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HomeMy WebLinkAbout08 1ST AMENDMENT TO ENA WITH REGENCY CENTERS ACQUISITIONSAGENDA REPORT Agenda Item Reviewed: City Manager Finance Director 8 !/A MEETING DATE: APRIL 16, 2013 TO: JEFFREY C. PARKER, CITY MANAGER FROM: JOHN A. BUCHANAN, PROGRAM MANAGER SUBJECT: DISPOSITION PACKAGE 1C WEST- ST AMENDMENT TO EXCLUSIVE NEGOTIATION AGREEMENT (ENA) WITH REGENCY CENTERS ACQUISITIONS, LLC. SUMMARY: Approval is requested to amend the ENA with Regency Centers Acquisition, LLC (Developer) by modifying the negotiation schedule, the Good Faith Deposit, a deposit to offset City staff expenses during the negotiation period, and non - reimbursable deposits for extending the negotiations. RECOMMENDATION: Authorize the City Manager to execute the attached 1st Amendment to the ENA between the City of Tustin and Regency Centers Acquisition, LLC subject to any non - substantive modifications as may be deemed necessary and /or recommended by the City's special real estate counsel or the City Attorney. FISCAL IMPACT: The Developer has agreed to a) pay all third party costs including legal costs incurred by the City during the negotiation period, and b) pay City staff costs up to $25,000. Developer will be required to provide additional deposits during the negotiation process as described in the Background section of this report. BACKGROUND: On August 7, 2012, the City entered into an ENA with the Developer to negotiate for the development of a neighborhood retail center. The ENA allowed for an initial negotiation period of 180 days with two 30 day extensions at the discretion of the City Manager. These negotiation periods have expired. The proposed retail center will serve the nearby residential neighborhoods in Tustin Legacy and immediately north of Edinger Avenue. Critical to the success of this neighborhood center will be the Developer's ability to secure an acceptable grocery tenant and drugstore. The developer has met with and has solicited interest from all the major grocery store tenants in this market. All of the prospective grocery tenants have expressed interest in the site but, because traffic counts are important to their location decisions, they will not make commitments before the completion of Tustin Ranch Road. Because of this, the developer is requesting an extension to the negotiating period as proposed in the 1st Amendment. Agenda Report — 1s' Amendment to the ENA with Regency Centers Acquisition, LLC April 16, 2013 Page 2 of 2 In summary, the proposed 1st Amendment does the following: a) Developer will continue to pay for third party costs incurred by the City during the negotiation period which are predominately legal costs. These costs will not be credited toward the purchase price. Currently, the developer has made a Good Faith Deposit in the amount of $250,000; the 1st Amendment reduces this amount to $200,000 but continues to obligate Developer to cover all third party costs incurred by the City associated with the transaction. The $50,000 reduction will be applied as follows: b) $25,000 of the existing deposit will be set aside to compensate the City for staff expenses during the negotiation period. These expenses will not be credited toward the purchase price. Under the existing ENA, staff costs during the negotiation period are not paid by the Developer. c) $25,000 of the existing deposit will be retained by the City and will become non- refundable upon execution of a Letter of Intent (LOI) with an acceptable grocery store anchor and approval by that anchor's real estate committee. The existing ENA does not require a deposit of this nature. d) In permitting extensions of the ENA, the Developer is required to make an additional deposit of $100,000 no later than December 30, 2013. An additional deposit of $100,000 will be required of the Developer by June 30, 2014 to permit a further extension of the ENA to December 30, 2014. Approval of the extensions is not automatic but is subject to concurrence by the City Manager that Developer has negotiated diligently and in good faith and that reasonable and sufficient progress has been made toward fulfillment of the requirements of the ENA. In the event the Developer has not executed a Disposition and Development Agreement (DDA) by December 30, 2014 the deposits will be retained by the City (non - refundable deposit). In the event that a DDA is executed the extension deposits will be credited toward the purchase price. The existing ENA does not require the developer to make non- refundable deposits as described above. FIRST AMENDMENT TO EXCLUSIVE AGREEMENT TO NEGOTIATE (WESTERLY DISPOSITION PACKAGE 1C) THIS FIRST AMENDMENT TO EXCLUSIVE AGREEMENT TO NEGOTIATE (WESTERLY DISPOSITION PACKAGE 1C) ( "Amendment ") is made as of April 4, 2013 (the "Amendment Effective Date "), by and between THE CITY OF TUSTIN (the "City ") and REGENCY CENTERS ACQUISITION, LLC, a Florida limited liability company ( "Developer "). The City and Developer are individually referred to as a "Party" and collectively referred to as the "Parties." RECITALS This 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 1B), dated as of August 7, 2012 ( "Original Agreement") with respect to certain land referred to therein as the "IC Property." B. The Original Agreement, as amended by this Amendment, shall hereinafter be referred to as the "Agreement." C. Pursuant to the terms of the Original Agreement, the City Manager granted two 30 day extensions to the term of the Original Agreement, to April 4, 2013. E. The Parties have agreed to modify the terms and conditions of the Original Agreement on the terms set forth herein to (1) further extend the term of the Agreement and (2) modify the deposit provisions and certain other terms of the Original Agreement. 