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HomeMy WebLinkAboutRDA 01 DDA UTT JUICE 05-15-00AGENDA RDA NO. 1 05-15-00 Inter-Com DATE: MAY 15, 2000 TO: FROM: SUBJECT: WILLIAM A. ttL'STON, EXECUTIVE DIRECTOR REDEVELOP.MENT AGENCY STAFF EXCLUSIVE AGREEMENT TO NEGOTIATE A DISPOSITION AND DEVELOPMENT AGREEMENT (DDA) AND GROUND LEASE FOR UTT JUICE PROPERTY LOCATED IN THE VICINITY OF MALN STREET AND PROSPECT AVENUE SUMMARY: Agency approval is requested to enter into exclusive negotiations for an Agency-owned site in the Town Center Project Area. The Agency, by law, may enter negotiations with private developers and property owners seeMng to develop projects in Redevelopment Project areas that are consistent with the goals and objectives of the Agency. RECOMMENDATION It is recommended that the Redevelopment Agency authorize the Executive Director to execute an Exclusive Agreement to Negotiate ber~veen the Tustm Community Redevelopment Agency and Burge Corporation and Gallo Corporation. FISCAL IMPACT This action will have no direct fiscal impact on the Redevelopment Agency. If the negotiations result in a Disposition and Development Agreement (DDA) and Ground Lease, the fiscal impact of such an agreement will be discussed if Agency approval of a DDA and Ground Lease is requested in the future. BACKGROUND ANI) DISCUSSION In February, 1998 the .agency solicited qualifications and interest for the development of the property located at 191, 193 and 195 Main Street, which was being acquired by the Agency using its eminent domain authority. Formerly the site of the Utt Juice Company, the site is vacant and in need. of substantial renovation. On April 6, 1998 the Agency approved proceeding w/th the solicitation of a development proposal frOm Sanderson J. Ray Development for redevelopment of the Utt Juice site. After considerable delay by the developer, Agency staff terminated discussions with the developer and proceeded to market the site to other qualified interested developers. .agency staff received a development proposal including conceptual design plans and a prelim/nary economic analysis from the Burge Corporation and Gallo Corporation (the "developer"). Subsequently, Agency staff have discussed non-binding business terms with the developer to serve as the framework for exclusively negotiating a DDA and Ground Lease for the redevelopment of the Utt Juice property.. Attached is a proposed Exclusive Agreement to Negotiate between the Redevelopment Agency and the developer. The Agreement commits the Agency to negotiating in good faith with the intent of entering into a Disposition and Development Agreement (DDA) and Ground Lease for the redevelopment of the Utt Juice property. It does not commit the Agency to any expenditure of funds nor does it commit the Agency to Mr. William A. Huston Exclusive Agreement to Negotiate: Uit Juice Property May 15, 2000 Page 2 providing financial assistance at this time. Agency staff will seek specific Agency negotiating direction in any financial discussions. If, after negotiating in good faith, the Agency and developer fail to reach a DDA and Ground Lease, neither party is liable to the other. The Exclusive Agreement to Negotiate provides fora 90-day negotiating period, which can be extended for 60 days if a DDA and Ground Lease has been prepared by the Agency and executed by the developer but not yet approved by the Agency Board, or for 30 days if, in the determination of the Executive Director, the major business terms ofa DDA and Ground Lease have been reached, or by mutual agreement of the Agency and the developer. In addition to requiring the developer to negotiate in good faith with the Agency, the Exclusive Agreement to Negotiate also requires the developer to: Provide on-going oral and x~rten status reports advising the Agency of all matters and studies being undertaken on the project. Provide the Agency, without cost or expense to the Agency, copies of all plans, reports, studies, or investigations prepared by or on behalf of the developer with respect to the site and the proposed project. Demonstrate to the Agency, in its sole discretion, the developer's financial capacity to perform its obligations under the DDA and Ground Lease for the proposed project. Within fifteen (1'5) days of execution, submit for approval by the Agency the proposed project architect and identify the development team, including its agents, authorized negotiators and other associates participating in the development of the proposed project. Within sixty (60) days of execution, submit for approval by the Agency preliminary design drawings and related docum~ts containing the overall plan for development of the project which meet the Agency's planning and design requirements. Within sixty (60) days of execution, prox4de a financing plan and economic projection for the proposed project,, including a pro forma analysis of the project's financial return adequate to enable the Agency to evaluate the economic