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HomeMy WebLinkAbout12 PROPOSED FIRST AMENDMENT TO STANDARD PACIFIC ENA1TY O AGENDA REPORT ,4,4F MEETING DATE: (Cell FROM: FEBURARY 5, 2013 JEFFREY C. PARKER. CITY MANAGER JOHN A. BUCHANAN, PROGRAM MANAGER Agenda Item 12 Reviewed.' City Manager Finance Director 1A SUBJECT: STANDARD PACIFIC CORPORATION PROPOSED FIRST AMENDMENT TO THE EXCLUSIVE AGREEMENT TO NEGOTIATE (ENA) SUMMARY: The City and Standard Pacific Corporation ( "Standard Pacific" or "Developer ") entered into an Exclusive Agreement to Negotiate (ENA) for Tustin Legacy Disposition Package 1B on July 17, 2012. This proposed amendment to the ENA extends the period for negotiation to June 14, 2013 and proposes to include an additional portion of Disposition Package 6, known as 6A. RECOMMENDATION: 1. Authorize the City Manager to execute the attached First Amendment to the ENA between the City of Tustin and Standard Pacific Corporation (Developer), subject to any non - substantive modifications as may be recommended by the City's special real estate counsel or the City Attorney. 2. Find that the direct negotiation of 6A will provide additional benefits to the City that are not available from the public at large or others who might reasonably expect to respond to a solicitation and that a solicitation process would not produce any advantage for the City. FISCAL IMPACT: With execution of the ENA, the Developer deposited a $100,000 good faith deposit to fund the expenses incurred by the City during the negotiation of a Disposition and Development Agreement ( "DDA "), a Development Agreement ( "DA "), and any other agreements directly associated with the project. There will be near to long -term financial impacts of any subsequent DDA and DA. These impacts will be evaluated during the negotiation process and reported with the submission of the DDA and DA to the City Council for consideration. 907185.1 Agenda Report – Standard Pacific Corporation February 5, 2013 Page 2 of 6 BACKGROUND: The initial negotiating period (180 days) commenced on July 17, 2012 and ended on January 13, was extended for an additional 30 days to February 13 with the consent of the City Manager. Under the ENA, the initial negotiating period may be extended for two additional 30 -day periods if the City Manager has determined that both parties are diligently negotiating in good faith. Staff has reviewed options to accelerate the construction of backbone infrastructure at Tustin Legacy. One of the challenges to maintaining current momentum is the construction of Peter's Canyon Channel improvements. In March 2003, a Joint Cooperative Agreement (No. D02 -119) was entered between the City and the Orange County Flood Control District (OCFCD) and subsequently amended in June 2004. This agreement restricts development within the Master Developer Footprint until a contract for Peter's Canyon Channel Improvements has been awarded. Under this agreement, award of the contract and commencement of construction of the channel improvements must take place prior to the issuance of certificates of use and occupancy for the 1001 st residential unit or certificates of use and occupancy on more than 270 acres of land. Subsequent to the execution of this cooperative agreement, the City has entered into two DDAs in 2012 for Disposition Packages 2A (The Irvine Company) and 1A -North (St. Anton Partners) for a combined 758 residential units. Disposition Package 1B which is being negotiated with Standard Pacific Corporation is currently proposed at 238 units; the combined residential unit count for the three residential projects is 996 units. City funding sources for Peter's Canyon Channel improvements are not immediately available; this Amendment proposes that the Developer will advance funding for the Peter's Canyon Channel Improvements including the Moffett Avenue Bridge. The Developer will be reimbursed with land sale proceeds from the sale of property to the Developer. The Amendment proposes that the DDA will have development occur in two phases. Phase 1— Developer will be responsible for the following: a. Importation of approximately 500,000 cubic yards of dirt from the City - owned Tustin Legacy property known as Disposition Package 7. b. Design and construction of all in -tract local streets, parks, greenbelts, sidewalks, pathways, neighborhood signage, wet and dry utilities, and recreation facilities and amenities associated with the comprehensive development of the Property. The central park shall be approximately than 6.1 acres and the greenbelts shall not be approximately 3.8 acres. C. Construction of the following infrastructure improvements identified in the Tustin Legacy Backbone Infrastructure Program: 1. Moffett Avenue from Park Avenue to Jamboree Road, 907185.1 Agenda Report – Standard Pacific Corporation February 5, 2013 Page 3 of 6 2. Park Avenue from Legacy Road to Moffett Avenue, 3. Backbone storm drain related to the project, 4. Backbone dry utilities related to the project. d. Design and construction of not more than 200 single family homes in 4 product types. Phase 2— Developer will be responsible for the following: a. Construction of the following infrastructure improvements identified in the Tustin Legacy Backbone Infrastructure Program: 1. Moffett Avenue Bridge spanning Peter's Canyon Channel. 