HomeMy WebLinkAbout06/01/2010, B7 - SUBJECT TO CERTIFICATION OF THE ENVIRONMENTAL IMPACT REPORT FOR GARDEN STREET TERRACES PROJECT, APP council M°n°� 6-1-2010
j ac En ba Report
CITY O F SAN LUIS O B I S P O
FROM: Katie Lichtig, City Manager
J. Christine Dietrick, City Attorney
Prepared By: Shelly Stanwyck, Assistant City Manager
Claire Clark, Economic Development Manager
SUBJECT: SUBJECT TO CERTIFICATION OF THE ENVIRONMENTAL IMPACT
REPORT FOR GARDEN STREET TERRACES PROJECT, APPROVAL
OF TERM SHEET FOR LONG-TERM LEASE OF CITY'S PARKING
LOT NUMBER TWO.
RECOMMENDATION
Providing Council has certified the Environmental Impact Report (EIR) with the
Environmentally Superior and Project Without Public Parking Alternatives, staff recommends
approval of a Term Sheet with WestPac Investments, Inc (WestPac) for the Garden Street
Terraces Project that outlines the principal terms for inclusion in a new Memorandum of
Understanding (MOU) affecting the City's Parking Lot Two (Lot 2) and any other documents
necessary to finalize these negotiations (such as a ground lease).
DISCUSSION
Background
In 2006, the City and WestPac entered into a Memorandum of Understanding (MOU), shown at
Attachment 2, intended to facilitate the development of a significant downtown mixed use
project utilizing both private and public property shown on the Vicinity Map at Attachment 1.
The MOU was based on the provision of public parking to replace a portion of the existing
public parking spaces on site at Lot 2. Council approved exclusive negotiations preceding
adoption of the MOU because WestPac 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 for 2005-07 as well as implementing a
series of important City Policies.
Based on the MOU, Garden Street SLO Partners, LP submitted applications to the City in 2006
to develop a downtown mixed-use center including retail, residential units and hotel known as
the Garden Street Terraces Project. The project has substantially evolved through multiple
redesigns each one responding to input from community members and City Advisory Bodies.
The project will be redesigned again to meet the requirements of the certified EIR.
9�__ 1
Garden Street Terraces Term Sheet Page 2
Certification of the EIR
Certification of the Final EIR approving the Reduced Development (environmentally superior)
and Project Without Public Parking Alternatives has necessitated revisions to the MOU. Because
the MOU was based on the provision of public parking, the Planning Commission's
recommendation to eliminate the public parking component drove the need to consider revisions
to the MOU. Staff sought and received authority for negotiations with WestPac on April 20
following the Planning Commission's recommendation. Staff obtained parameters for
negotiations from the Council and undertook negotiations with WestPac. On May 4, staff
returned to Council in closed session, with the results of the preliminary negotiations as set forth
herein and to request authorization to proceed with final negotiations on the same terms.
Subsequent to receiving that authorization, staff and WestPac representatives reached agreement
on terms. Staff now seeks Council's approval of the terms which will be the basis on which final
documents are crafted.
Significant Contents of the Narrative Term Sheet
The following table provides an overview of the various points that are included, and expanded
upon, in the narrative Term Sheet shown at Attachment 3. Staff used the existing MOU as a
template for modification of the terms. Similar to the MOU, the Term Sheet does not
contemplate the outright sale of City property, but contemplates a long term lease of City Parking
Lot 2 to WestPac, with improvements to the property reverting to the City upon expiration of the
lease.
The following Term Comparison and Summary outlines the terms more formally set forth in the
narrative Term Sheet:
Term Existing MOU Terms Negotiated Terms
1. Public Parking 22 spaces eliminated at$30,000 $1.86M. Conceptually the same as current MOU:
per space for a total of$660,000 payment to the City for the 62 spaces eliminated at
$30,000 per space for a total of$1,860,000.
