HomeMy WebLinkAbout14 TUSTIN LEGACY, PARCELS 1B AND 6A - 2ND AMENDMENT TO DDA BETWEEN STANDARD PACIFIC AND CITY OF TUSTIN• Agenda Item 14
AGENDA REPORT Reviewed
City Manager JCP
Finance Director N/A
MEETING DATE: APRIL 21, 2015
TO: JEFFREY C. PARKER, CITY MANAGER
FROM: CITY MANAGER'S OFFICE — ECONOMIC DEVELOPMENT DIVISION
SUBJECT: TUSTIN LEGACY, PARCELS 1(B) AND 6(A) — 2ND AMENDMENT TO
DISPOSITION AND DEVELOPMENT (DDA) BETWEEN STANDARD
PACIFIC CORPORATION (DEVELOPER) AND CITY OF TUSTIN
SUMMARY
The Second Amendment to the DDA will accelerate the Developer's Project Fair Share
Contribution to the City for backbone infrastructure at Tustin Legacy. In addition, the
schedule for funding the improvements associated with CFD 14-01 can be accelerated.
RECOMMENDATION
Authorize the City Manager to approve Amendment No. 2 to the Disposition and
Development Agreement between Standard Pacific Corporation and the City of Tustin.
FISCAL IMPACT
If approved, the 2nd Amendment to the DDA has the following impacts:
1. The unpaid balance of the Fair Share Backbone Contribution (which totals $16.93
million) from Standard Pacific will be accelerated. This contribution is currently
being paid on a unit -by -unit basis as permits are issued. The balance is due within
30 business days of the execution of the 2nd Amendment of the DDA. These
funds will be earmarked, in a separate account, by the City for Fair Share
Backbone improvements.
2. The CFD 2014-1 bonds are anticipated to be sold in August/September 2015; this
should allow the bonds to be sold in a favorable interest rate environment. The
net proceeds from the sale of the bonds are estimated at $13.1 million.
The fiscal impact to the City, including the Fair Share Backbone Contribution and the net
proceeds from CFD bond, total approximately $30.1 M.
CORRELATION TO THE STRATEGIC PLAN
This action correlates to the City's Strategic Plan for Economic and Neighborhood
Development (Goal A).
Agenda Meeting — April 21, 2015
Parcel 1 B and 6A — 2nd Amendment to the DDA
DISCUSSION
Under the existing DDA and entitlements granted for the property, the Developer (Standard
Pacific) was authorized to construct 375 homes. This work has commenced. However, under
Cooperative Agreement D02-119 between the City and Orange County Flood Control District
(OCFCD), a limitation was placed on the number of residential units that could be constructed
at Tustin Legacy. Specifically, under this cooperative agreement, no more than 1,000 units
could be occupied within the former master developer footprint until the City commenced
construction of the Peters Canyon Channel improvements. Because 758 of the 1,000 units
had previously been constructed or approved for construction, the DDA restricted the
Developer from constructing more than 242 units until such time as the City commenced the
Peters Canyon Channel Improvements; the remaining 133 units could only be constructed
after that work commenced. Under action taken by the City Council and OCFCD/Orange
County to amend the joint cooperative agreement, the restriction on residential construction
was modified so that a total of 1,200 units could be occupied at Tustin Legacy prior to
commencement of the Peters Canyon Channel work. The proposed 2nd Amendment to the
DDA applies this increase to the DDA by permitting Standard Pacific to construct the remaining
133 units without constraint. The 2nd Amendment to the DDA is consistent with action taken
by the City Council on April 7 amending the cooperation agreement between the City and
OCFCD. In exchange, Standard Pacific has agreed to accelerate the required payment of its
Tustin Legacy Backbone Infrastructure Fair Share Obligation, totaling $16.93 million and to
commence payment of CFD assessments upon issuance by the City of CFD bonds (but no
earlier than July 1, 2014).
