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HomeMy WebLinkAbout05 REINSTATEMENT AND AMENDMENT OF EXCLUSIVE NEGOTIATING AGREEMENT WITH CD-CW (TUSTIN) LLC FOR A PORTDocusign Envelope ID: D6F74F67-C363-4353-8654-7FE8E6620C7B MEETING DATE TO: FROM: SUBJECT: SUMMARY: Agenda Item 5 AGENDA REPORT Reviewed: City Manager Finance Director APRIL 21, 2026 ALDO E. SCHINDLER, CITY MANAGER BRIAN MONCRIEF, DEPUTY CITY MANAGER — REAL PROPERTY REINSTATEMENT AND AMENDMENT OF EXCLUSIVE NEGOTIATING AGREEMENT WITH CD-CW (TUSTIN) LLC FOR A PORTION OF LAND AT TUSTIN LEGACY Request for approval to reinstate, amend and extend the Exclusive Negotiating Agreement with CD-CW (Tustin) LLC to continue the negotiating period for the disposition and development of a portion of Disposition Area 8B at Tustin Legacy in order to facilitate a close of escrow of the property by the end of this year. The extension would provide an initial 60-day period for CD-CW (Tustin) LLC to secure an equity partner for the project with an executed Letter of Intent. Further extensions of the Exclusive Negotiating Agreement through October 2026 would be permitted, as needed, for CD-CW (Tustin) LLC to achieve milestones consisting of entitlement approvals, completion of DDA negotiations and execution, and completion of construction plans for permit review submittal. RECOMMENDATION: Recommend the City Council take the following action: Authorize the City Manager to execute a reinstatement and amendment to the Exclusive Negotiating Agreement reflecting the extensions as requested by CD-CW (Tustin) LLC, establish a milestone schedule of performance for CD-CW (Tustin) LLC to adhere to, and make any non -substantive additions or modifications as may be deemed necessary and/or recommended by the City's special real estate counsel or the City Attorney. FISCAL IMPACT: The Exclusive Negotiating Agreement will be amended to require a $300,000 extension deposit for the first 60-day extension and a $100,000 monthly extension deposit for the remainder of the ENA Negotiating Period. The extension deposits are non-refundable, however, if the Disposition and Development Agreement is executed and close of escrow occurs, the extension deposits (without interest accrued) are applicable to the purchase price and the purchase price deposit. Docusign Envelope ID: D6F74F67-C363-4353-8654-7FE8E6620C7B City Council Agenda Report CD-CW (Tustin) LLC ENA Reinstatement and Amendment April 21, 2026 Page 2 CD-CW (Tustin) LLC also 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 transaction documents. CORRELATION TO THE STRATEGIC PLAN: The extension of the Exclusive Negotiating Agreement with CD-CW (Tustin) LLC contributes to the fulfillment of the City's Strategic Plan Goal A: Economic and Neighborhood Development. Specifically, this item implements Strategy 1 which is to develop critical phases of Tustin Legacy. BACKGROUND AND DISCUSSION: On September 19, 2023, the City Council authorized the City Manager to enter into an Exclusive Negotiating Agreement (ENA) with CD -MS (Tustin) LLC (now CD-CW (Tustin) LLC and referred to hereinafter as Developer) to negotiate the disposition and development of a portion of Disposition Area 813 at Tustin Legacy for a senior congregate care facility project. The ENA provided for an initial negotiating period of 270 days from the effective date, which could be extended for one additional period of 90 days at the discretion of the City Manager, which was granted. On August 20, 2024, the City Council authorized the City Manager to extend the ENA for an additional 90 days with an option, at the City Manager's discretion, to grant a further extension of the ENA by an additional 90 days to March 17, 2025, which was granted. On March 4, 2025, the City Council amended the ENA and approved a 270-day extension as requested by the Developer in order to allow time to process a new entitlement submittal for a re -visioned project and negotiate a Disposition and Development Agreement (DDA). At the same time, the City Council also formally approved Clearwater Senior Living as the new operator. In accordance with the ENA, the Developer provided the required $100,000 extension deposit. On December 2, 2025, the City Council approved another amendment and extension of the ENA at the request of the Developer to allow for a 120-day extension until April, 11, 2026, in order to select an equity partner for the project and