HomeMy WebLinkAboutOrdinance No. 2622-2012the city o f
KENAL ALASKA
Ayr
Suggested by: Administration
CITY OF KENAI
ORDINANCE NO. 2622 -2012
AN ORDINANCE OF THE COUNCIL OF THE CITY OF KENAI, ALASKA, AUTHORIZING
THE CITY MANAGER TO ENTER INTO A LEASE PREFERENCE RIGHT AGREEMENT
WITH THOMAS WAGONER AND DOROTHY WAGONER WITH RESPECT TO LOT 2,
BLOCK 1, GUSTY SUBDIVISION (11472 KENAI SPUR HIGHWAY) LOCATED WITHIN
THE AIRPORT RESERVE.
WHEREAS, on August 20, 1970, the City entered into a lease with James A. Adkins
and Edward A. Ferguson for City -owned lands which lands included Lot 2, Block 1,
Gusty Subdivision (the Property); and,
WHEREAS, since 1970, the parties to that lease have amended the lease and the
terms of the lease for Lot 2, Block 1 are set forth in the August 20, 1970 lease as
amended through the Sixth Amendment to Lease recorded in the Kenai Recording
District at 2011 - 005192 -0 (the Lease); and,
WHEREAS, on June 20, 1988, the interest in the Lease with respect to Lot 2, Block 1
was conveyed to Thomas H. Wagoner and Dorothy C. Wagoner; and,
WHEREAS, on October 31, 2005, the Wagoners assigned their leasehold interest to Ma
& Pa Alaskan Treasures, Inc., and the Wagoners subsequently issued Ma & Pa
Alaskan Treasures, Inc. a warranty deed to the leasehold property and took a security
interest in that property, including the improvements on the property, to secure
repayment of a promissory note in favor of the Wagoners; and,
WHEREAS, the Kenai City Council, through Ordinance No. 2553 -2011, waived a sale
restriction imposed by the Kenai Municipal Code (KMC) and thereby authorized a sale
of the Property to the current lessee, Ma & Pa Alaskan Treasures, Inc., subject to
certain restrictions, promises, and /or covenants; and,
WHEREAS, at its February 1, 2012 Council Meeting, the Kenai City Council
authorized the City Manager to enter into a purchase and sales agreement for the
Property with Ma & Pa Alaskan Treasures, Inc.; and,
WHEREAS, among other terms of the sale, the Council required that if Ma & Pa
Alaskan Treasures, Inc. elected to use City financing to finance its purchase of the
Property, the debt must be secured by a first deed of trust on the real property and a
first or second deed of trust on any and all improvements on the property; and,
WHEREAS, Administration recommends that, in consideration of the Wagoner's
previous leasehold interest in the property and the Wagoner's security interest in the
improvements on the Property, the City enter into a preference right agreement to
allow the Wagoners to again lease the Property in the event of a default by Ma & Pa
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Ordinance No. 2622 -2012
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Alaskan Treasures, Inc. with respect to a deed of trust benefiting the City to secure its
loan for the purchase price; and,
WHEREAS, a preference right in favor of the Wagoners would preserve the status quo
of their security interest in the improvements on the Property in light of the sale so
long as the preference right is limited to permitting a new lease under the same terms
of the Lease in the event of a default; and,
WHEREAS, the Property is identified for non - aviation uses in the current Airport
Layout Plan and is not needed otherwise for a public purpose and, therefore complies
with the lease requirements of KMC 21.10.020; and,
WHEREAS, it is in the best interest of the City to authorize the City Manager to enter
into a land lease that deviates from the standard form lease authorized by the City
Council, and for a shorter lease term than otherwise set out in KMC 21.10.090, in
order to further the preference right authorized.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF KENAI,
ALASKA, as follows:
Section 1. Classification: This is a non -code ordinance.
Section 2. Preference Right Agreement: The Kenai City Council authorizes the City
Manager to enter into lease preference right agreement with Thomas Wagoner and
Dorothy Wagoner with respect to Lot 2, Block 1, Gusty Subdivision. The preference
right granted shall be limited as follows: the Wagoners may exercise a right to lease
only in the event that Ma & Pa Alaskan Treasures, Inc. defaults on any deed of trust
benefitting the City with respect to the Property and either (1) the City forecloses on
the Property and becomes the new owner of the property through a trustee's deed or
(2) if, in lieu of foreclosure, Ma & Pa Alaskan Treasures, Inc. reconveys the Property to
the City.
