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HomeMy WebLinkAbout10 EXCLUSIVE AGREEMENT TO NEGOTIATE WITH R.D. OLSON DEVELOPMENT 10 AGENDA REPORT Agenda Item: Reviewed: City Manager Finance Director N/A MEETING DATE: NOVEMBER 2, 2010 TO: DAVID C. BIGGS, CITY MANAGER FROM: REDEVELOPMENT AGENCY SUBJECT: EXCLUSIVE AGREEMENT TO NEGOTIATE WITH R.D. OLSO N DEVELOPMENT SUMMARY: The City previously received several hotel developer proposals for the disposition and development of a portion of property within the Tustin Pacific Center East and, upon review of the terms and proposed pricing of said proposals, the City Council directed staff to prepare an Exclusive Agreement to Negotiate with R.D. Olson Development. RECOMMENDATION: Subject to non-substantial modifications as may be determined necessary by the City Attorney prior to execution, approve and authorize the City Manager, or designee, to execute an Exclusive Agreement to Negotiate ("ENA") between the City of Tustin, and R.D. Olson Development, and to carry out all actions necessary to negotiate a Disposition and Development Agreement ("DDA"). FISCAL IMPACT: Selection of a prospective developer in which to enter into an Exclusive Agreement to Negotiate has no direct immediate fiscal impact. The developer will be required to make an initial good faith deposit with the ENA prior to entering into the exclusive negotiation period. There may be near to long term fiscal impacts, which will be driven by any type of development on the site, revenues from land sale proceeds, and project generated revenues. These fiscal impacts will be evaluated as part of the negotiation process on the DDA. BACKGROUND: The Agency at its August 3, 2010 Closed Session reviewed two proposals from different hotel developers, including terms and conditions of a potential sale of property for hotel development on property located within the Tustin Pacific Center East Specific Plan area, a portion of the former AAE site, and also excess Cal Trans property resulting from the November 2, 2010 Exclusive Agreement to Negotiate Page 2 Newport Extension/SR-55 Freeway Ramp Reconfiguration Project (Phase 1) located west of Newport Avenue and north of the new SR-55 Edinger Ramp As a result of the review of the anticipated terms and conditions of a potential sale of property, City Council directed staff to further pursue negotiations on the subject site with R.D. Olson Development. R.D. Olson is a high quality hotel developer with experience in all stages of the hotel development process and over 30 years of hotel construction experience. Over the years, it has cultivated relationships with the strongest hotel brands in the world and the debt and equity partners required to execute hotel developments. The extensive relationships, experience, and capabilities established by R.D. Olson places the company among the most highly regarded regional hotel developers in California. R.D. Olson proposes to develop two, high quality, branded, select service hotels totaling not less than 300 rooms to serve local businesses and leisure travelers. The proposed hotel products include a Marriott Residence Inn, and a business hotel, the Hilton Garden Inn. The proposed development is also intended to include additional restaurant and/or retail space and potential conference space up to 8,000 square feet. While modifications to the Pacific Center East Specific Plan will likely be required, these amendments and the process for any future entitlements for the project would be agreed to during the negotiation process. Attached is an Exclusive Agreement to Negotiate (ENA). During the negotiation period, the business points of a Disposition and Development Agreement will be negotiated and brought back for City Council consideration, along with any necessary environmental documentation. In summary under the ENA, R.D. Olson would be generally responsible for: • Providing a good faith deposit to the City in the amount of $50,000 (to cover City transaction expenses and be replenished up to $75,000); • Undertaking its initial review of the suitability of the subject property for the project (the "Review Period") fora 60 day period; • Negotiating with the City for a period of 180 days after a Preliminary Review Period, subject to extensions that may be mutually agreed to; • Agreeing to acquire the vacant parcel at the appraised value; • Employing consultants to design the site and hotel; • Arranging project financing; • Obtaining entitlement approval from the City, and payment of all application fees; • Overseeing construction and the development process under the terms and conditions of the DDA. November 2, 2010 Exclusive Agreement to Negotiate Page 3 The City will provide the following: • An independent appraisal of the land to determine the acquisition price; • A draft Disposition and Development Agreement; • Obtaining approvals to build the two hotels and ancillary restaurant and/or retail and conference space and completion of any environmental documentation. Staff will be available to respond to any questions that the City Council might have at its meeting on November 2, 2010. Christine Shingleton Assistant City Manager Attachment: Exclusive Agreement to Negotiate EXCLUSIVE AGREEMENT TO NEGOTIATE BETWEEN THE CITY OF TUSTIN AND R.D. OLSON DEVELOPMENT THIS EXCLUSIVE AGREEMENT TO NEGOTIATE ("Agreement") is entered into this day of , 2010 (the "Effective Date") by and between the CITY OF TUSTIN (the "City") and R.D. OLSON DEVELOPMENT (the "Developer"). The City and the Developer (collectively referred to herein as the "Parties") hereby agree as follows: 1.0 Introduction. 1.1 The City received two proposals to develop hotel uses on a portion of vacant property within the Pacific Center East Specific Plan and South Central Redevelopment Project Area. 1.2 The Developer has submitted written correspondence to the City dated July 15, 2010, indicating an interest in purchasing certain property within the Pacific Center East Specific Plan area from the City at Fair Market Value, subject to negotiated terms and conditions for conveyance of the property. Based on Developer's correspondence, the site that is the subject of this Agreement is shown on Exhibit A, attached hereto (hereinafter referred to as the "Subject Property"). 