HomeMy WebLinkAbout10 REGENCY CENTERS - 2ND AMENDMENT TO THE EXCLUSIVE RIGHT TO NEGOTIATE (PARCEL 1C WEST) %cY Q Agenda Item 1 0 G- 4 •—:., Reviewed: cs, AGENDA REPORT City Manager &Si% Finance Director , N/A MEETING DATE: DECEMBER 16, 2014 TO: JEFFREY C. PARKER, CITY MANAGER FROM: CITY MANAGERS OFFICE SUBJECT: DISPOSITION PACKAGE 1C WEST- 2nd 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 a non-refundable deposit for extending negotiations. RECOMMENDATION: Authorize the City Manager to execute the attached 2nd Amendment to the ENA between the City 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: a) The Developer's Good Faith Deposit which reimburses the City for transaction costs is $250,000 of which $200,000 Developer will continue to pay for third party costs incurred by the City during the negotiation period which are predominately legal fees. This is a continuing obligation from the 1s` Amendment. The Developer has an obligation to reimburse the City for staff and expenses; this amount has been increased from $25,000 to $50,000. The City transaction costs will not be credited toward the purchase price. Each time the amount on deposit drops below $50,000 the Developer is required to make an additional deposit of$50,000. b) Under the 1V` Amendment the Developer made a total of $200,000 in non-refundable extension deposits, the first $100,000 deposit was made in December 2013 to extend the negotiating period through June 30, 2014 and the second $100,000 deposit was made in June 2014 that extended the negotiating period to December 31, 2014. Because a Disposition and Development Agreement (DDA) will not be executed prior to the expiration of the 151 Amendment, the City will retain the extension deposits totaling $200,000. The extension deposits under the 1s` Amendment will not be applied to the purchase price for Disposition Parcel 1-C. Agenda Report—2nd Amendment to the ENA with Regency Centers Acquisition, LLC December 16, 2014 Page 2 of 2 c) Under the 2nd Amendment, the Developer will be required to make a deposit of $100,000 by December 18, 2014 to extend the negotiating period to June 30, 2014. This $100,000 deposit will be credited to the purchase price only if the Developer has signed a DDA and DA that has been approved by the City; otherwise, the ENA shall automatically terminate on June 30, 2014 and the City will retain the deposit ($100,000). BACKGROUND: On August 7, 2012, the City entered into an ENA with the Developer for the construction of a grocery anchored neighborhood retail center to serve the residents of Tustin Legacy and adjacent neighborhoods. The initial negotiating period was 240 days which expired in April 2013. Upon termination of the initial negotiating period, the City entered into the 1St Amendment with the Developer to extend negotiations until December 31, 2014. Negotiations between City staff and the Developer have been on-going during this period; however, the Developer has had difficulty securing the appropriate grocer for the site. During this period the following factors have contributed to the difficulty in securing a grocery tenant: (a) lack of sufficient traffic on adjacent roadways; (b) scarcity of residential units within the immediate market area, and (3) instability in the grocery industry impacted by mergers/acquisitions of national grocers, a reduction in the number of new and existing stores by certain markets, and modifications by national/regional chains in merchandising and store layouts in response to trending consumer tastes. Many of the former impediments by the grocers have gone away with the opening of Tustin Ranch Road and the construction of over 1,150 residential units in various stages of development at Tustin Legacy. The Developer has received and staff has reviewed a Letter of Interest (LOI) from two regional grocers within the last 30 days; therefore, City staff is recommending the extension of negotiations through June 30, 2014 in order to allow time to finalize the DDA and for the Developer to secure entitlements. a--w_ CJohn . Buchanan eputy Director, Economic Development Attachment: 2nd Amendment to the Exclusive Right to Negotiate SECOND AMENDMENT TO EXCLUSIVE AGREEMENT TO NEGOTIATE (WESTERLY DISPOSITION PACKAGE 1C) THIS SECOND AMENDMENT TO EXCLUSIVE AGREEMENT TO NEGOTIATE (WESTERLY DISPOSITION PACKAGE 1C) ("Second Amendment") is made as of December 16, 2014 (the "Second 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 Second 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 1 C), dated as of August 7, 2012 ("Original ENA") with respect to certain land referred to therein as the "1C Property," as amended by that certain First