HomeMy WebLinkAbout13 CORNERSTONE 1 - TUSTIN LEGACY (EXCLUSIVE NEGOTIATION AGREEMENT) 0Y Agenda Item 1 3
I '� AGENDA REPORT Reviewed:
t City Manager
Finance Director N/A
MEETING DATE: JUNE 2, 2015
TO: JEFFREY C. PARKER, CITY MANAGER
FROM: CITY MANAGER'S OFFICE — ECONOMIC DEVELOPMENT DIVISION
SUBJECT: CORNERSTONE I —TUSTIN LEGACY
EXCLUSIVE NEGOTIATION AGREEMENT
SUMMARY
Approval is requested to execute an Exclusive Negotiation Agreement (ENA) with Lincoln Property
Company Commercial, Inc. (Developer)for office development at Cornerstone I in Tustin Legacy.
RECOMMENDATION
Authorize the City Manager to execute the Exclusive Negotiation Agreement between the City of
Tustin and the Developer, Lincoln Property Company Commercial, Inc.
FISCAL IMPACT
Concurrent with the execution of the ENA, the Developer will submit a good faith deposit of$150,000,
this amount will be applied toward third party costs incurred by the City including the retention of legal
counsel and staff costs associated with the negotiation, these costs are separate from entitlement
expenses that will be borne by the Developer. Staff will negotiate the terms and conditions under
which the property will be sold including the purchase price. If negotiations are successful, staff will
present to the Council a Disposition and Development Agreement(DDA)for consideration. •
COORELATION TO THE STRATEGIC PLAN
This action correlates to the City's Strategic Plan for Economic and Neighborhood Development (Goal
A).
DISCUSSION
In April, 2011, Council adopted a Disposition Strategy for the Former Master Developer Footprint
at Tustin Legacy which authorized the marketing and disposition of identified parcels to potential
end users. Under this Strategy, three properties have been sold; two apartment sites, and one site
for single family detached houses. Negotiations are on-going for the disposition and development
of a neighborhood shopping center and medical office complex.
Cornerstone I is located on Barranca Parkway between Aston Avenue to the west, Armstrong
Avenue to the east and the future Legacy Park on the north. The property is approximately 37
acres with the potential for up to 860,000 square feet in office and related uses.
In June 2014, the City retained CBRE as the commercial real estate broker to assist in identifying
large scale creative office developers utilizing criteria approved by the staff. In addition LPA, a
Agenda Report — ENA, Tustin Gateway Project
June 2, 2015
Page 2 of 2
design consultant, was retained to prepare: site studies, design guidelines, and a conceptual plan
for Legacy Park.
As part of the marketing strategy, CBRE prepared a website and print material specifically for
Cornerstone. In addition, CBRE promoted the visibility of the property in making presentations to
commercial brokerage firms, real estate investors, and office developers. By January 2015, the
number of qualified and potential development entities was narrowed through an interview process
which was followed by a request for a business proposal from each of the qualified developers.
The selection process used the following criteria: a) the experience of the development entity and
the leadership directly associated with project; b) the conceptual plan of development; c) the
developer's financial resources including equity, capital partners, and lenders; and, d) the
developer's Business Offer taking into consideration the land takedown schedule, the development
schedule, and contingencies that would impede the ability to negotiate a DDA in a timely manner.
Preference was given to proposals that minimized the City's risk; such as, a developer committing
to purchase and develop the property without the contingency of securing pre -lease commitments.
Based on staff's review of the Business Proposals which included the development concepts, staff
is recommending that the City Council authorize the City Manager to execute an ENA with Lincoln
Property Company Commercial (LPC) for an initial period of 180 days (6 months) from the date of
execution.
LPC was established in 1965 and is one of the largest diversified real estate service firms in the
world with a presence in 36 markets and 10 countries. It currently has over 76 million square feet
of commercial office space, over 11 million square feet of specialty retail space, and 3 million
square feet of hotel space. The Los Angeles and Orange County offices will be managing the
Cornerstone project. Examples of high profile projects in southern California include:
100 W. Walnut Avenue (Pasadena) — transformation of the existing Parsons Engineering
headquarters property into a mixed-use urban village containing 620,000 square feet of
office use, 30,000 square feet of retail space, 10,000 square feet of restaurant space
and 475 residential units, including work/live units.
• Desmond (Los Angeles) — transformation of a historic 5 story warehouse into an office
building with AEG Live as a tenant.
• IMAX Corp.'s (Playa Vista) — development of new headquarters for IMAX.
• Runway (Playa Vista) — mixed-use development, once home to Howard Hughes
aerospace. Located on 14 acres, a 550,000 square foot mixed-use project with 200,000
square feet of retail space, 39,000 square feet of office, and 220 residential units.
Joh A. Buchanan
uty Director, Economic Development
City Manager's Office
Attachment — Exclusive Negotiation Agreement, Cornerstone I between the City of Tustin and
Lincoln Property Company Commercial, Inc.
EXCLUSIVE AGREEMENT TO NEGOTIATE
(CORNERSTONE I)
THIS EXCLUSIVE AGREEMENT TO NEGOTIATE (CORNERSTONE I)
("ENA") is entered into this day of _, 2015 (the "Effective Date") by and
between THE CITY OF TUSTIN (the "City") and LINCOLN PROPERTY COMPANY
COMMERCIAL, INC., a Texas corporation ("Developer"), with respect to certain land referred
to herein as the "Property" (defined below). The City and Developer (each, a "Party" and
collectively, the "Parties") hereby agree as follows:
1.0 Introduction.
1.1 Pursuant to the Defense Base Closure and Realignment Act of 1990 (Part A of
Title XXXIX of Public Law 101-510; 10 U.S.C. Section 2687 Note), as amended, the federal
government determined to close the Marine Corps Air Station -Tustin ("MCAS Tustin") located
substantially in the City of Tustin. In 1992, the City was designated as the Lead Agency or
Local Redevelopment Authority for preparation of a reuse plan for MCAS 'Tustin in order to
facilitate the closure of MCAS "Tustin and its reuse in furtherance of the economic development
of the City and surrounding region. The MCAS Tustin Reuse Plan developed in accordance with
this procedure was adopted by the City Council of the City of Tustin (the "City Council") on
October 17, 1996 and amended in September, 1998 (the "Reuse Plan").
1.2 A Final Joint Environmental Impact Statement/Environmental Impact Report for
the Disposal and Reuse of MCAS "Tustin (the "Final EIS/EIR") and Mitigation Monitoring and
Reporting Program for the Final EIS/EIR were adopted by the City on January 16, 2001. In
March 2001, a record of decision was issued by the Department of the Navy (hereinafter,
"Navy") approving the Final EIS/EIR and the Reuse Plan. Subsequently, a Supplement to the
Final EIR/EIS and an Addendum to the Final EIS/EIR were approved by the City.
1.3 In May 2002, the Navy approved an "Economic Development Conveyance of
Property at MCAS Tustin" and agreed to convey 1,153 acres of MCAS Tustin to the City. On
May 13, 2002, a total of 977 acres, including the Property which is the subject of this ENA, was
conveyed by the Navy to the City by quitclaim deed, in accordance with the provisions of.that
certain Memorandum of Agreement by and between The United States of America (through the
Secretary of the Army or designee) and the City dated May 13, 2002 (`Memorandum of
Agreement' or "MOA"). Additional acreage is currently under ground lease by the City from
the Navy. The 1.153 acres of MCAS Tustin located within the City of Tustin and either
conveyed by the Navy to the City or subject to ground lease between the Navy and the City is
referred to herein as "Tustin Legacy".
1.4 On February 3, 2003, the City adopted an ordinance approving the MCAS Tustin
Specific Plan/Reuse Plan setting forth the zoning and entitlement framework for future
development of Tustin Legacy. Since its initial adoption, the City has approved numerous
Specific Plan Amendments. All references in this ENA to the "Specific Plan" shall be deemed
to refer to the MCAS Tustin Specific Plan/Reuse Plan, as the same may be amended from time to
Exclusive Negotiation Agreement Page I City of 'rustin/Lincoln Property
1088087.6
time. The Specific Plan conforms to and implements the Reuse Plan and the City's General
Plan.
1.5 The City desires to effectuate development of Tustin Legacy through the sale and
development of such property in accordance with applicable federal and local requirements.
Tustin Legacy shall be developed in accordance with all City requirements, including, without
limitation, the Reuse Plan and the Specific Plan.
