (Redevelopment Agency)
was dissolved effective February 1, 2012, in accordance with state law. The
Redevelopment Agency held certain properties at the time it was dissolved that were
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November 14, 2022
Page 3 of 8
subsequently transferred to the Successor Agency to the San Juan Capistrano
Redevelopment Agency. The Successor Agency, in accordance with the statutes
governing the dissolution of redevelopment agencies, prepared a Long Range Property
Management Plan (LRPMP) addressing the disposition of the properties. A copy of the
LRPMP (and amendment) is provided as Attachment 1. The State directed those
properties owned by the City’s former Redevelopment Agency to be sold and the
proceeds distributed to the taxing entities, including not just the City but also the County
of Orange, school district and special districts in which the properties were located. The
downtown properties located at 31776 El Camino Real and 26874 Ortega Highway are
included in the LRPMP.
Subsequent to the adoption of the initial LRPMP, there was a change in redevelopment
law and the Successor Agency modified its disposition plan and received State approval
to retain the Parking Lot Property for future public parking. Though no longer required to
dispose of the Parking Lot Property, it is recommended to be sold to facilitate the
proposed development project for the site.
Proposed Development Project
In recognition of the public interest in the development of these downtown properties, in
2016 the City retained commercial broker CBRE to market these properties as well as
Lower Rosan Ranch, the other former Redevelopment Agency property. After an
extensive marketing program, the City received 11 proposals for the purchase and
development of the Downtown properties. After careful review of the proposals and the
qualifications of the potential buyers, the City Council identified four proposers to
participate in a community workshop on April 26, 2017. In October 2017, the properties
were included in an Exclusive Negotiation Agreement (ENA) with 26874 Ortega Highway
LLC (Frontier Development) for potential sale and development. Since that time, the City
and 26874 Ortega Highway LLC have negotiated a Disposition and Development
Agreement (DDA) for each property to effectuate the real estate transaction and
memorialize performance measures for construction of the proposed development project
for the site.
The DDA is a standard sales agreement commonly utilized by public agencies for real
estate transactions. The DDA establishes the terms of the sale including sales price,
escrow schedule, scope of proposed development of the property, and any specific
considerations or restrictions. The two DDAs for consideration require the Developer to
construct the recently-approved El Camino Specific Plan project consisting of an
approximately 27,457 square foot retail, restaurant, and office building, and an
approximately 196 space, four-story parking structure with approximately 2,600 square
feet of retail space. The schedule of performance, provided as Exhibit C in both proposed
DDA documents, establishes the timeframe for the escrow process and calls for
construction to begin no later than three years after close of escrow, and completion of
the project within two years from that date. In addition, the DDA for the Playhouse
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November 14, 2022
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Property requires that the Developer receive approval from the City Manager prior to
demolishing the existing Playhouse structure and includes a provision that allows the
South Orange County Community Theatre to continue to operate within the existing
structure until 30 days prior to demolition.
Although the initial concept for the proposed development project included space that
could accommodate a future performing arts center, the approved project has shifted the
scope to development of a vibrant mixed-use project that expands the availability of
downtown public parking. There are ongoing efforts by a non-profit organization to
develop a funding plan to support a future performing arts center in San Juan Capistrano.
The availability of easily accessible public parking in multiple locations could support a
future performing arts center at a location to be determined.
Property Valuations
The fair market value of the Parking Lot Property, established through an independent
appraisal process, is $1,900,000. The DDA requires the recording of a covenant
preserving 65 public parking spaces in the new development as a requirement of the
City’s prior retention of the Parking Lot Property for public parking. Although the spaces
will be retained for public use, the retention of these spaces was not a factor in the
appraisal process or sales negotiations. In recognition of the benefit to downtown
businesses and visitors of providing parking to the public, the DDA also calls for the
retention in perpetuity of 20 additional public parking spaces and offsets the purchase
price by $599,000, the estimated cost of constructing these 20 spaces in the proposed
parking structure. Reducing the purchase price by the one-time cost of these additional
parking spaces for long-term public use provides the community with significant benefit.
The combined 85 spaces will be provided for use by the public in perpetuity, supporting
the varied operations of downtown business.