feas~ility of the proposed project and to prepare a "fair reuse value" study and Section 33433 Report as required under California Redevelopment Laxv. This Exclusive Right to Negotiate ~511 allow the developer to proceed in completing preliminary design documents, detailed economic and cost evaluations, and allow him to begin serious discussions on the necessary financing for the project. Mr. William A. Huston Exclusive Agreement to Negotiate: Utt Juice Property May 15, 2000 Page 3 FINDING OF BENEHT This site is located m the Town Center Project Area. On March 6, 2000 the Tustm Community Redevelopment Agency adopted a five-year Implementation Plan for the Town Center and South/Central Redevelopment Project areas for fiscal years 2000-2001 through 2004-2005. The Implementation Plan was composed of two parts, a five-year plan for Redevelopment activities and a five-year plan for housing activities. Anticipated accomplishments and expenditures for the five-year period included the rehabilitation of substandard and deteriorating structures to improve building conditions, increase functionality and desirability, and to integrate design characteristics ~ith the aim of creating a cohesive commercial district in the Town Center Project Area. The proposed project is consistent with the Implementation Plan for the Town Center Project Area. It will remove a blighting influence in the Project Area by rehabilitating or clearing existing improvements that are characterized by substantial deferred maintenance and developing a commercially viable mixed retail and office project. It is anticipated that the proposed project would bring new commercial uses to the Tustin Historic Old Town District and stimulate economic development activity in the Project Area. If financial assistance is prox4ded for this project through a DDA and Ground Lease, Agency staff will prepare and present for the Agency consideration a resolution making the required legal findings. Christine A. Shingleton Assistant City Manager ~a2r~oSr AR' Draugh~nedevelop?r~t Project Manager Attachment JD:kd\Town Center Project/Un Juiee.~tay 1 ENA Staff Report. doc EXCLUSIVE AGREEMENT TO NEGOTIATE THIS EXCLUSIVE AGREEMENT TO NEGOTIATE ("AGREEMENT") is made this day of ., 2000, by and between the TUSTIN COMMU.'NIIY REDEVELOPMENT AGENCY ("AGENCY") and BURGE CORPORATION AND GALLO CORPORATION, California Corporations ("DEVELOPER"). Each of the Agency and Developer are sometimes referred to as the "Party" and collectively as the "Parties?' RECITALS The Parties entered into this Agreement on the basis of the following facts, understandings, and intentions: A. The Agency is a public body, corporate and politic, exercising governmental functions and powers and organized and existing under the Community Redevelopment Law of the State of California (Health and Safety Code Sections 33000 et seq.). B. The Agency desires to encourage and effectuate the redevelopment of certain real property (the "Site") owned by the Agency located in the Town Center Redevelopment Project Area of the City of Tustin in furtherance of the Agency's revitalization efforts, and which consists of that certain real property which is depicted on the "Site Map" attached hereto as Exhibit A and incorporated herein by reference. To this end, the Agency desires to negotiate a Disposition and Development Agreement (DDA) and Ground Lease to have the Developer construct a mixed commercial retail and office project on the Site. C. The Developer desires to ground lease with the option to acquire fi.om the Agency an approximately 0.98-acre Site, which currently contains approximately 6,200 square feet of improvements located at 191,193, and 195 Main Street and the adjacent vacant land located along Prospect Avenue to Third Street. D. The Developer desires to negotiate a DDA and Ground Lease that involves rehabilitating, reconstructing, or clearing the existing improvements, and developing an approximately 30,.000 square feet mixed commercial retail and office project (hereinafter referred to as ("Project"). E. The Developer represents that it has the necessary expertise, eXPerience, and financial capability to undertake the development contemplated herein. F. The Developer represents and agrees that its ground lease/acquisition of the Site and its other undertakings pursuant to this Agreement are and shall be used for the timely redevelopment of the Site and not for speculation in land holding. G. The Parties desire, for the period set forth herein, to negotiate diligently and in good faith the terms and conditions of a DDA and Ground Lease which will specify rights, obligations and method of participation of the Parties with respect to development of the Site. NOW THEREFORE, and in consideration of the recitals above and the mutual covenants hereinafter contained, the parties agree as follows: 1.0 NATURE OF NEGOTIATIONS 1.1 Good Faith. The Parties agree that for the period set forth in Section 2 and provided .that Developer