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HomeMy WebLinkAbout07 4TH AMEND VESTAR/KIMCO FOR DISTRICT 12-02-08AGENDA REPORT MEETING DATE: DECEMBER 2, 2008 TO: WILLIAM A. HUSTON, EXECUTIVE DIRECTOR Agenda Item 7 Reviewed: City Manager Finance Director FROM: CHRISTINE SHINGLETON, ASSISTANT CITY MANAGER SUBJECT: FOURTH AMENDMENT TO INFRASTRUCTURE CONSTRUCTION AND PAYMENT AGREEMENT WITH VESTAR/KIMCO TUSTIN, L.P. (`DEVELOPER") FOR THE DISTRICT AT TUSTIN LEGACY SUMMARY City Council authorization is requested for an amendment to the Infrastructure Construction and Payment Agreement (the "Agreement") for the District at Tustin Legacy. RECOMMENDATION It is recommended that the City Council: 1. Authorize progress or partial reimbursements to the Developer subject to requirements contained in the Fourth Amendment to the Agreement. 2. Subject to any non-substantive modifications as may be determined necessary by the City's Tustin Legacy Special Counsel or City Attorney, approve and authorize the City Manager, or Assistant City Manager to execute the Fourth Amendment to the Infrastructure Construction and Payment Agreement (the "Amendment") between the City of Tustin and the Developer and to carry out all actions necessary to implement the Amended Agreement. FISCAL IMPACT The Infrastructure Construction and Payment Agreement (the "Original Agreement") is an implementing agreement required by DDA 04-02. The Agreement and three previous amendments modified certain commitments to reimburse the Development for their identified contribution in excess of their fair share obligation related to the Tustin Legacy Backbone Infrastructure Program. The Fourth Amendment permits the City to provide for progress or partial reimbursements to the Developer for Developer's Infrastructure Work and permits the City to use Tustin Legacy Enterprise Funds that might be available through April 30, 2009 which are not committed to other Tustin Legacy eligible projects but only as City cash flow needs would permit. BACKGROUND The City Council previously approved an Infrastructure Construction and Payment Agreement (the "Original Agreement") which was executed on June 8, 2005 and Disposition and Development Agreement (DDA) for the District at Tustin Legacy on July 20, 2004. The City Council subsequently approved and the City and Developer entered into the First Amendment to the Agreement on July 26, 2007, the Second Amendment to the Agreement in conjunction with the Tustin Legacy/Retail Center Community Facilities District No. 07-01 (CFD 07-01) on September 1, 2007, and the Third Amendment to the Agreement on January 2, 2008. Pursuant to the Amended Agreement, the Developer is entitled to reimbursement of its Tustin Legacy Backbone Infrastructure costs which exceed the Tustin Legacy Project Fair Share Obligation upon full acceptance of individual Developer Backbone Infrastructure Segments, also subject to provisions of Section 4.2.1 of the Agreement. Under this section of the Agreement, the Developer is entitled to reimbursement only to the extent of specific sources of funds and terms for payment of such sources. This has imposed a heavy financial burden on the Developer as construction is nearing completion of a large portion of the Developer's Backbone Infrastructure Work. Further, there may be a delay in the payment to the Developer of land sale proceeds from the master developer footprint originally contemplated in late September of 2009. Accordingly, to mitigate the burden on the Developer and to facilitate completion of additional Tustin Legacy Backbone Infrastructure Work as required under the DDA and Agreement, the Developer has requested the release of sources of funds that may be available as identified in Section 4.2.1 of the Agreement. In addition to full release of funds at completion of a Segment, Developer would be able to receive reimbursement in the form of progress or partial payments with respect to work for specific Tustin Legacy Backbone Infrastructure Work that has already been performed and for which payment requests are eligible expenditures under the Agreement and for which both the City Engineer and City's construction manager can certify completion of a percentage of work commensurate with a requested progress payment. While not a source of funds originally identified in Section 4.2.1, the Developer has also requested release of certain cash funds in the Tustin Legacy Enterprise Fund (other than those Enterprise Funds already identified in Section 4.2.1 of the Agreement) only in the amount(s) determined available prior to April 30, 2009 and