Amendment to Exclusive Agreement to Negotiate (Westerly Disposition Package 1C) dated as of April 4, 2014 ("First Amendment"). B. The Original ENA and the First Amendment (together, the "Prior ENA"), as amended by this Second Amendment, shall hereinafter be referred to as the"Agreement." C. Pursuant to the terms of the Prior ENA, and upon payment by Developer of the two Extension Deposits described in First Amendment, the City Manager granted various extensions to the term to December 31, 2014. D. The Parties have agreed to modify the terms and conditions of the Prior ENA on the terms set forth herein to (1) further extend the term of the Agreement to June 30, 2015, (2) allocate the amount identified as the Grocery Tenant Deposit in the First Amendment as an additional Staff Costs Deposit and (3) further modify the deposit provisions and certain other terms of the Prior ENA, as further set forth below. 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 Prior ENA, unless otherwise expressly stated herein. 2. Negotiation in Good Faith; Extension of Term. Each of the Parties Tustin Regency 2nd Amendment to ENA 12-5-2014 FINAL acknowledges that the other has negotiated diligently and in good faith during the initial period of the Prior ENA. 3. Authority to Extend. The provisions of Sections 4.2.2 and 4.2.3 of the Prior ENA are hereby amended to read as follows: "4.2.2 Request for Extension. The term of this Agreement has previously been extended by the City for two additional periods upon payment by Developer to the City of the following extension deposits ("Non-Refundable Deposits"): (a) To secure an extension of the Amended Termination Date until June 30, 2014, Developer has made an additional $100,000 non- refundable deposit on or before December 31, 2013; (b) To secure an additional extension of the Amended Termination Date from June 30, 2014 until December 31, 2014, Developer has made an additional $100,000 non-refundable deposit on or before June 30, 2014. As consideration for the agreement of the City to further extend the ENA and the period of negotiations under this Agreement pursuant to Section 4.2.3, Developer acknowledges and agrees that, notwithstanding any other provision of this Agreement, the Non-Refundable Deposits shall be fully non-refundable in all cases and shall not be applicable to the purchase price for the 1C Property." "4.2.3 Additional Extension Deposit. To secure an additional extension of the Amended Termination Date from December 31, 2014 to June 30, 2015, Developer shall make an additional $100,000 deposit ("Additional Extension Deposit") on or before December 18, 2014. The Additional Extension Deposit shall be non-refundable in all cases, provided that the DDA shall provide that the Additional Extension Deposit shall be applicable to the purchase price for the 1C Property. In the event Developer does not make the Additional Extension Deposit on or before December 18, 2014, this Agreement shall automatically terminate on December 31, 2014 without further action of the Parties and the City shall retain the Non-Refundable Deposits. 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 and submitted such documents to the City for consideration pursuant to Section 4.2.4 of this Agreement, this Agreement shall automatically terminate." 4. Staff Costs Deposit. Section 4.3.1(ii)(A) is hereby amended to read as follows: Tustin Regency 2nd Amendment to ENA 12-5-2014 FINAL "A) City Staff Costs. The City shall be entitled to allocate the entire amount of the reduction in the Original ENA Deposit Amount, comprising Fifty Thousand Dollars ($50,000) (the "Staff Costs Deposit"), to offset City staff costs related to project activities during the term of the Agreement and, if entered into, the DDA ("Staff Costs"). The City shall keep a separate accounting of amounts expended for Staff Costs. The Staff Costs Deposit will be expended to cover the City's staff costs during the negotiation process and the term of the DDA, 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. If the Parties fail to enter into a DDA within the time period identified in Section 4.2 of this Agreement, 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 this Agreement. If the Parties enter into a DDA within the time period identified in Section 4.2 of this Agreement, funds remaining and not allocated by the City to Staff Costs during the term of this Agreement and the DDA shall be applied to Staff Costs during the term of the DDA, and, if funds then remain unallocated, returned to the Developer following the conveyance to Developer by the City of the entirety of the 1C Property. In no event shall the Staff Costs Deposit be