HomeMy WebLinkAboutSPEC 01 REQ TO TRANS CONTROL W/TLCP 05-07-07MEETING DATE: MAY 7, 2007
T0: WILLIAM A. HUSTON, CITY MANAGER
FROM: CHRISTINE A. SHINGLETON, ASSISTANT CITY MANAGER
SUBJECT: REQUEST FOR TRANSFER OF CONTROL PURSUANT TO THE
DISPOSITION AND DEVELOPMENT AGREEMENT (MASTER
DEVELOPER) BETWEEN THE CITY OF TUSTIN (CITY) AND TUSTIN
LEGACY COMMUNITY PARTNERS, LLC (TLCP)
SUMMARY:
Approval is requested in response to a request from Tustin Legacy Community
Partners, LLC (TLCP) to permit the withdrawal of Centex Homes, as a Member of the
TLCP development partnership between Centex Homes, Shea Properties, LLC and
Shea Homes Limited Partnership, and the acquisition by Shea Properties II, LLC of the
interests of Centex Homes and Shea Properties, LLC.
RECOMMENDATION:
It is recommended that the City Council approve, with conditions, the request from
TLCP to permit Centex Homes to withdraw from the partnership, and the acquisition by
Shea Properties II, LLC of the interest of Centex Homes and Shea Properties, LLC
subject to certain conditions identified herein.
FISCAL IMPACT:
The requested transfer of control has involved due diligence review by City staff and its
real estate and legal team and will result in the City incurring expenses and legal costs
to modify implementation and transfer documents. The approval with conditions of the
withdrawal of Centex Homes from TLCP and the proposed reconfiguration of the TLCP
entity will require reimbursement to the City of any and all expenses necessary to
accommodate the transfer and reconfiguration including, but not limited to, City staff
time and legal services and shall be in addition to any other reimbursement provisions
contained in the Disposition and Development Agreement (DDA} 06-01 (Master
Developer}.
Page 2
BACKGROUND:
The original DDA 06-01 was entered into by and between the City and TLCP on May 3,
2006. The original DDA sets forth the parameters of development and conveyance by
the City of Tustin and Tustin Public Financing Authority (hereinafter the "Agency") of
certain property at Tustin Legacy (the former MCAS Tustin) to TLCP. In the Original
DDA 06-01, members of TLCP included Centex Homes (as to a 50% interest) Shea
Homes Limited Partnership (as to a 25% interest) and Shea Properties, LLC (as to a
25% interest) (collectively, the "Developer"). TLCP did not indicate any concerns at that
time or issues with the partnership. The Tustin City Council and Tustin Public Financing
Authority also recently approved the First Amendment to the original DDA 06-01 at their
regular meeting on March 20, 2007 (the original DDA and subsequent First Amendment
to the DDA are hereafter referred to as the "DDA").
On March 29, 2007, the City received a letter indicating the intent of Centex Homes, a
Nevada general partnership, to withdraw from the TLCP partnership as of March 30,
2007. Subsequently on April 9, 2007, the City received a letter requesting a
reconfiguration of the ownership in the TLCP entity. The approval of such a request
would remove Centex from any contractual obligation at this point to perform under the
DDA and they would withdraw from the TLCP entity. Additionally, as part of the
reconfiguration, Shea Homes would retain its 25% membership interest in TLCP, Shea
Properties II, LLC ("SP II",anew entity) would be admitted to TLCP as a member and
will assume Centex's original 50% membership interest as well as replace Shea
Properties, LLC ("SP")and assume its 25% membership interest. As a result, SP II will
have, in the aggregate, a 75% membership interest in TLCP. In addition, it is also
requested that SP II become the managing member of TLCP.
Pursuant to Section 4.1.2 of the DDA, the proposed change of the members of the
Developer results in a Transfer of Control as defined by the DDA which shall be subject
to the City's prior written approval. In addition, the withdrawal of Centex from TLCP and
the proposed reconfiguration will necessitate certain changes to the Operating
Agreement of TLCP, which the City must consent to pursuant to Section 4.1.2 of the
DDA.
Based on the City's review of the request and discussions with representatives from
Shea Homes Limited Partnership and Shea Properties II, LLC, we are prepared to
recommend to the City Council approval of the restructuring subject to the following
conditions of approval:
1. TLCP shall provide a certificate showing the revised organizational structure of
the Developer, the authority granted to the officers and Key Employees and shall, from
time to time, provide updated certificates in the event of any changes to any of the
foregoing or at the request of the City.
2. TLCP shall enter into an amendmentto the TLCP Operating Agreement in a form
Page 3
and content acceptable to the Assistant City Manager and City's Tustin Legacy special
real estate counsel to implement the changes described above, pursuant to Section
4.1.2 of the DDA.
3. As a condition and prior to the Phase 1 Escrow Close, TLCP shall have delivered
to the City a declaration by Shea Properties II, LLC and Shea Homes that the following
documentation submitted by the Developer to the City remains true and correct as of
the City's approval date of the requested transfer of control and TLCP reconfiguration
including:
a. documentation relating to the corporate, partnership, limited liability, or similar
status as the case may be, of Developer's limited liability company and its
members (and, if any partner is a limited partnership, its general partners}; and if
any partner is a limited liability company, its members, including, as applicable:
Articles of Incorporation, California Foreign Entity Registration, Certificate of
Limited Partnership, Limited Partnership Agreement and Statement of
Information and operating agreements, including any amendments thereto;
b. copies of all resolutions or other necessary actions taken by each such entity
to authorize the execution of documents or instruments required by the DDA;
c. a certificate of good standing and tax good standing of the Developer, Shea
Properties II, LLC, and Shea Homes issued by the Delaware and California
Secretaries of State (as applicable}; and
d. a copy of all Fictitious Business Name Statements, if any, as published and
filed with the Clerk of Orange County.
4. As a condition prior to the Phase I Escrow Close, and to indicate TLCP's
demonstrated commitment to the Tustin Legacy project, TLCP including and not limited
to Shea Properties II, LLC and Shea Homes Limited Partnership shall have executed a
Letter of Credit for their required DDA contribution to the Tustin Library Project in an
amount of $7,953,900 in a form approved by the City Attorney and consistent with the
letter agreement on this matterfrom TLCP received by the City.
5. TLCP shall provide certain evidence of financing and availability of funds to the
City as has been agreed to.
6. TLCP shall enter into an amendment to the DDA and any exhibits thereto, as the
City shall determine is necessary or desirable, to document the definition of the
"Developer" and change in managerial control of the TLCP partnership, also expressly
requiring all new TLCP members to also acknowledge the DDA obligations and to
assume and agree to perform as a member of TLCP all current DDA obligations.
7. TLCP shall provide a minimum deposit of $50,000 against any and all
reimbursement expenses for all City staff time and expenses, including fees and
Page 4
expenses of the City's outside legal counsel and financial consultants, to accommodate
the transfer and reconfiguration including the cost of preparation and documentation of
the required amendment to the DDA which shall be in addition to any other
reimbursement provisions contained in the DDA, replenishing said deposit as shall be
necessary to ensure complete reimbursement of all related City expenses as identified
herein.
8. Based on input from reconstructed members of the TLCP partnership, the Parties
have agreed that to a revised Phase 1 escrow closing date of June 19, 2007. Any
delays that are beyond the revised escrow closing date shall require TLCP to pay an
increased performance deposit of $1,000 per day for the period commencing on the
Phase I Closing Date as defined above and ending on the date when the Developer
acquires the Phase I Conveyance Property.
Christine A. Shingle
Assistant City Manager