which have not been committed to other Tustin Legacy authorized expenses as determined by the City. The Developer also understands that any release of these additional Tustin Legacy Enterprise Funds prior to April 30, 2009 would also be based on available cash flow needs of City as determined by the City Manager and City Finance Director in their sole discretion. A Fourth Amendment to the Infrastructure Construction and Payment Agreement is attached and staff recommends its adoption. ~~~~ Christine A. Shingleton Assistant City Manager ~`~ Tim Serlet Public Works Director Attachments S:\RDAIRDA Report\Agenda Report 12-02-08.Doc '` Vestar November 20, 2008 Christine Shingleton Assistant City Manager City of Tustin 300 Centennial Way Tustin, CA 92780 R>N;: District of Tustin Legacy Infrastructure Reimbursements Dear Chris, Allan J. Kasen General Counsel Chris, first, let me say that Vestar is very appreciative of all of the hard work and cooperation shown by the City with respect to the complex subject of infrastructure reimbursements. The purpose of this letter is to request that certain progress payments he made to Vestar/Kimco Tustin, L.P. ("Vestar") as an implementation of reimbursement payments pursuant to the Infrastructure Construction and Payment Agreement (the "Infrastructure Agreement") in light of current circumstances with respect to infrastructure matters. As the City is aware, Vestar has been required to fund construction of the Developer Backbone Infrastructure in an amount in excess of its Project Fair Share Contribution of $36,330,000. Under the Agreement, the current differential between Vestar's capped Project Fair Contribution and the estimated price of Developer's Backbone Infrastructure Work is an amount not to exceed $46,180,692. Pursuant to the Agreement, Vestar is entitled to reimbursement of its infi•astn~cture costs which exceed the Project Fair Share Obligation upon full acceptance of individual Developer Backbone Infrastructure Segments, also subject to provisions of Section 4.2.1 of the Agreement. Under this section, Vestar is entitled to reimbursement only to the extent of specific sources of funds and terms for payment of such sources. Naturally, this has imposed a heavy financial burden on Vestar as construction is nearing completion of a large portion of the Developer's Backbone Infrastructure Worlc.. Further, as you know, there may likely be a delay in the payment to Vestar of land sale proceeds from the master developer footprint originally contemplated in late September of 2009. Accordingly, to mitigate the burden on Vestar and to facilitate completion of additional infrastructure ,Vestar would request the release of sources of funds that may be available as identified in Section 4.2.1 of the Agreement in the form of progress payments with respect to work for specific Backbone Infrastructure Segments that has already been perfoi-~ned and for which payment requests are eligible expenditures under the Agreement and for which both the City Engineer and City's construction manager can certify ,~ ~ Pr .pied nii recycled popes; (p%3L1'~:. recycled <n~ileiil; acid free Vestar Development Co. 2425 Easi Camelback Road Suite 750 Phoenix, Arizona 85016 phone: 602.866.0900 fax: 602.955.2298 November 20, 2008 Page 2 of 2 completion of a percentage of work commensurate with a requested progress payment. While not a source of funds originally identified in Section 4.2.1, Vestar would also request release of certain cash funds in the Tustin Legacy Enterprise Fund only in the amount(s) detern~ined available prior to April 30, 2009 and also Enterprise Funds which have not been committed to other Tustin Legacy authorized expenses as determined by the City's Finance Director and Redevelopment Agency. Vestar also understands that any release of these additional Enterprise Funds prior to April 30, 2009 would also be based on available cash flow needs of City as determined by the City's Finance Director. Naturally, the City will be required to verify the costs and work for which Vestar is seeking progress payment reimbursements. One major segment that fits in this category is the work on Barranca Parkway which has been substantially completed by Vestar as reflected by tl~c completion books that Vestar has previously submitted to the City. As to Barranca Parkway, as you know, the City of ovine has requested the completion of some additional work in the City of Irvine right of way, but has instructed Vestar to postpone that work (and not dig up the street) for a several month period. In any event, with respect to the relatively