is not in default on any of the obligations under this Agreement, the Parties will negotiate in good faith with respect to a DDA and Ground Lease to be entered into between the Parties for development of the Project on the Site. 1.2 Essential Terms The ri~hts and obligations of the Agency and Developer's ri~hts and obligations shall be as specifically set forth in the DDA and Ground Lease and shall include without limitation the following: a. Design of the Project, subject to approval rights of the Agency and compliance with all requirements and regulations of the City of Tustin ("City"), including without limitation, applicable zoning. b. Construction of improvements comprising the Project, the completion of which shall be (i) guaranteed by Developer upon terms mutually agreeable to the Parties, and (ii) free of mechanics' liens and liens other than those respecting the financing of the acquisition of the Site and the development of the Project. c. Operation and maintenance of the Project. d. Restrictions on transfer of the Project, Developer's interest in the DDA and Ground Lease, and control of Developer. e. Reimbursement to the Agency of costs incurred in connection with the DDA and the Project. f. Agency financial assistance to the Project. g. Security to assure Developer's performance under the DDA and Ground Lease. h. Developer will assume the full and complete responsibility to make all investigations of surface and subsurface conditions as may be necessary or appropriate and to evaluate the suitability of the Site for the development. The Agency on behalf of itself and on behalf of the City does not make any representations or warranties concerning the Site, its suitability for the use intended by Developer, or the surface or subsurface conditions of the Site. 2.0 PERIOD OF NEGOTIATION The Parties agree to negotiate for a period of ninety (90) days fi'om the date this Agreement is signed by the Agency, and this Agreement shall terminate at~er the expiration of such period unless extended by the Agency Board as follows: a. For sixty (60) days if a DDA and Ground Lease has been prepared by the Agency's Execrative Director and executed by Developer and has been submitted to the Agency but has not yet been approved by the Agency Board; or b. For thirty (30) days if the major business terms have been agreed to and the Executive Director detenrfines that further negotiations are likely to result in a written DDA and Ground Lease; or c. For such additional time by mutual written agreement of the Parties. Upon termination of this Agreement, any interest that Developer may have under this Exclusive Agreement to Negotiate shall cease and Agency shall have the right to thereafter deal with the Site as it shall determine in its sole discretion. Developer understands and acknowledges that if negotiations culminate in a DDA and Ground Lease, such DDA and Ground Lease shall be effective only after and if the DDA and Ground Lease has been considered and approved by the Agency Board after all related public heatings as required by law and the Developer performs such conditions as required in the DDA and Ground Lease to be performed before the DDA and Ground Lease may become effective. 3.0 PLANS, REPORTS, STUDIES AND INVESTIGATIONS Developer shall provide the Agency, without cost or expense to the Agency, copies of all plans, reports, studies, or investigations (collectively, "Plans") prepared by or on behalf of Developer with respect to the Site and the Project. All Plans shall be prepared at Developer's sole cost and expense. If this Agreement is terminated for any reason, the Agency may request that Developer, for consideration to be mutually agreed, transfer ownership rights to any or all Plans identified by the Agency, but under no event shall the cost to the Agency exceed five hundred dollars ($500.00). Upon such request, Developer shall deliver to the Agency copies of all Plans requested by the Agency together with a bill of sale therefor, which Plans shall thereupon be the sole property of the Agency, flee of all claims or interests of Developer or any other person or entity. Upon the Agency's acquiring title to any or all of the Plans, the Agency shall be permitted to use, grant, license or otherwise dispose of such Plans to any person or entity for development of the Site or any other purpose; provided, however, that Developer shall have no liability whatsoever to the Agency or any transferee of title to the Plans in connection with the use of the Plans. 4'.0 DEVELOPER'S RESPONSIBILITIES During the period of negotiation, Developer shall prepare and submit to the Agency the following documents and perform the following acts, all in furtherance of the negotiation process: . 4.1 Status Reports Developer agrees to make oral and written reports advising the Agency and/or its staff of all matters and studies b~ng made, including Developer's progress in analyzing the feasibility of the Project, as may be requested by the Agency or its staff. 