2. Project Parking Not specifically addressed Pay In-Lieu Fee if Owed. Parking in-lieu fee at time
Deficit. of building permit issuance(currently$17,072)for
Any deficit to be required parking spaces to meet City zoning
covered by appropriate requirements not provided on-site with no limit on
"in-lieu"fees. increases from the current fee.
r l
Garden Street Terraces Term Sheet Page 3
Term Existing MOU Terms Negotiated Terms
3. City Parking $2,400,000 repaid at market rate Financing of Fees. $2.4 million at no net cost to the
Assistance Financing (there should be no net cost to City based on a 30 year term,market interest rate and
This represents a loan City)based on 30-year term, issuance costs,whether City issues bonds or not.
by City to the market interest rate and issuance
Applicant. costs,based on whether City Financing will be for City fees up to$2.4 million.
issuances bonds or not.
The security for this financial obligation is still being
discussed by legal Counsel. It is likely to be in one or
more of the following common forms of security:
bond, letter of credit,or secured by the project parcels
but the City would be in second place.
4. Property Fee title transfer with concurrent A Lease. Long Term Leaser 99 year ground lease
Ownership conveyance back to City of
airspace condominium for new
City-owned parking facility.
Developer leases new parking
facility from City for 99 years:
"Initial Term"of 30 years and
"Renewal Term"of 69 years.
5. Supplemental Supplemental Parking Revenue Minimum Rent. Minimum Rent shall be equal to
Parking Revenue Replacement Payment of$1,272 Supplemental Parking Revenue Replacement
per public parking space Payment for 62 spaces in Lot 2 at the current net
removed: 22 spaces revenue per parking space,subject to a CPI increase
@ 1272/space=$28,000 per of no less than 3%accrued annually. The resulting
year minimum rent is$167,800.
5a. Base Rent No similar base rent concept. Rent Based on Reuse Appraisal and having a
Minimum Amount. Base rent will be equal to the
fair market percentage of a re-use value of the real
property,but no less than the minimum rent as
described above. Both lease percentage and value to
be determined by an independent appraiser hired by
the City.
5b. Additional Rent Renewal Term: $40,000 plus Additional Rent at Year 15.
1.5%of amount that gross hotel 1.5%of amount by which gross hotel room revenues
room revenues exceed exceed$71,500 per room beginning in year fifteen.
$5,000,000 at year 30.
($71,500 represents a per-room value that totals
$5,000,000 in a 70-room hotel,but recognizes the
room count in the ultimate project may change.).
�� 3
Garden Street Terraces Term Sheet Page 4
Term Comparison and Summary
Term Existing MOU Terms Negotiated Terms
5c. Rent Reduction Rent reduction of net realized Rent Reduction. Rent reduction of net realized
increase in City property tax increase in City property tax(estimated at$53,000).
(estimated at$66,000).
Note:No net General Fund impact; assumption is
Note:No net General Fund that tax is paid to the General Fund and the Parking
impact; assumption is that the Fund is responsible for this rent reduction.
Parking Fund is responsible for
this rent reduction.
6.Garden Street Developer to contribute fifty Willing to Pay for and Construct All
Improvements percent"or more"of aggregate Improvements. Developer to pay 100%of cost of
costs of Garden Street Makeover the Garden Street Makeover(estimated at$300,000).
Plan(Estimate: $150,000)
Improvements to Garden Street Alley are to be
planned and funded by the developer per MM LU-I
in the EIR(page 8-29).
Next Steps
Upon approval of the Term Sheet, staff will begin formulation of a new MOU and any other
accompanying documents such as a ground lease. Staff will return to Council with a proposed
MOU and any other documents upon completion. Additional key features in the existing MOU
will be reflected in the new MOU such as conditions precedent to closing escrow, rental of Lot 2
in an"as is" condition, documentation requirements, and definitions.
Following execution of the new MOU, the applicant will move forward with a redesign of the
project in keeping with the requirements of the EIR. Upon completion of that work, the City will
obtain necessary valuations required prior to allowing WestPac to control Lot 2.