The fair market value of the Playhouse Property, established through an independent
appraisal process, is $1,330,000. The State-approved Lang Range Property
Management Plan (LRPMP) designated the Playhouse Property for future development
and called for the City to enter into a compensation agreement with the taxing entities to
complete the sale of the property. The purpose of the proposed Master Agreement for
Taxing Entity Compensation (Attachment 2) is to define the process for remitting the
share of sale proceeds to the affected taxing entities. The proposed Master
Compensation Agreement provides for the net unrestricted proceeds from the Playhouse
Property sale, less actual costs for expenses incurred by the City in connection with the
management and disposition of the property, to be remitted to the Orange County Auditor-
Controller for distribution to the taxing entities in accordance with their respective share
of the base property taxes. In addition, the agreement calls for the entities to receive their
proportionate share of revenues received from the annual license agreement payment
received from the South Orange County Community Theatre (El Camino Real
Playhouse).
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November 14, 2022
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Surplus Land Act
In 2019, the State took several actions to make public lands available for affordable
housing development including modifications to the Surplus Land Act. The Surplus Land
Act requires that prior to the sale of surplus land, unless an exemption applies, cities must
provide notice to affordable housing developers that a property is potentially available for
development. In working with the City Attorney’s office, staff determined the City-owned
properties to be exempt from the Surplus Land Act due to the fact that the City entered
into an Exclusive Negotiation Agreement to dispose of the property prior to the effective
date of the Surplus Land Act noticing requirements.
Staff recommends that the City Council approve and authorize the City Manager to
execute a Disposition and Development Agreement for sale of the Playhouse Property
(Attachment 3) for the fair market value of $1,330,000, a Disposition and Development
Agreement for sale of the Parking Lot Property (Attachment 4) for the fair market value of
$1,301,000 (appraised value less the cost to construct 20 public parking spaces), and a
Master Agreement for Taxing Entity Compensation for the disbursement of the Playhouse
Property sale proceeds. Prior to disposition of the property, State law requires the
Planning Commission determine the sale of the City-owned property is consistent with
the City’s General Plan. The Planning Commission acted to approve the matter at its
November 9, 2022, meeting.
FISCAL IMPACT:
Approval of the recommended action would result in $1,301,000 in one-time gross sales
proceeds from the sale of the Parking Lot Property and approximately $130,000 in one-
time gross sales proceeds to the City from sale of the Playhouse Property. The costs for
completing the sales transactions such as escrow costs and title insurance will be
deducted from the gross sales proceeds. Additionally, a portion of the cost borne by the
City to facilitate the disposition of the Playhouse Property would be recovered from the
property sale proceeds prior to disbursement of funds to the Affected Taxing Entities.
ENVIRONMENTAL REVIEW:
The proposed Project is categorically exempt from further environmental review under
State CEQA Guidelines, Section 15332, In-Fill Development Projects (Class 32). The
entire Project (which includes the project approvals on October 4, 2022, adoption of a
Resolution of Intention on October 18, 2022, to sell the subject properties, and any other
follow-on actions including consideration of purchase agreements) is exempt per Section
15332 because the Project meets the required conditions for Class 32. The City filed and
posted a Notice of Exemption for the Project on October 7, 2022, with the Orange County
Clerk-Recorder.
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November 14, 2022
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As explained in the October 4, 2022, staff report on the El Camino Specific Plan, the
Project is consistent with the applicable General Plan designation and all applicable
General Plan policies as well as with applicable zoning designations and regulations
outlined in the El Camino Specific Plan; in all respects where the El Camino Specific Plan
does not specify a development standard, the Project is consistent with the San Juan
Capistrano General Plan and Title 9 of the Municipal Code, Land Use. The Project occurs
within city limits on a project site of less than five acres and is substantially surrounded by
urban uses. Specifically, the Project is located at 31776 El Camino Real in the City of San
Juan Capistrano, consists of 1.68 acres, and is surrounded by Town Center (commercial),
Community Park (public), and Town Center Edge (commercial) zoning to the north, south,
and east, respectively, and Town Center (commercial) zoning to the west. The Project site
has no value, as a habitat for endangered, rare, or threatened species because the
majority of the Project site has already been developed and is currently improved with a
commercial building, parking lot, and associated improvements on the parcels. Therefore,
the site is not habitat for endangered, rare, or threatened species.