Section 3. Authorization for Alternate Lease Form, KMC 21.20.150(b): Should the
Wagoners exercise the preference right permitted by this Ordinance, the Kenai City
Council authorizes the City Manager to enter into a new lease with the Wagoners in
which the new lease is in the same foi in and under the same terms as the lease
entered into on August 20, 1970 as amended.
Section 4. Effective Date: Pursuant to KMC 1.15.070(1), this ordinance shall take
effect one month after adoption.
PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA this 18th day of April,
2012.
PAT PORTER, MAYOR
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Ordinance No. 2622 -2012
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ATTEST:
Sandra Modigh, City Clerk
Introduced: April 4, 2012
Adopted: April 18, 2012
Effective: May 18, 2012
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KENAI, ALASKA
MEMO:
"Village with a Past, City with a Future"
210 Fidalgo Avenue, Kenai, Alaska 99611 -7794
Telephone: (907) 283 -7535 / FAX: (907) 283 -3014
www.ci.kenai.ak.us
TO: Kenai City Council
FROM: Christine Cunningham, Assistant to City Manager
1 THROUGH: Rick Koch, City Manager
�bATE: March 28, 2012
SUBJECT: City of Kenai Sale of Property to Ma & Pa Alaskan Treasures, Inc.
Lot 2, Block 1, Gusty Subdivision, Kenai; KPB Parcel No. 043 - 270 -37
Ordinance No. 2622 -2012
The purpose of this memo is to provide additional information in support of the referenced
Ordinance, which authorizes the City Manager to enter into a Lease Preference Right
Agreement with Thomas Wagoner and /or Dorothy Wagoner only in the event of a default by
Ma & Pa Alaskan Treasures Inc.
The City originally leased the referenced property to Thomas and Dorothy Wagoner. The
Wagoners sold their leasehold interest to Ma & Pa Alaskan Treasures in 2006 in a transaction
financed by the Wagoners. To secure payment, Ma & Pa Alaskan Treasures executed a
promissory note and deed of trust in favor of the Wagoners. Unfortunately, the 2006 deed of
trust and associated note incorrectly stated that the note was secured by a deed of trust in the
entire fee simple interest in the property (the land owned by the City). The deed of trust was
not limited to the improvements on the parcel and the leasehold interest. All parties have
agreed to correct this improper encumbrance on the City's property prior to executing the
closing documents on the sale to Ma & Pa Alaskan Treasures.
It is the understanding of Administration that the Wagoners agree they are not entitled to a
security interest in the fee interest or in the land itself as opposed to the improvements
thereon. Accordingly, before closing on the City's sale of the land to Ma & Pa Alaskan
Treasures, a corrected deed of trust or other suitable document will be executed and recorded.
Because the leasehold interest in the property will be extinguished by the sale of the land to
the current leaseholder, that deed of trust will encumber only the improvements on the
property. The Lease Preference Right Agreement in Ordinance No. 2622 -2012 provides the
Wagoners with assurance that they will have some recourse to benefit from their limited
security interest in the improvements in the event that Ma & Pa Alaskan Treasures defaults.
KENAI, ALASKA
l aaa e with a Past, Gc with a Futurell
uwoeaarov
'111!
MFtMO:
210 Fidalgo Avenue, Kenai, Alaska 99611 -7794
Telephone: 907 - 283 -7535 / FAX: 907 - 283 -3014
1992
TO: City Council
FROM: Rick Koch
DATE: April 12, 2012
SUBJECT: Ordinance No. 2622 -2012, Agreement for Lease Preference
The purpose of this memo is to provide, for your information, the draft Agreement for
Lease Preference associated with Ordinance No. 2622 -2012.
The draft Agreement for Lease Preference was provided to Thomas Wagoner and
Dorothy Wagoner; however, due to the current Legislative Session, the Wagoners have
been unable to provide a response in advance of the April 18, Council Meeting
deadline.