2. Peter's Canyon Channel Improvements within the City. 3. Peter's Canyon Trail Improvements within the City. b. Design and construction of not more than 175 single family homes in 4 product types. The total amount of acreage proposed with the inclusion of the 6A Property is 86.5 acres; the net developable site is approximately 59.5 acres for the combined parcels. The amendment proposes that the DDA will require the Developer to purchase the property in two phases. The Phase 2 property will be retained by the City and will be conveyed contingent upon the Developer's performance in Phase 1 and demonstrated financial capacity to perform in Phase 2. The cost for the design and construction of the infrastructure backbone improvements for Disposition Packages 1 B and 6A including bridge and channel improvements are estimated at approximately $37,266,000. The Tustin Legacy infrastructure Backbone fee for both parcels is estimated at approximately $16,900,000. As indicated above, the estimated cost of construction will exceed the backbone fees by approximately $20,366,000. Although the land price is currently being negotiated, an internal analysis indicates there will be sufficient revenue from the sale of Phase 1 and 2 to reimburse the Developer for monies advanced for the construction of the all improvements including the Moffett Avenue Bridge and the Peter's Canyon Channel improvements. By combining the two Disposition Packages the following will be achieved. • A global approach to the construction of infrastructure and grading issues impacting 1 B and 6A. A reduction in the City's on -going maintenance and water mitigation expenses for the undeveloped portions of Tustin Legacy. 907185.1 Agenda Report — Standard Pacific Corporation February 5, 2013 Page 4 of 6 • Minimize the City's risk because the Developer will finance and install all of the designated Tustin Legacy Backbone Infrastructure. • Accelerate the ability to develop Disposition Package 7, that is, the area north of Moffett Avenue and east of Tustin Ranch Road. • The consolidation of 1 B and 6A will avoid disjointed development. • An enhanced circulation system within the combined parcels for vehicles and pedestrians. • A central location for the community park and recreation facilities that could not be achieved under with the development of two separate parcels. In addition, larger facilities by creating up to two acres of additional park space (totaling 6.1 acres) and additional greenbelt areas (totaling 3.8 acres). • Consistency of products and quality across the site. • Larger lots than if 1 B and 6A were developed separately. Direct Neaotiation Since 2002, the City has implemented the disposition of City -owned property through a variety of methods. In April 2011, the Council adopted a Disposition Strategy for the Master Developer Footprint. Under the Disposition Strategy, the Council has the authority to dispose of property through a solicitation and proposal process or, in certain circumstances, by direct negotiation. 1. Developer Solicitation Process. The Disposition Strategy sets forth a two -step process for selection of a developer that involves review of several proposals prior to a final determination. Specifically, Section 7.4 specifies a marketing and developer selection process in which (a) a panel of experts selected by the City interviews interested and panel- recommended developers and recommends to the City Council, for approval by the Council, a list of the 3 most highly qualified developers, and (b) a more detailed RFP is requested of /submitted by the 3 selected developers and evaluated by the evaluation team. Based on the recommendation of the evaluation team, the City Council makes the final determination. (Chapter 7.4 and Executive Summary at p. E -2). 