1.6 The Disposition Strategy for Former Master Developer Footprint, Tustin Legacy
Project (April, 2011) adopted by the City Council provides the City with the authority to directly
market portions of the Disposition Packages to potential end business users in order to more
specifically direct and accelerate development absorption. Consistent with the Disposition
Strategy, the City retained CBRE ("CBRE") to assist the City in identifying commercial
development opportunities in portions of Disposition Package, 4 at Tustin Legacy. CBRE,
utilizing evaluation and screening criteria approved by the City Council, identified office
development companies with the qualifications, financial capacity and experience to develop
large scale creative office development at "Tustin Legacy. City has reviewed competitive
proposals from the development companies, and has elected to consider Developer's proposal.
1.7 Developer submitted a business proposal on March 9, 2015 (the "Business
Proposal') for purchase in two phases of approximately 37.4 acres of land within Disposition
Area 4, generally in the location depicted on the Site Map attached as Exhibit A (the
"Property"). The exact location and size of the Property and the Project shall be determined
during the ENA Negotiating Period (defined below). Developer proposes development of the
Property with development totaling approximately 835,000 rentable square feet, including
approximately 760,000 square feet of creative office (to be defined during the ENA Negotiating
Period (as defined in Section 4.2.1) but to specifically exclude warehousing or manufacturing),
approximately 16,500 square feet of food hall, approximately 44,400 square feet of retail, and
approximately 13,500 square feet reserved for commercial pads, together with in -tract
infrastructure and an accompanying set of amenities to be agreed by City and Developer and
constructed by Developer. The proposed development of the Property described above and as
further described in this ENA is referred to herein as the "Project".
1.8 The City and Developer desire, for the period set forth herein, to negotiate
diligently and in good faith, the terms and conditions of a disposition and development
agreement ("DDA") and development agreement ("DA") which if agreed upon and executed will
specify the rights. obligations and method of participation of the City and Developer with respect
to the sale and development of the Property and the development thereon of the Project (the
"Transaction").
2.0 Agreement to Negotiate.
2.1 Terms and Conditions. Notwithstanding that the terms of the Transaction are to
be negotiated, the City and Developer and the City have agreed that the transactional documents
to be negotiated to describe the Transaction shall be in the form of a DDA and DA. the necessity
for and the form and substance of which shall be agreed upon by the Parties each in its sole
discretion the ("Transaction Documents"). The City and Developer each desire to negotiate
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1088087.6
Transaction Documents which if agreed upon and executed, shall set forth the terms and
conditions pursuant to which the Properly shall be conveyed by the Cityto Developer or a joint
venture between the Developer (or an affiliate) and a capital partner as described in the Business
Proposal and approved by the City (the "Joint Venture") and developed by Developer or the
Joint Venture.
2.2 ENA Not a Final Agreement. The Parties acknowledge and agree that this ENA
is for the sole purpose of establishing and facilitating the initial basis for negotiation of the
Transaction. This ENA is not, and the Parties do not intend that this ENA be, a lease, purchase
and sale agreement, option or similar contract setting forth the essential terms of a land
transaction (an "Essential Terms Agreement"). Subject to the obligations and rights expressed
in this ENA, unless and until a DDA and any other agreed upon Transaction Documents are
approved as set forth in Section 2.4 and executed by both Parties, the Parties do not intend to be
bound in any way to an Essential Terms Agreement, nor do they intend to be bound by any other
agreement except for the specific undertakings of each set forth in this ENA. Each Party
acknowledges that this ENA is merely an agreement to enter into the ENA Negotiating Period
according to the concepts presented herein, reserving final discretion and approval of any
Transaction Documents by the City Council (or in the case of Developer, the authorized
representatives of Developer) as to actions required, if any.
2.3 Essential Terms Not Agreed. The City and Developer acknowledge that this
ENA is a framework for negotiation of essential terns of any transaction in an Essential Terms
Agreement. but that they have not herein agreed upon the essential terns or the material
elements of a transaction, including, without limitation, the purchase price, the legal description
of the Property to be conveyed (including the exact amount of acreage, phasing, and precise
location of the land), the time or manner of and significant terms related to the conveyance, the
conditions precedent to conveyance (including without limitation, related to the design and
entitlement of the Project) and the requirements related to development of the Project, each of
which are an essential component of Che transaction (collectively, the "Essential Terms"); (b)
they do not intend this ENA to be a statement of Essential Terms, which shall be the subject
matter of their further negotiations, and (c) the Essential Terms of the Transaction, if agreed to
by the City and Developer, shall be set forth, ifat all, in the Transaction Documents approved by
the City Council (or in the case of Developer, the authorized officers or members of Developer)
and executed by authorized representatives of each of the City and Developer or the Joint
Venture. Further, Developer acknowledges that the design of the Proposed Project, the identity,
stability and financial capacity of Developer and any proposed manager/operator of the Project
and the terms and conditions of the sale of the Project, if any, will be of material concern to the
City and comprise part of the Essential Terms that are not yet agreed upon by the Parties.
2.4 Effectiveness of Subsequent Agreements. "rhe DDA and the DA shall not exist
and shall not be binding unless and until each is fully executed by Developer or the Joint Venture
and the City, approved by the City Council of the City and by the authorized representatives of
Developer. The DDA and DA shall become effective only after and if the agreements have been
considered and approved by the City Council of the City at a properly noticed meeting and after
compliance with CEQA as further described below. Nothing in this ENA shall supersede or
waive any discretionary or regulatory approvals required to be obtained from the City pursuant to
the Tustin City Code or the provisions of any applicable State or Federal law or regulation.
Exclusive Negotiation Agreement Page 3 Cit) of "I ustini Lincoln Property
1088087.6
2.5 Public Hearings and Compliance. The concurrence of the City negotiators with
the terms and provisions of a proposed DDA and DA shall not be construed or interpreted as the
City approving or accepting such terms. Such concurrence shall be viewed as nothing more than
the willingness of the City negotiators to recommend to the City Council that they approve such
terms.
2.6 Assumption of Risk. City and Developer each assume the risk that,
notwithstanding this ENA and good faith negotiations, the City and Developer may not enter into
any agreement due to their failure to agree upon Essential Terms of the transaction or the
Transaction Documents. Accordingly, except as specifically set forth in this ENA, neither Party
will have any liability to the other in the event that the Parties are unable to reach such a
definitive agreement with respect to the proposed transaction for any reason or no reason.
3.0 Developer's Representations, Warranties and Agreements. Developer represents,
warrants and agrees as follows:
3.1 Expertise and Financial Qualifications. Developer has the necessary expertise,
experience and financial capability to undertake development of the Project at the Property as
contemplated by this ENA.
3.2 No Speculation in Land Holding. Developer's intended acquisition of the
Property and its other intended undertakings pursuant to this ENA shall be used for the timely
development of the Project at the Property, and accompanying infrastructure and amenities, and
not for speculation in land holding.
3.3 Experience. Developer is experienced in development and understands the
process and requirements required to make development projects such as the Project described
herein.
3.4 Project Financing. Developer is capable of acquiring the Property and
developing the Project with a capital partner and financing from a bank group or other
institutional lender, utilizing the Property and the Project as collateral. Developer has
represented that it intends for Developer, its capital partner, or the Joint Venture to provide any
nonrecourse carve -out guarantee, construction completion guarantee, and environmental
indemnity required by the lender under such financing.
3.5 Creative Office Campus Project — Phase I (Minimum Project). Developer in
Business Proposal referenced in Section 1.7 has represented that the Project would be built as
described without user/tenant contingencies for the following products by category: 1) Office(s)
for approximately 345,000 square feet; 2) Food Hall for approximately 16,500 square feet; 3)
Retail for approximately 20,000, 4) pad uses for approximately 3,500 square feet, and 5)
sufficient parking for the described products which will include a parking structure and surface
parking. These products shall be developed on approximately 17.53 acres in the approximate
location described in the Business Proposal. All proposed products shall be of the quality
described in the City's Cornerstone Design Guidelines dated November 6, 2014.
3.6 Creative Office Campus Project — Phase II. Developer and City shall during
the course of negotiating the Transaction Documents agree upon the terms and conditions for the
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1088087.6
conveyance of Phase II, that is, the balance of the site and intensity of development. The quality
of the Project negotiated shall be at a level not less than the Project designed and constructed in
Phase I.