1.3 After careful consideration of the proposals received, the Tustin City Council has directed the preparation of an Exclusive Agreement to Negotiate for the disposition and development of a portion of the Tustin Pacific Center East site with the Developer. The City desires to secure hotel and retail uses within the Pacific Center East Specific Plan area. Both of these uses are suitable uses for the site given the site's adjacency to the State Route 55 (SR-55) Freeway. A restaurant, conference space or retail use and hotel uses can have a positive fiscal impact on the City. 1.4 The Developer has demonstrated significant experience in developing successful hotels and associated retail projects in Southern California operated by nationally recognized hotel operators. The Parties desire, for the period set forth herein, to negotiate diligently and in good faith the terms and conditions of a Disposition and Development Agreement ("DDA") with respect to Subject Property which, if agreed and executed, will specify the rights, obligations and method of participation of the Parties with respect to the sale and development of the subject parcels. 2.0 Agreement to Negotiate. 2.1 The City and the Developer each desire to negotiate a DDA which, if agreed upon and executed, shall set forth the terms and conditions pursuant to which the Subject Property totaling approximately 9.088 acres shall be conveyed by the City to the Developer and developed by the Developer with two nationally recognized "flag ship" hotels with a minimum of 300 total rooms and a minimum of 8,000 square feet of restaurant and/or retail space. Developer may also include conference space in conjunction with any restaurant and/or retail space (hereinafter referred to as the "Project"). Developer acknowledges and agrees that in negotiation of the -1- DDA, the City will need to retain a water well site on a portion of the Subject Property owned by the City of Tustin but located within the City of Santa Ana jurisdictional boundaries parallel to the SR-55 Freeway. 2.2 This Agreement (including all exhibits hereto) is solely an exclusive right to negotiate and is not a final agreement. The Parties do not intend this agreement to be a purchase, option or similar contract or to be bound in any way by this Agreement, other than to establish a period of exclusive negotiations during which time each Party shall negotiate with the other in good faith, the City shall not market the subject parcels to other interested parties, and the Developer shall be bound not to withdraw any offer made by it pursuant to Section 4.2.4, except as otherwise provided herein. 2.3 The Parties acknowledge that they have not set forth herein nor agreed upon all essential terms of the subject matter of an agreed transaction and that such essential terms will be the subject matter of further negotiations. 2.4 Execution of this Agreement is not intended to confer any third party beneficiary rights in or create any liabilities on the part of either Party to any third parties. 2.5 The DDA shall not exist and shall not be binding unless and until it is fully executed by both Parties, approved by counsel to each Party as to form, and approved by the City Council of the City and by the managing members of the Developer. 2.6 Each Party assumes the risk that, notwithstanding this Agreement and good faith negotiations, the Parties may not enter into any subsequent DDA due to the Parties' failure to agree upon essential terms of the transaction: 3.0 Developer's Representations and Warranties. 3.1 The Developer represents that it has the necessary expertise, experience and financial capability to undertake development of the Project contemplated herein. 3.2 The Developer represents and agrees that its intended acquisition of the subject parcels and its other intended undertakings pursuant to this Agreement shall be used for the timely development of the subject parcels and not for speculation in land holding. 3.3 The Developer represents that it is experienced in redevelopment and understands the process and requirements necessary to pursue redevelopment projects such as the Project described herein. 4.0 Negotiations. 4.1 Good Faith Negotiations. The City will prepare the DDA and submit it to the Developer for review and comment. The City and the Developer agree for the period set forth in Section 4.2 to exclusively negotiate with one another diligently and in good faith to prepare a DDA and related documents to be entered into between the City and the Developer with respect to the Subject Property. -2- 4.2 Period of Negotiations. 4.2.1 The Parties agree to negotiate for a period commencing on the Effective Date and terminating one hundred and eighty (180) days after the end of the Preliminary Review Period (defined below) subject to extensions as further provided in this Section 4.2 (the "Period of Negotiation"). If on that 180th day (or within any extension of time mutually approved by the Parties in accordance with the terms of the Agreement), the Developer has not signed and submitted a DDA in form and substance approved by the City in its sole discretion then this Agreement shall automatically terminate. The Developer may request from the City an extension of the initial exclusive negotiation period. The City will determine whether reasonable and sufficient progress has been made toward fulfillment of the requirements of this Agreement in its consideration of any extension. The initial exclusive negotiation period may be extended by the mutual consent of the Parties for up to two (2) additional periods of sixty (60) days each. The Parties acknowledge and agree that the term "Preliminary Review Period" refers to the sixty (60) day period that commences on the Effective Date which period shall be automatically extended for a corresponding number of business days for each additional business day it takes the City to deliver the documents to Developer required by Section 4.6. 4.2.2 Notwithstanding the period of exclusivity set forth in Section 4.2.1, it is the intent of the Parties to negotiate and prepare definitive documentation reflecting the transaction for execution and delivery on or before October 1, 2011. Thus, unless otherwise extended in writing by the Parties, this Agreement shall automatically terminate at the end of the period set forth in Section 4.2.1, except for the confidentiality provisions set forth herein. 