complete negotiations. If successful, an additional extension of 60 days would be available at the discretion of the City Manager. The Developer paid the required $150,000 extension deposit and worked diligently to advance the entitlements, DDA, and source equity for the project, but did not meet the agreed upon milestones of selecting an equity partner and executing an agreement with said partner. As of April 11, 2026, the Third Amendment Mandatory Milestones had not been met by the Developer and accordingly the Amended ENA terminated by its terms (after giving effect to the business day provisions in Section 4.2.4(g) of the Amended ENA) on April 13, 2026. Docusign Envelope ID: D6F74F67-C363-4353-8654-7FE8E6620C7B City Council Agenda Report CD-CW (Tustin) LLC ENA Reinstatement and Amendment April 21, 2026 Page 3 The Developer has submitted a request to reinstate, amend and extend the ENA in order to execute a Letter of Intent (LOI) with an equity partner within 60 days and finalize DDA negotiations and complete the entitlement process in subsequent extension periods in anticipation of closing escrow on the property this year. Milestones would be incorporated into the ENA extensions. Assuming that the milestones are met after the initial 60-day extension period, the City Manager may grant additional extensions if the Developer continues to meet the required milestones and advance the project in a timely manner. The first additional ENA Negotiating Period extension of 60 days requires approval by the City Council and will require a $300,000 extension deposit with any further 30-day extensions requiring a $100,000 extension deposit for each extension and may be extended by the City Manager if the Developer has accomplished the milestones identified in the ENA extension request letter. Extension deposits are applicable to the purchase price and purchase price deposit but would remain non-refundable in the event the DDA is not executed or close of escrow does not occur. During the initial 60-day extension period, the major milestone identified by the Developer is to have secured an equity partner with an executed LOI and engaged said equity partner in the DDA negotiations. Additional milestones beyond the initial 60-day period lead up to a scheduled close of escrow this December. These additional milestones include completion of the entitlements in order to schedule public hearings before the Planning Commission and City Council in August and September of this year, finalizing negotiation of the DDA for consideration by the City Council this October, and completing required agreements with the equity partner during the ENA Negotiating Period. City staff and the Developer will continue to hold bi-weekly meetings or more frequently as needed throughout the remaining ENA Negotiating Period in order to advance the project and negotiations. Staff intends to provide regular updates to the City Council on milestone progress throughout the ENA Negotiating Period. Brian Moncrief Deputy City Manager — Real Property Attachments: Ryan Swiontek Deputy Director of Real Property 1. Letter requesting extension of the ENA from the Developer dated April 10, 2026 Docusign Envelope ID: D6F74F67-C363-4353-8654-7FE8E6620C7B - Confluent development April 10, 2026 VIA ELECTRONIC MAIL and VIA FEDERAL EXPRESS OVERNIGHT DELIVERY City Manager City of Tustin 300 Centennial Way Tustin, CA 92780 Attention: Aldo Schindler Email: CityManager(abtustinca.org WITH COPIES TO: Real Property Division City Manager's Office City of Tustin 300 Centennial Way Tustin, CA 92780 Attention: Brian Moncrief Email: DCM-RPktustinca.org City Attorney Woodruff, Spradlin & Smart 555 Anton Blvd., Suite 1200 Costa Mesa, CA 92626 Attention: David Kendig, Esq. Email: dkendigkwoodruff.law Hepner & Myers LLP 1241 Johnson Avenue, Suite 360 San Luis Obispo, CA 93401 Attention: Amy E. Freilich. Esq. Email: afreilichgHepnerMyers.com Re: Request for Extension pursuant to that certain Exclusive Negotiating Agreement (Tustin Legacy Portion of Disposition Area 8B with an Effective Date of September 19, 2023 (as amended, the "ENA"), entered into by and among the City of Tustin ("City") and CD-CW (Tustin) LLC, a Colorado limited liability company ("Developer"). Dear Mr. Schindler: Confluent Development, LLC, a Colorado limited liability company ("Confluent") is the Manager for the Developer. Please note that unless otherwise