credited toward the purchase price of the 1C Property or any portion thereof. The Staff Costs Deposit shall be deposited in an account in a bank or trust account selected by the City." 5. Grocery Tenant Deposit. Section 4.3.1(ii)(B) of the Prior ENA is hereby deleted in its entirety. Under the First Amendment, a "Grocery Tenant Deposit" (as defined in the First Amendment) in the amount of$25,000 was established. The Parties hereby agree that (a)the full amount of the Grocery Tenant Deposit is hereby allocated as a Staff Costs Deposit (such that the total Staff Costs Deposit is increased from $25,000 to $50,000) and will be refunded to Developer, if at all, in accordance with Section 4.3.1(ii)(A) of this Agreement and (b) the Grocery Tenant Deposit will not be credited toward the purchase price of the 1C Property or any portion thereof. 6. Additional Amendments to Text of Prior ENA. Sections 4.3.3 and 4.3.7 of the Prior ENA arc hereby amended to read as follows: "4.3.3 Return of Deposits Under Specified Conditions. (a) If the Parties enter into a DDA within the time period identified in Section 4.2 of this Agreement: (i) the City shall return to Developer those portions of the ENA Deposit remaining after deducting therefrom the City Transaction Expenses or (ii) at Developer's election, such remaining unused funds in such account can be applied to any additional deposit required as security for Developer's performance under the DDA. Nothing herein shall require the Tustin Regency 2nd Amendment to ENA 12-5-2014 FINAL return to Developer of the Non-Refundable Deposits or the Additional Extension Deposit if the DDA shall terminate prior to the close of any escrow under the DDA, or application of the Non-Refundable Deposits to the purchase price for the IC Property, it being specifically agreed that the Non-Refundable Deposits constitute non-refundable consideration to the City in all events and shall not be applicable to the purchase price for the IC Property, and that the Additional Extension Deposit constitutes non-refundable consideration to the City in all events, but shall be applicable to the purchase price in the event of a close of escrow for all or a portion of the Parcel 1C Property under the DDA. (b) 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 the Non- Refundable Deposits, the Additional Extension Deposit and the amounts allocated from the ENA Deposit and Staff Costs Deposit to City expenses. Any remaining unused portions of the ENA Deposit and/or the Staff Costs Deposit shall be retained by the City 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 $50,000 Staff Costs Deposit plus interest, if any, which has accrued thereon, as liquidated and agreed damages. DEVELOPER'S INITIALS" "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 tennination, in the event Developer has negotiated in good faith hereunder and materially complied with the terms hereof; 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 therefrom the Staff Costs) together with any interest accrued thereon to Developer upon termination of this Agreement. Notwithstanding any such termination of this Agreement, the City shall in all cases be entitled to retain the Tustin Regency 2nd Amendment to ENA 12-5-2014 FINAL Non-Refundable Deposits and the Additional Extension Deposit." 7. 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. 8. Counterparts. This Second 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 Second Amendment. 9. Terms. Unless otherwise expressly indicated herein, all references in the Prior ENA and in this Second Amendment to "this Agreement" or the "ENA" shall mean and refer to the Prior ENA as modified by this Second Amendment. 10. No Other Changes. Except as modified by the terms of this Second Amendment, the terms of the Prior ENA shall remain unmodified and in full force and effect. Only those provisions of the Prior ENA specifically amended herein shall be affected by this Second Amendment. In the event of any conflict or inconsistency between the terms of the Prior ENA and this Second Amendment, the terms of this Second Amendment shall control. (remainder of page blank; signatures on following page) Tustin Regency 2nd Amendment to ENA 12-5-2014 FINAL IN WITNESS WHEREOF, the City and Developer hereto have executed this Second Amendment as of the date set opposite their signatures. "CITY" CITY OF TUSTIN Dated: By: Jeffrey C. Parker City Manager APPROVED AS TO FORM By: David Kendig, City Attorney Armbruster Goldsmith & Delvac LLP Special Tustin Counsel By: Amy E. Freilich "DEVELOPER" REGENCY CENTER ACQUISTION, 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 2nd Amendment to ENA 12-5-2014 FINAL