4.2.3 The City hereby delegates to the Assistant City Manager the authority to agree to grant the extensions specified in Section 4.2.1 upon determination by the Assistant City Manager in its sole and absolute discretion that the Developer has negotiated diligently and in good faith and that reasonable and sufficient progress has been made toward fulfillment of the requirements of this Agreement. No such extension of time shall be effective unless it is in writing. 4.2.4 The execution by Developer of a form DDA shall constitute an offer to purchase the Subject Property. Developer hereby agrees that it shall not withdraw such offer to purchase for a period of ninety (90) days following submittal of the executed DDA to the City. Such offer shall remain in effect for a period of ninety (90) days to enable the City to (a) determine whether it desires to enter into such DDA, (b) take the actions necessary to authorize the City to sign the DDA if the City desires to do so, and (c) sign the DDA. If the City has not considered and approved the DDA by such 60th day or, at the end of any extension mutually agreed upon by the Parties in writing, then this Agreement shall automatically terminate. 4.3 Deposits and Costs. 4.3.1 Upon the Effective Date of this Agreement, the Developer shall submit to the City a good faith deposit in the sum of Fifty Thousand Dollars ($50,000) (the "ENA Deposit") in the form of a check to the City to ensure that the Developer will proceed diligently and in good faith to negotiate and perform all of the Developer obligations under this Agreement and to also be applied to cover any City Transaction Expenses (defined below) -3- incurred after the Effective Date of this Agreement by City. The ENA Deposit shall be deposited in an account in a bank or trust company selected by the City. Interest shall accrue to any balances in the account for the benefit of Developer and as additional security for the Developer obligations hereunder. The ENA Deposit will be expended to cover the City's costs during the DDA negotiation process, and the ENA Deposit will be depleted accordingly. Each time the amount of funds in the ENA Deposit account is depleted below Twenty-Five Thousand Dollars ($25,000), the Developer shall be required to submit to City an additional Twenty-Five Thousand Dollars ($25,000) into the ENA Deposit account. 4.3.2 From and after the Effective Date, the ENA Deposit may be used by the City to pay the City's third party predevelopment costs including, without limitation, third party consultants, outside counsel, and any other expenditures required in connection with the drafting, negotiation and execution of the DDA or termination of this Agreement, including any and all City third party fees and costs incurred by legal counsel, financial and other consultants ("City Transaction Expenses") provided that City agrees that City Transaction Expenses to be charged Developer shall not exceed $75,000 prior to execution of a DDA. City Transaction Expenses do not include any fees or deposits required of Developer for processing entitlement applications or complying with provisions of the California Environmental Quality Act ("CEQA") or its State CEQA implementing regulations. Determination of costs, expenses, and fees constituting City Transaction Expenses shall be made by the City in its sole discretion and Developer shall upon request be entitled to receive summary notices from the City setting forth amounts constituting City Transaction Expenses to be retained by City. 4.3.3 If the Parties enter into a DDA within the time period identified in Section 4.2 of this Agreement, the City shall return any remaining unused funds in the ENA Deposit account to the Developer or the Developer can apply it to any additional deposit required as security for the performance under the DDA. If the Parties fail to enter into the DDA within the time period identified in Section 4.2 of this Agreement or any extension thereto, the City may retain any remaining unused portions of the ENA Deposit only if the Developer has not negotiated diligently or in good faith or has not carried out its obligations under this Agreement and the City has negotiated diligently and in good faith and has carried out its obligations under this Agreement. The Developer's failure to submit to the City plans, reports, studies, investigations, and materials specified in Section 5 and Section 6 of this Agreement within the time periods specified therein, shall be deemed to demonstrate the Developer's failure to negotiate diligently and in good faith and its failure to carry out its obligations hereunder. If the Developer has failed to do so, inasmuch as the actual damages which would result from a breach by the Developer of its obligations under this Agreement are uncertain and would be impractical or extremely difficult to determine, the City shall be entitled to retain any remaining unused portions of the original $50,000 ENA Deposit plus interest, if any, which has accrued thereon, as liquidated and agreed damages. 4.3.4 By the initials of their respective signatories hereunder, the City and the Developer acknowledge and agree that forfeiture of the original amount of the deposit (together with any interest earned and accrued thereon) is not in lieu of any other relief, right or remedy to which the City might be entitled by reason of the Developer's default. -4- Initials: Developer (;ity 4.3.5 Developer acknowledges that it is currently anticipated that the DDA shall require an additional deposit in an amount to be determined as security for the performance of the Developer's obligations under the DDA. In addition, it is currently anticipated that the DDA shall require the Developer to assume certain property maintenance costs of the Subject Property to be determined in the DDA. 4.3.6 Developer acknowledges and agrees that the City shall have no responsibility to pay or reimburse Developer for costs and expenses incurred by Developer in connection with this Agreement or the compliance by Developer with its obligations under this Agreement unless the City assumes any specific responsibilities in the fully executed DDA. Costs and expenses for which the Developer shall be responsible include all pre-contractual expenses described in the RFP and all costs and expenses incurred by Developer with respect to compliance with the terms of this Agreement. 