HomeMy WebLinkAbout09/07/2010, B5 - APPROVAL OF A MEMORANDUM OF AGREEMENTS BETWEEN THE CITY AND GARDEN STREET SLO PARTNERS, L.P., REGAR co u n c a l nln6ngDam
9-7-2010
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C I T Y O F S A N L U I S O B I S P O
FROM: Christine Dietrick, City Attorney
Michael Codron, Acting Assistant City Manager
Prepared by: Claire Clark, Economic Development Manager
SUBJECT: APPROVAL OF A MEMORANDUM OF AGREEMENTS BETWEEN THE
CITY AND GARDEN STREET SLO PARTNERS, L.P., REGARDING A
LONG-TERM LEASE OF PARKING LOT TWO.
RECOMMENDATIONS
Approve a Memorandum of Agreements (Agreement) between the City of San Luis Obispo
("City") and Garden Street SLO Partners, L.P., a California limited partnership ("Developer"),
providing for a long-term, 99-year lease of Parking Lot 2, subject to satisfaction of conditions
precedent, and superseding the existing Memorandum of Understanding (MOU) dated July 18,
2006.
REPORT-IN-BRIEF
On June 1, 2010 the City Council certified the Final Environmental Impact Report (EIR) for the
Garden Street Terraces Project approving the Reduced Development Alternative, eliminating
public parking from the project, and reducing the project's overall size. See Vicinity Map at
Attachment 1.
Following certification of the EIR, Council approved a Term Sheet which became the basis from
which the Agreement has been drafted. In addition to revised financial terms, the Agreement
provides for a long term lease of Lot 2, and a transfer of airspace rights anticipated to be created
through a subsequent development application, rather than outright sale of City property.
DISCUSSION
Background
On May 4, 2010, the City Council authorized staff, during closed session, to proceed with
negotiations of a final MOU with Developer. Negotiations were based on a term sheet reviewed
by the City Council and resulted in the proposed Agreement, which addresses the changed nature
of the Garden Street Terraces project. Specifically, the City Council's certification of the Final
Environmental Impact Report (EIR), and approval of the Reduced Development Alternative,
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Parking Lot 2 Long-Term Lease Agreement Page 2
eliminate public parking from the project and reduce its overall size. The following is an
overview of the steps leading to the creation of the Agreement.
1. Exclusive Negotiation ALYreement
On August 23, 2005, the Council entered into an Exclusive Negotiation Agreement with
Developer for the purposes of exploring use of City-owned Parking Lot 2 as a component of the
Garden Street Terraces (GST) proposal. The purposes of the exclusive negotiations were to
assess the impacts and feasibility of the proposal, gain a better understanding of the scope of the
development review process, and provide Developer with an opportunity to involve the
community in the process. Council approved exclusive negotiations because Developer was the
controlling owner of property on Broad, Marsh, and Garden Streets surrounding Lot 2 and the
proposed project. In addition, the proposed project was anticipated to accomplish several major.
City Goals in the 2005-2007 Financial Plan, as well as implement a series of important City
Policies.
2. Memorandum of Understandine
In 2006, the City and Developer entered into a Memorandum of Understanding (MOU) intended
to facilitate the development of a significant downtown mixed use project utilizing both private
and public property (Attachment 4). The MOU included provisions for public parking within the
project to replace some of the parking that would be lost with development of Parking Lot 2.
Based on the MOU, Garden Street SLO Partners, L.P., submitted applications to the City in 2006
to develop a downtown mixed-use center including retail, residential units, hotel, and a 40-space
public parking facility. The project had substantially evolved through multiple redesigns, each
one responding to input from community members and City Advisory Bodies. However, the
elements of the project—retail, residential and hotel —remained consistent.
3. Project Approvals and Direction to Revise MOU
In February 2010 the Planning Commission recommended elimination of the public parking from
the project based on the environmentally superior alternative identified in the EIR. This, in turn,
necessitated review of the MOU which had been prepared on the basis of provision of public
parking within the project. Staff sought and received authority and parameters from Council on
April 2010 for negotiations and proceeded to negotiate with Developer representatives. On May
4, 2010, staff returned to Council in closed session with the results of the preliminary
negotiations and received authorization to proceed with final negotiations of the terms.
4. Term Sheet Approved and Agreement Developed
On June 1, 2010, the Council certified the Final Environmental Impact Report (EIR) and
approved the GST project based on the EIR's "Reduced Development Alternative" and "Project
without Public Parking Alternative". Following certification of the EIR, Council approved a
Term Sheet (Attachment 3) which became the basis from which the Agreement has been drafted.
In addition to revised financial terms, the Agreement (Attachment 2) provides for a long term
lease of Lot 2, and a transfer of airspace rights anticipated to be created through a subsequent
development application, rather than outright sale of City property to Developer.
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Parking Lot 2 Long-Term Lease Agreement Page 3
As with the MOU, the proposed Agreement does not confer final project approvals. The
approval process will continue with Developer's re-submission of plans to the City's Community
Development Department for final Architectural Review in accordance with Council's
certification of the EIR and Reduced Project Alternative. In the process of developing and
entering into the MOU and, subsequently the Agreement, the City has been acting in its
proprietary, or ownership role, not its regulatory role, as it does during the development review
process. The Agreement does not in any way alter the Developer's obligation to proceed through
the City's standard development review processes and it does not commit the City to issue any
final project approvals in the event the Developer does not successfully complete any design or
environmental review processes as normally required.
Overview of the Agreement
The Agreement is a binding conditional agreement that sets forth the basis for terms that will be
included in a 99-year, long-term lease of Parking Lot 2 and conveyance of air-space rights above
the parking lot. One of the significant changes proposed in the Agreement is that it does not
stipulate the outright sale of City property. The City receives consideration in exchange for the
long term lease in the form of annual rent and additional compensation for the removed City
parking spaces in the form of a one-time fee. The following discussion explains key Agreement
provisions in greater detail.
1. Rent under the Lease
The Rent payable by Developer includes the following types of payments:
a) Base Rent
Developer will pay to the City base rent that is equal to an agreed upon fair market
percentage of the re-use value of the real property, to be determined by a qualified
appraiser agreeable to Developer and the City, provided that the base rent is no less than
the operating net revenue from the operation of Parking Lot 2 as of the date the parking
lot is taken out of operation. The current annual net revenue is $167,800 per year. In
addition, the base rent will increase periodically based on increases in the Consumer Price
Index. Base rent payments will begin to accrue from the date the City delivers possession
of the premises to Developer. Rent will be due annually. This term is similar to the Base
Rent term in the MOU however the new base rent will reap greater financial returns for
the City because a minimum base rent is set out in the Agreement.
b) Percentage Rent
In addition to the base rent, Developer shall also pay an additional rent based on hotel
room revenues. Beginning with year 15 of the Lease, the City will receive 1.5% of gross
individual hotel room revenues that exceed $71,500 per room, per year. This term is an
amended version of the percentage rent charged in the MOU terms, again reaping greater
returns for the City because the percentage rent begins in year 15 instead of year 30 as
outlined in the MOU..
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Parking Lot 2 Long-Term Lease Agreement Page 4
c) Rent Reduction
Developer will be entitled to a reduction in the base rent in an amount equal to the City's
net realized increase in property tax, not including any possessory interest tax paid by
Developer. Based on analysis by the Finance Department that amount is currently
estimated to be approximately $53,000 annually. This rent reduction represents a term
carried over from the MOU.
2. One-Time Fee for Replacement of On-site Parking
Lot 2 presently has 62 metered surface parking spaces. The City Council's approval of the
Reduced Project Alternative described in the EIR requires elimination of public parking on the
project site, eliminating those spaces from public use. In recognition of this cost to the City, the
developer will pay a one-time fee of$30,000 for each of the 62 parking spaces. The total fee of
$1,860,000 is intended to offset the construction cost of replacement spaces. The amount per
space follows the MOU term that set the amount at $30,000 for each public parking space
removed from Lot 2. However, because all 62 public parking spaces will be eliminated under the
proposed project, the dollar amount to be paid to the City is significantly greater than
contemplated in the MOU ($1.2 million greater).
This payment does not relieve the developer from the requirement to provide on-site project
parking in accordance with City standards. If the project fails to provide all required parking on
site, the developer will be required to pay the generally applicable in-lieu parking fee.
3. Loan to Developer
The Agreement provides for the City, via the Parking Fund, to provide a loan to the Developer.
This loan is at no cost to the City, in an amount not to exceed $2.4 million, to be repaid in 30
years or fewer with compounded interest equal to the City's cost of borrowing equivalent funds
whether or not the City chooses to incur debt. The rate of interest will be set to reflect the City's
cost of tax exempt financing if the loan qualifies, or in the alternative at a rate equal to the City's
cost of taxable financing. Due to the economic downturn, this term offers the developer a key
financing source and offers the City an opportunity to invest in the long-term health of the
community while providing a good vehicle for investment of money from the Parking Fund. The
Parking Fund is projected to have a sufficient balance to make this loan and is not expected to
have to borrow additional funds to do so. This loan matches the loan contemplated in the MOU
to facilitate the project.
4. Public Improvements to Garden Street
The Agreement also requires Developer to complete the design, construction, and funding of
physical improvements to Garden Street consistent with the currently approved Garden Street
Makeover Plan. This term changes the Developer's responsibility from 50%, as stipulated in the
MOU, to 100%responsibility. The Garden Street Makeover Plan, which is estimated to cost
approximately$300,000, is not currently funded in the City's Capital Improvement Plan. This
provision will provide funding for these improvements.
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Parking Lot.2 Long-Term Lease Agreement Page 5
Recitals and Summary of Standard Terms
The Recitals section includes basic definitions and a summary of the general concepts contained
in the Agreement. The Recitals describe current conditions, how the developer controls the
properties adjacent to Lot 2, and what the City's ownership interest is in Lot 2. The future
ownership interests are also described generally including the intent to create an air space
subdivision. Additionally, the goals and objectives that the project is intended to accomplish are
described in the Recitals.
J. The Project
The Project details are described in the Agreement. Although the Agreement is not an approval
of the Project, the specifics of the conceptual project are contained therein because they are
integral to the Agreement. The Agreement cites the approved project components and specifies
minimum sizes for housing, hotel and retail uses to protect the City's interest in projected
revenues from the project. Under the terms of the Agreement, the project will include no fewer
than 45 boutique hotel rooms carrying a three or four star rating, no fewer than 13 residential
units, and no less than 20,000 square feet of ground level retail space.
