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Home My WebLink About05 EXTENSION OF ENA WITH AVALONBAY COMMUNITIES INC AREAS 2B, 2C AND 8DocuSign Envelope ID: C4D9D8C5-9A82-466B-AE41-3D39D8D3590E MEETING DATE Ito] FROM AGENDA REPORT APRIL 18, 2023 MATTHEW S. WEST, CITY MANAGER ECONOMIC DEVELOPMENT DEPARTMENT Agenda Item 5 Reviewed: os City Manager Finance Director SUBJECT: EXTENSION OF EXCLUSIVE NEGOTIATING AGREEMENT WITH AVALONBAY COMMUNITIES INC. AND ABODE COMMUNITIES FOR PORTIONS OF TUSTIN LEGACY DISPOSITION AREAS 2B, 2C AND 8 SUMMARY: Request for approval of an extension of the Exclusive Negotiating Agreement (ENA) with AvalonBay Communities Inc. (AvalonBay) and Abode Communities (Abode) (collectively, "Developer") to continue the negotiating period for the disposition and development of portions of Disposition Areas 2B, 2C and 8 at Tustin Legacy for a multifamily mixed -use project for an additional 180 days. RECOMMENDATION: Approve an extension of the ENA of an additional period of ninety (90) days, as well as an option for the City Manager to grant an additional ninety (90) day extension and authorize the City Manager to provide written notice of the ENA extension terms to the Developer. FISCAL IMPACT: No fiscal impact. Developer has a deposit account with the City that will continue to fund the City transaction expenses incurred by staff and third -party consultants including the retention of legal counsel associated with the negotiation and drafting of the Disposition and Development Agreement (DDA) and related agreements. CORRELATION TO THE STRATEGIC PLAN: This action correlates to the City's Strategic Plan for Economic and Neighborhood Development (Goal A). DocuSign Envelope ID: C4D9D8C5-9A82-466B-AE41-3D39D8D3590E Agenda Report — AvalonBay/Abode ENA Extension April 18, 2023 Page 2 BACKGROUND: On May 3, 2022 (Effective Date), the City Council authorized the City Manager to enter into an ENA with Developer to negotiate the disposition and development of portions of Disposition Areas 213, 2C and 8 at Tustin Legacy for a multifamily mixed -use project. The ENA provided for an initial negotiating period of two hundred seventy (270) days from the Effective Date which could be extended for one (1) additional period of ninety (90) days at the discretion of the City Manager, which was granted. The ENA negotiating period, with the previously approved extension, will expire on May 1, 2023. Any subsequent ENA negotiating period extensions require approval by the City Council. Q 6*9111:14 IQ ki F The City and Developer continue to negotiate the DDA, the Development Agreement (DA) and the related instruments and agreements (Transaction Documents) diligently and in good faith, and the Developer has made reasonable and sufficient progress towards fulfilling the requirements of the ENA. However, due to the financial and development complexity as well as size of the project, additional time is requested to complete predevelopment and negotiations of the Transaction Documents. While the City and Developer continue to negotiate the final DDA, Developer has expended almost $4 million in advancing City and Developer transaction expenses, entitlements and design development drawings for the project. Developer has submitted a letter to the City dated March 30, 2023 (included as Attachment 1) requesting an additional ENA extension period of ninety (90) days, as well as an option for the City Manager to grant an additional ninety (90) day extension, for a prospective total of 180 days based on the City's determination that sufficient progress has been made towards fulfilling the terms of the ENA. If approved by the City Council, the first ninety (90) day extension would expire on July 31, 2023. If the City Manager extends the ENA for the additional ninety (90) days, the ENA would expire on October 30, 2023. Any additional ENA extensions beyond October 30, 2023 would require approval by the City Council, which approval shall be at the sole discretion of the City Council. Staff finds that sufficient progress is being made toward fulfilling the requirements of the ENA, and therefore recommends City Council approval of the ENA extension as requested. DocuSign Envelope ID: C4D9D8C5-9A82-466B-AE41-3D39D8D3590E Agenda Report — AvalonBay/Abode ENA Extension April 18, 2023 Page 3 DocuSigned by: �,I�,visfapl�,w�asfzv Chrls op er Koster Director of Economic Development DocuSigned by: pl, - EB# Kenneth Piguee Senior Management Analyst Attachments: DocuSigned by: � swibKht fT yan wlon ek Manager of Development Services Attachment 1 — Letter requesting extension of ENA from Developer dated March 30, 2023 DocuSign Envelope ID: C4D9D8C5-9A82-466B-AE41-3D39D8D3590E MAYER I BROWN March 30, 2023 VIA EMAIL AND UPS OVERNIGHT MAIL Attention: Matthew S. West