4.4 Exclusivity. During the period of exclusive negotiation, the City covenants and agrees to negotiate exclusively with the Developer and shall not solicit another party for the Subject Property or enter into any agreement with any other party regarding the development of the Subject Property, with the exception that the Developer agrees and acknowledges that it understands that a portion of the Subject Property within the City of Santa Ana may need to also accommodate a water well for the Tustin Water Department and such siting and accommodation may need to involve City discussions with other water purveyors. The City acknowledges and agrees that but for this exclusivity, the Developer would not have entered into this Agreement. In the event a court of competent jurisdiction determines in a final decision that the City has breached this exclusivity covenant, the City shall be deemed to have failed to negotiate in good faith and, provided that a DDA has not been entered into pursuant to this Agreement, the Developer shall, in addition to any and all other rights and remedies, be entitled to the return of the good faith deposit (together with interest accrued thereon) and any other deposits made by the Developer. 4.5 Due Diligence. 4.5.1 As-Is Conveyance. The Developer acknowledges and agrees that if the Subject Property is conveyed by the City pursuant to a DDA, the Subject Property shall be conveyed on an "AS-IS, WHERE-IS AND WITH ALL FAULTS" basis, and the Developer shall be obligated to release, defend, indemnify and hold harmless the City with respect to its acquisition and development of the Subject Property and the condition of the Subject Property, including any and all land use and environmental conditions of the Subject Property. 4.5.2 Inspection; License. The City hereby grants to the Developer and its representatives and agents a license during the term of this Agreement to enter upon the Subject Property for purposes of conducting Developer's due diligence inspection, provided that Developer shall: (a) deliver to the City written evidence that Developer has procured the insurance required under Section 4.5.3; (b) give the City twenty-four (24) hours telephonic or written notice of any intended access which involves work on the Subject Property or may -5- result in any impairment of the use of the Subject Property by its current occupants; (c) access the Subject Property in a safe manner; (d) conduct no invasive testing or boring without the written consent of the City; (e) allow no dangerous or hazardous condition created by Developer or Developer's agents to continue beyond the completion of such access; (f) comply with all laws and obtain all permits required in connection with such access; and (g) conduct inspections and testing, subject to the rights of any existing owners or tenants of the Subject Property, if any (which inspections and testing, if conducted at times other than normal business hours, shall be conducted only after obtaining the City's consent, which shall not be unreasonably withheld). The limited license granted herein is revocable by the City during the continuation of any breach of this Agreement by Developer and shall be automatically revoked and terminated, without further action of the City, upon the termination of this Agreement or any period of exclusive negotiation hereunder. 4.5.3 Insurance. Developer shall obtain, or cause its consultants to obtain, at Developer's cost, with no cost or expense to the City, prior to commencement of any investigative activities on the Subject Property, a policy of commercial general liability insurance covering any and all liability of Developer and the City arising out of any investigative activities of Developer or its consultants with respect to the Subject Property in an amount of One Million Dollars ($1,000,000) and provided by a carrier reasonably approved by the City. Such policy of insurance shall be kept and maintained in force during the term of this Agreement and so long thereafter as necessary to cover any claims of damages suffered by persons or property resulting from the above referenced activities and any acts or omissions of Developer, Developer's employees, agents, contractors, suppliers, consultants or other related parties in undertaking said referenced activities. 4.5.4 Indemnity. Developer hereby agrees to protect, indemnify, defend and hold the City and its elected officials, employees, agents, representatives, consultants and contractors free and harmless from and against any and all claims resulting from Developer's access to the Subject Property or its exercise of its rights hereunder, including, without limitation, any inspections, surveys, tests or studies performed by Developer or its employees, consultants or contractors, save and except to the extent such claims result from the gross negligence or willful misconduct of the City or its agents, employees or representatives. Developer shall keep the Subject Property free and clear of any mechanics' liens or materialmen's liens related to Developer's inspection of the Subject Property. The indemnification by Developer set forth in this Section 4.5.4 shall survive the termination of this Agreement and the execution of the DDA and shall not survive the closing and transfer to Developer of the Subject Property and shall not merge into any deed granted pursuant to the DDA. 4.6 City Information. The City agrees to provide a copy of any environmental studies it has of the Subject Property and of immediately adjacent City infrastructure within fifteen (15) days following the Effective Date. The Parties acknowledge and agree that the Developer is solely responsible to investigate to determine the presence of hazardous materials and suitability of the Subject Property for development of the Project. -6- 5.0 Proposed Development Concept and Essential Terms and Conditions. 5.1 The proposed Project to be negotiated hereunder shall include the development and use of the Subject Property consistent with the General Plan, and the Pacific Center East Specific Plan, as Developer and City may be required to amend. 