Administration had discussed the Agreement in general with Thomas Wagoner, and
does not expect any substantive changes to the attached draft
AGREEMENT FOR LEASE PREFERENCE
This agreement is made between the City of Kenai (City), whose address is 210 Fidalgo
Avenue, Kenai, AK 99611, and Thomas H. Wagoner and Dorothy C. Wagoner
(Wagoners), whose address is 4040 Primrose Place, Kenai, AK 99611.
RECITALS
On August 20, 1970, the City entered into a lease of City -owed airport lands with James
A. Adkins and Edward A. Ferguson for property that included Lot 2, Block 1, Gusty
Subdivision (the Property). That lease was recorded in the Kenai Recording District at
Book 115, Page 947 et seq. on October 24, 1977. Since 1970, the parties to the lease
have amended the lease from time to time. The complete terms of the lease are as
amended through the Sixth Amendment to Lease (recorded in the Kenai Recording
District at 2011- 005192 -0) and are referred to here as "the Lease."
In 1988, the Wagoners were the highest bidders on a bank foreclosure of the leasehold
interest in Lot 2, Block 1. The Wagoners were issued a trustee's deed (recorded in the
Kenai Recording district at Book 327 pages 547 -548) and the Wagoners became the
lessees of Lot 2, Block 1.
On October 31, 2005, the Wagoners sold and assigned their leasehold interest in Lot 2,
Block 1 to Ma & Pa Alaskan Treasures, Inc. (MPAT). The sale was financed by the
Wagoners. That loan is documented in a Deed of Trust Note signed by MPAT in favor of
the Wagoners and dated January 10, 2006. To secure repayment of the note, the
Wagoners took a security interest, and Deed of Trust dated January 10, 2006, in the
Property.. MPAT signed the'De,ed of Trust in the Property under which the Wagoners
were the beneficiaries.
On February 1, 2012, the Council "authorized a sale of Lot 2, Block 1 to MPAT in a City -
financed transaction. The Council conditioned the City financing by requiring that its
loan to MPAT for the sale of the property outright be secured by first deed of trust with
respect to the land. The Council was satisfied that if sufficient equity existed in the value
of the real property, the City could be secured by a second position with respect to any
improvements thereon. (Although the sale of airport lands located in the City's Airport
Reserve (including Lot 2, Block 1) is generally prohibited under the Kenai Municipal
Code, in 2011, by non -code ordinance 2553 -2011, the Kenai City Council waived this
sale restriction with respect to Lot 2, Block 1.)
The sale of Lot 2, Block 1 has implications on the Wagoners because the Deed of Trust
Note in favor of the Wagoners will not be paid through closing of the sale of the land
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between the City and MPAT. The Wagoners, however, do not wish to lose their security
interest in the leasehold. 'Because the leasehold interest would merge into the MPAT's
ownership under a sale of the land to MPAT, the leasehold interest will be extinguished
in the sale of Lot 2, Block I to the current lessee (MPAT).
In the process of finalizing the land sale to MPAT and, considering this effect on the sale
to MPAT, the City and Wagoners discovered that the 2006 Deed of Trust recorded in
favor of the Wagoners improperly encumbered the entire fee interest of the City in Lot 2,
Block 1, not just the Wagoner's leasehold interest. The Wagoners agree that this was a
done in error and that their security for repayment of the Deed of Trust Note from MPAT
in favor of the Wagoners is more properly in the leasehold interest and improvements
only
Accordingly, the Wagoners have agreed to relinquish the first deed of trust position with
respect to the real property covered under the Lease. The Wagoners and the City are
working to correct this error through a corrected deed of trust or similar instrument.
To facilitate the sale of the property to MPAT and, in consideration of the Wagoner's
previous leasehold interest in the property and their proper security interest in the
improvements, the City and Wagoners wish to enter into a preference right agreement to
allow the Wagoners to lease Lot 2, Block 1 under the same lease terms and conditions of
the Lease if MPAT were to default in its obligations to the City under the deed of trust
the City will take as a result of its sale of the Property to Ma & Pa Alaskan Treasures,
Inc.
The Kenai City Council agreed to grant such a preference right by Ordinance No. 2622-
2012 adopted by the Kenai City Council on April 18, 2012.
City and Wagoners therefore agree as follows:
1. PREFERENCE RIGHT GRANTED.
(A) City grants to Wagoners, jointly and severally, a preference right to lease
the Property from the City of Kenai under the same terms and conditions of the Lease
as it exists on the date of this agreement.