Due to the changes required via the City Council's land use and environmental approvals, the
Agreement contemplates the following counts. Note that the MOU and the Council Approved
project columns indicate the maximum count for each use. The Agreement indicates minimum
counts to assure that the project has at least these levels of each use.
MOU Project Council Approved Agreement Project
(maximums) Project(maximums) (minimums)
Hotel Rooms 70 63 45
Housing Units 50 33 13
Retail, Square Feet 18,000 27,500 20,000
Public Parking 40 0 0
2.. "As Is" Conveyance
The Developer will be obtaining rights to Lot 2 "as is" and will therefore be responsible for all
necessary studies, such as environmental, archeological etc., and costs associated with those
studies and/or remediation to prepare Lot 2 for construction of the Project.
3. Conditions Precedent to Lease Execution
There are a series of obligations that each party must satisfy prior to execution of the Lease of
Lot 2 and the conveyance of airspace rights. The City will not lease Lot 2 or convey the airspace
rights unless and until:
a) The Project has obtained final design approval in accordance with the Certified EIR;
b) The Lease has been evaluated in accordance with CEQA requirements;
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Parking Lot 2 Long-Term Lease Agreement Page 6
c) Developer has obtained or agrees to obtain, by a date to be specified by the City, building
permits for the Project; and
d) Developer has provided an acceptable plan that addresses trash and delivery access during
construction to the businesses along Higuera Street that currently depend on parking Lot
2 and the adjacent alleyway for these purposes;
4. Conditions Precedent to Possession or Lot 2
Prior to taking possession of Lot 2, Developer must also:
a) Obtain a final binding commitment for construction financing for the project;
b) Obtain Building Permits, and
c) Receive written authorization from the City to take Lot 2 out of operation.
5. Agreement is a Binding Agreement
The Agreement is a binding agreement setting the parameters of the project and terms required to
finalize the financial aspects of the transaction. A provision not in the MOU but included in the
Agreement is the requirement that the project_satisfy all conditions and begin construction on Lot
2 no later than five years from the date of execution of the Agreement.
Next Steps
If the Agreement is approved, Developer will move forward with submittal of final project plans
for Architectural Review and City Council consideration, based on the reduced project
entitlements approved by the City Council. After design approval of the revised project, and
assuming that the Developer has satisfied all conditions precedent, staff will return to the City
Council with the final lease consistent with the parameters described in the Agreement.
FISCAL IMPACT
As outlined below, there are significant fiscal benefits to the City from the project. The General
Fund is expected to benefit from increased Transient Occupancy Tax, Sales Tax, and Property
Tax revenues immediately upon occupancy. The Parking Fund will benefit from the required
one-time payment for the loss of 62 public parking spaces currently in service on Lot 2 and from
interest payments from the proposed loan to Developer.
General Fund
As summarized below, the Council-approved project is estimated to add approximately$450,000
annually to the General Fund. As described earlier in this report, the Agreement adds minimum
project requirements and the projected annual net new revenue to the General Fund will be
$325,700.
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Parking Lot 2 Long-Term Lease Agreement Page 7
Project Council Agreement
Envisioned Approved "Project"
General Fund Revenue Increase in MOU "Project" (minimums)
Sales Tax .
Onsite retail 83,000 88,000 87,500
Hotel guest spending 13,000 11,700 8,300
Resident spending 20,000 13,200 5,200
Property Tax 66,000 53,000 41,300
Transient Occupancy Tax 317,000 285,300 183,400
Total $499,000 $451,200 $3259700
As reflected above, the revenue estimates from the Council Approved Project, as well as from the
project minimums specified in the Agreement, are less than the project envisioned in the current
MOU due to the reduced project size. Revenues received from the project will vary from the
estimates above depending upon the actual project built and the economic conditions in place at
the time of construction.
In addition to direct General Fund revenues, the Developer will complete 100% of the design,
construction, and financing of physical improvements to Garden Street eliminating that expense
from the City's future Capital Improvement costs. Under the MOU the City was to incur 50% of
these costs.
Parking Fund
The following compares the fiscal benefits for the Parking Fund of the proposed terms with the
MOU:
-Parking Fund Fiscal Summary
Term Current Proposed Variance
One-Time Revenue
Replacement Parking 660,000 1,860,000 1,200,000
On-going Revenue
Lending$2.4 million at market rates Unchanged Unchanged
Other Terms with No Direct Cost/Revenues
In-lieu fees for any"new demand"deficit at rate Not New Provision
in effect at the time(currently$17,072 per Addressed
space)
Lease Revenue for Parking Lot 2 and Airspace Rights
The following summarizes the fiscal benefits associated with the on-going lease revenue of the
proposed terms with the MOU:
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Parking Lot 2 Long-Term Lease Agreement Page 8
Term Current Proposed Variance
Ongoing Lease Revenue
1. Minimum Rent 28,000 167,800 139,800
2. Additional Rent
a. Fair market rent based on gross receipts None To be
as determined in updated reuse appraisal determined
b. 1.5%of gross revenues above$71,500 per Same Same
room plus minimum rent
Begins after 30 years 15 years
3. Rent Reduction (66,000) (53,000) 13,000
The lease revenue over the term of the 99-year lease is substantial. Under the proposed scenario,
minimum rent will increase by CPI, with a minimum adjustment of 3%. In combination with
receiving the additional rent after year 15, rather than year 30, the proposed scenario results in
substantially more rent than under the MOU terms. For context, under the MOU, minimum rent
at year 30 would be$40,000 and under the proposed scenario, it would be$253,000 at year 30.
The determination on the appropriate City fund to which lease revenues will be allocated (e.g.
General Fund or Parking Fund) is not relevant to adopting the Agreement and is a decision the
City Council will make in the future. All previous discussions of lease revenues related to the
MOU were based on the previously contemplated project, which included public parking on-site.
In this context, it has been assumed in prior reports to the City Council and the public that lease
revenue would be allocated to the Parking Fund. However, the proposed Agreement is based on a
project that does not include parking on site, but does include a newly proposed$1.8 million one-
time payment to the Parking Fund.
Parking Lot 2 was purchased by the General Fund in the 1950's and so it would normally follow
that lease revenues for this property, which will not be used for public parking going forward,
would be allocated to the General Fund. However, when this issue returns to the Council for a
policy decision, staff will present revenue projections comparing the impact to the Parking Fund
of receiving the $1.8 million payment and not receiving lease revenues. In addition, staff will
have had the opportunity to consult with the appropriate stakeholders to the process before
returning to the City Council for policy direction.
ALTERNATIVES
1. Reject the proposed Agreement. This alternative should only be selected if the Council no
longer supports the project in conformance with the EIR. If the Garden Street Terraces concept
remains supported by the Council, then the Agreement that has been carefully negotiated over the
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Parking Lot 2 Long-Term Lease Agreement Page 9
course of several months is recommended since it is consistent with several City policies and
goals and contains terms that are fair to both parties.
2. Provide direction to negotiate further and/or provide additional information. During the
discussion of this item, Council may identify additional information needed prior to entering into
the proposed Agreement or may provide direction to negotiate further with Developer on specific
terms. The proposed Agreement is intended to serve as a framework to assist in developing
future agreements. If Council has major concerns about the proposed Agreement, and would like
staff to negotiate further, it will be helpful for Council to clearly state what the concerns are, and
how Council would like them addressed.
ATTACHMENTS
1. Vicinity Map
2. Proposed Agreement
3. Final Term Sheet June 1,2010
4. MOU Dated July 18, 2006
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ATTACHMENT 2
MEMORANDUM OF AGREEMENTS
This MEMORANDUM OF AGREEMENTS (the "Agreement") is made and entered
into, effective as of August 17, 2010 (the "Effective Date"), by and between THE CITY OF
SAN LUIS OBISPO, a chartered California municipal corporation (the "City"), and GARDEN
STREET SLO PARTNERS, L.P., a California limited partnership ("Developer") and
supersedes the prior MOU between the parties dated July 18, 2006, with reference to the
following facts:
RECITALS:
A. Developer and its affiliates have acquired title to or control of all parcels of real
property that are owned by parties other than the City and are situated in that portion of the City
of San Luis Obispo that is bounded by Broad Street, Garden Street, Marsh Street, and the Garden
Alley (such parcels, in conjunction with "Parking Lot 2" described below, collectively are
referred to as the "Project Area"), the ownership of which is set forth on EXHIBIT 1 to this
Agreement; and
B. The City is the owner of a 62-space parking facility that is situated at the interior
of the Project Area, and
C. Developer desires to develop and construct in the Project Area a mixed use
Project that will include residential condominiums, a hotel, retail stores, and restaurants, and
which will eliminate on-site public parking previously contemplated to be constructed on a
portion of the Project Area (collectively, the "Project"); and
D. On July 18, 2006, Developer and City entered into an MOU which contemplated
the sale of Parking Lot 2 to Developer in exchange for the Developer's construction and lease
back to the City of an airspace condominium public parking facility; and
E. The Project originally contemplated by the parties has been modified through the
City's environmental and development review processes; and
F. On June 1, 2010, the City Council of the City provided final approval of the
environmental and land use entitlements for the Project by adopting the following resolutions
(together, the "Final Entitlements"):
(i) Resolution No. 10182 (2010 Series), "A Resolution of City of San Luis
Obispo Certifying the Final EIR for the Garden Street Terraces Project and
Approving the Reduced Development and Project without Public Parking
Spaces Alternatives as the Required Project (E 1240-06)," certifying the final
environmental impact report for the Project; and
(ii) Resolution No. 10183 (2010 Series), "A Resolution of the City of San Luis
Obispo Approving A Modified Use Permit and Vesting Tentative Tract Map
TAGSTIMOU Modification\CC Mtg.Final Docs.2010.9.7\Agr.Fiml.2010.9.7v3.doc
135-- i1
ATTACHMENT 2
for the Garden Street Terraces Project (U/TR 124-06)" (Resolution No.