5.2 The Parties agree that it is their intent, upon entry into this Agreement, to negotiate a DDA which is anticipated to address the following terms and conditions: 5.2.1 The Developer shall acquire the Subject Property from the City at "Fair Market Value". The terms and conditions of this conveyance, including but not limited to the manner of conveyance, the conditions precedent to conveyance and the amount of the purchase price, shall be determined as part of the negotiation of and detailed in the DDA. Developer herein acknowledges and agrees that Developer will not in any way share in any transient occupancy tax generated from the Project. 5.2.2 The Developer shall design and construct the development on the Subject Property at its own cost and expense in accordance with a scope of development and a schedule of performance to be negotiated as part of the DDA, and in accordance with plans and specifications prepared by the Developer and approved by the City in accordance with such schedule of performance and in compliance with all requirements and regulations of the City including, without limitation, applicable zoning. 5.2.3 The Developer has proposed certain project components on the Subject Property as identified in Section 2.1. It is agreed that the total commercial square footage on the site shall be based on compliance with all City requirements including development standards in the Specific Plan, as will be amended, and any requirements contained in this Agreement. 5.2.4 In connection with its development of the Subject Property, Developer acknowledges that the Subject Property will be subject to applicable development fees, including but not limited to those required by the City of Tustin, or other jurisdictions such as the Foothill/Eastern Corridor Fee, the Santa Ana/Tustin Transportation System Improvement Area (TSIA) fee, school impact fees by the Tustin Unified School District (TUSD), current Orange County School Facility Bonds (Measure G and Measure L), utility meter and connection fees. 5.2.5 The Developer shall prepare and process applications for, and obtain from the City and other federal, state and local jurisdictions, all applicable land use, planning and zoning approvals for the proposed development with the support of the City. These entitlements will be required to be consistent with the Pacific Center East Specific Plan, as may need to be amended, or any final revisions approved by the City Council. The Developer is willing to process any necessary amendments to the Pacific Center East Specific Plan which are requested by the City and are mutually acceptable to the City and Developer. 5.2.6 The Project shall be completed within the guidelines of the land uses specified in the Pacific Center East Specific Plan, as will be amended. -7- 5.2.7 Project costs and revenues will be separately analyzed and funding of all project costs will be the responsibility of the Developer. 5.2.8 The Developer anticipates implementation of the Project without the need for any expenditure by or loan from the City to the Developer. 6.0 Developer's Responsibilities. During the period of negotiation, the Developer shall prepare and submit to the City the following: 6.1 Status Reports. The Developer agrees to make bi-weekly oral and/or written reports advising the City and/or its staff of all matters and studies being made, including the Developer's progress in analyzing the feasibility of the Project as may be requested by the City or its staff. 6.2 Development Team. The Developer shall, within ten (10) days of execution of this Agreement, submit in writing to the City full disclosure of the names of the Developer's agents, authorized negotiators, professional employees or other associates of Developer who may be participants in development of the Project and other relevant information concerning the above, such as addresses, telephone numbers, and employers. The Developer shall also designate and submit in writing to the City the names of all the Developer's lead negotiators who shall have authority to make decisions on behalf of the Developer. 6.3 Financial Status. The Developer shall continue to be responsible for demonstrating to the City the financial capacity and capability to perform its obligations under this Agreement and the proposed DDA. The Developer shall submit any additional financial information of its key principal or principals as requested by the City within thirty (30) days of a request by the City. The Developer shall identify with specificity the documents which the Developer wants the City to maintain as confidential documents and a statement as to why the request is consistent and complies with the provisions of the Public Records Act of the State of California. If confidentiality is requested and if nondisclosure under the Public Records Act is allowed, the documents shall be delivered to and maintained by the City and copies shall not be disseminated. To the extent permitted by law, the City shall not make public disclosure of the documents. The City's agents, negotiators and consultants may review the statements as necessary as long as such parties agree to maintain the confidentiality of such statements. 6.4 Assignment. If the Developer determines to joint venture or partner development of the Subject Property, or if the Developer determines to form a new legal entity to develop the Subject Property, the Developer shall promptly inform the City of such determination and submit to the City the joint venture's or partner's most recent financial statements and the financial statements of its key principals. The assignment of the Developer's rights under this Agreement to any new entity, partnership or joint venture may be approved in writing by the City, provided that City is satisfied in its sole discretion, that the new entity, partnership, or joint venture has the financial capability to perform under this Agreement and the proposed DDA. 6.5 Design Review/Entitlements. It is understood and agreed to by the Developer that the quality, character and uses proposed for the Project are of particular importance to the -8- City and that planning and design review approval and other