2. Direct Negotiation. The Disposition Strategy also includes other provisions that would allow direct negotiation under certain circumstances. For example: • "The City, particularly on the residential Disposition Packages, will also reserve the flexibility to offer subsequent rolling take -downs or Disposition Packages to builders based on performance." (Executive Summary at page E -3). • "Opportunities for individual developers who demonstrate success on initial development opportunities within the Project to be provided with 907185.1 Agenda Report — Standard Pacific Corporation February 5, 2013 Page 5 of 6 rolling take down options on future phases or segments should also be considered ..." (Chapter 4, at page 37) • 'The operational approach under the proposed Disposition Strategy focuses on these infrastructure needs and market factors by identifying a group of potential parcels to be sold to single developers in an amount of acreage large enough to achieve economies of scale. "(Chapter 6, at page 59). • 'The Disposition Strategy also allows direct marketing to end business users." (Chapter 7, at page 70). • Under this direct negotiation process, the City Council may elect to offer a property for sale to a developer or other business entity. In practice, this approach is recommended where the Council is able to determine that the direct marketing of property would provide additional benefits to the City that are not available from the public at large or others who might reasonably expected to respond to a solicitation and that a solicitation process would not produce any advantage for the City or make it practically impossible for the City to achieve what it requires 3. Timing of Disposition of Parcels. The Disposition Strategy makes clear that parcels may be taken out of order: • "Other Disposition Packages could also proceed when market opportunities and land value considerations present themselves and when infrastructure costs can be reasonably accommodated." (Chapter 6, page 59). • 'Tustin will retain the flexibility to respond to property interest and market conditions." (Chapter 7, page 70). 4. Justifications for Direct Negotiation. • Standard Pacific was chosen as the proposed developer of Disposition Parcel 1 B on the basis of the selection process described in the Disposition Strategy. • The Disposition Plan provides flexibility to the City to vary the timing of its disposition of parcels and to offer subsequent take -downs to residential developers on the basis of performance. It also permits the City to aggregate parcels to achieve economies of scale. • Parcel 6A is adjacent to and integrally related to Parcel 1 B in terms of its infrastructure, roadway access and land use and zoning designations. Each is part of Planning Area 15, neighborhood G under the Tustin Specific Plan and is zoned for single - family residential uses. 907185.1 Agenda Report — Standard Pacific Corporation February 5, 2013 Page 6 of 6 • Due to the irregular size and shape of Parcel 1B, development of Parcel 6A with Parcel 1B allows for a more efficient and well - planned community. • The concurrent grading and construction of infrastructure on Parcels 1B and 6A allows for much greater efficiency and cost - effectiveness for the City and the developers of those parcels than would separate development. • The parcels were not subject to a single Disposition Package only because of the limitations imposed on the City's ability to develop more than 1,000 units of housing prior to development of the Peters Canyon Channel improvements; as a condition to the take -down of Parcel 6A, Standard Pacific will be required to complete the Peters Canyon Channel improvements. • Competitive bidding in this situation would not produce an advantage to the City. Standard Pacific has previously been selected for similar development in the City. The expansion of the number of units to be developed by Standard Pacific will allow the City to achieve a more well - planned community and greater economies of scale with respect to grading and infrastructure. It will also permit early completion of the Peters Canyon Channel improvements which will benefit the City. As a result, Staff recommends that the City Council find that the direct negotiation of 6A will provide additional benefits to the City that are not available from the public at large or others who might reasonably expect to respond to a solicitation and that a solicitation process would not produce any advantage for the City. 907185.1 FIRST AMENDMENT TO EXCLUSIVE AGREEMENT TO NEGOTIATE (DISPOSITION PACKAGE 1B) THIS FIRST AMENDMENT TO EXCLUSIVE AGREEMENT TO NEGOTIATE (DISPOSITION PACKAGE 113) ( "First Amendment ") is made as of February 5, 2013 (the "Amendment Effective Date "), by and between THE CITY OF TUSTIN (the "City ") and Standard Pacific Corp., a corporation organized and existing under the General Corporation Law of the State of Delaware ( "Developer "). The City and Developer are individually referred to as a "Party" and collectively referred to as the "Parties ". RECITALS This First Amendment is entered upon the basis of the following facts, understandings and intentions of the Parties. A. The Parties entered into that certain Exclusive Agreement to Negotiate (Disposition Package 