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. 2. Negotiation in Good Faith; Extension of Term. Each of the Parties acknowledges that the other has negotiated diligently and in good faith during the initial period of the Original Agreement. 3. Amendments to Text of Original Agreement. (a) Section 4.2.1 through 4.2.3 of the Original Agreement are hereby amended to read as follows: 4.2.1 Initial Period. The Parties agree that the term of this Agreement Tustin Regency Centers First Amendment to ENA -4 -10 -2013 1 and the period of negotiations hereunder shall remain in effect until December 31, 2013 unless extended pursuant to Section 4.2.2 and 4.2.3 (the "Amended Termination Date "). If by the Amended Termination Date, Developer has not signed a DDA and DA in form and substance prepared and approved by the City in its sole discretion, this Agreement shall automatically terminate. 4.2.2 Request for Extension. The term of this Agreement may be extended by the City for two additional periods upon (a) agreement by the City as described in Section 4.2.3 and (b) payment by Developer to the City of the following extension deposits ( "Extension Deposits "): (i) To secure an extension of the Amended Termination Date until June 30, 2014, Developer shall make an additional $100,000 non - refundable deposit on or before December 31, 2013; (ii) To secure an additional extension of the Amended Termination Date from June 30, 2014 until December 31, 2014, Developer shall make an additional $100,000 non - refundable deposit on or before June 30, 2014. The Extension Deposits shall be non - refundable in all cases, provided that the DDA shall provide that the Extension Deposits shall be applicable to the purchase price for the Parcel 1C Property. In the event Developer does not make either of the Extension Deposits on or before the date for such deposit to be made as specified above, the Agreement shall automatically terminate on the date upon which such Extension Deposit was due to be made and without further action of the parties. 4.2.3 Authority to Extend. 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 4.2.2 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. No such extension of time shall be effective unless it is in writing. The City shall have the right, in its sole discretion, to determine not to extend the ENA for any reason. (b) Section 4.3.1 of the Original Agreement is amended to read as follows: 4.3.1 Good Faith Deposit. (i) Original ENA Deposit Amount and Replenishment. Developer has submitted to the City a good faith deposit in the sum of Two Hundred Fifty Thousand Dollars ($250,000)(the "Original ENA Deposit Amount ") in the form of a check to the City to ensure that Developer will proceed diligently and in good faith to negotiate and perform all of Developer obligations under this Agreement and to also be applied to cover any City Transaction Expenses (defined below) incurred by the City after the Effective Date of this Agreement. The ENA Deposit shall be deposited in a bank or trust account selected by the City. Each time the amount of funds in the ENA Deposit account is depleted below Fifty Thousand Dollars ($50,000), Developer shall be required to Tustin Regency Centers First Amendment to ENA- 4 -10 -20 13 2 submit an additional Fifty Thousand Dollars ($50,000) to City which shall be credited by the City to the ENA Deposit account. (ii) Modification to Amount of ENA Deposit. The Parties hereby agree that the Original ENA Deposit Amount shall be reduced by $50,000 to a total of $200,000 (hereinafter, the "ENA Deposit "). To effectuate this reduction, the City shall allocate the difference between the Original ENA Deposit Amount and the revised ENA Deposit (i.e., $50,000) as follows within 5 Business Days after the Amendment Effective Date, provided that nothing in this section shall modify the obligations of Developer to replenish the ENA Deposit as described in Section 4.3.10). (A) City Staff Costs. The City shall be entitled to allocate Twenty Five Thousand Dollars ($25,000) (the "Staff Costs Deposit ") to offset City staff costs related to project activities during the term of the Agreement ( "Staff Costs "). The City shall keep a separate accounting of amounts expended for Staff Costs. Funds remaining and not allocated by the City to Staff Costs during the term of this Agreement shall be returned to the Developer upon termination of the Agreement. The Staff Cost Deposit shall not be credited toward the purchase price. The Staff Costs Deposit shall be deposited in an account in a bank or trust account selected by the City. The Staff Costs Deposit will be expended to cover the City's staff costs during the negotiation process, and the Staff Costs Deposit will be depleted accordingly. The Staff Costs Deposit is not required to be replenished by Developer unless otherwise agreed in writing by the City and Developer, each in its sole discretion. (B) Grocery Tenant Deposit. The City shall be entitled to allocate Twenty Five Thousand Dollars ($25,000) of the Original ENA Deposit Amount as an additional deposit (the "Grocery Tenant Deposit ") to be held by the City. The Grocery Tenant Deposit shall be refundable only in the event that Developer fails to (x) enter into a Letter of Intent (LOI) with a grocery tenant ( "Grocery Tenant "), acceptable to the City, in its sole discretion and (y) to obtain the approval of Grocery Tenant's Real Estate Committee, in each case, by December 31, 2013. If Developer is successful in entering into an LOI and obtaining Grocery Tenant's Real Estate Committee approval by such date, the $25,000 shall be non- refundable and shall be credited toward the Purchase Price. Notwithstanding the foregoing, the City shall retain the Grocery Tenant Deposit until the termination of the ENA. (c) Section 4.3.3 of the Original Agreement is hereby amended to read as follows: 4.3.3 Return of Deposits Under Specified Conditions. 