entitlements by the City will be required for the development. The Developer and its proposed architect shall meet with representatives of the City to review and come to a clear understanding of the planning and design criteria required by the City. Within forty-five (45) days after the Effective Date, the Developer shall submit a schedule for entitlement processing, including any necessary Pacific Center East Specific Plan amendments and anticipated environmental evaluation of the project. Within ninety (90) days after the Effective Date, Developer shall submit for approval by the City, preliminary concept design drawings and related documents for development of the Developer's Project including the following: preliminary site plan showing building layout and dimensions, parking, landscaping and access on or related to each individual parcel, preliminary floor plans, preliminary materials call-outs and preliminary conceptual building renderings and a development schedule. 6.6 Project Financial Pro Forma. Within thirty (30) days after the Effective Date, without a termination of this Agreement by Developer, Developer shall submit cost and revenue estimates and related data in sufficient detail to enable the City to evaluate the Developer's business offer and the financial feasibility of the proposed development of the Project. All information submitted to the City for the project pro forma must be in a current electronic version of Microsoft Excel including all underlying formulas and formats. All linked spreadsheets to the project pro forma must be provided in Microsoft Excel including all underlying formulas and formats. All electronic pro forma information submitted must be unprotected allowing for access to spreadsheet cells. Developer shall subsequently be required to reexamine its project financial pro forma and make any revisions as necessary to reflect any comments the City provides to the Developer on the preliminary site plan submitted under Section 6.5. 6.7 Additional Economic Data. Within thirty days (30) days after the Effective Date, without a termination of this Agreement by Developer, the Developer shall submit estimated transient occupancy taxes and sales taxes that will be generated by each hotel and the restaurant and/or retail uses it proposes on the Subject site. Developer shall provide with the submission all assumptions made in estimates such taxes. Developer shall subsequently be required to reexamine this additional economic data and make any revisions as necessary to reflect any comments the City provides to the Developer on the preliminary site plan submitted under Section 6.5. 6.8 Appraisal. Within forty five (45) days after the Effective Date, without a termination of this Agreement by Developer, City shall obtain services of an independent third party appraiser to conduct an appraisal of the Subject Property ("Appraisal"). The Appraisal shall be the basis for negotiations between Developer and City on the "Fair Market Value" of the Subject Property to be paid by Developer pursuant to the DDA. 6.9 Additional Information. The Developer understands and agrees that the City's negotiating team reserves the right at any time to reasonably request from the Developer additional information, including information, data and commitments to ascertain the depth of the Developer's capability and desire to develop the project expeditiously. The City's negotiating team will provide a reasonable time in which the Developer may obtain and submit to the City such additional information. -9- 6.10 Contacts During Negotiation. The Developer shall only negotiate with the City's negotiating team as defined in writing by the Assistant City Manager and with no other persons unless expressly authorized to do so by the City's negotiating team. During the period of negotiations, the Developer shall make no statements to the media about the proposed Project without the approval of the Assistant City Manager. The Developer's failure to comply with the provisions of this Section shall be conclusive evidence that the Developer has not "negotiated in good faith." 6.11 Environmental and Other Studies. 6.11.1 Environmental Requirements. Compliance with the California Environmental Quality Act ("CEQA") is a legal precondition to any final City action to approve and execute a DDA. The Developer shall cooperate with the City and abide by the City's environmental compliance procedures and fee requirements, which include but are not limited to the obligation to deposit funds to pay all of the City's costs of preparing any additional required environmental studies as maybe determined. 6.11.2 Plans, Reports, Studies and Investi ations. The Developer shall provide the City, without cost or expense to the City, copies of all plans, reports, studies or investigations (collectively, "Plans") prepared by or on behalf of the Developer with respect to the Subject Property and the Project. All Plans shall be prepared at the Developer's sole cost and expense. If this Agreement is terminated for any reason other than a material breach or default hereunder by the City, the City may request that the Developer transfer Developer's rights to any or all Plans identified by the City, provided that City shall pay to Developer, as consideration for such Plans, Developer's actual direct out of pocket cost for such Plans, but in no event shall the cost to the City exceed five thousand dollars ($5,000). Upon such request, the Developer shall deliver to the City copies of all Plans requested by the City together with a bill of sale therefore, provided that Developer makes no representations, warrantee or guarantee regarding the completeness or accuracy of the Plans, and Developer does not covenant to convey the copyright or other ownership rights of third parties thereto. Such Plans shall thereupon be free of all claims or interests of the Developer or any liens or encumbrances. Upon the City's acquiring the Developer's rights to any or all of the Plans, the City shall be permitted to use, grant, license or otherwise dispose of such Plans to any person or entity for development of the Subject Property or any other purpose; provided, however, that the Developer shall have no liability whatsoever to the City or any transferee or title to the Plans in connection with the use of the Plans. The City shall, within ten (10) business days of execution of this Agreement and at no cost to the Developer, provide Developer with copies of all plans, reports, studies, investigations and other materials the City may have that are pertinent to the Subject Property and/or development of the Project provided, however, that the City makes no representations, warrantee or guarantee regarding the completeness or accuracy of such plans, reports, studies, investigations and other materials. 