113), dated as of July 17, 2012 (referred to herein as the "Original Agreement ") with respect to certain land referred to therein as the 111B Property." B. The Original Agreement, as amended by this First Amendment, shall hereinafter be referred to as the "Agreement ". C. Pursuant to the terms of the Original Agreement, the City Manager granted a 30 day extension of the term of the Original Agreement, to February 13, 2013. E. The Parties have agreed to modify the terms and conditions of the Original Agreement on the terms set forth herein to (1) extend the term of the Agreement and (2) include certain land referred to herein as the "6A Property" (defined below) which comprises a portion of Tustin Legacy in order to allow the City and Developer to achieve a more well - planned community and greater economies of scale with respect to grading and infrastructure. AGREEMENT NOW, THEREFORE, in consideration of the mutual terms, covenants, conditions and promises set forth herein, the City and Developer agree as follows: 1. Definitions. All capitalized terms used herein shall have the definitions given in the Original Agreement, unless otherwise expressly stated herein. From and after the Amendment Effective Date, the following terms used in the Agreement shall have the meaning set forth below: (a) "Amended Project" shall mean the development of the Property with approximately 375 single family homes in 4 product types, 6.1 acres of park and 3.8 acres of greenbelts and such additional in -tract infrastructure and amenities described in Schedule "B -1" attached to the First Amendment and incorporated by this reference into the Agreement. (b) "First Amendment" shall mean this First Amendment to Exclusive Agreement to Negotiate (Disposition Package 1 B). (c) "Property" shall mean the 1 B Property and the 6A Property, collectively. 2. Negotiation in Good Faith; Extension of Term. (a) Each of the Parties acknowledges that the other has negotiated diligently and in good faith during the initial period of the Original Agreement and that reasonable and sufficient progress has been made toward the fulfillment of the requirements of the Original Agreement. On that basis and notwithstanding anything to the contrary set forth in Original Agreement, the Parties agree to extend the Agreement to June 14, 2013 (the "Amended Termination Date "). (b) Developer may request from the City an extension of the Amended Termination Date. The Amended Termination Date may be extended by the mutual consent of the City and Developer for up to two (2) additional periods of thirty (30) days each. (c) The City hereby delegates to the City Manager, or his or her designated representative, the authority to agree to grant the extensions specified in Section 2(b) of this First Amendment upon determination by the City Manager or his or her designated representative in their sole and absolute discretion that 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. (d) No such extension of time shall be effective unless it is in writing. 3. Property. The property described by Disposition Package 6A is comprised of a portion of the property referred to in the Navy transfer documents as "I -H -1, I -H -7, and I -H -8 ", and is further legally described and depicted on the Site Map attached as Schedule A -1 to this First Amendment and incorporated into the Agreement by this reference (the "6A Property "). 4. Definition of Property. Wherever the term "1B Property" is used in Sections 2 through 10.15 of the Original Agreement, it shall be replaced with the term "Property" as defined in this First Amendment in order to reflect the addition of the 6A Property to the Project. 5. Definition of Project. Wherever the term "Project" is used in Sections 1.7 through 10.15 of the Original Agreement, it shall be replaced with the term "Amended Project" as defined in this First Amendment in order to reflect the modifications to the Project described in this First Amendment. 6. Amendments to Text of Original Agreement. (a) Section 1.8 of the Original Agreement is hereby deleted in its entirety and replaced with the following: "1.8 The property described by Disposition Package 1B is comprised of a portion of property referred to in the Navy transfer 2 documents as 1-1-1-1, I -H -7 and I -H -B" and is further legally described and depicted on the Site Map attached as Schedule "A -1" to the First Amendment (the "1 B Property ")." (b) Section 3.5 of the Original Agreement is hereby amended as follows: (1) clause (a) thereof is modified to read: "(a) pursuant to the RFP selection process, the selection by the City of Developer pursuant to the First Amendment, the RFP or any modification or defect thereto, or any information set forth therein," (2) clause (y) thereof is amended to read: "(y) the right to protest