Under the DDA, Standard Pacific is allowed to transfer the rights associated with up to 77
housing units to one other builder. The DDA provided pre -approval to Brookfield Homes
Residential, Inc. (Brookfield Homes), a builder that had applied and was determined by the
City to have the required experience and financial capacity during the City's original RFP
process for the disposition of the property. The DDA permitted the City to confirm that
Brookfield Homes retained the required experience and financial capacity. Brookfield Homes
desires to acquire the property though various subsidiaries and the City has required that
Brookfield Residential US Corporation execute a completion guaranty in connection with each
acquisition. As further security for this transfer, the DDA limits the number of lots that can be
transferred to Brookfield at any one time to 14 lots. In February 2015, the Developer and
Brookfield entered into an agreement for the Purchase and Sale of real property. A Letter
Agreement between the City, Brookfield Homes US and a subsidiary known as Brookfield
Huntley 77, LLC and the Developer has been executed confirming the City's approval of the
transfer to these Brookfield entities and the terms of that transfer. Under the agreements,
Brookfield will build 77 units of housing, which will comprise one of four products at the
Standard Pacific Property (known as Greenwood) and the product is known as Huntley.
Standard Pacific will remain as the master developer of Greenwood and will build the remaining
298 units. Brookfield Residential US Corporation will guarantee the performance of the
obligations of Brookfield Homes or Brookfield Huntley, as applicable. No action is required of
the City Council regarding the Letter Agreement.
Agenda Meeting — April 21, 2015
Parcel 1 B and 6A — 2nd Amendment to the DDA
ohn .Buchanan
y Director of Economic Development
City Manager's Office
Attachment No. 1 — 2nd Amendment to the Disposition and Development Agreement between
the City of Tustin and Standard Pacific Corporation
AMENDMENT NO. 2 TO TUSTIN LEGACY DISPOSITION AND
DEVELOPMENT AGREEMENT FOR DISPOSITION PARCELS IB & 6A
This AMENDMENT NO. 2 TO TUSTIN LEGACY DISPOSITION AND
DEVELOPMENT AGREEMENT FOR DISPOSITION PARCELS IB & 6A (this "Second
Amendment") is entered into as of April , 2015 (the "Second Amendment Effective Date")
by and between the CITY OF TUSTIN (as more fully defined in the Original DDA (defined
below),"City"), and STANDARD PACIFIC CORP., a Delaware corporation (as more fully
defined in the Original DDA, "Initial Developer"). The City and Initial Developer are sometimes
referred to herein individually as a "Party" and collectively as the "Parties".
RECITALS
A. The City and Initial Developer entered into that certain Tustin Legacy Disposition
and Development Agreement for Disposition Parcels 1B & 6A executed on March 11, 2014 (the
"Original DDA") as amended by that certain Amendment No. 1 to Tustin Legacy Disposition and
Development Agreement for Disposition Parcels 1B & 6A dated as of June 17, 2014 (the Original
DDA, as so amended, the "Prior DDA") pursuant to which, among other things, the City agreed
to sell, and Initial Developer agreed to purchase, the Property (as defined in the Original DDA.)
The Prior DDA as amended by this Amendment is referred to herein as the "Agreement." Initially
capitalized terms not defined herein shall have the respective meanings assigned to such terms in
the Prior DDA.
B. The Close of Escrow under the Prior DDA took place and the Property was
conveyed to Initial Developer on August 15, 2014.
C. Initial Developer entered into that certain Agreement for Purchase and Sale of Real
Property and Joint Escrow Instructions dated as of February 9, 2015 with Brookfield Homes
Southern California LLC, a Delaware limited liability company (`Brookfield Homes"), a Builder
Transferee, with respect to the purchase and sale of a portion of the Project, pursuant to which: (i)
portions of the Development Parcels have been or shall be Transferred to Brookfield Homes or its
wholly owned subsidiary, Brookfield Huntley 77 LLC, a Delaware limited liability company
(`Brookfield Huntley") in phased takedowns, which shall each be carried out through execution
of, among other things, an assignment and assumption agreement between Initial Developer and
Brookfield Huntley (`Brookfield Assignment and Assumption").