10183"), approving Developer's application for a use permit for the Project;
and
G. The appeal periods for the Final Entitlements have lapsed without any appeal
being filed with respect to such Final Entitlements; and
H. The Final Entitlements require the Project to be reduced in scale, eliminate the
previously contemplated public parking component of the Project, and require review and
approval of final design of the Project by the City Council; and
I. As a result of the modified Project, as entitled, Council also approved a Term
Sheet setting forth terms to be included in a successor Memorandum of Understanding
memorializing the parties' conceptual agreement for the lease of Parking Lot 2 to Developer for
a period of 99 years (the "Long Term Lease") in order to facilitate the construction and operation
of the Project; and
J. The Project as entitled will have an important revitalization effect on the
downtown area and, therefore, continues to merit particular consideration by the City; and
K. The Project is consistent with key General Plan policies including Land Use
Element Policy 4.1, which describes downtown's role as that of ensuring: 1) the Downtown is
the cultural, social and political center of the City for its residents as well as home for those who
live in its historic neighborhoods; 2) that the civic, cultural and commercial portions of
downtown should be a major tourist destination; and 3), that downtown visitor appeal should be
based on natural, historical, and cultural features, retail services, and numerous and varied visitor
accommodations. In addition, Land Use Element Policy 4.2.1, together with Housing Element
Policy 3.11.2, direct new Downtown development, such as the Project, to include dwellings; and
L. The Project will support concepts set forth in the Conceptual Physical Plan for the
City's Center(the Downtown Concept Plan), which is to be considered by the City as set forth in
Land Use Element Policy 4.16; and
M. Negotiations between City and Developer are appropriate in light of Developer's
ownership or control of the parcels abutting Parking Lot 2,but for those parcels fronting Higuera
Street and 742 Marsh Street, and the Developer's significant investment to procure the Project
entitlements to date because, without Developer's participation, the Project and the benefits it
confers upon the community would not occur; and
N. Therefore, the City contemplates that the proposed Long Term Lease (as defined
in Recital I above) will be accomplished without a competitive bidding process that the City
otherwise might use if the Project, of which the Long Term Lease is a part, did not serve
substantial revitalization objectives furthered by the Project, and if private ownership on the site
was fragmented, rather than fully consolidated by the Developer, as in this instance; and
2
a.-
ATTACHMENT 2
O. The utilization of City property and the elimination of on site City parking is
critical to implement the Project, as entitled by the City Council on June 1, 2010; and
P. Developer has agreed diligently to pursue final design approval of the Project as
entitled; and
Q. The parties contemplate later entering into a Property Lease Agreement and other
instruments necessary to implement the terms and conditions set forth herein, subject to
Developer receiving design approval and completing required environmental review of the Long
Term Lease; and
R. The core components of the Project contemplated to be a part of the Long Term
Lease were part of the Project description included in the final EIR, which was certified by
Council Resolution No. 10182 (2010 Series);
S. The parties have agreed to. execute this Agreement in order to memorialize the
core components and terms and conditions precedent to the execution of the contemplated Long
Term Lease and related aspects of the Project.
AGREEMENTS:
NOW, THEREFORE, the parties hereto, intending to be legally bound, do hereby agree
as follows with respect to the proposed Long Term Lease and the Project.
1. CONCEPTUAL PROJECT DESCRIPTION. The Project, as entitled, included the
following elements, which the parties acknowledge may be modified as to number of units and
total retail square footage prior to final design, subject to the limits set forth in Para aQr nh 2,
below:
1.1 HOTEL. A 63-room hotel containing approximately 2,500 square feet of
meeting space and a restaurant, bar, gym, and spa facility occupying a total built area of 51,346
square feet; and
1.2 RESIDENTIAL UNITS. 33 residential units ranging in size from 650 square
feet to 1,500 square feet, with the average size of each unit being approximately 1,100 square
feet occupying a total built area of 40,775 square feet; and
1.3 RETAIL SPACE. General - 14,341 square feet of retail space on the ground
floors; and
1.4 RETAIL SPACE. Market— 13,248 square feet of retail space; and
1.5 PARKING. 147 parking spaces, not including any public parking spaces.
2. PERMISSIBLE SCOPE OF CHANGES TO PROJECT COMPONENTS.
Developer acknowledges that the inclusion of the following Project components are a necessary
3
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ATTACHMENT 2
elements of the consideration for the Agreement and the City's Execution of the Long Tenn
Lease and the parties agree that if the Developer reduces or eliminates any component below the
following minimum requirements, the City shall have no obligation to enter into the Long Term
Lease contemplated herein:
2.1 HOTEL. The Project shall include a hotel that has no fewer than 45 boutique
hotel rooms and carries a three-star or four-star rating.
2.2. RESIDENTIAL UNITS. The Project shall include no fewer than 13 Residential
units.
2.3 RETAIL SPACE. The Project shall include no less than 20,000 square feet of
retail space including ground level retail as approved by the City Council.
3. ENVIRONMENTAL REVIEW OF LONG TERM LEASE. The Parties (a)
acknowledge that (i) the Long Term Lease, which shall be finally negotiated based upon the final
approved project design, will require environmental review, (ii) the City shall have no obligation
to enter into the Lease, as contemplated herein; until Developer has obtained the requisite
environmental determination relating to the Long Tenn Lease and has agreed to comply with any
required mitigations, and (iii) as noted in Recital R above, the core components of the Long
Term Lease were part of the Project description included in the final EIR, which was certified by
Council Resolution No. 10182 (2010 Series), and (b) agree to complete such environmental
review of the Long Term Lease at the earliest meaningful time after which the proposed final
project design is known.
4. LEASE OF PARKING LOT BY CITY — Subject to Paragraph 3, above,the City and
Developer shall enter into the Long Term Lease with respect to Parking Lot 2, and the City shall
convey to Developer certain airspace rights, on the following terms and subject to the conditions
precedent set forth in this Agreement:
4.1 PREMISES — LEASE. The premises subject to the Long Term Lease shall
include the undivided fee interest in Parking Lot 2.
4.2 PREMISES — AIRSPACE. Developer shall• be permitted to pursue a
subdivision of the airspace above Parking Lot 2 and City shall convey to Developer fee
ownership of the airspace lots created by any subdivision that may be approved, while retaining
fee ownership of the ground below any subdivided airspace.
5. TERM. The term of the Long Term Lease shall be ninety-nine (99) years. The Long
Term Lease shall provide that, at the end of the lease term, Developer shall have no further right
to occupy or improve Parking Lot 2 and all rights and title to any and all improvements on or to
the Property shall become the sole property of the City, unless a successor lease is negotiated
prior to the expiration of the term.
6. BASE RENT. Developer will pay to the City base rent that is equal to an agreed upon
fair market percentage of the re-use value of the real property, to be determined by a qualified
4 8 � - ��
ATTACHMENT 2
appraiser agreeable to Developer and City, reduced pursuant to Paragraph oh 9, below and subject
to the terms and conditions set forth in Paragraphs 6.1 and 6_2 below.
6.1 The parties acknowledge that the City's annual net revenue from the operation of
Parking Lot 2 currently is $167,800 per year, and agree that in no event shall the base rent be less
than the amount of the City's annual net revenue from the operation of Parking Lot 2 as of the
date the lot is taken out of operation.
6.2 Annual base rent shall be increased on the first day of every third fiscal year by
the amount of increase in the Consumer Price Index (Los Angeles-Riverside-Orange County) for
each of the 3 years immediately preceding, but in no event shall the increase be less than two
percent (2%) nor more than four percent (4%) per year, for a cumulative total increase of not less
than six percent (6%) and not more than twelve percent (12%) in any three year period. For
purposes of this Agreement, all references to "fiscal year" shall be deemed to be references to the
fiscal year of the City.
7. TIME OF RENT PAYMENT. Base rent payments shall begin to accrue on the date on
which the City delivers to Developer possession of the premises, which shall mean the date on
which the Developer requests and the City agrees, in writing, to cease operation of Parking Lot
2. Rent shall be due and payable in advance on the first day of the first year of the lease term
and first day of each fiscal year every year of the lease term thereafter.
8. PERCENTAGE RENT. Beginning on the first day of year 15 of the.Long Term Lease,
the Developer shall pay an amount equal to one and one-half percent (1.5%) of the amount by
which gross individual room revenues for the hotel that is included in the Project exceed the
stipulated room revenue threshold of$71,500 per room.
9. RENT REDUCTION. Developer shall be entitled to a reduction in base rent in an
amount equal to the City's Net Realized Increase in Property Tax, not including any possessory
interest tax paid by the Developer. The "Net Realized Increase in Property Tax" shall be the
amount by which (x) the City's actual revenue realization from property tax in the first year of
full reassessment for the new Project (following completion of construction and commencement
of occupancy thereof), not including the amount of possessory interest tax paid on the City
property, exceeds (y) the net realization from property tax on the same property in effect
immediately prior to the date on which the parties execute the Long Term Lease. The Net
Realized Increase in Property Tax shall exclude any and all additional property taxes or
assessments levied, on the property by virtue of citywide or special district taxes imposed
subsequent to the execution of the Lease Agreement and associated documents.
10. DEVELOPER DILIGENCE; LEASE "AS IS." Developer shall perform at its cost and
expense such due diligence investigations of Parking Lot 2 as Developer determines to be
appropriate. The City shall lease Parking Lot 2 to Developer on an "AS IS" basis, without any
representation or warranty regarding the condition of such property. City shall not be responsible
in any way for cleaning, removing, monitoring, cataloguing or otherwise addressing sub-soil
conditions, archeological conditions, hazardous materials, etc. that may be found in the Project
5 135- 1
ATTACHMENT 2
Area and the parties shall execute any additional agreements necessary to ensure that Developer
will assume full responsibility for such costs.
11. FINAL PROJECT ENTITLEMENTS.
11.1 The City acknowledges and agrees that Developer has successfully completed the
processing of all discretionary land use approvals needed to proceed with the final design of the
Project. Final design approval and building permits, consistent with conditions of discretionary
entitlements and mitigations required by the certified Final EIR, and any subsequent
environmental review that may be deemed necessary, will allow construction to proceed.
11.2 The City acknowledges that Developer has provided to the City with respect to
the Project, as entitled, a construction phasing plan that has been approved by the Community
Development Director. The Parties acknowledge that if any significant changes are made to the
project subsequent to the date on which the Final Project Entitlements were approved by the City
Council, then the Developer will be required to submit such changes to and obtain Director
approval of a revised construction phasing plan.
12. CONDITIONS TO LEASE EXECUTION. The obligations of the Parties to proceed
with the Long Term Lease shall be subject to the waiver or satisfaction of the following
conditions.