the RFP and /or the terms or selection process pursuant to the RFP or the selection of Developer for exclusive negotiations with respect to the 6A Property and the Amended Project pursuant to the First Amendment." (c) Section 5.2.1 of the Original Agreement is hereby deleted in its entirety and replaced with the following: "521 Essential Terms. Developer shall acquire the Property from the City in two phases. The terms and conditions of the conveyances, including but not limited to the manner of the 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, provided that (a) Developer acknowledges and agrees that the purchase price for the Property shall be consistent with the overall site plan attached to the Agreement as Schedule "A -1" and with the Amended Project proforma to be submitted by Developer to the City in accordance with the requirements of Section 6.6(b) of the Agreement and (b) the Phase 2 property will be retained by the City and will be conveyed based on the Developer's performance in Phase 1 and demonstrated financial capacity to perform in Phase 2." (d) Section 5.2.5 of the Original Agreement is hereby deleted in its entirety and replaced with the following: "5.2.5 Tustin Legacy Backbone Infrastructure Program Fair Share Contribution. In connection with development of the Property, Developer shall make a Fair Share Contribution to the Tustin Legacy Backbone Infrastructure Program based on the allocations to the Property in the City's Tustin Legacy Backbone Financing Program — 2011 as updated from time to time. Pursuant to such plan, the Fair Share Contribution allocated to the 1B Property is currently estimated at $9,031,842 and the Fair Share Contribution allocated to the 6A Property is currently estimated at $7,902,862. The Fair Share Contribution shall be collected for each phase at close of escrow for such phase under the DDA and shall be subject to adjustment based on refined design information, updates to the benefit 3 analysis or availability of any outside funding sources and adjustments in the construction cost index, as appropriate, as may be agreed by the Parties in the DDA. (e) Section 5.2.7 of the Original Agreement is hereby deleted in its entirety and replaced with the following: "5.2.7 Construction of In -Tract and Backbone Infrastructure. The Developer will be responsible for all costs of any necessary in -tract improvements, including those identified for the Property in Schedule "B -1" as Phase I, clauses (a) and (b). The Developer will also construct, on behalf of the City, certain Backbone Infrastructure Improvements identified in Schedule B -1 as Phase I, clause (c) and Phase II, clause (a). In the event the Developer commences construction of any of the Backbone Infrastructure Improvements prior to Developer's payment of its Fair Share Contribution, the Developer shall receive a credit against Developer's Fair Share Contribution for the cost of such work. In addition, the costs to be incurred by Developer in construction of the Backbone Infrastructure Improvements for the Project are anticipated to exceed the total Fair Share Contribution of Developer. For any construction of the Backbone Infrastructure Improvements performed following payment of Developer's Fair Share Contribution, the City shall reimburse the Developer for the cost of such work. The DDA will provide for a reimbursement agreement in the standard form used by the City Department of Public Works, with additional modifications agreed to by the Parties, with respect to Backbone Infrastructure Improvements constructed by Developer. (f) Section 6.6 of the Original Agreement is hereby amended by renumbering the existing text as subsection (a) and adding at the end thereof a new subsection (b) as follows: "(b) On or before April 1, 2013, Developer shall submit, in the same Business Plan format provided in the RFP Response or as otherwise requested by the City: (i) revised overall cost and revenue estimates and Amended Project cost and revenue data including information on the Amended Project's financial return adequate to enable the City to evaluate Developer's business offer and the economic feasibility of the proposed development of the Amended Project, as proposed, on the Property; (ii) a comprehensive Amended Project proforma demonstrating (x) the feasibility of the Amended Project by phase including a Static Analysis and a Cash Flow Analysis by quarter, and (y) land takedown by phase; and (iii) an Amended horizontal improvements phase. Project schedule for construction of in -tract and Backbone Infrastructure Improvements by rd The financial proformas for the Project shall reflect any comments the City provides to Developer on the preliminary site plan." (g) Section 7.1 of the Original Agreement is hereby amended by deleting the tern "Disposition Package 1B" in the first sentence and replacing it with "the Property and the Amended Project." (h) Section 9.3 of the Original Agreement is hereby amended by deleting the term "Disposition Package 1 B" therein and replacing it with "the Property ". 