7.0 The Developer. 7.1 Nature of the Developer. Developer will be R.D. Olson Development or such other business entity (such as another limited liability corporation) as the City may approve, in its sole discretion, upon terms and conditions as the City may request and the Parties may agree, -10- as specified in the DDA. Concurrently with its execution of the DDA, Developer shall submit a copy of the applicable formation documents relating to Developer and any corporate members of Developer (i.e., as applicable: articles of incorporation; partnership agreement; and/or limited liability corporation articles of incorporation, statement of information and operating agreement). 7.2 Offices of the Developer. The principal offices of the Developer are located at 2955 Main Street, Suite 300, Irvine, CA 92614. 7.3 Principals and Employees of the Developer. The principals of the Developer who will be directly involved in the development are as follows: Robert D. Olson, President, R.D. Olson Development Blake Evans, Development Manager, R.D. Olson Development Robert A. Olson, General Counsel, R.D. Olson Development 7.4 The Developer's Consultants and Professionals. The Developer is required to make full disclosure to the City of any changes to its principals, officers, stockholders, partners, joint venturers, Project employees, and other associates and all other pertinent information concerning the Developer and its associates during the term of this Agreement. Developer agrees to substitute or supplement any of its consultants and professionals as reasonably requested by the City. 8.0 The Developer's Financial Capacity. 8.1 Financial Statement. Any additional financial statements of the Developer, if requested, shall be submitted to the City or its consultant as requested by the City for the purposes of this Agreement. 8.2 E ui The Developer proposes to obtain its equity capital in the following manner: a Private Placement Memorandum to a select group of individual investors. 8.3 Construction Financing. The Developer proposes to obtain its construction financing for the project from a reputable, institutional lender, as approved by the City, which approval shall not be unreasonably withheld, conditioned or delayed. The Developer may propose self-financing provided Developer can demonstrate sufficient financial capacity as reasonably determined by City. 8.4 Long-Term Development Financing. The Developer intends to commit to the provision of long-term development financing in the same manner as to be specified in the DDA to the extent that third party financing is not otherwise advisable or available to implement the Project. 8.5 Bank and Other Financial References. The Developer shall submit relevant bank and other financial reference information, as requested by City, including the Developer's equity positions and status of loans for the hotel properties represented in Developer's property portfolio. -11- 8.6 Full Disclosure. The Developer will be required to make and maintain full disclosure to the City of the methods of financing and the financing documents to be used in the development. 9.0 City's Responsibilities. 9.1 Environmental Requirements. A final Environmental Impact Report for the Pacific Center East Specific Plan and a Supplemental Environmental Impact Report have been prepared and certified (collectively, the "EIR"). The Developer agrees to finance and supply information and otherwise assist the City as requested to enable the City to determine the environmental impact of the proposed development under the DDA and for any necessary Pacific Center East Specific Plan amendments and to prepare such additional addendum or supplement to the environmental documents, if any, as may be needed to be completed for the development. 9.2 Assistance and Cooperation. The City shall cooperate fully in providing the Developer with appropriate information and assistance. 9.3 City Approval. If the negotiations hereunder culminate in a DDA, such agreement becomes effective only after and if the agreement has been considered and approved by the legislative body of the City and the City Council of the City after noticed public hearing. Nothing in this Agreement shall supersede or waive any discretionary or regulatory approvals required to be obtained under from the City pursuant to the Tustin City Code or the provisions of any applicable State or Federal law or regulation. 10.0 Miscellaneous. 10.1 Real Estate Commissions. The City shall not be liable for any real estate commission, finder's fee or any broker's fees which may arise from this Agreement. The City represents that it has not engaged any broker, agent, or finder in connection with this Agreement and the Developer agrees to hold the City and its representatives harmless from any losses and liabilities arising from or in any way related to any claim by any broker, agent, or finder retained by the Developer regarding this Agreement or development of the Subject Property. 10.2 No City Duty. Except as expressly provided above, the City shall have no obligations or duties hereunder and no liability whatsoever in the event the Parties fail to timely execute a DDA. 10.3 Non-Liability of City Officials and Employees. No member, official, representative, director, staff member, attorney or employee of the City shall be personally liable to the Developer or any successor in interest in the event of any default or breach by the City or for any amount which may become due to Developer or to its successor, or on any obligations under the terms of this Agreement. 