12.1 DEVELOPER REQUIREMENTS. Subject to Paragranh.3 of this Agreement,
the City shall be obligated to enter into the Long Term Lease contemplated by this Agreement if
and only if Developer has satisfied or legally bound itself to satisfy the following conditions or
the City has waived the conditions:
(a) Developer has obtained final design approval to proceed with the Project
in accordance with the City's normal design review requirements, which shall be subject to the
City Council's final approval [this condition shall not be waived by the City];
(b) The proposed Lease has received final environmental approval and any
subsequent Project environmental review necessitated by any changes by the Developer to the
Project has been completed [this condition shall not be waived by the City];
(c) Developer has obtained or agrees to obtain, by a date to be specified by
the City; building permits for the Project, consistent with the design finally approved by the San
Luis Obispo City Council;
(d) City shall have no obligation to permit Developer to occupy Parking Lot
2 and City shall retain the right to operate and retain all revenues from its parking lot until such
time as Developer has obtained a final, binding commitment letter from a lender of Developer's
choice to fund the construction costs of the Project, obtained building permits to construct the
Project consistent with the City's approved phasing plan, and has requested and received written
authorization from the City to take Parking Lot 2 out of operation; and
6
557 - 1 (2
n ATTACHMENT 2
(e) Developer shall agree to include a provision to permit termination of the
Long Term Lease and reversion of all rights in and to Parking Lot 2 to the City if Developer fails
to meet agreed upon benchmarks toward Project completion, which shall be set forth in the Long
Term Lease;
(f) Developer has provided a plan that is acceptable to the City and addresses
trash and delivery access, during construction, to the businesses along Higuera Street that
currently depend upon Parking Lot 2 and the alleyway adjacent to it for these purposes.
12.2 CITY REQUIREMENTS. Developer shall be obligated to enter into the Long
Tenn Lease if and only if the City has satisfied or legally bound itself to satisfy the following
conditions, or the Developer has waived the conditions:
(a) City agrees to allow Developer to pursue a subdivision of the airspace
above Parking Lot 2 as necessary to facilitate the development of the Project as finally approved
by the San Luis Obispo City Council; and
(b) City agrees to convey to Developer fee ownership of the airspace lots
created by any subdivision that may be approved, free and clear of all liens and encumbrances
securing monetary obligations and free and clear of all covenants, conditions, and restrictions
(other than those hereafter negotiated between the City and Developer in connection with the
Long Tenn Lease and the Project). Developer acknowledges that City shall retain fee
ownership of the ground below any subdivided airspace.
13. DATE FOR SATISFACTION OF ALL TERMS AND CONDITIONS. All terms and
conditions contained herein shall be completed by and construction of the Project on Lot 2 shall
begin no later than five years from the date of execution of this Agreement ("Date of
Satisfaction"). Failure to satisfy all terns and conditions by the Date of Satisfaction, without a
party waiving a term or condition, or legally binding itself to satisfy a tern or condition,
terminates this Agreement. The City Manager shall have the authority to extend the Date of
Satisfaction for a time period not to exceed one year.
14. COMPENSATION TO THE CITY FOR REPLACEMENT OF ON-SITE PUBLIC
PARKING REMOVED.
14.1 The parties acknowledge that Parking Lot 2 currently contains sixty-two (62)
spaces and the certified final EIR recommends elimination of public parking on the Project site,
the effect of which will be to remove from public use 62 on-site parking spaces that currently are
available to the public generally at Parking Lot 2.
14.2 In recognition of the elimination of public parking, the Developer shall pay to the
City, upon the earlier of issuance by the City of building permits for the Project or Developer's
possession of Parking Lot 2 (which possession date shall be deemed to occur on the date on
which the City takes parking Lot 2 out of operation at Developer's request), a one-time fee of
Thirty Thousand Dollars ($30,000) for each of the sixty-two (62) public spaces that are to be
eliminated on-site in connection with the Project (i.e., 62 parking spaces x $30,000/parking space
7
135 - 17
ATTACHMENT 2
_ $1,860,000 total parking replacement fee). The parties further acknowledge that the amount of
such $1,860,000 is a replacement parking fee and is not to be construed as meeting the in-lieu
parking fees described in Paragraph 14, below, in .whole or in part because the amount thereof is
intended to contribute to the costs of constructing replacement spaces.
15. IN-LIEU PARKING FEES. If the Project fails to provide all required parking on site,
then the Developer will be required to pay the generally applicable in-lieu parking fee at the time
building permits are issued. Such payments will be in addition to those set forth in ParaZrWh 13
above for the replacement of public parking.
16. LOAN TO DEVELOPER. The City, via the Parking Enterprise Fund, will provide a
loan to the Developer, at no cost to the City, in an amount not to exceed $2.4 million, to be
repaid as follows:
16.1 TERM. The term of such loan shall be for a term of 30 years or such shorter
term as to which the Parties may agree.
16.2 INTEREST RATE. The compound interest rate charged shall be equal to the
City's costs of borrowing equivalent funds whether or not the City chooses to actually incur
more debt. The rate will reflect the City's cost of tax exempt financing if bond counsel confirms
that this loan qualifies for such financing. Developer shall otherwise pay a rate equal to the
City's cost of taxable bond financing.
17. DEVELOPER PARTICIPATION IN GARDEN STREET IMPROVEMENTS.
17.1 Developer shall complete the design, construction, and funding of physical
improvement to Garden Street substantially consistent with the Garden Street Makeover Plan (as
memorialized in those certain "Garden Street Improvements Construction Documents" prepared
by "firma" (Specification No. CP #90088B) dated 12/4/03). The design for said Garden Street
Improvements shall be submitted to the City as part of the final Garden Street Terraces Project
architectural design review process consistent with paragraphs H and 11 of this Agreement.
17.2 As part of the Project, Developer shall assure high levels of maintenance,
uniformity of street facade appearance and maintenance, adequate security and a variety of other
enhancement improvements to the streetscape of Garden Street from Marsh Street to Higuera,
some of which will occur on public property or on property not owned by the Developer.
Developer shall construct all of the Garden Street improvements, concurrent with project
construction on Garden Street, at its sole expense with no contribution by the City.
18. PREVAILING WAGES. Developer shall be responsible for complying with prevailing
wage requirements which may be applicable to work associated with the Garden Street
Makeover Plan improvements that Developer will construct.
19. DOCUMENTATION. The parties agree that, at a minimum, the documentation to be
created as a result of this Agreement may include the following:
8
ATTACHMENT 2
19.1 Lease Agreement;
19.2 Loan Documents and security instrument(s); and
19.3 A Performance Bond for the Garden Street Makeover improvements.
19.4 Conveyance of airspace rights to Developer.
20. RESPONSIBILITIES OF THE PARTIES
19.1 DEVELOPER. It shall be the responsibility of the Developer diligently to pursue
final design approval for the Project and pay all costs associated with Project approvals,
including any environmental processing and reimbursement to the City for third party expenses
associated with the Long Term Lease, subsequent or supplemental environmental review
necessitated by subsequent changes to the Project to comply with approved Project conditions or
mitigations, and for third party expenses (without any mark up) incurred after approval of this
Agreement in the preparation of any documents necessary to implement this Agreement and
finalize other documents contemplated herein.
19.2 CITY. The City, in its role as landowner, shall cooperate with and furnish
information to the Developer regarding the properties included within the Project. With regard to
zoning, land use, and environmental and design review and/or approval, the City's responsibility
shall be limited to providing that level of interaction, timely response, and review as provided for
in state law, regulations and ordinances of the City of San Luis Obispo.
21. OTHER MUNICIPAL PROCESSING. The Parties understand and agree that those
approvals required of the City acting in its governmental or regulatory capacity are separate and
distinct from those approvals required by the City under this Agreement. Notwithstanding
anything to the contrary in this Agreement, nothing herein shall be interpreted to mean that the
City is in any way waiving, limiting, or weakening any regulatory or police power the City may
have in any of its governmental capacities. It is intended that the Developer shall be obligated to
fulfill such requirements as may be imposed by the City or any other governmental agency or
authority having or exercising any jurisdiction over the Project or over any construction to be
undertaken by the Developer in, on or about said Project. Refusal or failure by the City in its
governmental or regulatory capacity to take a legislative action, issue any permit, license or any
other action or approval sought by the Developer for construction of improvements on, or
development of, the Project shall not constitute a breach of this Agreement.
22. HOLD HARMLESS AND INDEMNIFICATION. Developer agrees to hold harmless,
defend and indemnify the City, its agents, officers and employees from and against all actions,
damages, claims, losses or expense of every type and description to which they may be subjected
or put, by reason of, or resulting from any claims arising out of or related to this Agreement.
Notwithstanding the foregoing, no indemnification is given hereunder for any action, damage,
claim, loss or expense to the extent directly attributable to the intentional acts or negligence of
the City or its officers, directors, employees or agents.
9
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ATTACHMENT 2
�l
23. POSSESSORY INTEREST TAXES. The Developer (a) acknowledges that if the
Project contemplated by this Agreement is subsequently approved and constructed, then a
possessory interest subject to property tax may be created and owed by Developer, and the
Developer or its interest in the Project and the improvements thereon may be subject to payment
of property taxes levied on such possessory interests, and (b) agrees to pay all such taxes,
however categorized or calculated.
24. MISCELLANEOUS. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California (without regard to application of the
conflict-of-law principles thereunder). Upon the request of either party, each of the undersigned
shall make, execute, and deliver such documents and instruments, and shall take such other
actions, as may be reasonably necessary to carry into effect the agreements of the parties
described in this Agreement. If at any time any provision of this Agreement is or becomes
illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the
legality, validity or enforceability of the remaining provisions hereof, nor the legality, validity, or
enforceability of such provision under the law of any other jurisdiction, will in any way be
affected or impaired thereby, and the remainder of the provisions of this Agreement will remain
in full force and effect. This Agreement (a) represents the entire understanding between the
parties regarding the subject matter hereof, and supersedes and replaces all prior and
contemporaneous understandings, whether oral or written, regarding such subject matter, and (b)
may not be modified or amended, except by a written agreement executed after the effective date
hereof by the party sought to be charged by such modification or amendment. If any action is
commenced to construe or enforce this Agreement or the rights and duties of the parties
hereunder, then the party prevailing in that action shall be entitled to recover its costs and
reasonable attorneys' fees in that action, as well as such costs and fees of enforcing any
judgment entered therein. This Agreement may be executed in counterparts, each of which shall
be deemed an original and both of which, taken together, shall constitute one and the same
instrument, binding on each signatory thereto. A copy of this Agreement that is executed by a
party and transmitted by that party to the other party by facsimile or as an attachment (e.g., in
".tif' or ".pdf' format) to an email shall be binding upon the signatory to the same extent as a
copy hereof containing that party's original signature.