3.7 Release. Except as specifically set forth in Sections 4.3.3, 4.4.1, 6.9.2 and 10.5,
Developer, on behalf of itself and its successors and assigns, hereby waives the right to recover
from and fully and irrevocably releases the City and its elected and appointed officials,
employees, agents, attorneys, affiliates, representatives, consultants, contractors, successors and
assigns (the "City Parties") with respect to any and all claims. actions, causes of action,
demands, orders, or other means of seeking or recovering losses, damages, liabilities, costs,
expenses (including, without limitation, attorneys' fees, consultant fees and court, arbitration and
litigation costs) or any other type of compensation whatsoever, direct or indirect, known or
unknown, foreseen or unforeseen ("Claims") that Developer or its officers, directors, employees,
agents, representatives, tenants, prospective tenants, consultants or contractors may now or
hereafter have or incur relating to or arising from: (a) the process for selection of CBRE or
Developer, or any modification or defect thereto, or any information provided by the City or
CBRE during the course of the selection or negotiation process, (b) with respect to the terms of
this ENA including, without limitation, the information set forth herein or the termination hereof,
(c) any disputes, claims, actions, causes of action, demands or orders arising between Developer
and any third parties, and/or (d) any actions of the City, CBRE or the City Parties in connection
with any of the foregoing (including, without limitation, the exercise by the City of its
discretion, decision, or judgment with respect to the foregoing).. This waiver and release
includes, without limitation. a waiver and release with respect to: (w) any and all damages and/or
monetary relief (whether based in contract or in tort), including, without limitation, any right to
claim direct, compensatory, reliance, special, indirect or consequential damages. (x) any right to
payment or reimbursement from the City, (y) the right to protest the terms of this ENA, any
Transaction Document or the selection or negotiation process and (z) the failure of the City to
negotiate in good faith pursuant to this ENA or to enter into a Transaction Document. Nothing
herein limits or releases Claims by Developer against the United States Government, including
but not limited to the Department of the Navy, regarding the environmental condition of the
Property.
3.8 Survival of Provisions. The provisions of this Section 3 shall survive the
termination of this ENA.
4.0 Negotiations.
4.1 Good Faith Negotiations. The City will prepare a draft of the Transaction
Documents and submit the draft documents to Developer for review and comment. The City and
Developer agree for the period set forth in Section 4.2 to exclusively negotiate with one another
diligently and in good faith to prepare Transaction Documents and related documents to be
entered into between the City and Developer (or Joint Venture) with respect to the purchase and
sale and development of the Project at the Property.
4.2 Period of Negotiations.
4.2.1 Initial Period. The parties agree to negotiate exclusively and in good faith
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)098087,6
for a period of one hundred eighty (180) days from the Effective Date, subject to extensions as
further provided in this Section 4.2 (as so extended or earlier terminated in accordance with the
provisions of this ENA, the "ENA Negotiating Period"). If on the 180th day from the Effective
Date (or within any extension of time mutually approved by the City and Developer in
accordance with the terms of this ENA), Developer or the Joint Venture has not signed
Transaction Documents in form and substance prepared and approved by the City in its sole
discretion, then this ENA shall automatically terminate.
4.2.2 Request for Extension. Developer may request from the City an extension
of the 180 -day exclusive negotiation period. The City will determine whether reasonable and
sufficient progress has been made toward fulfillment of the requirements of this ENA in its
consideration of any extension. The 180 -day exclusive negotiation period may be extended by
the mutual consent of the City and Developer for up to two (2) additional periods of sixty (60)
days each.
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 ENA. No such extension of the ENA Negotiating Period shall be effective unless it is in
writing. Any extensions other than the two (2) periods of sixty days specified in Section 4.2.2
shall require approval by the City Council, which approval shall be at the sole and absolute
discretion of the City Council.
4.2.4 Offer to Purchase. The execution by the Developer or Joint Venture of a
form DDA and DA shall constitute an offer to purchase the Property on the terms set forth
therein. Developer hereby agrees that it shall not withdraw such offer to purchase for a period of
sixty (60) days following submittal of the executed DDA and DA to the City. Such offer shall
remain in effect for a period of sixty (60) days ("Offer Period") to enable the City to (a)
consider the environmental impacts of the proposed Definitive Transaction Documents as
evaluated in an environmental document prepared in accordance with the California
Environmental Quality Act; (b) determine whether it desires to enter into such a DDA and DA;
(c) take the actions necessary to authorize the City to sign the DDA and DA if the City desires to
do so; and (d) sign the DDA and DA. If the City has not considered and approved the DDA and
DA by such 60th day or, at the end of any extension mutually agreed upon by the City and
Developer in writing, then this ENA shall automatically terminate.
4.3 Deposits and Costs.
4.3.1 Good Faith Deposit. Concurrent with the execution of this ENA by the
City, Developer will submit to the City a good faith deposit in the sum of One 1-11.1ndred Fifty
Thousand Dollars ($150,000) (together with any interest accruing thereon and any additional
amount deposited as set forth below in this Section 4.3.1, the "ENA Deposit") 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 ETNA and to also be applied to cover any
City Transaction Expenses (defined below) incurred by the City after the Effective Date of this
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ENA. The ENA Deposit shall be deposited in an account in a bank or trust company selected by
the City. Interest shall accrue to any balances in the account for the benefit of Developer and as
additional security for Developer's obligations hereunder. The ENA Deposit will be expended to
cover the City Transaction Expenses, as further described in Section 4.3.2 and the ENA Deposit
will be depleted accordingly. Each time the amount of funds in the ENA Deposit account is
depleted below Fifty Thousand Dollars ($50,000). Developer shall be required to submit an
additional Fifty Thousand Dollars ($50,000) to City which shall be credited by the.City to the
ENA Deposit account. Amounts due to the City on account of City Transaction Expenses and
deducted by the City from the ENA Deposit are referred to herein as "City Expense Payments".
4.3.2 City Transaction Expenses. From and after the Effective Date, the ENA
Deposit may be used by the City to pay the predevelopment and negotiation costs and expenses
incurred by the City or accrued during the ENA Negotiating Period and, if DDA is executed by
Developer, through the Offer Period, including, without limitation, City staff costs attributable to
the Project, fees and costs of third party consultants, legal counsel (including, without, limitation,
fees and expenses of the, City Attorney and outside legal counsel) financial advisors, engineers,
appraisers and environmental and other consultants and any other expenditures required in
connection with the implementation and/or termination of the ENA, the drafting, negotiation and
execution of the Transaction Documents, and other acts carried out in contemplation of the
proposed Project (collectively, the "City Transaction Expenses"). Fees and deposits required
of Developer for processing entitlement applications or complying with provisions of the
California Environmental Quality Act ("CEQA") or its State CEQA implementing regulations
shall be separately funded by Developer and shall not constitute City Transaction Expenses.
Determination of costs, expenses, and fees constituting City Transaction Expenses shall be made
by the City in its sole discretion and Developer shall upon request be entitled to receive summary
notices from the City setting forth the identity of the provider or cost and the amounts
attributable to each that constitute City Transaction Expenses.
4.3.3 Return of Deposit Under Specified Conditions. If the Parties enter into
Transaction Documents, the Unapplied Deposit Funds (defined below) shall be returned to
Developer, or at Developer's request, applied to any deposit required as security for Developer's
or the Joint Venture's performance under the DDA. If the parties fail to enter into the
Transaction Documents within the ENA Negotiating Period or any subsequent Offer Period and
Developer has not negotiated diligently or in good faith or has not otherwise carried out its
obligations under this ENA, the City may retain the Unapplied Deposit Funds unless a court of
competent jurisdiction determines in a final decision that the City has not negotiated in good
faith as described in Section 4.4. In all other cases, upon the expiration or termination of the
ENA, the City shall return the Unapplied Deposit Pends to Developer. "Unapplied Deposit
Funds" means the amount of the ENA Deposit (including any additional funds deposited by
Developer pursuant to this Section 43) remaining after the City has deducted therefrom the full
amount of the City Transaction Expenses incurred by the City to the date of termination of this
ENA and, if applicable, the Offer Period,
4.3.4 Additional Transaction Deposit. Developer acknowledges that it is
currently anticipated that the Transaction Documents shall require an additional deposit in an
amount to be determined as security for the performance of Developer's or Joint Venture's
obligations under the Transaction Documents.
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4.3.5 Costs and Expenses Borne by Developer. Developer acknowledges and
agrees that the City shall have no responsibility to pay or reimburse Developer for costs and
expenses incurred by Developer in connection with this ENA or the compliance by Developer
with its obligations under this ENA unless the City, in its sole discretion, agrees to assume any
specific responsibilities in the fully executed Transaction Documents. Developer shall be
responsible, without any cost or liability to the City (except as otherwise set forth in Sections
4.4.1, 6.9.2 and 10.5), for all City Transaction Expenses and all costs and expenses incurred by
Developer with respect to compliance with the terms of this ENA, including without limitation,
costs incurred by Developer in planning and designing the Project, preparing Plans, submitting
applications, conducting due diligence or property investigations, arranging financing, negotiating
the terms of the Transaction Documents or carrying out other acts in contemplation of the possible
purchase and sale of the Property.
4.3.6 Developer Right to Terminate. Developer may terminate this ENA and
the ENA Negotiation Period upon provision of three (3) days prior written notice to the City in
the event that during the course of the investigations and evaluation of the Property and the
Project, Developer determines in good faith that the Project is not feasible or financeable. In
such event, the City shall return the Unapplied Deposit Funds, if any, to Developer upon
termination of this ENA in the event Developer has negotiated in good faith hereunder and
materially complied with the terms hereof.