10.4 Public Hearings and Compliance. If the negotiations hereunder culminate in a DDA, such DDA will be considered for approval by the City only after all required public hearings have been held and after compliance with all applicable laws and ordinances. The concurrence of the City negotiators with the terms and provisions of a proposed DDA under any -12- provisions of this Agreement shall not be construed or interpreted as the City approving or accepting such terms. Such concurrence shall be viewed as nothing more than the willingness of the City negotiators to recommend to the legislative body of the City and the City Council that they approve such terms. 10.5 Entire Agreement; Attorneys' Fees. This Agreement represents the entire agreement of the Parties with respect to the matters set forth herein and supersedes any prior negotiations or contemporaneous writings or statements. This Agreement may not be amended except in writing signed by each of the Parties hereunder. If any Party brings an action or files a proceeding in connection with the enforcement of its respective rights or as a consequence of any breach by the other Party of its obligations hereunder, then the prevailing Party in such action or proceeding shall be entitled to have its reasonable attorneys' fees and out-of-pocket expenditures paid by the losing Party. 10.6 Covenant Against Discrimination. The Developer shall not discriminate against nor segregate, any person or group of persons on account of sex, race, color, age, marital status, religion, handicaps, creed, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Subject Property, nor shall the Developer establish or permit any such practice or practices of discrimination or segregation in the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the Subject Property. 10.7 Notices/Submittals. All notices or submittals required or permitted hereunder shall be delivered in person, by overnight courier, or by registered or certified mail, postage prepaid, return receipt requested to such Party at its address shown below, or to any other place designated in writing by such Party. City: Christine Shingleton, Assistant City Manager City of Tustin 300 Centennial Way Tustin, CA 92780 Developer: Robert D. Olson, President R.D. Olson Development 2955 Main Street, Suite 300 Irvine, CA 92614 Any such notice or submittal shall be deemed received upon delivery if delivered personally, one (1) day after delivery by the courier if delivered by courier and three (3) days after deposit into the United States mail if delivered by registered or certified mail. 10.8 Prohibition Against Assignments. Except as may be permitted under Section 6.4, this Agreement shall not be assigned by the Developer. 10.9 Supersession by Disposition and Development Agreement. Following mutual execution by the Parties of a DDA, this Agreement shall be of no further force or effect, except that the indemnity set forth in Section 4.5.4 shall remain in effect with respect to claims arising -13- during the term of this Agreement. In the event of any conflict between the provisions of this Agreement and any DDA approved by the Parties, the provisions of the DDA shall for all purposes prevail. 10.10 Confidentiality. The City and the Developer represent and warrant that each shall keep this Agreement and all information and/or reports obtained from the other, or related to or connected with the Subject Property, the other Party, this Agreement, the DDA, or any other documents negotiated by the Parties, confidential and will not disclose any such information to any person or entity without obtaining the prior written consent of the other Party, except that the City shall have the right to disclose any information contained in any third party reports obtained by Developer. Notwithstanding the foregoing, this Agreement, the DDA, and all other material relating to this Agreement are subject to the provisions of the California Public Records Act (Government Code Section 6250 et seq.). The City's use and disclosure of its agreements and records are governed by this Act. 10.11 Governing Law/Exclusive Venue. The Agreement shall be interpreted in accordance with California law. The Parties agree that in the event of litigation, exclusive venue shall be in Orange County, California. 10.12 Counteruarts. This Agreement maybe signed in one or more counterparts. IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date set opposite their signatures. "CITY" City of Tustin Dated: By: David C. Biggs City Manager APPROVED AS TO FORM By: Doug Holland City Attorney -14- "DEVELOPER" R.D. OLSON DEVELOPMENT Dated: By: Robert D. Olson President, R.D. Olson Development -15- EXHIBIT A SUBJECT PROPERTY The Subject Property includes parcels 2, 3 of preliminary Parcel Map 2010-127 and the State Excess Parcel shown on the Exhibit A attachment. EXHIBIT "A" I I I R/~N ~ ~ ~. N Z ~ < N 1 Y 4 =Z~ zma ~ W m O y. O ° o1 Am a< ~ ~~ N °~ r '^ a ~~ i o N ~ ~ ~ ~ N ~ ~ °~ \/ i ~7a r ~ Q J O W N S 0 W o a I tea. Z I ` W ~ Z N Q ~ $ O ~ I,oE W z I J 0 AN EXHIBIT MAP FORS I /, /, I I / , _ ~ EXISTING R/W J / N _ _ EXISTING R/W _ _ _ ~ EDINGER n AVENUE ~ ~ 0 0 ~ a ~ a EXISTING R/W EXISTING R/W __ I ~~~ PROPOSED ~~ PROPOSED R/W ~ R/W I I ~I I / I W to / I I 1 I w / • I m W U / ,. I I F Q ~~ ~ a ~ 1 I ~ m~ ^° i/ ~ W II i d ~d ~ ""' ! ~~ I I ~ m°o °~ / IaZ ~ I Q or ~ V <o da 11 ? 7 11 I f' ~' i~ ~~ z~ !I ~Q 1 j 0 O W ~" '_ / 1 ~ I I Z of ~ Z ~ I W II I Z W Q I I~ 1 I ! I °u z ~ / 1 130.00' ~ I 63 76~ 66.24' 11 ~ ~ 1 ~ 1 I V ~ I I 11 a n ~ ! II I o I !,^r 1 I J o 1 /; I W n I /N 1 63.76' I ~ A, ~_________ /g i 1 ¢ _ !~ I I ~ w ~ u ~ 11 d /(' I 75.76' 1 a ~ ~ :_ la 11 ~ ~ ~ N l~ \ C Y t l~ ~ 11 142 ~0 I 4~ \ u ~ ~ ~ ~ i t /_ ~ U 1 75.16' 662 1\ N ~ ~ u ~ o ~ C I J o N \ 1 \ I E / W ~ II \ \ I I k / a \ \ \ E c~ ~ M \ r q I I F / ~ v U \ \ I E/ a a \\ Z I \\ I F~ ~ \\\ ~Z \\\ I I \ GW __-. \\ 7~ \\ i G ~ \ f~ \ ~, E ~ \\ s \ " Ka w \ \ \ '~ t o N n U \ ~ \ A F~ W N N a 661 \ /~ Er ~a N ~ t~ ~~ II ~ GG U ~ r~V ~pR E ac ~ ~ a ~ t ,~ Ett°' d < ~ a F~~„1 a d x'15°~u`y`,! ~~ ~ SOMA S G qyd ~311v1`il~ s o((,i~~c~lo',doi(eBiioT ~~'L SS3b9 La0"~ yUy` 17141545 sae3 cFA%) kr Nl d0 `' ~~ ~4iLWLL"'may'' SHEET 1 OF 1 SCALE NOT TO SCALE THE CITY OF TUSTIN PARCELS 2 AND 3 (PARCEL MAP 2010-127)AND STATE EXCESS PARCEL CITIES OF TUSTIN AND SANTA ANA COUNTY OF ORANGE STATE OF CAI DRAFTED KVO CHECKED KJL DATE 9/15/2010 JOB NUMBER 2TUS011301 :SIGN\X-EXHB-PCL2-3-STATE_EX