4.2 Development Team Developer shall within fifteen (15) days of execution of execution of this Agreement submit in writing to the Agency full disclosure of the names of 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, employers. Developer shall also designate and submit in writing to the Agency the names of all Developer's lead negotiators, who shall have authority to make decisions on behalf of the Developer. Developer shall within thirty (30) days of execution of this Agreement submit for approval by the Agency's Executive Director, at his sole discretion, the name(s) and qualifications statement of the proposed architect and related consultants for the Project. 403 Financial Status Developer shall demonstrate to the Agency the financial capacity and capability to perform its obligations under this Agreement, the DDA and the Ground Lease. Developer's most recent certified financial statement and the financial statements of its key principal or principals shall be submitted to the Agency xvithin forty-five (45) days of execution of this Agreement. To the extent Developer wants such financial statements to remain confidential, Developer shall identify with specificity the documents which the Developer wants the Agency to maintain as confidential documents and a statement of the reasons why such documents are to be maintained 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 statements shall be delivered to and maintained by the Agency Counsel and copies not disseminated. To the extent penuitted by law, the Agency, including Agency Counsel, shall not make public disclosure of the statements. The Agency's negotiators and consultants may review the statements as necessary. If Developer determines to joint venture or partner development of the Site, or if Developer determines to form a new legal entity to develop the Site, Developer shall promptly inform the Agency of such determination and submit to Agency joint venture' s or partner's most recent certified financial statements and the financial statements of its key principals. The assignment of Developer's rights under this Agreement, the new entity, partnership or joint venture may be approved in writing by the Agency, provided the Agency, at its sole discretion, is satisfied that the new entity, partnership, or joining venture has the financial capability to perform under this Agreement, the DDA, and the Ground Lease. 4.4 Design Review It is understood and agreed to by Developer that the quality, character, and uses proposed for the Project are of particular importance to the Agency and that planning and design review approval by the Agency and the City will be required for the development of the Site. Developer and the proposed architect shall meet with representatives of the Agency and the City to review and come to a clear understanding of the planning and design criteria required by the Agency and the City. Within sixty (60) days after the date of this Agreement, Developer shall submit for approval of the Agency preliminary design drawings and related documents containing the overall plan for development of the Developer's Project in the form acceptable for submission of an application to the City of Tustin for a design review and a request for a zone change for the site to Planned Development. 4.5 Financing Plan/Exx)nomic Projection Within sixty (60) days after the date of this Agreement, Developer shall submit a financing plan and economic projection for the Site. The financing plan shall include a detailed statement about the overall costs of construction and the source and availability of equity capital, 'acquisition, development and construction financing. The economic projection shall estimate the market demand and income to be derived fi.om the Project and shall include a pro forma statement of the Project's financial return adequate to enable the Agency to evaluate the economic feasibility of the proposed development of the Project. 4.6 Additional Information Developer understands and agrees that the Agency's negotiating team reserves the right at any time to request from Developer additional information, including information, data, and commitments to ascertain the depth of Developer's capability and desire to develop the Site expeditiously. The Agency's negotiating team will provide a reasonable time in which Developer may obtain and submit to the Agency such additional information. 4.7 Contacts During Negotiations Developer shall only negotiate with the Agency's negotiating team as defined in writing by the Executive Director and with no other persons unless expressly authorized to do so by the Agency's negotiating team. During the period of negotiations, Developer shall make no statements to the media without the approva! from the Executive Director. Developer's failure to comply with the provisions of this Section shall be conclusive evidence that Developer has not "negotiated in good faith." 