7. Additional Developer Covenants and Agreements. Developer hereby covenants and agrees that: (a) The release by Developer in Section 3.5 of the Original Agreement is applies with respect to the Property and the Amended Project and to all information provided by the City with respect thereto, and to the selection of Developer by the City as proposed developer for the 6A Property as described in this First Amendment. Accordingly, Section 3.5 (Release), as amended by this First Amendment, is hereby restated as of the Amendment Effective Date as though fully set forth in this First Amendment. (b) The acknowledgements of Developer in the Agreement, including without limitation, those contained in Section 5.2.6 (CFD), Section 6.9.3 (Hazardous Material Assessment), and Section 6.9.4 (Insurance) of the Original Agreement, shall apply to the entirety of the Property and the Amended Project and are hereby restated as of the Amendment Effective Date as though fully set forth in this First Amendment. 8. Modification to Exhibit A. Exhibit A (111 Property Legal Description and Site Map) is hereby deleted in its entirety and replaced with the Property Legal Description and Site Map attached hereto as Schedule A -1. 9. Authority. The persons signing below represent that they have the authority to bind their respective party, and that all necessary board of directors', shareholders', partners', agency's or other approvals have been obtained. 10. Counterparts. This First Amendment may be signed by different parties hereto in counterparts with the same effect as if the signatures to each counterpart were upon a single instrument. All counterparts shall be deemed an original of this First Amendment. 11. Agreement in Full Force and Effect. Except as otherwise expressly modified by the terms of this First Amendment, the Agreement remains unchanged and in full force and effect. [signatures on following page] E IN WITNESS WHEREOF, the City and Developer hereto have executed this Agreement as of the date set opposite their signatures. Dated: APPROVED AS TO FORM By: David Kendig, City Attorney Armbruster Goldsmith & Delvac LLP Special Tustin Counsel Amy E. Freilich Dated: 0 "CITY" City of Tustin Jeffrey C. Parker City Manager "DEVELOPER" Standard Pacific Corp. In Ted McKibbin, President Southern California Coastal By: Gary Jones, Vice President Land Acquisition Southern California Coastal Schedule "A -l" Property Legal Description and Site Map LEGAL DESCRIPTION Lots 8, 9, 10, 1 l 12, 13, 14, CCC DDD, FFFF, MM, 00, PP, QQ RR TT, SS 000 00000, VV, UU of Tract No 17404 in the City of Tustin County of Orange State of California as shown on a map filed in Book 884, Pages 1 to 14, Official Records of Orange County Califorma SITE MAP et' XAXr,11�''J ° vo 1 h o 0 cor or LOT ess / 13 19 / c° c0T� 15 / 1 24 `0reg�� \o l 13 U 4k gJ- o �y 2 =� LOT MMM v CH iv 0` =20 19 X11 � 14 7 rLOTPPP °r� t0 11 4° all 3 LOT 000 c° g 8v 12 10 0 �� O �0 pP o Schedule `13-P' Amended Proiect Description The Property will be developed in two phases as generally described in this Schedule. Phase 1— Developer will be responsible for the following: (a) Importation of approximately 500,000 cubic yards of dirt from the City - owned Tustin Legacy property known as Disposition Package 7. (b) Design and construction of all in -tract local streets, parks, greenbelts, sidewalks, pathways, neighborhood signage, wet and dry utilities, and recreation facilities and amenities associated with the comprehensive development of the Property. The central park shall not be less than 6.1 acres and the greenbelts shall not be less than 3.8 acres. (c) Construction of the following Backbone Infrastructure Improvements identified in the Tustin Legacy Backbone Infrastructure Program: 1. Moffett Avenue from Park Avenue to Jamboree Road, 2. Park Avenue from Legacy Road to Moffett Avenue, 3. Overall backbone storm drain for a portion of Reach 700, 4. Backbone dry utilities for a portion of Reach 750. (d) Design and construction of not more than 200 single family homes and 4 product types. Phase 2— Developer will be responsible for the following: (a) Construction of the following Backbone Infrastructure Improvements identified in the Tustin Legacy Backbone Infrastructure Program: 1. Moffett Avenue Bridge spanning Peter's Canyon Channel, 2. Peter's Canyon Channel Improvements from the Railroad tracks south to the City limit with the City of Irvine, 3. Peter's Canyon Trail Improvements. (b) Design and construction of not more than 175 single family homes and 4 product types.