minor work to be completed on Barranca Parkway, this is to confirm that Vestar will timely complete that work in accordance with the timetable permitted by the City of Irvine, that Vestar will set aside the funds necessary to complete such work, and that Vestar agrees that the performance bonds for such work will not be reduced or released until such time a full acceptance of the infrastructure work by Tustin. We would also request progress payment for the Barranca Channel work and the Barranca storm drain work performed by Vestar and any other work the City deems appropriate for progress payment reimbursement based on submissions made or to-be-made by Vestar. At all events, we believe that progress payments to Vestar will in no way negatively impact the City, but rather will simply ameliorate a growing and substantial financial burden on Vestar, and will facilitate the completion of additional infrastructure by freeing up available funds that can be utilized for that purpose. Once again, we thank you for your continuing cooperation on the subject of infrastructure and infrastructure reimbursements. Sincerely, Allan J. Kasen AJK/dfe cc: Tim Serlet, via email Doug Anderson, via email Riclc Kuhle, via email Pau] Rhodes, via email Jeff Lochner, via email Jeff Axtell, via email FOURTH AMENDMENT TO INFRASTRUCTURE CONSTRUCTION AND PAYMENT AGREEMENT This FOURTH AMENDMENT TO INFRASTRUCTURE CONSTRUCTION AND PAYMENT AGREEMENT (this "Fourth Amendment") is entered into as of , 2008 (the "Effective Date") by anal between the CITY OF TUSTIN ("City") and VESTARJKIMCO TUSTIN, L.P., a California limited partnership ("Developer"). The City and the Developer are sometimes referred to herein individually as a "Party" and collectively as the "Parties." RECITALS A. City and Developer entered into that certain Infrastructure Construction and Payment Agreement dated. June 8, 2005 ("Original Agreement", to which reference is made for the meaning of each capitalized term used, but not defined herein), pursuant to the Tustin Legacy Disposition and Development Agreement ("Retail Development") dated as of June 21, 2004, as amended ("DDA") pursuant to which, among other things, the Developer agreed to: (i) pay the Project Fair Share Contribution (as defined in the DDA) with respect to the Tustin Legacy Backbone Infrastructure Program, and (ii) to design and construct "Developer's Backbone Infrastructure Work" (as defined in the DDA), and (iii) to maintain the same until completion of Developer's Backbone Infrastructure Work. The physical infrastructure improvements which are a part of Developer's Infrastructure Backbone Infrastructure Work are referred to as the "Facilities" and were set forth in Exhibit A of the Original Agreement and further broken down by "Segments" as described in Exhibit A. B. City and the Developer entered into the First Amendment to Infrastructure Construction and Payment Agreement dated July 26, 2007 ("First Amendment"), in order to amend and modify Exhibit A to the Original Agreement, which sets forth the description of the Segments and the Estimated Release Price for each Segment. C. City and the Developer entered. into the Second Amendment to the Infrastructure Construction and Payment Agreement dated September 1, 2007 ("Second Amendment") to provide for the City's acquisition of one of the Segments identified in the First Amendment from the Developer and the payment to Developer of the purchase price for such Segment, which purchase price was payable solely from proceeds of Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007 (the "CFD No. 07-01 Bonds"). D. City and the Developer entered into the Third Amendment to the Infrastructure Construction and Payment Agreement dated January 2, 2008 (the "Third Amendment") to provide for a modification to the definition of "Completion" in the Agreement and to provide the Developer with some relief for reimbursements of certain Segments in Irvine under certain conditions. E. The Original Agreement, as amended and modif ed by the First Amendment, Second Amendment, and Third Amendments, is referred collectively to as the "Amended Agreement". FOURTH AMENDMENT TO INFRASTRUCTURE CONSTRUCTION AND PAYMENT AGREEMENT This FOURTH AMENDMENT TO INFRASTRUCTURE CONSTRUCTION AND PAYMENT AGREEMENT (this "Fourth Amendment") is entered into as of , 2008 (the "Effective Date") by and between the CITY OF TUSTIN ("City") and VESTAR/KIMCO TUSTIN, L.P., a California limited partnership ("Developer"). The City and the Developer are sometimes referred to herein individually as a "Party" and collectively as the "Parties." RECITALS