[Signatures appear on the following page]
10
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ATTACHMENT 2
IN WITNESS WHEREOF, the undersigned have executed this Agreement, effective as
of the "Effective Date" set forth above.
"CITY:" "DEVELOPER:"
CITY OF SAN LUIS OBISPO GARDEN STREET SLO PARTNERS, L.P.,
A Municipal Corporation a California limited partnership
By DOWNTOWN INVESTORS, LLC, a
By: California limited liability company, its
City Manager general partner
ATTEST: By
Hamish Marshall, its Manager
City Clerk
APPROVED AS TO FORM:
City Attorney
11
ATTACHMENT 2
EXHIBIT 1
OWNERSHIP OF PROJECT AREA
(per Recital A)
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ATTACHMENT 3
PARKING LOT 2 - GARDEN STREET TERRACES
FINAL TERM SHEET 6-1-2010
1. PURPOSE;SCOPE AND FLEXIBILITY
The purpose of this Proposed Term Sheet is to outline significant deal points on which the City
of San Luis Obispo and WestPac Investments, Inc. or assigns (the "Parties' agree to proceed
with the negotiation of a revised Memorandum of Understanding or other conceptual
agreement and all final agreements to memorialize the intent of the City and the Developer
related to the Garden Street Terraces development, which includes the use of City owned
property known as Parking Lot 2. Such documents will include, but are not limited to, a revised
MOU and a ground lease. This term sheet recognizes that the project described herein is not
one for which design has been submitted or which has been subject to any detailed financial
analysis because the ultimate project design will ultimately change in order to conform to
conditions of project approval and environmental mitigations included in the final EIR, as
certified by the City. As a result, it is also recognized that the project that is ultimately
constructed may have different project features, some of which may be less square footage
than the project description outlined below.
Any quantitative financial terms set forth in this term sheet, except where total amounts are
specified, are to be considered as per unit or formula driven items such that the terms will not
need to be.renegotiated in the event the designed project differs in terms of numbers of units,
within the environmentally approved scope, from the Conceptual Project Description shown
below.
2. CONCEPTUAL PROJECT DESCRIPTION
2.1. HOTEL. A 63-room hotel containing approximately 2,500 square feet of meeting space
and a restaurant, bar, gym, and spa facility occupying a total built area of 51,346
square feet; and
2.2. RESIDENTIAL UNITS. 33 residential units ranging in size from 650 square feet to 1,500
square feet, with the average size of each unit being approximately 1,100 square feet
occupying a total built area of 40,775 square feet.
2.3. RETAIL SPACE - General - 14,341 square feet of retail space on the ground floors.
2.4. RETAIL SPACE - Market— 13,248 square feet of retail space.
2.5. PARKING—147 spaces, not including any public spaces.
3. CONVEYANCE OF PARKING LOT BY CITY - The City shall convey to Developer a ground lease
interest in Parking Lot 2 and certain airspace rights under the terms set forth below:
3.1. PREMISES-THE premises subject to the lease shall include the undivided fee interest in
Parking Lot 2. Developer shall be permitted to pursue a subdivision of the airspace
above Parking Lot 2 and City shall transfer to developer fee ownership of the airspace
lots created by any subdivision that may be approved, while retaining fee ownership of
the ground below any subdivided airspace.
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ATTACHMENT 3
3.2. TERM. Ninety-nine (99) years. At the end of the lease term Developer shall have no
further right to occupy or improve Parking Lot 2 and all rights and title to any and all
improvements on or to the Property shall become the sole property of the City, unless a
successor lease is negotiated prior to the expiration of the term.
3.3. COMPENSATION TO THE CITY FOR REPLACEMENT OF ON-slrE PUBLIC PARKING REMOVED.
The parties acknowledge that City Lot 2 currently contains sixty-two (62) spaces and
the final EI.R recommends elimination of public parking on the project site, the effect of
which will be to remove from public use 62 on-site parking spaces that currently are
available to the public generally at City Lot 2.
In recognition of that elimination of public parking, the Developer shall pay the City,
upon issuance by the City of building permits for the Project, a one-time fee of Thirty
Thousand Dollars ($30,000) for each of the sixty-two (62) public spaces that are to be
eliminated on-site in connection with the Project (i.e., b2 parking spaces x
$30,000/parking space = $1,860,000 total parking replacement fee). The parties
further acknowledge that the amount of such $1,860,000 replacement parking fee is
greater than the currently prevailing rate for in-lieu parking fees because the amount
thereof is intended to contribute to the costs of constructing replacement spaces.
3.4. In-lieu Parking Fees. Given the conceptual description above, the project more
than meets the zoning requirements for parking on site. If, however, the ultimately
proposed project fails to provide. all required parking on site, the Developer will be
required to pay the generally applicable in-lieu parking fee at the time building permits
are issued. Such payments will be in addition to those set forth above for the
replacement of public parking.
3.5. BASE RENT. Developer will pay to the City base rent that is equal to an agreed upon
fair market percentage of the re-use value of the real property, to be determined by a
qualified appraiser agreeable to Developer and City. In no event shall the base rent be
less than the amount of the City's annual net revenue from the operation of Parking Lot
2 as of the date of execution of the lease agreement (currently $167,800 per year).
Annual base rent shall be increased on the.first day of every third fiscal year by the
amount of increase in the Consumer Price Index for each of the 3 years immediately
preceding, but in no event shall the increase be less than two percent (2%) nor more
than four percent (4%) per year, for a cumulative total increase of not less than six
percent (6%) and not more than twelve percent (12%) in any three year period.
3.6. Time of Rent Payment. Base rent payments shall begin upon the date of
possession and shall be due on the first day of each fiscal year every year of the lease
thereafter.
3.7. PERCENTAGE RENT. Beginning in year 15 of the lease Term, the Developer shall pay an
amount equal to one and one-half percent (1.5%) of the amount by which gross
individual room revenues for the hotel that is included in the Project, exceed the
stipulated room revenue threshold of$71,500 per room.
4. CITY PARKING ASSISTANCE FINANCING. The City, via the Parking Enterprise Fund, will
provide a loan to the developer in an amount not to exceed $2.4 million, which may be
utilized by the developer to finance the parking replacement fee and an agreed upon portion
of other development and in-lieu fees subject to further negotiation.
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ATTACHMENT 3
4.1. TERM. The term of such loan shall not exceed 30 years.
4.2. RATE. The interest rate charged shall be equal to the City's costs of borrowing
equivalent funds whether or not the City chooses to actually incur more debt. The rate
will reflect the City's cost of tax exempt financing if bond counsel confirms that this loan
qualifies for such financing. Developer shall otherwise pay a rate equal to the City's cost
of taxable bond financing.
S. Streetscape Improvements. The developer shall construct all of the Garden Street
improvements consistent with the Garden Street Makeover Plan at its sole expense with no
contribution by the City.
6. POSSESSORY INTEREST TAxEs. The Developer (a) acknowledges that if the Project
contemplated by this term sheet is subsequently approved and constructed, then a
possessory interest subject to property tax may be created and owned by Developer, and the
Developer or its interest in the Project and the improvements thereon may be subject to
payment of property taxes levied on such possessory interests, and (b) agrees to pay all
such taxes, however categorized or calculated.
7. Rent Reduction. Developer shall be entitled to a reduction in base rent in an amount
equal to the City's net realized increase in property tax.
S. Further Negotiation. The parties acknowledge that this terms sheet reflects only what the
parties perceive to be the principal terms intended to be incorporated into a revised
Memorandum of Understanding or other successor agreement, that further negotiation is
required to achieve final agreements, and that no binding obligation is or can be created
other than by a binding Real Property Exchange Agreement or other binding legal
documents as may be determined to be appropriate upon final authorization of real property
transactions by City Council.
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ATTACHMENT 4
MEMORANDUM OF UNDERSTANDING
BETWEEN
THE CITY OF SAN LUIS O$[SPO
AND
GARDEN STREET SLO PARTNERS,L.P.
EXCHANGE OF CITY LOT N0.2
AND
DEVELOPMENT OF A NEW PARKING FACILITY AND RELATED IMPROVEMENTS
July 2006
1�3 s-� 6
• ATTACHMENT 4
TABLE.OF CONTF.NTS FOR MEMORANDUM OF UNDERSTANDING
J� \I BETWEEN
`�') TILE CI'T'Y OF SAN LUIS OBISPO AND GARDEN S'T'REET SLO PARTNERS,L.P.
FOR
TIIE EXCHANGE OF CITY LOT No.2
AND
DEVELOPMENT OF A NEW PARKING FACILITY AND RELATED IMPROVEMENTS
1. PROJECT DESCRIPTION............................,............. ..............................................................3
......