City Manager City of Tustin 300 Centennial Way Tustin, CA 92780 Email: mwest@tustinca.org Mayer Brown LLP 333 S. Grand Avenue, 47th Floor Los Angeles, CA 90071 United States of America T: +1 213 229 9500 F: +1213 625 0248 mayerbrown.com Edgar Khalatian T: +1 213 229 9548 F: +1213 576 8130 EKhalatian@mayerbrown.com Re: Exclusive Negotiating Agreement (Tustin Legacy Portion of Disposition Areas 2B, 2C & 8) between the City of Tustin (the "City), AvalonBay Communities, Inc., a Maryland corporation ("AvalonBay") and Abode Communities, a California non-profit corporation ("Abode"), as co - developers (AvalonBay and Abode, collectively "Developer") dated M!q 32022 (the "ENA regarding the multi -family mixed -use residential community with respect to approximately 19.4 acres of land located within portions of Disposition Areas 213, 2C and 8 as depicted on the site map attached as Exhibit A to the F,NA_ Ladies and Gentlemen: Reference is made to the ENA. Capitalized terms not defined herein shall have the meanings ascribed to them in the ENA. We are writing on behalf of our client, AvalonBay, in order to provide AvalonBay's written request to extend the ENA Negotiating Period pursuant to Section 4.2 of the ENA. On December 22, 2022, AvalonBay submitted a written request to the City for a 90-day extension of the Initial ENA Negotiating Period (originally set to expire on January 30, 2023), pursuant to Section 4.2.2 of the ENA. The City Manager granted AvalonBay's request for a 90- day extension on January 4, 2023, after finding that the Extension Standards of the ENA had been met. Accordingly, the ENA Negotiating Period was extended to May 1, 2023, on which date the ENA will terminate unless a further extension is granted. AvalonBay remains committed to working with the City towards finalizing an agreement for the disposition and development of the Development Parcels. From the outset, AvalonBay has negotiated diligently and in good faith to solidify the terms and conditions of the conveyance, which includes an affordable housing component to be developed by AvalonBay's co -developer, Abode Communities. However, given the size and complexity of the transaction, the Parties require additional time to complete the Transaction Documents. AvalonBay is grateful for all the time City staff has dedicated to this important project and remains excited about commencing construction. To date, AvalonBay has invested approximately $3.7 million towards the completion of due diligence, entitlement drawings, and legal documents, and has completed the 100 percent Mayer Brown is a global services provider comprising an association of legal practices that are separate entities including Mayer Brown LLP (Illinois, USA), Mayer Brown International LLP (England), Mayer Brown (a Hong Kong partnership) and Tauil & Chequer Advogados (a Brazilian partnership). 752733415.6 DocuSign Envelope ID: C4D9D8C5-9A82-466B-AE41-3D39D8D3590E mayer grown LLY Attention: Matthew S. West March 30, 2023 Page 2 design development documents for the proposed first phase of the Project. AvalonBay appreciates the City's willingness to work with us and we are confident in the quality of this project and our collective capacity to reach an agreement to complete the Project. Pursuant to Section 4.2.3 of the ENA, all further extensions to the ENA Negotiating Period require City Council approval. As such, AvalonBay is providing this letter (the "ENA Negotiating Period Extension Request") to serve as AvalonBay's written request for City Council approval of an extension to the ENA Negotiating Period. AvalonBay respectfully requests the City Council to approve an additional extension of ninety (90) calendar days, along with approving an option for the City Manager to grant a further ninety (90) calendar day extension (such that the ENA Negotiating Period shall expire on July 31, 2023, with an option for the City Manager to further extend to October 30, 2023). The City Council's approval of this ENA Negotiating Period Request will allow the Parties to continue negotiating diligently towards finalizing the Transaction. This ENA Negotiating Period Extension Request is being delivered in accordance with and within the time prescribed by Section 4.2 of the ENA. Except as provided herein, the ENA remains in full force and effect without change. Please confirm that this ENA Negotiating Period Extension Request will be considered by the City Council at its next meeting. Sincerely, ZggarlKhalafiati cc: Christopher Koster, Director of Economic Development David Kendig, Esq., Woodruff, Spradlin & Smart Amy Freilich, Esq., Hepner & Myers LLP Mark Janda, AvalonBay Communities Inc. Legal Department, AvalonBay Communities, Inc. Sara Tsay, Abode Communities Nicole Deddens, Esq., Bocarsly Emden LLP 752733415.6