D. The City and the OCFCD are parties to that certain Joint Cooperation Agreement
dated March 11, 2003, as amended, relating to improvements to Peters Canyon Channel (the "Joint
Cooperation Agreement"), which has been, as of the Second Amendment Effective Date, or is
proposed to be further amended by City and OCFD to increase the number of residential units
within the former master developer footprint of Tustin Legacy that drains to Peters Canyon
Channel that may be occupied prior to commencement of additional improvements to Peters
Canyon Channel from 1,000 to 1,200 residential units.
E. In order to further development of the Property and the construction of off-site
infrastructure, the City and Initial Developer desire to further amend the Prior DDA in order to
modify provisions related to the timing of construction of the final 133 Homes, the time periods
for payment of the Project Fair Share Contribution and to make other modifications as further
described below.
F. Brookfield Homes and Brookfield Huntley (collectively, the `Builder Entities"),
each on behalf of itself and each of its Successor Owners, have acknowledged and agreed by letter
agreement by and among City, Initial Developer, Brookfield Homes and Brookfield Huntley dated
of even date herewith ("Letter Agreement") that, notwithstanding whether either of them has then
become a party to the Agreement through execution of any Brookfield Assignment and
Assumption, Initial Developer and the City shall have the right to enter into this Second
Amendment without the consent of the Builder Entities or either of them, and have consented to
be bound by this Second Amendment effective upon the execution and delivery of the Brookfield
Assignment and Assumption with respect to any portion of the BH Property; and accordingly, have
executed this Second Amendment, to evidence such agreements.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing Recitals, which are hereby
incorporated in the operative provisions of this Amendment by this reference, and other good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties
further agree as follows:
1. Modification to Section 8.7.2 of the Original DDA. Section 8.7.2(b) of the Original
DDA is hereby deleted and replaced with the following:
"(b) The Project Fair Share Contribution shall be paid by Developer on a per
Home basis as a condition to the issuance of a building permit for each Home developed
within the Development Parcels until the earlier of (a) the occurrence of the Initial Channel
Condition (as described in Section 8.10.3) or (b) the JCA Amendment Date as defined
below) and the payment of the Project Fair Share Contribution for the remainder of the
Homes within the Project shall be fully due and payable to the City as a lump sum (the
"Lump Sum Payment") within thirty (30) Business Days following the earlier of such
dates. The Lump Sum Payment has been computed as the difference between $16,934,704
and the amount of the Project Fair Share Contribution previously paid by Developer to the
City."
2. Modification to Section 8.7.3 of the Original DDA. Section 8.7.3(4) of the Original
DDA is hereby deleted and replaced with the following:
"(d) At the sole discretion of the City, the AD/CFD may be structured such that
assessments shall be due and payable with respect to the Development Parcels without
consideration for whether or not Homes have been Completed thereon (i.e., such that all
Lots shall be assessed as improved or developed property); provided however, the AD/CFD
assessment on unimproved land or undeveloped portions of the Property shall be at an
undeveloped property assessment rate of Zero Dollars until a date established by the City
but in no event earlier than the commencement of the 2015-2016 fiscal tax year."
3. Modification to Section 8.9.2 of the Original DDA. Section 8.9.2(c) of the Original DDA
is hereby deleted and replaced with the following:
"(c) Ongoing Inventory and Production Phase Requirements. Construct, obtain
valid certificates of occupancy and offer for sale the Homes in production phases which
are based upon a reasonable analysis of market conditions and anticipated absorption and
which otherwise are in conformance with the Schedule of Performance. Taking into
consideration the market conditions and anticipated absorption, use commercially
reasonable efforts to commence construction of each subsequent production phase of
Homes not later than the close of escrow on the last Home for sale to the public in the prior
production phase. Until the earlier of the occurrence of the Initial Channel Condition or
the JCA Amendment Date, Developer will be limited to issuance of 242 building permits
for Homes."