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 (i.e., those portions of the ENA Deposit remaining after deducting therefrom the City Transaction Expenses and those portions of Tustin Regency Centers First Amendment to ENA -4 -10 -2013 3 the Staff Costs Deposit remaining after deducting therefrom the Staff Costs) to Developer or Developer can apply the remaining unused funds in each such account 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, the City may retain any remaining unused portions of the ENA Deposit and/or the Staff Costs Deposit only if 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, applications and materials specified in Section 5 and Section 6 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 City shall be entitled to retain any remaining unused portions of the $200,000 ENA Deposit and the $25,000 Staff Costs Deposit plus interest, if any, which has accrued thereon, as liquidated and agreed damages. 4.3.4 Not Sole Remedy of City. Subject to Section 10.6 of this Agreement, by the initials of their respective signatories hereunder, the City and Developer acknowledge and agree that forfeiture of the original amount of the ENA Deposit and/or the Staff Cost 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 Developer's default (other than a default in any obligation to negotiate in good faith which shall be governed by the preceding paragraph). CITY'S INITIALS DEVELOPER'S INITIALS (d) Section 4.3.7 of the Original Agreement is hereby amended to read as follows: 4.3.7 Developer Right to Terminate. Developer may terminate this Agreement in the event that during the course of the investigations and evaluation of the 1C Property and the Project, it determines in good faith that the Project is not feasible or financeable. In the event of such termination, the City shall return unused portions of the ENA Deposit (i.e., those portions remaining after deducting therefrom the City Transaction Expenses) and the Staff Costs Deposit (i.e., those portions remaining after deducting therefore the Staff Costs) together with any interest accrued thereon to Developer upon termination of the Agreement in the event Developer has negotiated in good faith hereunder and materially complied with the terms hereof. Tustin Regency Centers First Amendment to ENA -4 -I0 -2013 4 (f) Section 6.5 of the Original Agreement is hereby amended to read as follows: (g) follows: 6.5 Design Review/Entitlements. It is understood and agreed by Developer that the quality, character and uses proposed for the Project are of particular importance to the City and that planning and design review approval and other entitlements by the City will be required for the development of the 1C Property. Developer and the proposed architect and engineer for the Project 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 in its proprietary capacity and governmental capacity. Section 6.6 of the Original Agreement is hereby amended to read as 6.6 Proiect Financial Pro Forma. Within sixty (60) days after an LOI has been executed between the Developer and Grocery Tenant and approval of Grocery Tenant's Real Estate Committee has been received, Developer shall submit revised overall cost and revenue estimates for the entire project (i.e., 20+ acres), and Project cost and revenue data including information on Project's financial return adequate to enable the City to evaluate Developer's Business offer and economic feasibility of the proposed development of the Project, as proposed, on the IC Property. The information submitted shall be in the same Business Plan format provided in response to the RFP or as otherwise requested by the City. The financial pro formas for the Project shall reflect any comments the City provides to Developer on the preliminary site plan. 4. 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. 5. Counterparts. This 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 Amendment. 6. Terms. Unless otherwise expressly indicated herein, all references in the Original Agreement and in this Amendment to "this Agreement" or the "ENA" shall mean and refer to the Original Agreement as modified by this Amendment. 7. No Other Changes. Except as modified by the terms of this Amendment, the terms of the Original Agreement shall remain unmodified and in full force and effect. Only those provisions of the Original Agreement specifically amended herein shall be affected by this Amendment. In the event of any conflict or inconsistency between the Tustin Regency Centers First Amendment to ENA -4 -10 -2013 5 terms of the Original Agreement and this Amendment, the terms of this Amendment shall control. 8. Effective Date of Amendment. The Amendment Effective Date first set forth above shall be the effective date of this Amendment. IN WITNESS WHEREOF, the City and Developer hereto have executed this Agreement as of the date set opposite their signatures. "CITY" CITY OF TUSTIN Dated: By: APPROVED AS TO FORM By: David Kendig, City Attorney Armbruster Goldsmith & Delvac LLP Special Tustin Counsel By: Amy E. Freilich Jeffrey C. Parker City Manager "DEVELOPER" REGENCY CENTERS ACQUISITION, LLC By: Regency Centers, L.P., a Delaware limited partnership, its Manager By: Regency Centers Corporation, a Florida corporation, its General Partner By: John T. Mehigan Vice President, Investments Tustin Regency Centers First Amendment to ENA -4 -10 -2013 6