A. City and Developer entered into that certain Infrastructure Construction and Payment Agreement dated June 8, 2005 ("Original Agreement", to which reference is made for the meaning of each capitalized term used, but not defined herein), pursuant to the Tustin Legacy Disposition and Development Agreement ("Retail Development") dated as of June 21, 2004, as amended ("DDA") pursuant to which, among other things, the Developer agreed to: (i) pay the Project Fair Share Contribution (as defined in the DDA) with respect to the Tustin Legacy Backbone Infrastructure Program, and (ii) to design and construct "Developer's Backbone Infrastructure Work" (as defined in the DDA), and (iii) to maintain the same until completion of Developer's Backbone Infrastructure Work. The physical infrastructure improvements which are a part of Developer's Infrastructure Backbone Infrastructure Work are referred to as the "Facilities" and were set forth in Exhibit A of the Original Agreement and further broken down by "Segments" as described in Exhibit A. B. City and the Developer entered into the First Amendment to Infrastructure Construction and Payment Agreement dated July 26, 2007 ("First Amendment"), in order to amend and modify Exhibit A to the Original Agreement, which sets forth the description of the Segments and the Estimated Release Price for each Segment. C. City and the Developer entered into the Second Amendment to the Infrastructure Construction and Payment Agreement dated September 1, 2007 ("Second Amendment") to provide for the City's acquisition of one of the Segments identified in the First Amendment from the Developer and the payment to Developer of the purchase price for such Segment, which purchase price was payable solely from proceeds of Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007 (the "CFD No. 07-01 Bonds"). D. City and the Developer entered into the Third Amendment to the Infrastructure Construction and Payment Agreement .dated January 2, 2008 (the "Third Amendment") to provide for a modification to the definition of "Completion" in the Agreement and to provide the Developer with some relief for reimbursements of certain Segments in Irvine under certain conditions. E. The Original Agreement, as amended and modified by the First Amendment, Second Amendment, and Third Amendments, is referred collectively to as the "Amended Agreement". F. Pursuant to the Amended Agreement, the Developer is entitled to reimbursement of its infrastructure costs which exceed the Project Fair Share Obligation upon full acceptance of individual Developer Backbone Infrastructure Segments, also subject to provisions of Section 4.2.1 of the Agreement. Under this section of the Amended Agreement, the Developer is entitled to reimbursement only to the extent of specific sources of funds and terms for payment of such sources. This has imposed a heavy financial burden on the Developer as construction is nearing completion of a large portion of the Developer's Backbone Infrastructure Work. To mitigate the burden on the Developer and to facilitate completion of additional infrastructure, the Developer has requested the release of sources of funds that maybe available as identified in Section 4.2.1 of the Agreement in the form of progress reimbursement payments with respect to work for specific Tustin Legacy Backbone Infrastructure Work that has already been performed and for which payment requests are eligible expenditures under the Amended Agreement and for which both the City Engineer and City's construction manager can certify completion of a percentage of Backbone Infrastructure work commensurate with a requested progress payment. While not a source of funds originally identified in Section 4.2.1, the Developer has also requested release of certain additional cash funds (beyond those enterprise fund sources identified in Section 4.2.1 of the Amended Agreement) in the Tustin Legacy enterprise Fund only in the amount(s) determined available prior to April 30, 2009 and also Tustin Legacy Enterprise Funds which have not been committed to other Tustin Legacy authorized expenses as determined by the City. The Developer also understands that any release of these additional Tustin Legacy Enterprise Funds prior to April 30, 2009 would also be based on available cash flow needs of City as determined by the City. AGREEMENT NOW, THEREFORE, in consideration of the foregoing Recitals, which are hereby incorporated in the operative provisions of this Fourth Amendment by this reference and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties further agree as follows: 