(B) Wagoners may exercise this preference right only if:
(i) the City forecloses on a deed of trust under which MPAT is the
Grantor and the City is the beneficiary and the deed of trust is executed to secure
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repayment to City of the purchase price of the Property and the City becomes the new
owner of the Property through foreclosure; or,
(ii) if MPAT defaults under its obligations on a note and /or deed of
trust and, in lieu of foreclosure, MPAT reconveys the Property to the City.
(C) To the extent that any Kenai Municipal Code provision in effect at the
time the Wagoners exercise this preference right differs from the terms of the Lease, the
terms of the Lease will control unless such terms violate current requirements of state
or federal law or regulation or the terms of any grant assurances and conditions to
which the City is bound.
2. TERMINATION. The preference right granted under this agreement terminates
automatically upon the earlier of (A) MPAT's final payment to the Wagoners under the
2006 Deed of Trust Note; or (B) MPAT's final payment to the City under a note issued
by MPAT to City to finance MPAT's purchase of the Property; or (C) on June 30, 2025.
3. CITY'S RESOPNSIBILITIES.
(A) City will provide Wagoners with written notice should it begin foreclosure
proceedings under any note or deed of trust executed by MPAT to secure repayment to
the City of the City - financed loan to MPAT or if MPAT reconveys the Property to the
City in lieu of foreclosure.
(B) City shall furnish to Wagoners information that Wagoners may reasonably
request and as expeditiously as necessary to enable Wagoners to evaluate whether or not
to exercise the lease preference right if the C' becomes owner of the Property through a
foreclosure sale of the Property.
(C) Nothing in this agreement shall obligate City to make an offset bid for the
Property at a default sale of the Property in the event of a judicial or non - judicial
foreclosure of the Property.
4. WAGONERS' RESPONSIBILITIES.
(A) Wagoners must exercise their intention to exercise the preference right
within 30 days of City's notice that the City has foreclosed on the Property and become
the new owner, or of MPAT's reconveyance of the Property to the City in lieu of
foreclosure.
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(B) To exercise the preference right, Wagoners must submit an application for
lease according to Kenai Municipal Code 21.10.080, and the City will thereafter treat
the Wagoners as an existing tenant submitting an application for a lease renewal. The
application must be filed with the City within 30 days of the City's notice that the City
has foreclosed on the Property and become the new owner, or of MPAT's reconveyance
of the Property to the City in lieu of foreclosure.
(C) Further, in light of the City's continued interest in the Property, Wagoners
will inform City if Ma & Pa Alaskan Treasures, Inc. fails to perform any obligation due
under the Deed of Trust dated January 10, 2006, or due under any subsequently -
executed amendment or correction to that deed of trust or under a new Deed of Trust
executed to correct the defects of the January 10, 2006 Deed of Trust. Wagoners
should provide this information with 10 days of any default by MPAT under the Deed
of Trust or Deed of Trust Note.
(D) Wagoners agree that this preference right is personal to Wagoners.
Wagoners will not assign, sell, demise, or otherwise convey in any way their rights to
payment or performance under the Deed of Trust in the improvements on the Property
except as may be necessary for an administration of a personal estate.
5. NOTICES. Any notice or communication required or permitted under this
agreement shall be m writing,, addressed to the appropriate party at the address given
below for the type of delivery. Notice must be given personally, by certified mail (return
receipt requested), or by electronic mail. Notice by facsimile will NOT be accepted. All
notices are effective upon the date of receipt, except if the notice or communication is
received after 5:00 p.m. on a business day, or on a day that is not a business day of the
receiving party, and then the notice or communication is deemed received at 8:00 a.m. on
the next business day
City:
City of Kenai
210 Fidalgo Avenue (mailing/ hand - delivery)
Kenai, AK 99611
Attn: City Manager
rkochra ei.kenaiak.us (electronic)
To Wagoners: Thomas or Dorothy Wagoner
4040 Primrose Place
Kenai, AK 99611
(electronic)
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Either party may change their address for notice by giving notice as stated above to the
other party.
6. GENERAL PROVISIONS.
A. No Joint Venture. This Agreement is not intended to create, and nothing in
this Agreement should convey or be construed to create, a joint venture between the City
and Wagoners.
