Realizing Revenues from Your Real Estate (The Three R`s)

Realizing
Revenues From Your Real Estate
(The Three R’s)
Panelists

Joseph Quinonez
Facilities Development Manager – Montebello Unified School District – Moderator 
Sarine Abrahamian
Senior Counsel – Orbach Huff Suarez & Henderson 
Scott Sheldon
President – Terra Realty Advisors, Inc.
© 2012 Orbach, Huff & Suarez LLP
1
Overview

Have you thought about all the creative ways you can generate revenue streams from your real property?
Learn about alternatives for generating revenue.
 Legally implement those alternatives.
 Case Studies.

3
OUT OF THE BOX. Sometimes you’re all alone when creatively looking at new ways to generate revenue from your real property.
© 2012 Orbach, Huff & Suarez LLP
2
Creative Idea #1:
Outdoor Billboard Sign
IN THE BOX. You may be alone at the beginning, but are rarely so when you generate successful results!
© 2012 Orbach, Huff & Suarez LLP
3
What We are NOT talking about Today: “Surplus” Property

Selling or Leasing Surplus property is complex and time consuming. Some key points before we move on:





7‐11 Committee. Requires the Board to appoint a “7‐11” Committee to make “surplus” recommendation to Board.
Public Offerings/Bidding. Requires “public offerings” to public entities prior to formal bidding of property to highest bidder for long‐
term lease or sale.
Charter Schools. For property surplussed after July 1, 2012, offer that property to any charter school that has requested to be notified.
Naylor Act. For recreational property used for at least eight (8) years immediately preceding. Use of Funds. Use of funds limited to “facility” uses, but Ed. Code §
17463.7 permits school districts to make a “one‐time” use of funds to the general fund if the District can comply with certain provisions and abide by certain restrictions.
First Things First

Selling District property is rarely the best option.

Take all necessary steps to retain ownership of District property. 
Property and buildings are some of the District’s most valuable assets.
© 2012 Orbach, Huff & Suarez LLP
4
Options for District Real Estate




Joint Use
Joint Occupancy Fee‐Generating Facility
Exchange
Options to Create Revenue

© 2012 Orbach, Huff & Suarez LLP
At sites where District maintains some use, consider a lease to vendors pursuant to the following legal structures:

Joint Use: Joint provisions of the Education Code. (Ed. Code § 17527, et seq.)

Joint Occupancy: Joint occupancy provisions of the Education Code. (Ed. Code § 17515, et seq.)

Fee‐Generating Facility: (Gov. Code § 5956, et seq.)
5
Joint Use
Surplus Required?
NO

District can lease vacant space in “operating school buildings” on a Joint Use basis to various agencies under certain conditions.

Limited to a 5‐year term, unless Joint User/tenant is public entity that improves the property with park and recreation facilities.
Joint Occupancy
Surplus Required?
NO

Joint occupancy lease agreements allow the District and any private person, firm or corporation to jointly use the site.

Must require the private entity construct or provide for the construction of improvements on the property for the joint use of the District and the private entity. (Ed. Code §17515 et seq.)

District must follow specific procedures to utilize.

Maximum term is 66 years.
© 2012 Orbach, Huff & Suarez LLP
6
Fee‐Generating Facility
Surplus Required?
NO

District may solicit proposals and enter into agreements with private entities for the design, construction, or reconstruction of certain types of fee‐producing infrastructure projects.


Private entity selected by competitive negotiation process, not by formal bidding.
Maximum Term of 35 Years.
Q & A
© 2012 Orbach, Huff & Suarez LLP
7
Outdoor Billboard Signs
(Case Study)
Outdoor Billboard Signs
(Case Study)
© 2012 Orbach, Huff & Suarez LLP
8
Benefits to the District

Revenue

Potential returns to District can range from $50,000 to $250,000 annually, depending on location and type of billboard.

“Net Lease” Agreement, with $0 operating costs to District.

“Up front” costs recouped immediately.

Potential to “Bond” your income stream.

Advertising for School and Community Events.

Amber Alerts.
Site Determination of District Property(s)

Determine Long Term District Goals




Surrounding Land Uses & Site Constraints
Caltrans Regulations



Landscape Freeway
Permits
Local Regulations


© 2012 Orbach, Huff & Suarez LLP
Future Uses of School Property
Future Funding Needs
Zoning
Overlays and development agreements.
9
Legal Process for District

Structure



Joint Occupancy
Joint Use
Fee Generating Facility

CEQA Analysis

Requests for Proposals‐ Bids
Q & A
© 2012 Orbach, Huff & Suarez LLP
10
Ground Lease Revenue
(Case Study)
Ground Lease Revenue
(Case Study)
© 2012 Orbach, Huff & Suarez LLP
11
Site Determination of District Property(s)

Determine Long Term District Goals

Surrounding Land Uses & Site Constraints



Local Zoning Regulations
Potential City Benefits from Non‐school Use
Market Conditions
Legal Process for District

Structure



Joint Occupancy
Joint Use
Fee Generating

CEQA Analysis

Selection Process – Brokerage Marketing Firm RFP

Request for Proposals ‐ Bids to Develop Property

Selection Process ‐ Developer
© 2012 Orbach, Huff & Suarez LLP
12
Economic Benefits to the District

Revenue



Balance Private and District uses to maximize returns.
Potential “Bonding” of your income stream.
Joint Use of Space for Programs.
Q & A
© 2012 Orbach, Huff & Suarez LLP
13
Property Exchanges
(Case Study)
Property Exchanges
(Case Study)
© 2012 Orbach, Huff & Suarez LLP
14
Exchange
Surplus Required?
NO

The District may exchange any of its real property for real property of another entity. 
Any exchange shall be upon terms the parties may agree, and may be entered into without complying with other disposition requirements. (Ed. Code §17536).

Board shall adopt, by a 2/3 vote, a Resolution declaring its intention to exchange the property.
Determine Appropriate Sites

© 2012 Orbach, Huff & Suarez LLP
District Owned, Under Utilized Property(s).
15
Determine Appropriate Sites

Potential Site(s) Needed Now or in the Future.
Balancing Equities‐Due Diligence

Appraisals

Local Zoning Impacts

Two Party, Three Party Negotiations

Property Due Diligence
© 2012 Orbach, Huff & Suarez LLP
16
Economic Benefits to the District & Community

Avoid Unused Sites Being Assessed by the State.

Reduce/Eliminate M & O on Closed Sites.

Facilities Closer to Student Population Being Served.
Realizing Revenues From Your Real Estate
Thank You!
Joseph Quinonez
Facilities Development Manager – Montebello Unified School District
[email protected]
Sarine Abrahamian
Senior Counsel – Orbach Huff Suarez & Henderson [email protected]
Scott Sheldon
President – Terra Realty Advisors, Inc.
[email protected]
© 2012 Orbach, Huff & Suarez LLP
17