stated, capitalized terms used below shall have the same meaning as set forth in the ENA. In December, Confluent was granted a 120-day extension (the "First Extension") to the ENA, and an additional 60-day extension (the "Second Extension") for a total of 180 days to complete design development and pricing, start construction documents, select our equity partners, continue the negotiation of the DDA, and complete our entitlements. To continue with that activity and the other actions required for land closing Confluent is now proposing an additional ENA extension to select our equity partners, complete our entitlements, and execute the DDA, for our project. Confluent Development 1 2215 Market Street I Denver, CO 80205 (303) 573-6500 www.confluentdev.com Docusign Envelope ID: D6F74F67-C363-4353-8654-7FE8E6620C7B Operator Our operating partner Clearwater Senior Living, headquartered in Newport Beach, has invested significant time and funds in our project. Clearwater at North Tustin was recently recognized as Best Assisted Living and Best Memory Care, and Clearwater at Newport Beach was awarded with High Performing accolades for Caregiving (Assisted Living) and Food & Dining (Assisted Living and Memory Care) by U.S. News. Their stellar reputation for providing exceptional care and creating, luxury senior living communities, provides a competitive advantage both for attracting investors and building long-term relationships with community members. Clearwater's high standards with meticulous attention to detail will bring a truly unique, best -in -class Active Senior housing community to the Tustin Legacy neighborhood. Under our joint venture agreement, Clearwater is sharing all pursuit costs with Confluent and engaged its preferred equity partner, which has invested in other senior communities in Orange County. The Clearwater team remains fully engaged in the project and looks forward to completing this last leg of the ENA process and Closing on the project later this year. Design Confluent completed design development documents on schedule in February and pricing was received from our pre -construction general contractor partner on March 10. Construction design (CDs) commenced shortly after. The site plan, parking, unit mix, floor layouts, exterior design and common areas are solidified. This project is uniquely designed for the Tustin Legacy community, maintaining the same high architectural standards of other Clearwater communities and providing a wide array of luxury amenities across the Active Senior Living and Assisted Living/Memory Care parcels. The two projects will share a central corridor, connecting the projects seamlessly and providing residents with access to a full spectrum of lifestyle and care options. The project boasts market -leading amenities including multiple dining venues, second floor rooftop deck, fitness and wellness center, theatre, salon, pickleball court and more. Special attention was paid to connecting residents with the outdoors, apartments will have balconies or patios, and spacious courtyards will support a wide array of activities and social gatherings. Competition The James is the only community under construction or planned in the primary market area that will directly compete with our project. An aging supply with an average age of 31 years old and only 3 properties in the primary market area offering the full continuum of care (IL/AL/MC), the timing to deliver new age -restricted, Active Senior living units with care could not be better. Capital Partners CBRE's National Senior Housing Team has conducted a comprehensive and robust marketing process with institutional equity partners, resulting in four bona fide term sheets — three common equity structures and one full loan solution. This strong response reflects the proven track records of Confluent and Clearwater, the project's premier location within a top 10 MSA, its best -in -class luxury design and resident offering, and an attractive overall risk -return profile. We are actively advancing discussions with the most competitive groups and expect to finalize negotiations and execute a letter of intent within the coming weeks. Confluent Development 1 2215 Market Street I Denver, CO 80205 (303) 573-6500 www.confluentdev.com Docusign Envelope ID: D6F74F67-C363-4353-8654-7FE8E6620C7B Request for ENA Extension Confluent is requesting a 60-day extension (the "First Extension") to the ENA