1.1 HOTEL...................................................................................................................................3
1.2 RESIDENTIAL UNITS.............................................................................................................3
1.3 RETAIL.SPACE......................................................................................................................3
2. PARKING FACILITY EXCHANGE...........................................:..................................................3
2.1 DEVELOPER DILIGENCE;CONVEYANCE"AS IS................................................................3
2.2 CONDITIONS TO CLOSING....................................................................................................3
2.3 CLOSING................................................................................................................................4
2.4 CONSTRUCTION OF NEW PARKING FACILITY....................................................................4
2.5 COMPENSATION TO THE CITY FOR REPLACEMENT OF ON-SITE PUBLIC PARKING
REMOVED............................................:..............................................................................5
2.6 OFF SITE OVERFLOW PARKING.-..................I................................................................-.5
3. CITY FINANCING AND LEASE OF NEW PARKING FACILITY.................................._.......5
3.1 ADVANCE BY CITY................................................................................................................5
3.2 LEASE OF NEW PARKING FACILITY....................................................................................6
4. DEVELOPER PARTICIPATION IN GARDEN STREET PLANNING.....................................7
5. DOCUMENTATION.........................................................................................................................7
6. RESPONSIBILITIES OF THE PARTTES......................................_..........................._..................8
6.1 DEVELOPER ..........................................................................................................................8
6.2 CITY........................................................................................................................................8
7. OTHER MUNICIPAL PROCESSING............................................................................................8
S. NONBMLVG NATURE OF UNDERSTANDINGS................._..................................................8
9. POSSESSORY INTEREST TAXES............................................»..................................................9
EXHIBITS:
EXIIIBIT 1 Property Ownership Map
EXHIBIT 2A Preliminary Parking Ownership Map(Ground Floor Level)
EXHIBIT 211 Preliminary Parking Ownership Map(Basement Level Plan)
i
CADOCUMC-Aslfts,r�L.00AL S-HTunp�PARKIN-2.DOC
13 7
ATTACHMENT 4
MEMORANDUM OF UNDERSTANDING
L TIIIS MEMORANDUM OF UNDERSTANDING(the"MOU") is made and entered into,effective as of
July L8, 2006 (the "Effective Date"), by and between T}Ili CITY OF SAN LUIS OBISPO, a chartered
California municipal corporation (the "City"), and GARDEN STREET SLO PARTNERS, L.P., a California
limited partnership("Developer"), with reference to the following facts:
RECITALS:
A. Developer and its affiliates have acquired title to or control of all parcels of real property
that are owned by parties other than the City and are situated in that portion of the City of San.Luis Obispo
that is bounded by Broad Street, Garden Street, Marsh Street, and the Garden Alley (such parcels,
including "City Lot No. 2" described below, collectively are referred to as the "Project Area"), the
ownership of which is set forth on EXHIBIT I to this MOU; and
B. The City is the owner of a 62-space parking facility that is situated at the interior of the
Project Area; and
C. Developer desires to develop and construct in the Project Area a mixed use Project that
will include residential condominiums, a hotel, retail stores, restaurants and associated parking facilities
(collectively,the "Project"); and
D. Developer proposes to include in the Project a parking facility that will be owned by the
City and will contain ninety-six (96) parking spaces,of which (i) forty(40)parking spaces will be situated
_ on street level, will have parking meters, and will be used by the public generally, and (ii) fifty-six (56)
parking spaces will be situated on subterranean levels and will be reserved for use by guests of the hotel
that will be included as part of the Project (such 96-parking-space facility, the "New Parking Facility");
and
E. Developer has proposed that the City convey to Developer fee title to City Lot No. 2 in
exchange for the Developers conveyance to the City of fee title to the airspace condominium units
comprising the New Parking Facility(the"Parking Facility Exchange");and
F. It appears the Project will have an important revitalization effect on the downtown area,
and therefore may be worthy of particular consideration by the City;and
G. The Project will benefit the City by helping to achieve two of the Major City Goals in the
2005-07 Financial Plani to wit: increasing ,sales and transient occupancy taxes and supporting the
downtown,including"the reuse of large or downtown properties for unique boutique hotels";and
H. The Project will further several goals set forth in City's General Plan including: I)
ensuring the Downtown is the cultural, social and political center of the City for its residents as well as
home for those who live in its historic neighborhoods, 2) civic, cultural and commercial portions of
downtown should be a major tourist destination, 3) downtown visitor appeal should be based on natural,
historical, and cultural features, retail services, and numerous and varied visitor accommodations, and 4)
i
r, all new, large commercial project should include dwellings;and
l
ATTACHMENT 4
1. The Project supports goals set forth in the San Luis Obispo Downtown Association's Sair
Luis Obispo Dowxrown Srraregic Business Plan, especially goal 2.7 to "fill key gaps in the business mix"
r including -hotels/B&Bs;-and
J. The Project will support concepts set forth in the Conceptual Physical Plan for the City's
Center(the Downtown Concept Plan); and
K. Negotiations between City and Developer are appropriate in light of Developer's
ownership or control of all the parcels abutting City Lot No. 2, but for those parcels fronting Higuera
Street, thus, without Developer's participation, the Project and the benefits it confers upon the community
would not occur;and
L. Therefore, the City contemplates that the proposed Parking Facility Exchange(as defined
in Recital E, above) will be accomplished without a competitive bidding process that the City otherwise
might use if the Project, of which such exchange is a part, did not serve substantial revitalization
objectives furthered by the Project, and if private ownership on the site was fragmented, rather than fully
consolidated by the Developer as in this instance;and
M. The acquisition of City property and the rearrangement of City parking is critical to
implement the Project, and
N. In connection with the proposed Project and the proposed Parking Facility Exchange, the
City will incur costs not traditionally associated with municipal activities;and
0. The City Council previously directed the staff and consultants of the City to prepare this
MOU for review by the City Council describing the Project and,the proposed Parking Facility Exchange;
and
P. This MOU is intended to be,and shall be construed as,non-binding in nature;and
Q. Notwithstanding this MOU, the parties acknowledge that Developer must proceed
through City's development review process, including, but not limited to: consideration by the City's
Architectural Review Committee,Cultural Heritage Commission,Planning Commission and City Council,
and conformity with the applicable California Environmental Quality Act ("CEOA") process, and the
subject project may not be approved as a result of that process;and
R. The parties contemplate later entering into a Property Exchange and Construction
Agreement; and
S. The parties have agreed to execute this MOU in order to memorialize their understandings
with respect to the Parking Facility Exchange and related aspects of the Project.
SUMMARY"OF UNDERSTANDINGS:
Now,THEREFORE, the parties hereto have summarized below their current understandings with
respect to the proposed Parking Facility Exchange and the Project.
2
fi✓ ����
- - ATTACHMENT 4
1. PRo,IECT DESCRIPTION. The Project includes the following elements:
l 1.1 HDT[:L. A 70-room hotel containing approximately 2,500 square feet of meeting space
and a restaurant.bar, gym, and spa facility; and
1.2 RESIDENTIAL UNITS. Fifty (50) residential units ranging in size from 650 square feet to
1,500 square feet, with the average size of each unit being approximately 1,100 square feet.
1.3 RETAIL SPACE. Approximately 18,000 square feet of retail space on the ground floors
surrounding the area where City Lot No. 2 is situated, of which approximately 9,000 square feet is and
shall continue to be owned by persons other than Developer.
2. PARKING FACILITY EXCHANGE. On the terms and subject to the conditions set forth below, the
City shall convey to the Developer title to City Lot No. 2, and Developer shall convey to the City title to
the New Parking Facility.
2.1 DEVELOPER DILIGENCE; CONVEYANCE "AS IS." Developer shall perform at its cost
and expense such due diligence investigations of City Lot No. 2 as Developer determines to be
appropriate. The City shall convey City Lot No. 2 to Developer on an "AS IS" basis, without any
representation or warranty regarding the condition of such property. City shall not be responsible in any
way for cleaning, removing, monitoring, cataloguing or otherwise addressing sub-soil conditions,
archeological conditions, hazardous materials,etc. that may be found in the Project Area.
2.2 CONDITIONS TO CLOSING. The obligations of the parties to proceed with the Parking
Facility Exchange shall be subject to the waiver or satisfaction of the following conditions.
(a) CONDITIONS TO CITY CONVEYANCE. The obligation of the City to convey title
�•. to Lot No. 2 to Developer shall be subject to the satisfaction or waiver by the City of the following
( ✓ conditions:
(i) Developer has successfully completed the processing of all applications
for the Project that are required under CEQA;
(u) Developer has obtained all discretionary entitlements for the Project,
including but not limited to consideration by the Architectural Review Commission, Cultural Heritage
Committee, and Planning Commission, and approval thereof by the City Council of the City of San Luis
Obispo; and
(Gi) The building permits for the Project have been issued to Developer.
(b) CONDITIONS TO DEVELOPER OBLIGATIONS. The obligation of the City to
convey title to Lot No. 2 to Developer shall be subject to the satisfaction or waiver by the City of the
following conditions:
(i) Developer has obtained a final binding commitment letter from a lender
of Developer's choice to fund the construction costs of the Project;
(ii) Developer has successfully completed the processing of all applications
for the Project that are required under CEQA;
(Hi) Developer has obtained all discretionary entitlements for the Project,
including but not limited to consideration by the Architectural Review Commission, Cultural Heritage
Committee, and Planning Commission, and approval thereof by the City Council of the City of San Luis
Obispo;
3
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ATTACHMENT 4
(iv) Developer has provided a plan that is acceptable to the City and addresses
during construction trash and delivery access to the businesses along Higuera Sheet that currently depend
upon Parking Lot No.2 and the alleyway adjacent to it for these PuToses;
(v) Deveioper has provided a plan that is acceptable to the City that provides
for interim public parking for forty (40) vehicles until the new forty (40) surface level parking spaces in
the Project are available for public parking purposes and a Certificate of Occupancy has been issued; and
(vi) The building permits for the Project have been issued to Developer,
2.3 CLOSING. The closing of the Parking Facility Exchange shall occur through a licensed
title company with offices in the City of San Luis Obispo(the "Closing"). At the Closing:
(a) CONVEYANCE BY CITY. The City shall convey to Developer fee title to City Lot
No.2, free and clear of all liens and encumbrances securing monetary obligations and free and clear of all
covenants, conditions, and restrictions (other than those hereafter negotiated between the City and
Developer in connection with the Parking Facility Exchange and the Project).
(b) CONVEYANCE BY DEVELOPER. Developer shall convey to the City title to the
airspace condominium units comprising the New Parking Facility, free and clear of all liens and
encumbrances securing monetary obligations.
2.4 CONSTRUCTION OF NEW PARKING FACILITY. Following the Closing, the Developer
shall proceed as promptly as reasonably practicable to undertake and complete the construction of the
improvements comprising the New Parking Facility in accordance with plans and specifications approved
by the City in connection with its approval of the Project and the designs for the New Parking Facility.
r (a) DURATION OF PROJECT. `Che parties acknowledge that the construction of the
New Parking Facility will take approximately two (2) years from the date on which demolition
commences. Developer will exercise commercially reasonable efforts to complete construction of the
forty(40)parking spaces described in clause"(i)," below,and obtain a certificate of occupancy therefor in
order to enable such spaces to be available for use prior to completion of construction of the entire Project.
(b) COMPONENTS. The New Parking Facility shall contain ninety-six (96) parking
spaces,of which(i)forty(40)parking spaces will be situated on street level,will have parking meters, and
will be used by the public generally, and (ii)fifty-six(56) parking spaces will be situated on subterranean
levels and will be reserved for use by guests of the hotel that will be included as pan of the Project. Such
parking spaces shall be situated approximately in the locations depicted on EXHIBITS 2A (depicting the
Ground Floor Level)and.2B(depicting the Basement Floor Plan)to this MOU.
(e) SPECIFICATIONS AND FINISH. With respect to general design, the New
Parking Facility shall generally correspond to the baseline Project set forth in EXHIBITS 2A and 2B
hereto. The New Parking Facility shall be constructed in compliance with applicable building and
construction standards under City laws, rules, and ordinances. In its capacity as the subsequent owner of
the New Parking Facility,and separate from its capacity as regulator,the City shall have rights of specific
approval and review of all designs and plans, initially at the concept and schematic plan level, and
subsequently at the final plans as set forth herein.