4.3.7 Payment of Outstanding Amounts. Upon a termination of this ENA other
than as set forth in Section 4.4, to the extent that the funds provided by Developer to pay the City
Transaction Expenses are not sufficient to pay all City Transaction Expenses, Developer shall
promptly fund the amount remaining unpaid to the City.
4.3.8 Survival of Provisions. The provisions of this Section 4.3 shall survive the
termination of this ENA.
4.4 Exclusivity; Good Faith Negotiations and Remedies.
4.4.1 City Failure to Negotiate in Good Faith. During the period of exclusive
negotiation, the City covenants and agrees to negotiate exclusively with Developer and not to
solicit another party for the Project or enter into any agreement with any other party regarding
the development of the Property or any portion thereof. The City acknowledges and agrees that
but for this exclusivity, Developer would not have entered into this ENA. If a court of
competent jurisdiction determines in a final decision that the City has breached this exclusivity
covenant, the City shall be deemed to have failed to negotiate in good faith. Developer's sole
remedies for any breach by the City of the City's obligations to negotiate in good faith and
exclusively under this ENA shall be (a) the right to terminate this ENA and (b) the return to
Developer of the ENA Deposit, including the refund of any City Expense Payments made.
Except as specifically required by this Section 4.4.1, the City shall at no time have any obligation
to return any City Expense Payments.
4.4.2 Developer Failure to Negotiate in Good Faith. Developer's failure to
submit to the City plans, reports, studies, investigations, applications and materials specified in
Section 5 and Section 6 of this ENA within the time periods specified therein, failure to provide
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and maintain the insurance required by Section 4.5.2, or breach of the representations,
warranties and agreements set forth in Section 3 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 that would result
from a breach by Developer of its obligations under this ENA are uncertain and would be
impractical or extremely difficult to determine, the City shall be entitled to retain the ENA
Deposit including, without limitation, the Unapplied Deposit Funds, as liquidated and agreed
damages. The City's sole remedy for any breach by Developer of Developer's obligations to
negotiate in good faith and exclusively as required by this ENA shall be (a) the right to terminate
this ENA and (b) the retention by the City of the ENA Deposit including, without limitation, the
Unapplied Deposit Funds. Nothing herein shall be deemed to preclude the City from seeking or
receiving payment for amounts which Developer is obligated to pay pursuant to Section 4.3 (to
the extent the FNA Deposit is not sufficient to cover all City Transaction Expenses or such
amounts are not included in City Transaction Expenses) and Sections 4.5.3 and 10.5 of this ENA
or for direct monetary damages for breach by Developer of Sections 4.2.4 or 4.3.5 of this ENA
provided that City shall not be entitled to any damages in addition to the actual amounts owed by
the Developer to City pursuant to such Sections.
4.4.3 Limitation on Damages Payable by City. Developer acknowledges that
the City would not have entered into this ENA if the City could become liable for significant
damages under or with respect to this ENA or the proposed transaction. Consequently, and
notwithstanding any other provision of this ENA, except as set forth in Section 4.4.1 and the
following sentence, the City shall not be liable in damages under this ENA to Developer or any
third party and Developer, on behalf of itself and its successors and assigns, hereby waives any
and all rights to claim damages, reimbursements or monetary payments of any kind or nature
from the City except as set forth herein. Nothing herein shall be deemed to preclude Developer
from seeking payment for amounts which City is obligated to pay pursuant to Sections 4.4.1.
6.9.2 and/or 10.5 of this ENA, provided that Developer shall not be entitled to any damages in
addition to the actual amounts owed by the City to Developer pursuant to such Sections.
4.4.4 Additional Limitations on Damages. Each of the Parties, on behalf of
itself and its successors and assigns, hereby expressly waives, releases and relinquishes any and
all right to any expectation, anticipation, indirect, consequential, exemplary or punitive damages
or damages or monetary remedies not otherwise specifically set forth in this ENA.
4.4.5 No Liens or Lis Pendens. Developer, on behalf of itself and its successors
and assigns, hereby expressly waives any and all rights to record a lis pendens or to otherwise
place a lien or restriction of any type upon or affecting the Property.
4.4.6 Other Remedies and Restrictions. In the event the Parties enter into one or
more Transaction Documents, each Party, on behalf of itself and its successors and assigns,
hereby expressly waives its right to assert any breach by the other Party of the covenants of good
faith and exclusivity in this ENA. Nothing in this ENA shall preclude either Party from seeking
injunctive relief in order to enforce the Offer Period, release and/or confidentiality requirements
of this ENA.
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1088087.6
4.5 Inspection; License,
4.5.1 Access License. The City hereby grants to Developer, for use by
Developer and its employees, representatives, agents, contractors and consultants (collectively,
the "Developer Parties"), a license during the ENA Negotiating Period to enter upon the
Property for purposes of conducting a due diligence inspection, provided that Developer shall
and shall cause the Developer Parties to: (a) deliver to the City written evidence that Developer
has procured the insurance required under Section 4.5.2 prior to entry on the Property; (b) give
the City twenty-four (24) hours advance telephonic or written notice of any intended access
which involves work on or may result in any impairment of the use of the Property; (c) access
the Property in a safe manner; (d) conduct no invasive testing or boring without the written
consent of the City; (e) allow no dangerous or hazardous condition created by Developer and/or
the Developer Parties to continue beyond the completion of such access; (f) comply with all laws
and obtain all permits required in connection with such access; (g) keep the Property free and
clear of any and all liens of any kind caused by Developer or the Developer Parties, including
without limitation, mechanics' liens or materialmen's liens related to Developer's access to or
inspection of the Property and (h) conduct inspections and testing, subject to the rights of any
existing tenants or contractors doing work on the Property, if any (which inspections and testing,
if conducted at times other than normal business hours, shall be conducted only after obtaining
the City's consent, which shall not be unreasonably withheld) and in accordance with reasonable
terms and conditions established by the City. The limited license granted herein is revocable by
the City during the continuation of any breach of this ENA by Developer and shall be
automatically revoked and terminated, without further action of the City, upon the termination of
this ENA or the ENA Negotiating Period.
4.5.2 Insurance. Developer shall obtain, or cause the Developer Parties, with
respect to their access and investigative activities, to obtain, at Developer's or the Developer
Parties' sole cost and expense prior to commencement of any investigative activities on the
Property, a policy of commercial general liability insurance covering any and all liability of
Developer and the City arising out of Developer's investigative activities, in an amount of
$1,000,000 and issued by a company authorized by the Insurance Department of the State of
California and rated A, VII or better (if an admitted carrier) or A-, X (if offered by a surplus line
broker), by the latest edition of Best's Key Rating Guide. Such policy of insurance shall name the
City, its officials and employees as additional insured on the policy. Developer shall provide
certificates of insurance and insurer endorsements (or a copy of the signed policy binder, if
applicable), signed by a representative of the carrier evidencing the required insurance. Such
policy of insurance shall be kept and maintained in force during the ENA Negotiating Period
and, if applicable, the Offer Period and so long thereafter as necessary to cover any Claims by
persons or property resulting from any acts or omissions of Developer and/or the Developer
Parties.
4.5.3 Indemnity. Developer hereby agrees to indemnify, defend, protect and
hold the City and the City Parties free and harmless from and against any and all Claims arising
or resulting from or related to Developer's or the Developer Parties': (a) exercise of the license
provided in Section 4.5.1, including without limitation, entry onto or access to the Property; (b)
exercise of any rights hereunder, including, without limitation, any inspections, surveys, tests or
studies performed by Developer or the Developer Parties, (c) presence, activities or work on or
Exclusive Negotiation Agreement Page 10 City of Tustin/Lincoln Property
1088087.6
related to use of the Property and any mechanics' or materialmen's liens arising with respect
thereto, or (d) bodily injury to or death of any person (including, without limitation, any of the
City Parties) or damage to or loss of use of property resulting from the foregoing, save and
except to the extent such Claims result from (x) the discovery by Developer of any pre-existing
environmental conditions on the Property not caused or contributed to by Developer or the
Developer Parties, or (y) the gross negligence or willful misconduct of the City or its agents,
employees or representatives.
4.5.4 Survival of Provisions. The insurance obligations in Section 4.5.2 and the
indemnification by Developer set forth in Section 4.5.3 shall survive the termination of this ENA
and, if applicable, the execution of the DDA and the closing and transfer to Developer or the
Joint Venture and shall not merge into any deed conveying the Property.
5.0 Proposed Development Concent.
5.1 Compliance with Existine Land Use and Zoning Requirements. The proposed
Project to be negotiated hereunder shall include the development and use of the Property
consistent with the Reuse Plan, the City's General Plan, and the Specific Plan.