with notice required by April 11, 2026, and an additional 120-day extension (the "Second Extension") to be granted in 30-day increments for a total of 180 days to complete construction documents, receive a guaranteed maximum price from our GC, select our equity partners, finalize the negotiation of the DDA, and complete our entitlements including the DA. Upon receipt of the First Extension request and the City Council approval of such request, Confluent shall provide the City a Three Hundred Thousand Dollar ($300,000) non-refundable deposit in accordance with the ENA. Additionally, as consideration of each 30-Day Extension Period, Confluent shall provide to the City a One Hundred Thousand Dollars ($100,000) non-refundable deposit in accordance with the ENA. The Extension Deposits shall be non-refundable, provided that, if executed, the DDA shall provide that in all cases the Extension Deposits shall be then applicable to both the Purchase Price Deposit and the Purchase Price for the Development Parcel. To date Confluent has invested $4,300,000 into the development of the project with an additional investment of $3,200,000 plus the deposits defined above for the balance of preconstruction to groundbreaking. Below is a detailed outline of our proposed milestones for the 180-day period requested: Mandatory Milestones During 60 Day Extension Period (to June 10, 2026) • Timely pay Extension Deposit • Execute LOI with a qualified Equity group • Submit comments from Confluent/Clearwater/Equity group to DDA and DA, if any, and engage Clearwater/Equity group in negotiations if requested by City and/or Clearwater/Equity group no later than 30 calendar days following delivery of LOI • Continue negotiations of DDA and DA Mandatory Milestones During Additional 30 Day Extensions Periods (satisfaction of all Mandatory Milestones in this section shall be subject to a Resolution Period (if applicable) and must occur prior to expiration of final 30 Day Extension Period.) • Timely pay Extension Deposits when due • Developer shall have submitted entitlements in form that can be deemed complete by staff to trigger commencement of CEQA review no later than July 10, 2026 • Developer shall have completed negotiation of the DA such that the DA is deemed by City staff and Developer to be ready to submit to Planning Commission and shall have submitted an executed version of that DA no later than July 10, 2026 • Complete Construction Drawings • Complete negotiation of DDA such that the DDA ready to submit to City Council no later than September 8, 2026 • To commence the Offer Period, Developer to execute the DA and DDA and submit to the City for City Council consideration, no later than September 8, 2026 • No later than October 1, 2026, Equity Group and Clearwater to execute equity commitment/evidence of equity in favor of City and Developer, Equity Group and Clearwater to execute other operating and management agreements evidencing and supporting the equity, with removal of all contingencies in such operating and management agreements other than closing condition contingencies no later than 35 days following filing of CEQA Notice of Determination for the entitlements. Confluent Development 1 2215 Market Street I Denver, CO 80205 (303) 573-6500 www.confluentdev.com Docusign Envelope ID: D6F74F67-C363-4353-8654-7FE8E6620C7B Mandatory Milestone Meeting Requirements (throughout full ENA Negotiating Period) • Continue bi-weekly meetings with Real Property and other City departments as applicable to maintain open lines of communication to ensure advancement of both the project design and business elements of the project • Continue bi-weekly meetings with City Attorney and Developer Counsel to finalize Disposition and Development Agreement (DDA) Confluent is asking for consideration of the significant funds spent and meaningful progress on the development to date, receipt of four highly qualified term sheets with institutional partners and the commitment to mandatory milestones and non-refundable deposits as defined in this letter. The additional time is needed to bring a successful senior living project — to finalize our equity partner and execution of our DDA — to the City of Tustin. Please do not hesitate to reach out to me or my team with any questions. Sincerely, H McNeish Chief Operating Officer Confluent Development 1 2215 Market Street I Denver, CO 80205 (303) 573-6500 www.confluentdev.com