4. Modification to Section 8.10 of the Original DDA. Sections 8.10.1 through 8.10.3 of the
Original DDA are hereby deleted and replaced with the following Sections 8. 10.1 through 8.10.6:
"8.10.1 City Backbone Improvements. City shall use commercially reasonable
efforts, subject to availability of funds, to obtain license and entry permits from
OCFCD necessary or reasonably desirable in connection with the Channel
Improvements and to construct the City Backbone Improvements as further
described on Attachment 19. City intends to obtain permits, construct and complete
the City Backbone Improvements in accordance with the schedule attached hereto
as Attachment 19. Notwithstanding anything to the contrary set forth in this
Agreement, Developer acknowledges that such schedule is an estimate only and
failure of the City to commence the Initial Channel Condition, or carry out the tasks
described in this Section, or to perform in accordance with such schedule for any
reason shall not be a default under this Agreement.
8.10.2. Earmark of Funds. The City shall establish a separate account in the
City's accounts, books and records for the Project Fair Share Contribution, which
shall be dedicated by the City for construction of the City Backbone Improvements
until the earlier of completion of the City Backbone Improvements or the
termination of this Agreement.
8.10.3. Channel Improvements. The City is a party to that certain Joint
Cooperation Agreement with OCFCD dated March 11, 2003, as amended, relating
to improvements to Peters Canyon Channel, which provides that no more than
1,000 residential units within the former master developer footprint of Tustin
Legacy that drains to Peter's Canyon Channel may be occupied prior to
commencement of additional improvements to Peters Canyon Channel. The Parties
acknowledge that the City has previously granted rights to develop 758 residential
units to other developers within Tustin Legacy that are not restricted by this
requirement and nothing herein shall restrict the rights of developers under
agreements previously entered into by the City, from constructing residential units.
8.10.4 Channel Condition Satisfaction Date. Developer acknowledges and
agrees that pursuant to the terms of the DA and the Entitlements, from and after
issuance of the 242nd building permit, the City shall not issue building permits for
further Homes until the following has occurred: (a) a contract has been let by City
for the Channel Improvements and (b) construction of the Channel Improvements
have commenced (collectively, the "Initial Channel Condition"). If the Initial
Channel Condition does not occur prior to the later of (i) Developer's request for
the 243rd building permit and (ii) December 30, 2015 (the "Channel Condition
Satisfaction Date"), then any and all of Developer's obligations with respect to the
Schedule of Performance, Inventory Commitment and the construction,
Completion and sale of more than 242 Homes within the Project shall be extended
(a) on a day for day basis for each day following the Channel Condition Satisfaction
Date for which the Initial Channel Condition has not occurred and (b) if 180 or
more Homes have been Completed as of the date that the Initial Channel Condition
has occurred, an additional four (4) months. Following the Effective Date, the City
shall not enter into any new agreement for the development of new residential units
within Tustin Legacy that permits commencement of residential units before the
Initial Channel Condition has occurred.
8.10.5 City/OCFD Increase in Allowed Units. Notwithstanding the provisions
of Section 10.8.4 or any other provision of this Agreement, in the event that the
City and OCFD, at any time, enter into a binding and effective amendment to the
Joint Cooperation Agreement permitting construction of up to 1,200 residential
units within the former master development footprint of Tustin Legacy before the
restriction on commencement of additional improvements to Peters Canyon
Channel would apply, then upon the effective date of such Joint Cooperation
Agreement amendment (the "JCA Amendment Date") the provisions of Section
10.8.4 shall cease to apply and shall be of no further force or effect. In that event,
the City hereby agrees that it shall reserve a total of three hundred seventy five
(375) such residential units for the benefit of the Development Parcels and the
Project, comprised of the 242 units originally reserved, and an additional 133 units.
8.10.6 Moffett Drive and Park Avenue. City shall use commercially reasonable
efforts to cause the construction of Moffett Drive and Park Avenue to be completed
and cause Moffett Drive and Park Avenue to be properly dedicated as public roads
on or prior to December 1, 2016. Notwithstanding anything to the contrary set forth
in this Agreement, Developer acknowledges that such schedule is an estimate only
and failure of the City to cause such construction or carry out the tasks described in
this Section, or to perform in accordance with such schedule for any reason shall
not be a default under this Agreement."