(d) CONTRACT ARRANGEMENTS. Prior to initiation of construction of the New
Parking Facility, the Developer and City shall enter into a Property Exchange and Construction
Agreement pursuant to which Developer shall cause the New Parking Facility to be constructed. The form
and content of these documents shall be subject to approval by the City. Such construction contract shall
include, inter alia,the following provisions:
{ 1
u (i) Contractor shall pay prevailing wages.
4
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ATTACHMENT 4
` (ii) Developer shall deliver "as-built" plans for the New Parking Facility to
City.
(H i) Developer shall provide City, upon City's request, reasonable back-up
and cost confirmation for any part of the baseline Project.
(iv) A completion guarantee in a form satisfactory to City shall be provided
by the Developer to commence and. complete construction of the New Parking Facility.
(v) ICity's satisfaction that Developer has a source of finding to pay for the
construction costs of the New Parking Facility and the entire Project.
(e) CITY RIGHTS OF INSPECTION AND APPROVAL.
(i) INSPECTION. During the construction process of the New Parking
Facility, the City shall have the right, in its capacity as owner of such New Parking Facility, to review all
change orders, to require change orders which the City reasonably deems necessary only in order to ensure
consistency or equivalency with the approved plans and specifications, and to inspect all parts of
construction at any time. These rights,like the rights of plan review and approval,are supplementary to and
separate from the regulatory functions of the City.
(H) APPROVAL. The City, in its capacity as owner, shall have the right to .
review completion of the New Parking Facility and assure itself of satisfactory completion in addition to its
capacity as building inspector before issuing an initial Certificate of Occupancy for the New Parking
Facility and confirming "Substantial Completion" of the New Parking Facility. The City shall not be
required to provide final approval of the New Parking Facility until Developer has submitted to the City a
1r. complete set of "as built" plans. For purposes hereof, the term."Substantial Completion" shall mean
issuance of a certificate of occupancy and completion of the shell and core to a point at which the only
remaining requirements for tenant occupancy shall be those things normally designated as tenant
improvements.
2.5 COMPENSATION TO THE CITY TO FUND REPLACEMENT OF ON-SITE PUBLIC PARKING
REMOVED. The parties acknowledge that City Lot No. 2 contains 62 spaces, the New Parking Facility
will contain only 40 metered spaces for use by the public generally, and therefore the effect of the Project
will be to eliminate twenty-two (22) on-site parking spaces that currently are available to the public
generally at City Lot No. 2. in recognition of that reduction, the Developer shall pay the City, upon
issuance by the City of building permits for the Project,a one-time, in-lieu parking fee of Thirty Thousand
Dollars ($30,000) for each of the twenty-two (22) public spaces that are to be eliminated on-site in
connection with the Project (i.e., 22 parking spaces x $30,000/parking space = $660,000 total in-lieu
parking fee). The parties further acknowledge that the amount of such $660,000 in-lieu parking fee is
greater than the currently prevailing rate for in-lieu parking fees because the amount thereof is intended to
cover the costs of constructing replacement spaces.
2.6 OFF SITE OVERFLOW PARKING. Developer has requested that the City .provide to
Developer access to additional off-site parking spaces in order to accommodate peak hotel and event
parking at the completed Project site without depleting the supply of on-site public parking. City will
cooperate with Developer in exploring potential additional off-site parking spaces. Any such arrangement
shall be the subject of a separate agreement negotiated between the parties.
3. CITY FINANCING AND LEASE OF NEW PARKING FACILITY
r— 3,1 ADVANCE BY CITY. On a mutually acceptable date within thirty(30)days following the
t first date on which the forty (40) public spaces in the New Parking Facility are available for use by the
public generally, the City shall advance to Developer the sum of Two Million Four Hundred Thousand
5
ATTACHMENT 4
Dollars (.$2,400,000), which sum is intended to assist Developer in financing the cost of constructing the
tr �, New Parking Facility.
(a) FIXLD AMOUNT. Developer acknowledges that the amount of such advance is
being fixed hereunder, and shall not vary regardless of changes in Developer's cost of constructing the
New Parking Facility. In the event of cost overruns in the construction of the New Parking Facility,
Developer is responsible for the payment of such costs. The City shall have no responsibility or obligation
to pay them.
(b) CONDITIONS TO ADVANCE.
0) CITY APPROVAL. The City shall have approved the new Parking Facility
pursuant to Section 2.2(a) and(b)above,and shall have issued a Certificate of Occupancy therefor.
(ii) EXECUTION OF LEASE. The parties acknowledge that the rental
payments that Developer shall pay to the City under the "Lease" described in Section 3.2, below, are
intended to amortize the amount of such advance over the 30-year term of such Lease,and therefore agree
that the City's obligation to make such advance shall be conditioned upon the Developer's executing such
Lease concurrently with such advance.
3.2 LEASE of NEw PARKING FACILITY. In consideration of the City's agreement to make
the advance described in Section 3.1,above,Developer shall execute with the City a lease(the "Lease")of
the New Parking Facility concurrently with the City's advancing such funds to Developer. Such lease
shall:
(a) TERM. With respect to term, the parties (i) contemplate a term of ninety-nine
(99) years, (ii) acknowledge that the lease is subject to periodic public review pursuant to California
1 Government Code § 37380, and (iii) agree that by reason of the rental payment being measured by
reference to the rental income from the New Parking Facility, they believe that the rental rate will reflect
then-prevailing market rents for comparable facilities and therefore no adjustment shall be made to the
rental provisions of the Tease during the term thereof,so long as there is no material change in the use of
the property, i.e. there continues to be a hotel and retail uses on the site. In the event Developer or a
subsequent owner applies for a change in use or redevelopment of the site, then. the City shall have the
right to adjust the rent upward (but with no obligation to adjust downward)to current fair market rent.
(b) BASE RENT. Require Developer to pay to the City base rent for the New Parking
Facility as follows:
(i) INITIAL TERM. During the initial thirty (30) years of the lease term;the
annual base rent shall be an amount equal to the sum of: (x) the real or imputed "Amortizadon Payment"
(as defined below); plus (y) a "Supplemental Parking Revenue Replacement Payment," reduced by the
"Net Realized Increase in Property Tax" (as such terms are defined below). For purposes of the
foregoing:
(A) The "Amortization Payment" shall be equal to the"all-in"annual
payment cost associated with a bond used to finance the $2.4 million or, in the absence of a bond, the
annual payment required to amortize the $2.4 million at an imputed "all-in" cost of funds reasonably
estimated by the City. For this purpose, the term "all-in" cost of funds shall refer to the direct, out-of-
pocket expenses incurred by the City in connection with such bond issuance.
(B) The "Supplemental Parking; Revenue Replacement Pavment"
shall be $28,000 per year, representing approximately the City's average revenue per space from metered
parking spaces applied to the 22 onsite public metered spaces removed. Developer has offered this
payment as a supplementary inducement, notwithstanding Developer's agreement to fund $660,000 in
construction costs for replacement parking. Developer may request a reduction in this payment for all or
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ATTACHMENT 4
part of any sums paid to the City for public parking made available to Developer for off-site parking, the
approval of which shall not be unreasonably withheld by City.
(C) The "Net Realized Increase in Property' shall be the amount
by which (x) the City's actual revenue realization from property tax in the first year of full assessment for
the new Project,exceeds(y) the net realization from property tax on the same property in the fiscal year at
the time of close of escrow contemplated in section 2.4 above. The Net Realized Increase in Property Tax
shall exclude any and all additional taxes or assessments levied on the property by virtue of citywide or
special district taxes imposed subsequent to the execution of the Real Property Exchange Agreement and
associated documents.
(ii) RENEWAL, TERM. During each of the final sixty-nine (69) years of the
lease term, the base annual rent shall be equal to the sum of (A) $40,000, plus (B) one and one-half
percent (1.5%) of the amount by which (x) gross room revenues for the hotel that is included in the
Project,exceeds(y) the sum of$5,000,000, provided there is no material change in use as noted in Section
3.2(a)above.
(c) MAINTENANCE OF NEW PARKING FACILITY.
(i) BY DEVELOPER. Except as provided in Section 3.2(c)(ii), below,
Developer at its sole cost and expense shall be solely responsible for repairing and maintaining the New
Parking Facility for the term of the lease.
(u) BY CITY. The City, at its cost and expense, will install and maintain the
parking meters to be installed on the 40 ground-level parking spaces and, in consideration therefor, will be
entitled to retain all proceeds from the meters and fines imposed on persons parking in such spaces.
`+ (d) TRIPLE-NET LEASE. Except for the maintenance obligations of the City with
"— respect to the parking meters described in Section 3.2(c)(ii), above, the Lease is intended to be a "triple
net" lease so that the base rent payments described in Section 3.2(b), above, shall be net of all taxes, as
applicable,insurance,and maintenance and repair costs for the New Parking Facility.
(e) OPERATING COVENANTS. Developer may install gates limiting access to the 40
ground-levet parking spaces in the New Parking Facility, and to close that portion of the New Parking
Facility to public parking each night from 2:00 a.m., to 7:00 a.m., in order to prevent overnight use of
those spaces by hotel guests and to keep those spaces available to patrons of the retail and restaurant
facilities on site and nearby.
4. DEVELOPER PARTICIPATION IN GARDEN STREET PLANNING. Developer shall participate in the
design,construction, and/or the funding of physical improvement of the Garden Street stteetscape so as to
assist in achieving the goals of the Garden Street Makeover Plan (as memorialized in those certain
"Garden Street Improvements Construction Documents" prepared by "firma" (Specification No. CP
#90088B) dated 12/4/03). As pan of the Project, Developer contemplates the installation of some
mechanism to assure high levels of maintenance, uniformity of street facade appearance and maintenance,
adequate security and a variety of other enhancement improvements to the streetscape of Garden Street
adjoining the Project, some of which will occur on public property or on property not owned by the
Developer. Developers financial contribution to the costs of such Garden Street Makeover Plan shall be
fifty percent(50%)or more of the aggregate costs thereof.
