SJC Settles Suit, Can Now Sell Lot

Six years and two lawsuits later, the city of San Juan Capistrano is finally ready to sell a 3.5-acre property it once considered a possible site for future City Hall.

But when it does, it won’t get to keep all of the action.

The city has owned the property north of the Marbella Plaza ever since the original developer of Marbella Country Club and gated community dedicated it to the city for some public or institutional use in 1998.

In 2005, the city declared the parcel “surplus property” and set out to sell it, according to legal documents obtained by Patch. In 2006, the city found a willing buyer in a company called Centra Realty Corp. of Irvine, which wanted to build a medical building.

But the Marbella Development Co. sued for a portion of the proceeds because the nature of the future development changed from serving a public purpose to a commercial endeavor.

Eventually, Marbella and the city settled, and the city now owes the Marbella 25 percent of any proceeds it will receive from any future sale of the property.

Meanwhile, Centra Realty got frustrated with the litigation and demanded its $150,000 deposit back from the city. Its successor, known as SJ Lot 217 LLC, sued the city in December.

A settlement reached just this week will return the deposit to the commercial developer and gives him the right to 15 percent of the net sales proceeds.

According to the settlement, “net sales proceeds” is defined as the actual sales amount minus the cut Marbella would receive and customary escrow, brokerage, closing and title insurance fees.

But the settlement locks in the SJ Lot 217 price somewhere between $3.125 million and $4 million. That is, if the price comes under $3.125 million, the number will be calculated as if it were $3.125 million, according to the settlement.

And if the price exceeds $4 million, the number would be $4 million for SJ Lot 217’s calculations, according to the settlement.

The settlement calls upon the city to list the property within 20 days from when the parties signed off on the agreement. The City Council approved the settlement in closed session Tuesday.