B. Rights or Remedies. No right or remedy herein conferred upon or reserved
to each respective party is intended to be exclusive of any other right or remedy. Each
and every right and remedy is cumulative and is in addition to any other right or remedy
identified in this agreement and as may be now or later existing at law or in equity or by
statute.
C. Attorney's Fees and Costs. If any legal proceeding is brought for the
enforcement of this agreement, or because of a dispute, breach, default, or
misrepresentation in connection with any of the provisions of this agreement, the
prevailing party shall be entitled to recover from the other party, m addition to any other
relief to which such party may be entitled to full, reasonable attorney's fees and Alaska R.
Civ. P. 79 costs incurred in that action or proceeding.
D. Governsng Law /Venue. This agreement shall be construed and governed by
the laws of the State of Alaska. Any disputes related to this agreement shall exclusively
be litigated in the courts of the State of Alaska, Third Judicial District, at Kenai, Alaska.
E. Waiver and Forbearance. Except to the extent that such party may agree in
writing, no waiver by a party of any breach by the other party of any of the other party's
obligations under this agreement shall be deemed to be a waiver of any subsequent
breach of the same or of any other similar obligation. Likewise, any forbearance by a
party to seek a remedy for any breach of the other party will not be deemed a waiver by
the non - breaching party of its rights or remedies with respect to such breach.
F. Rights or Remedies. No right or remedy conferred upon or reserved to each
respective party is intended to he exclusive of any other right or remedy. Each and every
right and remedy shall be cumulative and in addition to any other right or remedy given
hereunder, or now or hereafter existing at law or in equity or by statute.
G. Severability. If any provision of this agreement is unenforceable to any
extent, the remainder of this agreement, or the application of that provision to any
persons or circumstances other than those as to which it is held unenforceable, will not be
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affected by that unenforceability and will be enforceable to the fullest extent permitted by
law.
H. General Rules of Interpretation. Headings of paragraphs are solely for
convenience of reference and shall not affect meaning, construction, or effect of this
agreement. Unless the context otherwise indicates, words expressed in the singular shall
include the plural and vice versa and the use of the neuter, masculine, or feminine gender
include the others as well.
I. Understanding. Each party has read and understands this agreement. Each
party represents that they have each had had the opportunity to review the same with
counsel of their choice and is executing this agreement of their own free will
J. Counterparts. This agreement may be executed in identical counterparts,
each of which together shall be deemed an original, but all of which together will
constitute one instrument. In the event that any signature is delivered by e -mail delivery
in a ".pdf' format or other data file, such signature creates a valid and binding obligation
of the party executing (or on whose behalf such signature is executed) with the same
force and effect as if such signature page were an original.
K. Effective Date. This agreement is effective upon
parties.
e tater o
signature of all
WITNTESS WHEREOF, the parties have set their hands and day and year as
stated in the acknowledgments below.
CITY OF KENAI:
By:
Rick Koch
Its: City Manager
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STATE OF ALASKA
)ss
THIRD JUDICIAL DISTRICT
THOMAS AND DOROTHY
WAGONER
By:
By:
Thomas Wagoner
Dorothy Wagoner
The foregoing instrument was acknowledged before me this day of
, 2012, . by Rick Koch. City Manager of the City of Kenai, an Alaska
municipal corporation, on behalf of the City.
Notary Public for Alaska
My Commission Expires:
STATE OF ALASKA )
) ss ,.-
THIRD JUDICIAL DISTRICT )
THIS IS TO CERTIFY that on this day of , 2012, Thomas
H. Wagoner, being personally known to me or having produced satisfactory evidence of
identification, appeared before me and acknowledged the voluntary and authorized
execution of the foregoing instrument.
Notary Public for Alaska
My Commission Expires:
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STATE OF ALASKA )
) ss
THIRD JUDICIAL DISTRICT )
THIS IS TO CERTIFY that on this day of , 2012, Dorothy
C. Wagoner, being personally known to me or having produced satisfactory evidence of
identification, appeared before me and acknowledged the voluntary and authorized
execution of the foregoing instrument.
Approved as to form:
Krista S. Stearns
City Attorney
Notary Public for Alaska
My Commission Expires:
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