Approval of the Project would not result in any significant effects relating to traffic, noise,
air quality, or water quality. Analysis has been conducted to ensure the Project does not
result in any significant effects relating to traffic and water quality, including the following:
a Traffic Sensitivity Analysis accepted by the City Traffic Engineer and the Preliminary
Water Quality Management Plan approved by the Public Works Department. Further, there
is no evidence that the Project would result in significant effects relating to air quality or
noise. The site can be adequately served by all required utilities and public services; the
Project site is currently serviced by all required utilities, including but not limited to
electricity, gas, garbage, water, and sewer and therefore would remain adequately
serviced. None of the exceptions to the categorical exemptions identified in CEQA
Guidelines, section 15300.2 apply. There is nothing unusual about the Project site or the
Project itself that would lead to a potentially significant impact. And, even if an unusual
circumstance did exist (one does not), based on the studies performed, there is no
reasonable possibility that the Project would have a significant effect on the environment.
The Project site is already developed with a commercially operating playhouse, the
Project’s Traffic Sensitivity Analysis concluded that the Project would not result in a
significant increase of inbound and outbound traffic, would provide adequate access, and
would provide adequate off-street parking. Further, the Project will not result in damage to
scenic resources within a highway officially designated as a state scenic highway; the
closest officially designated state scenic highway is located near Anaheim and therefore
the Project will not result in damage to scenic resources within or near such highway.
Further, the Project is not located on a site which is included on any list compiled pursuant
to Government Section 65962.5; the Project site has not been designated as a hazardous
waste site. Further, the Project will not cause a substantial adverse change in the
significance of a historic resource; specifically, there would be no substantial adverse
change in the significance of the Blas Aguilar Adobe for the reasons outlined in this report
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November 14, 2022
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and staff’s presentation. Thus, the exceptions are not triggered, and the Class 32
categorical exemption applies.
PRIOR CITY COUNCIL REVIEW:
• On November 1, 2022, the City Council continued the Public Hearing for
consideration of the purchase agreements for the properties to November 14,
2022.
• On October 18, 2022, the City Council adopted a Resolution of Intention declaring
its intent to sell the City-owned properties, declaring the properties exempt surplus
land pursuant to the Surplus Land Act, and set a hearing date of November 1,
2022, for consideration of purchase agreements to effectuate the transaction.
• On October 4, 2022, the City Council approved the entitlement actions for the
proposed development of an approximately 27,457 square foot retail, restaurant,
and office building, and an approximately 196 space, four-story parking structure.
• On October 17, 2017, the City Council approved an Exclusive Negotiation
Agreement with Frontier Real Estate Investments (26874 Ortega Highway LLC)
for the possible sale and development of the properties.
• On May 16, 2017, the City Council voted to enter into exclusive negotiations with
Frontier Real Estate Investments for the potential sale of the Parking Lot and
Playhouse properties.
• On April 26, 2017, the City Council conducted a Community Workshop to review
development proposals for the Parking Lot and Playhouse properties.
COMMISSION/COMMITTEE/BOARD REVIEW AND RECOMMENDATIONS:
• On August 24, 2022, the Planning Commission reviewed the Ortega and El Camino
Project proposed for the subject property and adopted a resolution recommending
that the City Council approve the Applicant’s requested General Plan Amendment,
Rezone and Code Amendment and finding that said action is categorically exempt
from the California Environmental Quality Act (CEQA) under CEQA Guidelines
Section 15332, In-Fill Development Projects (Class 32).
• On July 26, 2021, the Cultural Heritage Commission reviewed the Ortega and El
Camino Project proposed for the subject property and in accordance with City
Council Policy 603, found that the proposed land use improvements associated
with the El Camino Specific Plan are physically and aesthetically compatible with
the Blas Aguilar Adobe, a structure identified on the City’s Inventory of Historic and
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November 14, 2022
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Cultural Landmarks, the California Register of Historical Resources, and the
National Register of Historic Places.
• On December 9, 2021, the Design Review Committee reviewed the conceptual
plans of the proposed Ortega and El Camino project proposed for the subject
property and forwarded a recommendation of approval to the Planning
Commission.
• On January 14, 2021, the Design Review Committee reviewed the conceptual
plans for the proposed Ortega and El Camino project proposed for the subject
property and provided preliminary feedback on the design aspects of the project
to the Applicant.
NOTIFICATION:
26874 Ortega Highway LLC
Adjacent Property Owners
Interested Parties Notification List
ATTACHMENT:
Attachment 1—Long Range Property Management Plan and Amendment
Attachment 2—Proposed Master Agreement for Taxing Entity Compensation
Attachment 3—Resolution Approving Proposed Playhouse Property Disposition and
Development Agreement
Attachment 4—Resolution Approving Proposed Parking Lot Property Disposition and
Development Agreement