5.2 Terms of Transaction Documents to be Negotiated. Developer and the City
agree that it is their intent, upon entry into this ENA, to negotiate Transaction Documents which
are anticipated to address the following terms and conditions and such other terns and conditions
as they may agree, and which will be binding upon City and Developer and, to the extent
provided therein, their successors and assigns.
5.2.1 As -Is Conveyance. While Developer should undertake its own
investigation to determine the presence of hazardous materials and suitability of the Property for
development, Developer acknowledges and agrees that if the Property is conveyed by the City
pursuant to Transaction Documents, the Property shall be conveyed on an "AS -IS, WHERE -IS
AND WITH ALL FAULTS" basis, and Developer or the Joint Venture shall be obligated to
release, defend, indemnify and hold harmless the City with respect to its acquisition and
development of the Property and the condition of the Property, including, without limitation, any
and all land use, soil and environmental conditions of the Property.
5.2.2 Development. The Developer shall design and construct the Project on the
Property at its own, or the Joint Venture's cost and expense in accordance with the scope of
development and a schedule of performance to be negotiated as part of the Transaction
Documents and in accordance with plans and specifications prepared by Developer, and
approved by the City in accordance with such schedule of performance and in compliance with
all requirements and regulations ofthe City including, without limitation, applicable zoning.
5.2.3 Product(s). Developer understands and acknowledges that the product(s)
proposed for the Project will be subject to approval by the City, in its governmental and
proprietary capacity, and will be required to comply with applicable development standards in
the Specific Plan and any requirements contained in the Transaction Documents.
5.2.4 Community Facilities District (CFD). Developer acknowledges that the
City has formed a community services district for services to fund a portion of the City essential
Exclusive Negotiation Agreement Page I I City orTustin/Lincoln Property
1088087.6
services, including, without limitation, police and fire protection, ambulance and paramedic
services, recreation programs and services, street sweeping, traffic signal maintenance and the
maintenance of City -owned parks, parkways and open spaces, lighting, flood control and storm
drain services and other City services and facilities at Tustin Legacy by forming a community
facilities district pursuant to which is imposed a Special Tax "B" ("Tax B"). Developer
acknowledges and agrees that the term of Tax B imposed upon the Property and the Buildings(s)
and improvements thereon shall be perpetual and shall not be time limited in any manner unless
determined by the City in its sole discretion. Developer acknowledges and agrees that its
development plan will not require use of CFD proceeds of any kind and that CFD proceeds will
not be used to reimburse Developer for any costs of the development including without
limitation, any infrastructure costs.
5.2.5 Applications. Developer shall prepare and process applications for and
obtain from the City and other federal, state and local jurisdictions, all applicable land use,
planning and zoning approvals for the proposed development with the support of the City. These
approvals will be required to be consistent with the Specific Plan, unless, as part of approval of
any application, modifications to the Specific Plan or any development standards are granted by
the City.
5.2.6 Proiect Costs; Local Infrastructure. Project costs and revenues will be
separately analyzed. Funding of all Project costs will be the responsibility of Developer without
any cost or liability whatsoever to the City, provided that the City shall provide utilities to the
boundaries of the Property. Project costs for which the Developer will be responsible shall
include, without limitation, all costs of planning, designing, entitling and constructing the Project
and all costs of any necessary local infrastructure improvements (except with respect to utilities
at the Property boundaries as described above) and in -tract improvements required in connection
with development of the Project. Nothing in this ENA waives or otherwise limits the
applicability of the Tustin Legacy Backbone Infrastructure Program.
5.2.7 Development Fees. In connection with its development of the Property,
Developer acknowledges that the Property will be subject to applicable development fees,
including, but not limited to, those required by the City of Tustin, or other jurisdictions, such as
the Foothill/Eastern Corridor Fee, the Santa Ana/"I'ustin Transportation System Improvement
Area (TSIA) fee, school impact fees by the Santa Ana Unified School District, current Orange
County School Facility Bonds (Measure G and Measure L), utility meter and connection fees.
5.2.8 Transfer and Assignment Restrictions. Developer acknowledges that the
Transaction Documents shall contain limitations on transfer and assignment of the rights of
Developer including, among other things, the right of the City to approve in its sole discretion all
assignments and transfers by Developer of interests in Developer, the Transaction Documents,
the Project or the Property.
5.2.9 Mortgagee Limitations and Subordination. Developer acknowledges that
the Transaction Documents shall impose limitations on mortgages and mortgagees on the
Property and shall require subordination of any mortgage to the Transaction Documents.
Exclusive Negotiation Agreement Page 12 City ol'Tustin/l.inculn Property
5.2.10 Remedies and Termination Riehts. Developer acknowledges that the
Transaction Documents shall contain remedies and termination rights in favor of the City for
breach of the Transaction Documents, which shall include, without limitation, rights of reverter
in conveyed land.
5.2.11 Purchase Price. The basis for the Parties' negotiations with respect to the
purchase price for the Property and the costs for which Developer will be responsible shall be
established by the Business Proposal.
6.0 Developer's Responsibilities.
6.1 Status Reports. Developer agrees to make bi-weekly oral and/or written reports
advising the City and/or its staff of all matters and studies being made, Developer's progress in
analyzing the feasibility of the Project and Developer's compliance with the requirements of this
ENA, and such other infonnafion as may be reasonably requested by the City or its staff.
6.2 Development Team. Developer shall, within ten (10) days of execution of this
ENA, submit in writing to the City 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 and employers. Developer shall also designate and submit in
writing to the City the names of all of Developer's lead negotiators who shall have authority to
make decisions on behalf of Developer.
6.3 Financial Status. Developer shall continue to be responsible for demonstrating
to the City Developer's financial capacity and capability to perform its obligations under this
ENA and the proposed Transaction Documents. Subject to the Confidentiality Protocols (as
defined, and set forth, below), Developer shall submit any additional financial information
required to demonstrate Developer's financial capacity and capability to perform its obligations
under this ENA and the proposed Transaction Documents as requested by the City within thirty
(30) days of a request. Developer acknowledges that documents or other "records" (as that term
is defined in the California Public Records Act ("CPRA")) related to the Project may be
required to be made public upon request. Government Code Section 6253(a) provides that
"Public records are open to inspection at all times during the office hours" of the City. If
Developer believes that any documents or other records requested by the City are exempt from
the CPRA, Developer shall state in writing the legal basis for Developer's belief that such
documents or other records are exempt from the CPRA. Developer and City shall meet and
confer about exemption of such documents or other records, and City shall evaluate the asserted
basis for the exemption(s) in good faith. If City determines that the requested documents or
other records qualify for an exemption. Developer shall conspicuously mark the documents and
other records "Confidential" and shall submit them to City, and City will not make the records
public except as otherwise required by law or by court order. City's failure to correctly
determine the applicability or inapplicability of an exemption to the CPRA shall not constitute a
breach of this ENA or the Transaction Documents. City will endeavor to notify Developer of
any request made for records related to the Project when the request for the records allows
adequate time to provide such notice. Developer agrees to defend, indemnify and hold harmless
the City and the City Parties from any claims for damages, costs, court costs, attorney fees, or
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1088087.6
related claims in all lawsuits and writ proceedings seeking to make records public that Developer
has marked "Confidential" hereunder. (The third through ninth sentences of this Section 6.3 are
hereinafter referred to as the "Confidentiality Protocols.")
6.4 Assignment. If Developer determines to joint venture or partner development of
the Property, or if Developer determines to form a new legal entity to develop the Property,
Developer shall promptly inform the City of such determination and, subject to the
Confidentiality Protocols set forth in Section 6.3 above, submit to the City the joint venture's or
partner's or new entity's most recent financial statements and the financial statements of its key
principals. The assignment of Developer's rights under this ENA to any new entity, partnership
or joint venture may be approved in writing by the City, provided that the City is satisfied, in its
sole discretion, that the new entity, partnership, or joint venture has the financial capability to
perform under this ENA and the proposed Transaction Documents.
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 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. Within twenty (20) days after the Effective
Date, Developer shall submit a schedule for entitlement processing. Within sixty (60) days after
the Effective Date. Developer shall submit for approval of the City preliminary revised design
drawings and related documents containing the overall plan for development of the Project
including the following: preliminary site plan showing building layout and dimensions, parking,
landscaping and access on or related to each individual parcel, floor plans, preliminary materials
call -outs and conceptual building renderings and a development schedule.