5.0 MARKET AND OTHER STUDIES 5.1 Market Studies Market and such other studies as the Agency's Executive Director deems appropriate or necessary for completion of the Section 33433 Report identified 'in section 7.2 of this Agreement shall be prepared by or on behalf of the Agency to consider and analyze the financial impact of the proposed development under the DDA and Ground Lease. The Agency shall, at its sole cost and discretion, select the consultant(s) to perform said studies and shall enter into contracts with the selected consultants. The Agency shall, at its sole discretion, have the right to direct said consultant(s) and its staff[s) and to terminate the contract of any consultant which the Agency believes is not adequately or objectively performing its obligations under said contract. Developer shall cooperate with the Agency and its selected consultant(s) in responding to any information requested. 5.2 Environmental Studies The Agency's preparation of environmental studies including, but not limed to, an Environmental Impact Report if deemed necessary in accordance with the California Environmental Quality Act ("CEQA") is a legal precondition to the final Agency action of approving and executing the DDA and Ground Lease. The Developer shall cooperate with the Agency and abide by the Agency's environmental compliance procedures, and fee requirements, which include but are not limited to, the obligation to deposit funds to pay all of the Agency's costs of preparing the required environmental studies. 6.0 GOOD FAITH DEPOSIT Prior to the execution of this Agreement by the Agency, Developer shall submit to the Agency a good faith deposit in the sum often thousand dollars ($10,000) in the form of a certified cashier's check, irrevocable letter of credit, or other form of security acceptable to the Executive Director to ensure that Developer will proceed diligently and in good faith to negotiate and perform all of Developer's obligations under this Agreement. If the deposit is in cash or a certified cashier's check, it shall be deposited in an interest-bearing account in a bank or trust company selected by the Executive Director. Interest, if any, shall be added to the deposit and held as additional security for Developer's obligations hereunder. If the Parties enter into a DDA and Ground Lease within the time period identified in Section 2.0 of this Agreement or any extension thereto, the Agency shall return the deposit to Developer. If the Parties fail to enter into a DDA and Ground Lease within the time period identified in Section 2.0 of this Agreement or any extension thereto, the Agency may retain the deposit if Developer has not negotiated diligently or in good faith or has not carried out its obligations under this Agreement. Developer's failure to submit to the Agency plans, reports, studies, investigations, and materials specified in Sections 3.0 and 4.0 of this Agreement within the time periods specified therein shall be deemed to demonstrate Developer's failure to negotiate diligently and in good faith and its failure to carry out its obligations hereunder. If Developer has failed to do so, inasmuch as the actual damages which would result from a breach by Developer of its obligations under this Agreement are uncertain and would be impractical or extremely difficult to determine, the Agency shall be entitled to retain the entire original amount of said deposit plus interest, if any, which has accrued thereon, as liquidated and agreed damages. By their respective initials set forth below, the Agency and 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 Agency might be entitled by reason of Developer's default. Initials: Developer Developer Agency Executive Director 7.0 MISCELLANEOUS 7.1 Real Estate Commissions. The Agency shall not be liable for any real estate commission, finder's fee, or any broker's fees which may arise from this Agreement. The Agency represents that it has engaged no broker, agent, or finder in connection with this Agreement, and Developer agrees to hold the Agency and its representatives harmless fi.om any losses and liabihties arising fi.om or in any way related to any claim by any broker, agent, or finder retained by Developer regarding this Agreement or development of the Project, or purchases/sale of other property at the Site. 7.2 No Agency Duty Except as expressly provided above, the Agency shall have no obligations or dUties hereunder and no liability whatsoever in the event the Parties fail to timely execute a DDA and Ground Lease. Developer understands and acknowledges that the Agency presently ox~ms the Site and that as a condition precedent to approval of a DDA and Ground Lease, Agency is required under Section 33433 of Califomia Redevelopment Law to make a finding by resolution after a public hearing that the consideration received by the Agency from the Developer for the Site under the Ground Lease and purchase option is not less than the fair reuse value of the property at the use and