5. Dom,WNTATION. The parties agree that, at a minimum, the documentation to be created as a
result of this MOU may include the following:
f
5.1 A Real Property Exchange Agreement;
5.2 A Construction Agreement;
7
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ATTACHMENT 4
5.3 Applications For Regulatory Approval;
5.4 An Advance Agreement or other written instrument to memorialize the City's agreement
to advance the amount described in Section 3.1, above;
5.5 A I-ease Agreement;and
5.6 A Performance Bond for New Parking Facility Completion; and
5.7 A surety bond provided by Developer at its cost and expense to guarantee completion of the
New Parking Facility, or the return of the City's surface parking lot of xx spaces, public restrooms,
landscaping and public art, which meets City standards for such bonds. This surety bond and guaranty
shall be conditioned on the facts and then-known remediation costs associated with any archaeological or
environmental hazards impacts associated with the New Parking Facility construction.
6. RrSPONSIDILITIES OF THE PARTIES
6.1 DEVELOPER. It shall be the responsibility of the Developer to diligently pursue all
aspects of the application for the development of the Project, including all environmental processing, all
zoning processing, any supporting technical studies, and any other supporting studies as may be necessary,
including visual, traffic and circulation, historical, and archaeological investigation and mitigation. All
costs associated with both the processing of entitlements and City approvals and the production of studies
and planning for the development shall be paid for (without any mark-up) by the Developer,
including reimbursement to the City for those certain third-party expenses(without any mark-up) identified
on Exhibit 5 incurred after approval of the initial MOU in the preparation of the required documents
identified in Section 6. It is anticipated that,costs associated with development of the New Parking
( Facility will be included in the total cost of the New Parking Facility.
6.2 CITY. The City, in its role as landowner,shall cooperate with and furnish information to
the Developer on the properties. With regard to zoning, the City's responsibility shall be limited to
providing that level of interaction, timely response, and review as provided for in regulations and
ordinances of the City of San Luis Obispo.
7. OTHER MUNICIPAL PROCESSING. The Parties understand and agree that those approvals required
of the City acting in its governmental or regulatory capacity are separate and distinct from those approvals
required by the City under this MOU. Notwithstanding anything to the contrary in this MOU, nothing
herein shall be interpreted to mean that the City is in any way waiving, limiting, or weakening any
regulatory or police power the City may have in any of its governmental capacities. It is intended that the
Developer shall be obligated to fulfill such requirements as may be imposed by the City or any other .
governmental agency or authority having or exercising any jurisdiction over the Project or over any
construction to be undertaken by the Developer in,on or about said Project. Refusal or failure by the City
in its governmental or regulatory capacity to take a legislative action, issue any permit,license or any other
action or approval sought by the Developer for construction of improvements on, or development of, the
Project shall not constitute a breach of this MOU.
S. NONBINDING NATURE OF UNDERSTANDINGS. Without obligating either of the parties, this
MOU summarizes what the Developer and the City perceive to be the principal terms of the proposed
Parking Facility Exchange and the principal features of the Project. No binding obligation is created by
this MOU, and no binding obligation can be created other than by execution of both a binding Real
Property Exchange Agreement and other associated documentslisted in Section 6, above. This MOU is
an outline for discussion purposes only, and is not intended to be contractual or binding for any purpose
r_•- and is not an offer or representation by either party. Rather,this MOU is designed to reflect the ideas being
formulated, to provide a framework to attempt to resolve issues and concerns which have been raised, as
well as for the resolution of issues and concerns which may arise. In some instances, a tentative, but not
8
BS- 3S
ATTACHMENT 4
binding, agreement on a matter is referred to, and in other instances, material agreements are yet to be
defined and specified. The fact that any particular component or issue is not addressed in this MOU does
✓ not mean that it cannot be the subject of future discussions and negotiations, and the fact that a component
is addressed does not mean that it cannot be rejected or modified by either party. Developer further
acknowledge and agree that the officers, employees and consultants of the City, or any member of the City
Council, do not have authority to bind the City, and the final form of any proposed agreement to be
negotiated may have to contain matters not contemplated by this MOU, but which may be needed to
accommodate compliance with CEQA, and that there is no agreement by City to reimburse or defray any
cost or expense incurred by the Developer. The parties acknowledge that neither party will be
contractually bound to any sale, purchase or development or to any element of the proposed development
until the final execution of a mutually acceptable final agreement approved and executed by authorized
representatives.
9. TERMINATION. Either of the parties may determine that further negotiations will not be
fruitful and then terminate this MOU or allow this MOU to lapse without further liability to the other. In
the event of termination or lapse of this MOU,or the failure of the parties to otherwise execute those items
specified in Section 5(Documentation) above, the separate Exclusive Negotiating Agreement between the
parties entered into on August 23, 2005, subsequently extended through September 30, 2006, and as may
be amended from time to time, if applicable,shall also terminate.
10. POSSESSORY INTEREST TAXES. The Developer (a) acknowledges that if the Project
contemplated by this MOU is subsequently approved and constructed,then a possessory interest subject to
property tax may be created and owned by Developer, and the Developer or its interest in the Project and
the improvements thereon may be subject to payment of property taxes levied on such possessory
interests, and(b) agrees to pay all such taxes,however categorized or calculated.
[Signatures appear on the following page.]
9
X5 ' 36
ATTACHMENT 4
IN WITNESS W11f1t4:01,', the undersigned have executed this nonbinding Memorandum of
Understandings,effective as of the date first set forth above.
CITY OF SAN LUIS OBISPO
By: .
ATTEST:
)li liti
l9 rey Hooper,City Clerk
APPROVED AS TO FORM:
Jon owell,City Attorney
GARDEN STREET SLO PARTNERS, L.P., a
California limited parmership
By DOWNTOWN INVESTORS,LLC,a
r" . California limited liability company, its
general partner
By
,its Manager
EXT-tIBITS:
EXHIBIT 1 Property Ownership Map
EXHIBIT 2A Preliminary Parking Ownership Map(Ground Floor Level)
EXHIBIT 2B Preliminary Parking Ownership Map(Basement Level Plan)
10
x ' 37
A 17ACHMENT 4
Exhibit 111 "
Existing Property Ownership Map
m B
B B B
Ground Level Plot Map Legend
ODenotes City-Owned Parcel
Denotes Developer Parcels
�J 3S
ATTACHMENT 4
Exhibit "2A"
Preliminary Parking Ownership Map
I
1
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.r
Ground Floor Level Plan Legend
9otr,•bC RW.95.15 OE _
Proposed City-Owned Parcel
.��T,
� ..��; i:%• Proposed Developer Owner Parcels
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HCEED
SEP 0 7 2014
Tuesday,September 07,2010 SLO CITY CLERK
To: San Luis Obispo City Council
From: Donald E.Hedrick
Subject: Questionable actions of the Downtown Business Association
Several actions of the San Lias Obispo Downtown Business Association lately
draw questions concerning their fairness and equal treatment of its participants and also
raise concerns over free speech issues. When applications for political space use were
submitted or approached nearly two months ago by several candidates that wanted to use
the Farmer's Market as a public forum to publicly campaign for local office races,a
demand was placed ahead of processing their application. It appears that to talk and hand
political leaflets from a defined space exposes the need for a million dollars of liability
insurance coverage. For several Thursday visits to do a sampling of the space
participants,I was told by all the Political spaces and some non profit groups also,that
they had no such liability coverage.
That is one of the issues of this complaint There was an unequal nature to this
request for insurancx proof before being considered for acceptance for a space. At the
time that another interested local city candidate and I were inquiring we were being told
that this was a universal regirirement to have the insurance before the fad of being
approved when all the ousting political booths and some other non profit groups were
telling me that they did not have it. That makes this an issue of unequal and unfair
treatment
Another aspect of this before the fact request for insurance before a space is
assigned is not workable with the insurance system. When two insurance companies
were approached to inquire of the availability of event liability insurance,I was told that I
had w have my application approved before they could insure something. Not only did
the existing functioning political booths affirm their not having such liability insurance
but they were shocked that such requirements were being used to deny processing of
space applications. There is a catch 22 being evoked here in that you need insurance
before you can apply and you can't get insurance until you are approved as it is being
practiced selectively. This dance of checking in to see progress in my space approval and
being told that I had to have unobtainable proof ahead of the fact of having an approved
space went on-for several weeks with out having a space committed and the campaign
season was rapidly blowing by. This is damaging political campaigns unfairly and
unequally selectively.
This brings up questions of the actual authority of a private association over the
use of public streets and in fact a State Highway. Does the Downtown Association really
have such authority by state law,and be able to abuse that authority by unequally malting
the decision of an individual in that association selectively used against some candidates
and not others? What is the wording of State Law and the local agreement that permits a
Private Association to diticruninate unfairly? This abuse of airthority needs to be
questioned.
A complaint was filed with several State agencies last month while the other
political users of the Farmer's Market were still telling me that they did not have the
insurance being requested of me before the fact. Another check.in with the political
booths on the streetstill had no insurance request but that soon changed. Now I am
getting reports of all the Farmer's Market participants being asked by letter to submit new
applications with proof of insurance forms. This appears to be a knee jerk reaction to
cover the Downtown Business Association's tracks after the face of the complaint being
filed. Bear in mind that that complaint was filed long before the corrective cover up
action and does not relieve the exposure of the.Association to a lawsuit that actions has
been initiated.
Perhaps it is time to review the agreements between the City and the Downtown
Business Association in their use of the public street and State Highway that is used for
the Farmer's Market. This is an allegation of abuse of authority and unequal treatment of
citizens. This is also a question of it being appropriate for a private organization to
require political free speech to be insured. The only way that free speech will be served
is to not require individual participants with unequal resources to be held to maximum
liability. The Farmer's Market has been a venue for free speech for many years and what
now makes political expression.so dangerous as to require a million dollars of liability to
dispense words and published words? Liability would be appropriate for booths that sell
food and products that can cause harm,but our society was built on the ideals of free
speech. How is it that an individual can abuse authority to selectively impose an
outrageous pre requirement before the fact with no assurance that approval would follow
in a system that would not process the insurance application without have the approved
space,
Another concern is that this system of requiring this insurance in a free speech
setting does not address the possibility that a participant could be indigent and could not
afford the quoted thousand dollar premium for insurance to be able to participate in the
political process in the streets of our city,and a State Highway. What are the legal.
ramifications for that issue?
In the process of this questioning of abuse of authority of the Downtown Business
Association has also brought to light questions of other recent exercises of authority over
other aspects of the farmer's participation. It is time to review the City's agreements with
the Downtown Business Association in light of how they serve the interests and goals of
the whole city. Pestaps the Farmer's Market would be served better with another
organization administering morejustly and equitably for the entire town instead of an
abusive insider group.
Sincerely,
Donald E.Hedrick
Mayoral Candidate,2010
P.O.Box 343
San Luis Obispo,Calif. 93406