6.6 Project Financial Pro Forma. Within sixty (60) days after the Effective Date,
Developer shall submit its overall cost and revenue estimates, Project cost and revenue data
including information on the 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 Property. The information submitted shall be in the business plan format
requested by the City. Developer shall periodically update the financial pro formas for the
Project throughout the ENA Negotiating Period to reflect changes to the Project, the Plans
(defined below), expected costs and revenue assumptions, and any comments the City provides
to Developer on the Project, including, without limitation, the preliminary site plan. Developer
shall provide updated pro formas to the City on a quarterly basis, or more frequently if requested
by the City.
6.7 Additional Information. Developer understands and agrees that the City's
negotiating team reserves the right at any time to reasonably request from Developer additional
information, including data and commitments to ascertain the depth of Developer's capability
and desire to develop the Property expeditiously. The City's negotiating team will provide a
reasonable time in which Developer may obtain and submit to the City such additional
information.
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1088087.6
6.8 Contacts During Negotiation. Developer shall only negotiate with the City's
negotiating team as defined in writing by the City Manager, or his or her designated
representative, and with no other persons unless expressly authorized to do so by the City's
negotiating team. During the period of negotiations. Developer shall make no statements to the
media about the proposed Project without the approval of the City Manager or his or her
designated representative. The Developer's failure to comply with the provisions of this
Section 6.8 shall be conclusive evidence that Developer has not "negotiated in good faith."
6.9 Environmental and Other Studies.
6.9.1 Environmental Requirements. Compliance with CEQA is a legal
precondition to any final City action to approve and execute the Transaction Documents for the
Property. While the City has agreed to process and reflect the terns of a proposed transaction in
Transaction Documents to be considered by the City for approval, the Parties agree that no
obligation to enter into such Transaction Documents, or transaction, shall exist and no project
nor Transaction Document shall be approved or deemed to be approved on the part of any Party,
until after the Project is reviewed by the City in accordance with the requirements of CEQA.
Developer shall cooperate with the City and abide by the City's environmental compliance
procedures and fee requirements, which include, but are not limited to, the obligation to deposit
funds to pay all of the. City's costs of preparing any additional required environmental studies as
may be determined.
6.9.2 Plans, Reports, Studies and Investigations. Developer shall provide the
City, without cost or expense to the City, copies of all plans, reports, studies or investigations
(collectively, "Plans") prepared by or on behalf of Developer for development of the Project on
the Property. All Plans shall be prepared at Developer's sole cost and expense. If this ENA is
terminated for any reason other than a material breach or default hereunder by the City, the City
may request that Developer, for consideration to be Mutually agreed, transfer Developer's rights
to any or all Plans identified by the City, but in no event shall the cost to the City exceed five
hundred dollars ($500.00). Upon such request. Developer shall deliver to the City copies of all
Plans requested by the City together with a bill of sale therefore, provided that Developer makes
no representations, warranties or guarantees regarding the completeness or accuracy of the Plans,
and Developer does not covenant to convey the copyright or other ownership rights of third
parties thereto. Such Plans shall thereupon be free of all claims or interests of Developer or any
liens or encumbrances. Upon the City's acquiring Developer's rights to any or all of the Plans,
the City shall be permitted to use, grant, license or otherwise dispose of such Plans to any person
or entity for development of the Property or any other purpose; provided, however, that
Developer shall have no liability whatsoever to the City or any transferee of title to the Plans in
connection with the use of the Plans
6.9.3 Hazardous Materials Assessment. Developer acknowledges that, in
accordance with the City of Tustin's acquisition of the Property from the Department of the
Navy by quitclaim, the Navy issued Findings of Suitability for Transfer ("FOST") (FOST #2
dated September 2001, and FOST 47 dated April 2005) for unrestricted use. subject to
notification and restrictions set forth in the FOSTs, also determining that the Property can be
used with acceptable risk to human health and the environment. The City would intend upon
approval of a DDA to sell and convey by quitclaim in the same manner as the parcels were
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1088087.6
conveyed to the City including, without limitation, the covenants and warranties as identified in
the Navy's quitclaim deed.
6.9.4 Insurance. The Developer, and any permitted assignee(s), will be
responsible in conjunction with the Transaction Documents to provide commercial general
liability, workers compensation, builder's risk property insurance, and environmental insurance
as further described on Exhibit "B" attached hereto.
7.0 The Developer.
7.1 Nature of Developer. Developer will be Lincoln Property Commercial, Inc. or
such other business entity (such as a limited liability company or limited partnership joint
venture with a capital partner) as the City may approve upon such terms and conditions as the
City may request and the City and Developer may agree, as specified in the Transaction
Documents. Should another business entity be desired by Developer, subject to approval of the
City, Developer shall submit a copy of the applicable formation documents relating to
Developer and any corporate members of Developer (i.e., as applicable: articles of
incorporation; partnership agreement; and/or limited liability corporation articles of
incorporation, statement of information and operating agreement).
7.2 Offices of Developer. The principal offices of Developer are located at 2000
McKinney Ave., Suite 1000, Dallas, Texas 75201. The principals of Developer for purposes of
this ENA are as follows:
David Binswanger, Senior Executive Vice President
Kevin Hayes, Executive Vice President
7.3 The Developer's Consultants and Professionals. Developer is required to make
Full disclosure to the City of any changes to its principals, officers, stockholders, partners, joint
venturers, Project employees, and other associates and all other pertinent information concerning
Developer and its associates as identified in its Business Proposal. Developer agrees to
substitute or supplement any of its consultants and professionals as reasonably requested by the
City.
8.0 The Developer's Financial Capacity.
8.1 Financial Capacity. Any additional financial information required to
demonstrate financial capacity and capability to perform the obligations under this ENA of
Developer, if requested, shall, subject to the Confidentiality Protocols set forth in Section 6.3 be
submitted to the City or its consultant as requested by the City for the purposes of this ENA. .
8.2 Equity. Developer proposes to obtain its equity capital for development of the
Property from in-house sources and a qualified limited partner or limited liability company
member with whom the Developer has a current or prior relationship in funding similar projects.
8.3 Construction Financine. Developer proposes to finance construction of the
Project with equity and a bank group or other institutional lender.
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10880876
8.4 Lone -Term Development Financing. Developer intends to obtain long-term
development financing from a bank group or other institutional lender.
8.5 Bank and Other Financial References. The Developer's bank and other
financial references have been provided to the City under separate cover.
8.6 Full Disclosure. Developer will be required to make and maintain full disclosure
to the City of the methods of financing and the financing documents proposed to be used in the
development.
9.0 Citv's Responsibilities.
9.1 Environmental Requirements. A final Environmental Impact
Statement/Environmental Impact Report ("EIS/EIR") has been prepared and certified for the
MCAS Tustin Reuse Plan. Developer agrees to finance and supply information and otherwise
assist the City as requested to enable the City to determine the environmental impact of the
proposed development of the Project as described by the Transaction Documents and to prepare
such additional environmental documents, if any, as may be needed to be completed for the
development.
9.2 Plans and Studies. The City shall, within ten (10) business days of execution of
this ENA and at no cost to Developer, make available to Developer copies of all plans, reports,
studies, investigations and other materials the City may have pertinent to the Property provided,
however, that the City makes no representations, warrantee or guarantee regarding the
completeness or accuracy of such.plans, reports, studies, investigations and other materials and
the City shall have no liability whatsoever to Developer or any transferee of Developer in
connection with such plans and studies or the use thereof for any purposes. Nothing herein
limits or releases Claims by Developer against the United States Government, including but not
limited to the Department of the Navy.
9.3 FOST. The City agrees to make available a copy of the FOST to Developer
within ten (10) business days following the Effective Date.
10.0 Miscellaneous.
10.1 Real Estate Commissions. The City has retained CBRE pursuant to a separate
agreement and shall be responsible for payment of amounts, if any, due to CBRE thereunder in
connection with the transaction described in this ENA. The City agrees to hold Developer and
its representatives, successors and assigns harmless from any losses and liabilities arising from or
in any way related to any claim by CBRF', regarding this ENA or this sale of the Property.
Developer represents that it has not engaged any broker, agent, or finder in connection with this
ENA and Developer agrees to hold the City and its representatives, successors and assigns
harmless from any losses and liabilities arising from or in any way related to any claim by any
broker, agent, or finder retained by Developer, regarding this ENA or this sale of the Property.
The provisions ofthis Section 10.1 shall survive the termination of this ENA.
10.2 No City Duty. Notwithstanding any other provision of this ENA to the contrary,
except as expressly provided in Sections 4.3.3 and 4_4, the City shall have no obligations or
Exclusive Negotiation Agreement Page 17 City of Tustin/Lincoln Property
1088087.6
duties hereunder and no liability whatsoever in the event the City and Developer fail to agree
upon or to execute Transaction Documents.
10.3 Non -Liability of Officials and Emplovees. No member, official, representative,
director, staff member, attorney or employee of the City shall be personally liable to Developer
or any successor in interest in the event of any default or breach by the City or for any amount
which may become due to Developer or to its successor, or on any obligations under the terms of
this ENA. No member, official, representative, director, staff member, attorney or employee of
the Developer shall be personally liable to the City or any successor in interest in the event of
any default or breach by the Developer or for any amount which may become due to the City or
to its successor, or on any obligations under the terms of this ENA, unless the member, official,
representative, director, staff member, attorney or employee is or becomes a successor in interest
to, or assignee of, Developer.
10.4 Entire Aereement. This ENA represents the entire agreement of the City and
Developer with respect to the matters set forth herein and supersedes any prior negotiations or
contemporaneous writings or statements. This ENA may not be amended except in writing
signed by each of the City and Developer hereunder.
10.5 Attorneys' Fees. If either the City or Developer brings an action or files a
proceeding in connection with the enforcement of its respective rights or as a consequence of any
breach by any Party of its obligations hereunder, then the prevailing party in such action or
proceeding shall be entitled to have its reasonable attorneys' fees paid by the losing party.
10.6 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 origin or ancestry in the sale, lease, sublease, transfer, use,
occupancy, tenure or enjoyment of the Property, 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 Property.
10.7 Notices/Submittals. All notices or submittals 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.
City: John Buchanan
Deputy Director, Economic Development
City of Tustin
300 Centennial Way
Tustin, CA 92780
Jeffrey C. Parker
City Manager
City of Tustin
300 Centennial Way
Tustin, CA 92780
Exclusive Negotiation Agreement Page 18 City 01' 1 UStin/Lincoln Property
1088087.6
And with a copy to: David E. Kendig
City Attorney
Woodruff Spradlin & Smart
555 Anton Blvd. Suite 1200
Costa Mesa, CA 92626
Developer: David Binswanger
Lincoln Property Company Commercial, Inc.
915 Wilshire Blvd., Suite 2050
Los Angeles, CA 90017
Kevin Hayes
Lincoln Property Company Commercial, Inc.
5 Hutton Centre Dr., Suite 120
Santa Ana, CA 92707
And with a copy to: Gregory S. Courtwright
Lincoln Property Company Commercial, Inc.
2000 McKinney Ave., Suite 1000
Dallas, Texas 75201
10.8 Any such notice or submittal shall be deemed received upon delivery to all
required recipients, 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.
10.9 Prohibition Against Assignments. This ENA shall not be assigned by
Developer without the consent of the City in its sole discretion. Any attempted or purported
assignment by Developer of this ENA without the consent of the City as aforesaid shall be void
and a breach by Developer of its obligation to negotiate in good faith under this ENA.
10.10 No Third Party Beneficiaries. Execution of this FN is not intended to create
or confirm any third party beneficiary rights in or create any liability on the part of either the
City or Developer to any third parties.
10.11 Effect of Disposition and Development Agreement. Following mutual
execution by the City and Developer of the Transaction Documents, this ENA shall be of no
further force or effect, except that, unless otherwise agreed in writing by Developer and the City,
the releases set forth in Section 3.7, the insurance requirements set forth in Section 4.5.2 the
indemnities set forth in Section 4.5.3 and Section 10.1, and the confidentiality provisions set
forth in Section 10.12 shall remain in effect with respect to matters or Claims arising, and
documents and information delivered, during the ENA Negotiating Period. In the event of any
conflict between the provisions of this ENA and any Transaction Document approved by the
City and Developer, the provisions of the Transaction Document shall for all purposes prevail.
Exclusive Negotiation Agreement Page 19 City of Tustin/Lincoln Property
1098087,6
10.12 Confidentiality. Except as otherwise required bylaw or court order, the City and
Developer represent and warrant that each shall keep this ENA and all information and/or reports
obtained from the other, or related to or connected with the Property, the other Parties, this ENA,
and until presentation to the City for approval, the Transaction Documents or any other
documents negotiated by the City and Developer, confidential and will not disclose any such
information to any person or entity without obtaining the prior written consent of the other Party,
except that (a) the City shall have the right (i) to disclose any information contained in any third
party reports obtained by Developer and (ii) make disclosures to City's employees and
independent contractors, including, but not limited to consultants, financial planners, outside
counsel, contractors and experts as necessary in order to determine if the Project is feasible and
financeable, provided such persons and entities are made aware the information is confidential;
and (b) Developer shall have the right to make disclosures to Developer's potential capital
partners and lenders, and Developer's and their respective employees, partners, members,
affiliates and independent contractors, including but not limited to consultants, financial
planners, outside counsel, and experts as necessary in order to determine if the Project is feasible
and financeable, provided such persons and entities are made aware the information is
confidential. Notwithstanding the foregoing, this ENA, the draft DDA and DA and all other
material relating to this ENA are subject to the provisions of the California Public Records Act
(Government Code Section 6250 et seq.) ("Act"). The City's use and disclosure of its
agreements and records are governed by the Act and nothing herein limits the City's right and
obligation to comply with the Act or with laws mandating public notice or disclosure of public
records, including without limitation, agendas, public hearings, staff reports and minutes
produced in connection therewith, including, without limitation, the Ralph M. Brown Act. The
City makes no representations nor warranties that writings and materials provided to or
generated by the City during negotiations will be exempt from the Public Records Act; provided
however that nothing in the foregoing shall relieve the City of its obligation to abide by the
Confidentiality Protocols as set forth in Section 6.3 ofthis ENA.
10.13 Governing Law/Exclusive Venue. This ENA shall be interpreted in accordance
with California law. The Parties agree that in the event of litigation, exclusive venue shall be in
Orange County, California.
10.14 Counterparts. This ENA may be signed in one or more counterparts, each of
which shall constitute an original and all of which together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the City and Developer hereto have executed this
ENA as of the Effective Date set forth above.
{remainder of page is blank/signatures commence on following page)
Exclusive Negotiation Agreement Page 20 City of Tustin/Lincoln Property
1088087,6
•
"CITY"
City of Tustin
Dated: By:
Jeffrey C. Parker
City Manager
APPROVED AS TO FORM
BY: Art
., _ fry
David Kendig
City Attorney
"DEVELOPER"
Lincoln Property Company
Commercial Inc.. a Texas corporation
By: Zia
Name: David Binswanger
Title: Executive Vice President
Exclusive Negotiation Agreement Page 21 City of Tustin/Lincoln Property
1088087.6
EXHIBIT "A"
General Depiction of Property
PARCEL a
Site Area 12.E Acres
auddmg Area: 225,000 SF
0.47 FAR
BANNANCA PARK*AY
Exclusive Negotiation Agreement Exhibit A City of Tustin/Lincoln
Property
1088087.6
EXHIBIT "B"
DDA INSURANCE REQUIREMENTS
Insurance.
1.1. Required Insurance.
Without limiting the City's rights to indemnification, Developer shall procure and
maintain, at its own cost and expense, and furnish or cause to be furnished to the City, evidence
of the following policies of insurance (complying with the requirements set forth below) naming
Developer as insured and, with respect to the general liability and environmental liability
insurance required pursuant to Section l.l.l and 1.1.4 only, the City as additional insured. All
insurance required below shall be kept in force with respect to each such component of the
Property, the Project and/or the improvements until issuance of final Certificate of Compliance
by the City with respect thereto or for such longer period as is described below.
I.I.I. Liability Insurance. Commencing upon the effective date of the DDA,
Developer shall maintain or cause to be maintained commercial general liability insurance, to
protect against loss from liability imposed by law for damages on account ofpersonal injury,
including death therefrom, suffered or alleged to be suffered by any Person or Persons
whomsoever on or about the Property, the Project and/or the improvements and the business of
Developer on the Property, or in connection with the operation thereof. resulting directly or
indirectly from any acts or activities of Developer or anyone directly or indirectly employed or
contracted with or acting for Developer, or under its respective control or direction, and also to
protect against loss from liability imposed by law for damages to any property of any Person
occurring on or about the Property, the Project and/or the improvements or related to the Project
and the business of Developer on the Property, or in connection with the operation thereof,
caused directly or indirectly by or from acts or activities of Developer or any Person acting for
Developer, or under its control or direction. Such insurance shall also provide for and protect the
City against incurring any legal cost in defending Claims for alleged loss. Such insurance shall
be maintained in full force and effect until issuance of the Certificate of Compliance and so long
thereafter as necessary to cover any claims of damages suffered by persons or property prior to
issuance of the Certificate of Compliance, resulting from any acts or omissions of Developer,
Developer's employees, agents, contractors, suppliers, consultants or other related parties. The
amount of insurance required hereunder shall include comprehensive general liability and
personal injury with limits of at least Five Million Dollars ($5,000,000.00) and automobile
liability with limits of at least Two Million Dollars ($2.000,000.00) combined single limit per
occurrence. The insurance shall be issued by a company permitted by the Insurance Department
of the State and rated A-/Vll or better (if an admitted carrier) or A -/X (if offered by a surplus line
broker), by the latest edition of Best's Key Rating Guide. Such insurance may be provided by an
umbrella insurance policy otherwise meeting the requirements ofthis Section I.
An ACORD certificate evidencing the foregoing and providing the following endorsements
approved by the authorized representative of the underwriter and approved by the City shall be
delivered within seven (7) business days following the effective date of the DDA and annually
(upon request from the City) evidencing renewals of each policy until issuance of the Certificate
Exclusive Negotiation Agreement Exhibit B. Page I City o(Tuslin/Lincoln Property
1088087.6
of Compliance for the Project. The endorsements shall provide as follows: (1) designate the
City, its elected and appointed officials, agents, representatives and employees as additional
insureds on the commercial general liability policies; (2) the commercial general liability
insurance coverage shall be primary, and not contribute with any insurance or self-insurance
maintained by the City and (3) a waiver of subrogation for the benefit of the City. The procuring
of such insurance and the delivery of policies, certificates or endorsements evidencing the same
shall not be construed as a limitation of Developer's obligation to indemnify the City Parties as
required by the DDA.
1.1.2. Workers' Compensation Insurance. Commencing upon the effective
date of the DDA, Developer sliall obtain, and thereafter maintain or cause to be maintained,
workers' compensation insurance issued by a responsible carrier authorized under the laws of the
State to insure employers against liability for compensation under the workers' compensation
laws now in force in California, or any laws hereafter enacted as an amendment or supplement
thereto or in lieu thereof. Such workers' compensation insurance shall cover all Persons
employed by Developer in connection with the Project and shall cover liability within statutory
limits for compensation under any such act aforesaid, based upon death or bodily injury claims
made by, for or on behalf of any Person incurring or suffering injury or death in connection with
the Project or the operation thereof by Developer. Notwithstanding the foregoing, Developer
may, in compliance with the laws of the State and in lieu of maintaining such insurance, self -
insure for workers' compensation in which event Developer shall deliver to the City evidence
that such self-insurance has been approved by the appropriate State authorities. Developer shall
also furnish (or cause to be furnished) to the City evidence satisfactory to the City that any
contractor with whom it has contracted for performance of work on the Property or otherwise
pursuant to the DDA carries workers' compensation insurance required by law. The insurance
policy, and each renewal or replacement thereof, by endorsement approved by an authorized
representative of the underwriter, shall contain a waiver of subrogation against the City, and its
council members, officers, employees, attorneys and agents. The insurance provided for under
this Section 1. 1.2 shall be issued by a company rated B -/VIII or better or by the State
Compensation Fund,
1.1.3. Builder's Risk Insurance. Commencing upon the commencement of
construction by Developer of any improvements and continuing until such time as the City
delivers a final Certificate of Compliance, Developer shall obtain, or shall cause its contractor to
obtain, and thereafter maintain a builder's risk policy with respect to such improvements or
maintain comparable coverage through a property policy. Such insurance shall be maintained in
an amount not less than one hundred percent (100%) ofthe full insurable value of the Building(s)
and improvements. The insurance provided for under this Section 1.1.3 shall be provided by
insurer(s) permitted to do business in the State and with a Best's rating of B/NR or better.
1.1.4. Environmental Insurance. - From and after the Close of Escrow,
Developer shall obtain and shall thereafter maintain environmental and pollution legal liability
insurance coverage for the Property, including coverage for loss, remediation expense and legal
defense expenses, and naming the City as a named insured to address pollution risks at the
Property. Such policy shall include coverage relating to known pre-existing conditions and/or
conditions that are discovered during development on the Property. Such policy shall comply
with the following requirements:
Exclusive Negotiation Agrecment Exhibit B. Page 2 City of fustin/l.incolo Property
1088087.6
(a) The policy shall be written by the insurance company selected by
Developer and approved by the City, which approval shall not be unreasonably withheld, and
which insurer(s) shall have a Best's rating of A -/VI I or better;
(b) The policy shall provide not less than Five Million Dollars
($5,000,000) in coverage, subject to a maximum One Hundred Thousand Dollar ($100,000)
deductible per claim, to protect against Claims and loss from liability relating to known and
unknown conditions on the Property for a period of not less than 10 -years; and
(c) The policy shall be paid for in full at the time of issuance and shall
be endorsed as non -cancelable by Developer without the written consent of the City in its sole
discretion to such cancellation and shall contain a waiver of subrogation for the benefit of the
City and its council members, officers, employees, attorneys and agents. As such, Developer's
obligation to maintain environmental insurance pursuant to this Section 1.1.4 shall survive the
termination of the DDA following the Close of Escrow for the term required for such insurance
policy pursuant to Section 1.1.4(6).
(d) Developer's insurance policies shall name the City as an additional
insured with respect to any additional environmental and pollution legal liability insurance
coverage Developer acquires for the Project, the Property or any portion thereof.
The provisions of this Section 1. 1.4 shall survive the termination of the DDA.
1.2. General Insurance Requirements.
1.2.1. For all policies or certificates, the insurer endorsements (or a copy of the
policy binder, if applicable) shall specifically identify the DDA and shall provide evidence that
either (a) Developer has paid for its premium in full for any policy that is currently in place, or
(b) that said insurance shall not be cancelled except if the City is given at least thirty (30)
calendar days advance written notice of any cancellation or termination of insurance by the
insurer.
1.2.2. 'rhe tern "full insurable value" as used in this Section I shall mean the
cost determined by mutual agreement of the Parties (excluding the cost of excavation, foundation
and footings below the lowest floor and without deduction for depreciation) of providing similar
improvements of equal size and providing the same habitability as the improvements
immediately before such casualty or other loss, but using readily -available contemporary
components, including the cost of construction, architectural and engineering fees, and
inspection and supervision.
1.2.3. All insurance provided under this Section 1 shall be for the benefit of tile
Parties. Developer agrees to timely pay all premiums for such insurance and, at its sole cost and
expense, to comply and secure compliance with all insurance requirements necessary for the
maintenance of such insurance. Developer agrees to submit certificates evidencing the insurance
required by Sections 1.1.1 and 1.1.2 to the City on an ACORD foam within seven (7) business
days, following the effective date of the DDA, the insurance required by Section 1.1.3 on or
before commencement of construction, and the insurance required by Section 1.l .4, at the Close
of Escrow. Within seven (7) calendar days, after expiration of any such policy, certificates and
Exclusive Negotiation Agreement Exhibit t3, Page 3 City of Dustin/Lincoln Property
1088087,6
endorsements evidencing renewal policies shall be submitted to the City, together with evidence
of payment of premiums.
1.2.4. If Developer fails or refuses to procure and maintain insurance as required
by the DDA, the City shall have the right, at the City's election, and upon ten (10) calendar days'
prior notice to Developer, to procure and maintain such insurance. The premiums paid by the
City shall be treated as a loan, due from Developer, to be paid on the first calendar day of the
month following the date on which the premiums were paid. The City shall give prompt notice
of the payment of such premiums, stating the amounts paid and the name of the insurer(s).
1.25. Since the insurance policies required by Section 1. 1.4 will not be effective
until after the Close of Escrow, the evidence of insurance to be delivered by Developer to the
City at the Close of Escrow shall be limited to a binder evidencing that the insurance required by
Section 1. 1.4 will become effective following the Close of Escrow.
2. Initially capitalized terms used in this Exhibit "A" and not otherwise defined in the ENA
shall have the meanings set forth below:
2.1. "Certificate of Compliance" shall mean a certificate to be issued with respect to
the Property by the City upon completion by Developer of all of the Buildings and improvements
and satisfaction of all additional conditions precedent thereto with respect to the Property or
Phase, as the case may be, as described in the DDA.
2.2. "Close of Escrow" shall mean the close of escrow for the Property and the
transfer of fee title to the Property by the City to Developer.
2.3. "Governmental Authority" shall mean any and all federal, State, county,
municipal and local governmental and quasi -governmental bodies and authorities (including the
United States of America, the State of California and any political subdivision. public
corporation, district, joint powers authority or other political or public entity) or departments
thereof having or exercising jurisdiction over the Parties, the Project, the Property or such
portions of the foregoing as the context indicates.
2.4. "Person' shall mean an individual, partnership, limited partnership, trust, estate,
association, corporation, Limited Liability Company, joint venture, firm, Joint Stock Company,
unincorporated association, Governmental Authority, governmental agency or other entity,
domestic or foreign.
2.5. "State" shall mean the State of California.
Exclusive Negotiation Agreement Exhibit 13, Page 4 City of Tustin/Lincoln Property
1088087.6