with the covenants and conditions and development costs authorized by the sale or lease. Developer acknowledges and agrees that the Agency, as of the execution hereof, has not agreed to fund, subsidize, or otherwise contribute in any way toward the development of the Project. The Agency's financial and other involvement in the Project will be established by the DDA and Ground Lease, if at all. Any financial participation by the Agency as established in the DDA and Ground Lease will be determined by the Agency, in its sole and absolute discretion, based upon such factors such as market conditions, density of development, cost of development and/or rehabilitation of the Project, risks associated with development of the Project, estimated or actual revenues and profit to be derived from the Project, public purposes associated with development of the Project, and other matters relevant to establishing the fair market value of the Project to be developed, the financial requirements of Developer respecting its leasing and/or 'acquisition of the Site and development of the Project and the financial benefit to be derived by the Agency from development of the Project. By its execution of this Agreement, the Agency is not committing itself or the City to or agreeing to undertake: a) any disposition ofl~md to Developer; or b) any other acts or activities requiring the subsequent independent exercise of discretion by the Agency, the City, or any agency or department thereof. The Parties recognize that one or more of the conditions to Developer's proposal set forth herein may fail to be met as a result of subsequent studies, re'~Sews, and proceedings involving the exercise of discretion by the Agency, the City, or any agency or department thereof. This Agreement does not constitute a disposition of property or exercise of control over property by the Agency or the City and does not require a public heating. Execution of this Agreement by the Agency is merely an agreement to enter into a period of exclusive negotiations according to the terms hereof, reserving final discretion and approval by the Agency and the City as to any DDA and Ground Lease and all proceedings and decisions in connection herewith. 7.3 Non-liability of Agency Officials and Employees No member, official, representative, director, staff member, attorney, or employee of this Agency shall be perSonally liable to Developer or any successor in interest, in the event of any default or breach by the Agency or for any amount which may become due to Developer or to its successor, or on any obligations under the terms of this Agreement. 7.4 Public Hearings and Compliance If the negotiations hereunder culminate in Developer and Agency's Executive Director concurring on the terms and provisions of a DDA and Ground Lease, such DDA and Ground Lease will be considered for approval by the Agency only after all required public heatings have been held and after compliance with all applicable, laws and ordinances. The Agency's Executive Director's concurrence with the terms and provisions of a proposed DDA and Ground Lease under any provision of this Agreement shall not be construed or interpreted as Agency approval or acceptance of such terms. Such concurrence shall be viewed as nothing more than the Executive Director's willingness to recommend to the Agency Board that the Agency Board approve such terms. 7.5 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 both of the Parties hereunder. If either 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 Part3' of its obligations hereunder, then the prevailing Party in such action or proceeding shall be entitled to have its reasonable attomeys' fees and out-of-pocket expenditures paid by the losing Party. 7.6 Covenant Against Discrimination 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 ori~dn or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Site, nor shall 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 Site. 7.7 Notices All notices 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. Agency: Tustin Community Redevelopment Agency 300 Centennial Way Tustin, California 92780 Attention: Assistant Executive Director Developer: Mr. Dan Burge President Burge Corporation 981 Calle Negocia, Suite 200 San Clemente, CA 92673 Mr, Keith Gallo President Gallo Corporation 1100 S. Coast Highway, #207 Laguna Beach, CA 92651 Any such notice shall be deemed received upon delivery, if delivered personally, one (1) day after delivery to the courier, if delivered by courier, and three (3) days after deposit into the United States mail, if delivered by registered or certified mail. 3.2 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. Dated: AGENCY Tustin Community Redevelopment Agency By: William A. Huston Executive Director Approved as to form: Lois Jeffi'ey Agency Counsel DEVELOPER: By: Dan Burge, President Burge Corporation Keith Gallo, President Gallo Corporation JD:kd\TownCenterProjectXUttJuice~urge-Gallo ENA.doc 3.3