5. Modification to Section 8.10 of the Original DDA. Section 17.23.2 of the Original DDA
is hereby deleted and replaced with the following:
"17.23.2 Entire Agreement. This Agreement, including the Attachments
hereto, and the Letter Agreement, together with the Other Agreements, constitute
the entire agreement between the Parties with respect to the subject matter hereof.
Except as set forth in the last sentence of this Section 17.23.2, this Agreement and
the Other Agreements supersede and replace any and all prior agreements, proposed
agreements, negotiations and communications, oral or written, relating to the
subject matter hereof and contain the entire agreement between the Parties as to the
subject matter hereof and any and all prior agreements, understandings or
representations between the Parties and/or any Developer Affiliate are hereby
terminated and canceled in their entirety. Each Party hereby acknowledges that no
other Party hereto, nor its agents or attorneys, have made any promises,
representations or warranties whatsoever, expressed or implied, not contained in
this Agreement or the Other Agreements, to induce such Party to execute this
Agreement, and each Party acknowledges that it has not executed this Agreement
in reliance on any such promise, representation or warranty not contained in this
Agreement or any Other Agreements. For the avoidance of doubt, this Agreement
shall terminate and supersede the RFP, the responses of Developer or any
Developer Affiliate in connection therewith and the ENA, except that this
Agreement does not supersede Sections 3.5, 4.3.6, 4.5.2, 4.5.3, 6.9.2, 10.2 or 10.13
of the ENA which shall remain in effect with respect to claims arising during the
term of the ENA.
6. Amendments to Attachment 1, Glossary of Defined Terms.
6.1 The Definition of "Initial Channel Condition" in Attachment 1, Glossary of
Terms of the Original DDA, is hereby deleted and replaced with the following:
""Initial Channel Condition" shall have the meaning set forth in Section 8.10.4."
6.2 The following terms are hereby added to Attachment 1, Glossary of Terms of the
Original DDA, in alphabetical order:
""JCA Amendment Date" shall have the meaning set forth in Section 8.10.5."
""Letter Agreement" shall mean that certain Letter Agreement entered into by
City, Initial Developer, Brookfield Homes Southern California LLC, a Delaware
limited liability company and Brookfield Huntley 77 LLC, a Delaware limited
liability company, dated April 21, 2015."
""Second Amendment" shall mean the Second Amendment to DDA."
7. Additional Covenants and Agreements of Initial Developer in Favor of City.
7.1 Initial Developer Liability; Profit Participation Agreement. Initial Developer
hereby confirms and agrees solely for the benefit of the City: (a) that following any assignment by
Initial Developer to Brookfield Huntley 77 LLC, a Delaware limited liability company and/or
Brookfield Homes Southern California LLC, a Delaware limited liability company (collectively,
the `Builder Entities") Initial Developer shall remain fully liable for and shall not be released
from the obligations of "Developer" under this Agreement and the Other Agreements even if any
such obligations are expressly assumed by one or more of the Builder Entities, and all such
obligations shall remain the obligations of Initial Developer, and (b) that, without limiting the
generality of the foregoing and notwithstanding the provisions of Section 6.10 of the Profit
Participation Agreement, (i) Initial Developer shall remain fully liable for the obligations of
Developer under the Profit Participation Agreement as though it had not conveyed any Lots (as
defined in the Profit Participation Agreement) to the Builder Entities, or either of them, and
accordingly, the Profit Participation (as defined in the Profit Participation Agreement) shall be
calculated and Initial Developer shall pay such Profit Participation as required by the Profit
Participation Agreement on all 375 Residences (as defined in the Profit Participation Agreement)
or such lesser number thereof as is sold collectively by Initial Developer and any Builder (as
defined in the Profit Participation Agreement) to a member of the home buying public as though
all such Residences had been sold by Initial Developer directly to a member of the home buying
public and (ii) the sale of Lots by Initial Developer to any Builder Entity shall not be deemed an
"initial sale" pursuant to Section 6.10 of the Profit Participation Agreement and (c) Initial
Developer shall not convey to the Builder Entities, or either of them, those portions of the Property
comprised of Lots 263 through 268 inclusive, of Tract No. 17507 (the "Deed of Trust Lots").