1. Modification and Amendment of Amended Agreement. The Amended Agreement is hereby modified and amended as follows: 1.1 Subsection 4.2.1 (a) of the Amended Agreement is hereby modified and amended to read as follows: "Subsection 4.2.1 (a). The City shall have no obligation to reimburse Developer until the Final Completion has occurred and all Developer's Backbone Infrastructure Work has been fully completed to the satisfaction of the City, unless progress or partial reimbursements to Developer are authorized by the City Council at a regular City Council meeting with the exception that delay in completion of the following improvements identified herein shall also not prevent the Developer from receiving full, progress or partial reimbursements of all other Facilities identified in Exhibit A of the Amended Agreement pursuant to the requirements of Subsection 4.2.5 of the Agreement, subject to satisfaction of all other requirements of the Amended Agreement, including but not limited to maintenance of adequate security after the acceptance date of each Segment for the time frame identified in the Agreement and full security for the following improvements in an amount determined required by the Director: (i) Storm drainage facilities to be constructed in the City of Irvine within: a. Warner Avenue from east of Park Avenue to Peters Canyon Channel, and b. Barranca Parkway from Jamboree Road to Peters Canyon Channel. (ii) Barranca Parkway and Warner Avenue storm drain improvements and related work located between Jamboree Road and Tustin Ranch Road." 1.2 Subsection 4.2.4 is hereby added to the Amended Agreement to read as follows: "Subsection 4.2.4. Notwithstanding the specific sources of funding of the Reimbursement Amount as identified in Section 4.2.1 of the Agreement, certain additional cash funds in the Tustin Legacy enterprise fund may be available for full, progress or partial reimbursement payments to Developer only in the amount(s) determined available prior to April 30, 2009 and only to the extent that such Tustin Legacy Enterprise Funds have not been committed to other Tustin Legacy eligible project expenses as determined by the City. The Developer acknowledges and agrees that any release of these additional Tustin Legacy Enterprise Funds prior to April 30, 2009 would be based solely on the determination that such Tustin Legacy enterprise funds have not been committed to other Tustin Legacy eligible project expenses, and release of such enterprise funds would not negatively impact any available cash flow needs of City as determined by the City Finance Director and City Manager, in their sole discretion. 1.3 Subsection 4.2.5 is hereby added to the Amended Agreement to read as follows: "Subsection 4.2.5. Any release of sources of funds that may be authorized by the City Council as identified in Section 4.2.1 and Section 4.2.4 of the Agreement may be in the form of progress or partial payments with respect to work for specific Backbone Infrastructure Segments that has already been performed and for which payment requests are eligible expenditures under the Amended Agreement provided that both the Director and City's construction manager for Developer's Backbone Infrastructure Work can certify in writing completion of a percentage of work commensurate with a requested progress or partial payment for work." 2. Miscellaneous. 2.1 Agreement Ratified. Except as specifically amended or modified herein, each and every term, covenant and condition of the Amended Agreement is hereby ratified and shall remain in full force and effect. Each and every reference to the "Agreement" in the First Amended Agreement, the Second Amended Agreement, and in the Third Amendment shall be deemed to refer to the Amended Agreement as amended by this Fourth Amendment. 2.2 Binding Agreement. This Fourth Amendment shall be binding upon and inure to the benefit of the parties hereto, their legal representatives, successors and permitted assigns. 2.3 Governing_Law. This instrument shall be interpreted and construed in accordance with the laws of the State of California. IN WITNESS WHEREOF, City and the Developer have executed this Fourth Amendment as of the date first set forth above. CITY OF TUSTIN Dated: , 2008 By: William Huston, City Manager APPROVED AS TO FORM Special Counsel for City STEEFEL, LEVITY & WEISS A PROFESSIONAL CORPORATION By: DEVELOPER: VESTAR/HIMCO TUSTIN, L.P., a California limited liability company By: Vestar Tustin, L.L.C., a Delaware limited liability company Its: General Partner By: Hanley Tustin, Inc., Its: Managing Member By: Name: Title: