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Home My WebLink AboutNB 2 E. TUSTIN HOTEL 11-18-91NEW BUSINESS N0. 2 A 02'% EN 11-18-91 - --------- 1-1 tr -CUrn %r TE: NOVEMBER 18, 1991 a. TO: WILLIAM A. HUSTON, CITY MANAGES FROM: COMMUNITY DEVELOPMENT DEPARTMENT SUBJECT. EAST TUSTIN HOTEL RECOMMENDATION It is recommended that the City Council authorize the City Manager to execute the attached letter of understanding. BACKGROUND As the Council is aware, the East Tustin Development Agreement required The Irvine Company to construct a minimum 250 room hotel on the mixed use site within the East Tustin Specific Plan. Based on our discussions with numerous hotel industry representatives, the mixed use annex site between Bryan Avenue and El Camino Real just east of Tustin Ranch Road is really not a desirable market location for development of a hotel. With the volatility of the Orange County hotel market, it is not believed that a hotel would be successful at this location. However, recognizing that development of a hotel is still important to a number of representatives on the City Council, The Irvine Company would be prepared to commit to future development of a hotel on an alternate site in the vicinity of Sast Tustin which better meets the locational criteria that a hotel operator would find attractive. While The Irvine Company still believes that they may fully meet their revenue requirements in the Ea$t Tustin Development Agreement without a hotel, they are prepared tO also commit to development of approximately 263,000 square feet of retail space on the Tustin Market Place Annex to replace the hotel. They are currently negotiating with two major stores, Costco and K -Mart who when combined could generate up to $9010,000 a year to the City in additional sales tax. If the above approach is acceptable to the City Council, a letter of understanding with certain specific conditions established by staff is attached for consideration by the City Council. The City Council Report East Tustin Hotel November 18, 1991 Page 2 agreement has been reviewed and approved by the City Attorney's office. 'Christine A. Shingleto Assistant City Manage CAS:kbc\ethotel.cas Q-11 THE IRVINE COMPANY Richard G. Sim President Investment Properties Group NOVEMBER 11, 1991 CITY COUNCIL CITY OF TUSTIN 15222 DEL AMO AVENUE TUSTIN, CA 92680 SUBJECT: LETTER OF UNDERSTANDING CONCERNING THE HOTEL IN EAST TUSTIN' DEAR COUNCILMEMBERS: SECTION 1.4 OF THE EAST TUSTIN SPECIFIC PLAN DEVELOPMENT AGREEMENT REQUIRES THE IRVINE COMPANY ("THE COMPANY") TO CONSTRUCT A MINIMUM 250 ROOM HOTEL IN SECTOR 12 OF THE SPECIFIC PLAN AREA DESIGNATED AS "MIXED USE". SAID HOTEL WAS TO HAVE CONTAINED CUSTOMER SUPPORTING FACILITIES, AND IF PROPOSED TO BE BUILT IN MORE THAN ONE PHASE, SUCH PHASING WAS TO HAVE BEEN APPROVED BY THE CITY. DESPITE BEST EXPECTATIONS, THE MIXED USE ANNEX SITE BETWEEN BRYAN AVENUE AND EL CAMINO REAL JUST EAST OF TUSTIN RANCH ROAD HAS.NOT BEEN IDENTIIFIED AS A DESIRABLE SITE BY A VARIETY OF HOTEL OPERATORS. GIVEN THE VOLATILITY OF THE ORANGE COUNTY HOTEL MAROT, IRVINE COMPANY (COMPANY) AND CITY STAFF DO NOT BELIEVIE THAT A'HOTEL WOULD BE SUCCESSFUL N; AT THE ORIGINAL LOCATION' PROPOSED IN THE EAST TUSTIN DEVELOPMENT AGREEMENT. IN ADDITION, TWO MAJOR RETAIL STORES, COSTCO AND K -MART, HAVE EXPRESSED A STRONG INTEREST IN LOCATING ON THE MIXED USE ANNEX SITE. THESE STORES HAVE A TRACK RECORD FOR GENERIATING SIGNIFICANT SALES TAX REVENUES AND WHEN THIS BIENEFIT IS COMPOUNDED, THE CITY COULD SEE UP TO $900,0001A YEAR IN ADDITIONAL SALES TAX. DUE TO THE LACK OF MARKET DEMAND FOR A HOTEL ON THE SUBJECT SITE AND THE STRONG DEMAND FOR MAJOR RETAIL STORES, THE COSTCO AND K -MART PROPOSALS WOULD BE A POSITIVE ADDITION TO THE CITY. IT IS ALSO BEILIEVED THAT APPROXIMATELY 263,000 SQUARE FEET OF ADDITIONAIL RETAIL SQUARE FOOTAGE ON THE MIXED USE ANNEX SITE WILL MORE THAN FULLY SATISFY REVENUE REQUIREMENTS AS IDENTIFIED IN THE EAST TUSTIN DEVELOPMENT AGREEMENT. 550 Newport Center Drive, P.O. Box I, Newport Beach, California 92658-8904 (714) 720-2222 CITY OF TUSTIN NOVEMBER 11, 1991 PAGE TWO THE COMPANY UNDERSTANDS!THAT WHILE THEY MAY FULLY MEET THEIR REVENUE REQUIREMENTS IDENTIFIED IN THE DEVELOPMENT AGREEMENT AS 'HOTEL ROOM", THE CITY STILL WANTS TO HAVE A HOTEL DEVELOPED SOMEWHERE IN THE PROXIMITY OF EAST TUSTIN. IN ORDER TO ACHIEVE THE CITY'S OBJECTIVES, CITY STAFF AND THE COMPANY, SUBJECT TO REGULATORY APPROVAL BY THE CITY COUNCIL, HAVE IDENTIFIED THE FOLLOWING APPROACH TO RESOLVE THIS ISSUE. 1. THE COMPANY SHALL FIjLE AN APPLICATION TO AMEND THE EAST TUSTIN DEVELOPMENT AGREEMENT AND MORE SPECIFICALLY SECTIONS 1.4 AND 1.9' REQUESTING REMOVAL OF THE OBLIGATION TO CONSTRUCT A HOTEL WITHIN THE MIXED USE SITE OF THE EAST TUStTIN SPECIFIC PLAN. SAID APPLICATION SHALL BE',PROCESSED CONCURRENTLY BY THE CITY WITH ANY DISCRETIONARY APPLICATIONS NECESSARY TO ACCOMMODATE THE PROPOSED RETAIL DEVELOPMENT OF THE MIXED USE ANNEX SITE BOUNDED BY BRYAN AVENUE, TUSTIN RANCH ROAD, EL CAMINO REAL, AND THE EL MODENA CHANNEL. ;,,.:.. 2. THE COMPANY WILL PROPOSE AN AMENDMENT TO THE DEVELOPMENT AGREEMENT TO PROVIDE APPROXIMATELY 263,000 SQUARE FEET OF RETAIL. SPACE ON THE MIXED USE ANNEX SITE. AW 3. THEMPAN IL CO Y W LR E T AG � 0 CONSTRUCT A MINIMUM 250 ROOM HOTEL ON A SITE IN PROXIMITY OF THE I-5 FREEWAY AT JAMBOREE TO BE LOCATED IN THE CITY OF TUSTIN OR AT AN ALTERNATE SITE LOCATED AT PORTOLA AT JAMBOREE ON THE SECTOR 6 GENERAL COMMERCIAL SITE WITHIN THE EAST TUSTIN SPECIFIC PLAN AREA. SAID HOTEL IS TO CONTINUE TO CONTAIN CUSTOMARY SUPPORTING FACILITIES AS ORIGINALLY REQUIRED BY SECTION 1.4 OF THE EAST TUSTIN DEVELOPMENT AGREEMENT. 4. THE CITY AND COMPANY'SHALL COOPERATE IN THE INITIATION OF AMENDMENTS TO ITS GENERAL PLAN AND ZONING ORDINANCE OR EAST TUSTIN SPECIFIC PLAN OR DEVELOPMENT AGREEMENT OR ANY OTHER ACTIONS, INCLUDING ANY NECESSARY REORGANIZATION OF BOUNDARIES BETWEEN THE CITY OF IRVINE AND THE CITY OF TUSTIN, NECESSARY TO ENSURE IMPLEMENTATION OF THE PROPOSAL OUTLINED ABOVE. THE COMPANY BELIEVES THAT THIS SOLUTION CAN BE ACHIEVED SUCCESSFULLY FOR ALL INTERESTED PARTIES. .tiff?s ss tts t � s } •.it\t \ CITY OF TUSTIN NOVEMBER 11, 1991 PAGE THREE THE COMPANY RECOGNIZES THAT THE CITY COUNCIL CANNOT COMMIT IN ADVANCE OF NECESSARY PUBLIC HEARINGS TO APPROVE AN AMENDMENT OF THE EAST TUISTIN DEVELOPMENT AGREEMENT, OR TO THE ADOPTION OR AMENDMENT OF A GENERAL PLAN OR ANY ORDINANCE. ACCORDINGLY, THIS LETTER OF UNDERSTANDING SHALL NOT IN ANY MANNER CONSTITUTE A LEGALLY BINDING OBLIGATION ON THE CITY COUNCIL TO ENACT OR APPROVE REQUIRED POLICE POWER APPROVALS, OR ANY (OTHER RELATED APPROVAL NECESSARY TO IMPLEMENT THIS CONCEPT. HOWEVER, THE COMPANY CAN COMMIT TO THE CITY THAT IT WILL USE ITS BEST EFFORTS TO ACCOMPLISH THE FOREGOING COMPONENTS'OF THIS SOLUTION, SUBJECT TO APPROVAL OF THE CITY COUNCIL THAT THE FOREGOING COMPONENTS SHALL BE PURSUED IN THE BEST INTERESTS OF THE PUBLIC. THE COMPANY RESPECTFULLYREQUESTS THAT THIS SOLUTION BE FORMALLY CONSIDERED BY THE CITY COUNCIL. PROPERTIES RGS:CF CC•• BRAD OLSON NORM SMITH .. �,)!)yss�sSii�s.•! �) yys s•,+ss`s yi�iyi CHRISTINE SHINGLETON ACKNOWLEDGED & ACCEPTED WILLIAM A. HUSTON CITY MANAGER