7.2 Takedowns Not Subject to Deed of Trust. Initial Developer and the City
acknowledge that, so long as Initial Developer does not convey the Deed of Trust Lots as part of
any Takedown, no Takedown conveyed by Initial Developer to a Builder Transferee shall be
subject to the deed of trust securing the obligations of Initial Developer under the Profit
Participation Agreement.
8. Miscellaneous.
8.1. Agreement Ratified. Except as specifically amended or modified herein, each and
every term, covenant, and condition of the Prior DDA as amended is hereby ratified and shall
remain in full force and effect. Each and every reference to the "Agreement" in the Prior DDA
shall be deemed to refer to the Prior DDA as amended by this Amendment.
8.2. Governing Law. This instrument shall be interpreted and construed in accordance
with the laws of the State of California.
8.3. Binding Agreement. This Amendment shall be binding upon and inure to the
benefit of the Parties hereto and their respective heirs, representatives, successors and permitted
assigns.
8.4. Counterparts. This Amendment may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the
same document.
{signatures on following page)
IN WITNESS WHEREOF, City and Developer have executed this Amendment as of the
Amendment Effective Date.
CITY: CITY OF TUSTIN
By:
Dated: Jeffrey C. Parker,
City Manager
ATTEST:
By:
Erica Rabe
City Clerk Services Supervisor
APPROVED AS TO FORM
in
David Kendig,
City Attorney
Armbruster Goldsmith & Delvac LLP
Special Real Estate Counsel to the City
Amy E. Freilich
DEVELOPER:
Standard Pacific Corp.,
a Delaware corporation
By:
Name:
Title:
By:
Name:
Title:
{signatures continued on following page)
IN WITNESS WHEREOF, City and Developer have executed this Amendment as of the
Amendment Effective Date.
CITY:
Dated:
ATTEST:
By:
Erica Rabe
City Cleric Services Supervisor
APPROVED AS TO FORM
By:
David Kendig,
City Attorney
Armbruster Goldsmith Uelvac LLP
Special Real,,�state Col to the City
C
Amy F ytcilich
CITY OF TUSTIN
Bv:
Jeffrey C. Parker,
City Manager
DEVELOPER: Standard Pacific Corp.,
a Delaware corporation
By:
Name:
Title:
By:
Name:
Title:
{signatures continued on following page)
IN WITNESS WHEREOF, City and Developer have executed this Amendment as of the
Amendment Effective Date.
CITY:
Dated:
ATTEST:
Erica Rabe
City Clerk Services Supervisor
APPROVED AS TO FORM
David Kendig,
City Attorney
Armbruster Goldsmith & Delvae LLP
Special Real Estate Counsel to the City
M.
Amy E. Freilich
DEVELOPER:
CITY OF TUSTIN
Jeffrey C. Parker,
City Manager
Standard Pacific Corp.,
a Delaware corporation
By:
NamVICHAEL C. BA TAGLIA
TitOUTHORIZEp REPRESENTATIVE
f
By:
N me; ELLIOT MANN
Title: -- AUTHORIZED REPRESENTATIVE
{signatures continued on folloiving page)
ACKNOWLEDGED AND ACCEPTED BY
THE BUILDER ENTITIES:
BROOKFIELD HOMES SOUTHERN
CALIFORNIA LLC, a Delaware limited
liability company
By:
Name: RI HAR Te WHITN
Title: Chief Financial Officer
By:
Name:(_)-,(, A3
Title:
BROOKFIELD HUNTLEY 77 LLC,
a Delaware limited liability company
f �
By:
Name: RICIiAKU
A.
Title: Vice resp en
By: z4g—�l
Name: RICHART. W
Title: Chief Financial icer