FISCAL IMPACT
As outlined below, there are significant fiscal benefits to the City from the project. It is expected
to increase Transient Occupancy Tax and Sales Tax revenues in addition to adding a new hotel to
the mix downtown. In addition, the City stands to receive long term fiscal benefits from the rent
payments for the ground lease, augmented by the "Additional Rent" based on gross hotel room
revenue that begins in year fifteen.
Garden Street Terraces Term Sheet Page 5
General Fund
As summarized below, the revised project is estimated to add $450,000 annually to the General
Fund:
Project Reduced
Envisioned Development
General Fund Revenue Increase in MOU Alternative
Sales Tax
Onsite retail 83,000 88,000
Hotel guest spending 13,000 11,700
Resident spending 20,000 13,200
Property Tax 66,000 53,000
Transient Occupancy Tax 317,000 285,300
Total $4999000 $451,200
As reflected above, the revenue estimates from the "reduced development alternative" are
slightly less than the project envisioned in the current MOU due to the reduced project size.
Parking Fund
The following compares the fiscal benefits for the Parking Fund of the proposed terms with the
current MOU:
1 '
Garden Street Terraces Term Sheet Page 6
Parking Fund Revenue Summary
Term Current Proposed Variance-
One-Time
arianceOne-Time Revenue
Replacement Parking 660,000 1,860,000 1,200,000
Garden Street Makeover 150,000 300,000 150,000
Ongoing 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
Minimum Rent 40,000 253,000 213,000
Adjusted for
increases
in CPI
minimum 3%
3. Rent Reduction (66,000) (53,000) 13,000
Other Terms with No Direct CostlRevenues
In-lieu fees for any "new demand" deficit at rate Not Proposed
in effect at the time(currently$17,072 per Addressed
space)
Lending$2.4 million at market rates Unchanged Unchanged
Over the term of the proposed 99-year lease, the Parking Fund is estimated to receive $90.7
million in one-time and ongoing payments. Discounting for present value (PV), in recognizing
the "time value of money" and that the same dollar value today will be worth less in the future,
results in PV of funds received of$15.8 million. Taking a lot over shorter time frames, the PV of
one-time and ongoing payments is $5.8 million for 30 years and $3.8 million for the nest 15
years.
ALTERNATIVES
1. Reject the proposed Term Sheet. This alternative should only be selected if the Council no
longer supports the conceptual proposal. If the Garden Street Terraces concept remains supported
by the Council, then the Term Sheet is recommended since it is consistent with several City
policies and goals and contains terms that are financially beneficial to the City without rendering
Garden Street Terraces Term Sheet Page 7
the proposed project financially infeasible, such that the project's potential benefits to the City
will not be realized.
2. Provide direction to negotiate further and/or provide additional information. During
the discussion on this item, Council may provide direction to negotiate further with WestPac on
specific terms. The Term Sheet is intended to serve as a framework to assist in developing a
future MOU and other necessary documents. Staff should be provided direction about concerns
or preferences about less significant aspects of the Term Sheet so that these matters can be
addressed in the future agreements. If Council has major concerns about the proposed Term
Sheet, 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. If there is substantive negotiating
direction that needs to be provided to staff, the public disclosure of which would compromise the
City's negotiating position, direction should be provided to agendize a future close session.
ATTACHMENTS
1. Vicinity Map
2. Existing Memorandum of Understanding dated July 18, 2006
3. Proposed Term Sheet
TACouncil Agenda Repons\Administration CAR\GSTUvMOUCAR6-1-2010
�3- M � � -H
Attachment I
PF- PF-,H
C-D-f-I -
D-S-
_p_ C \
\0
VICINITY MAP File No. 124=06 N
11197 11237 11257 11277 11293 1137 Garden
712 7209 7229 728 7369 748 Marsh B�"�
ATTACHMENT 2
MEMORANDUM OF UNDERSTANDING
BETWEEN
THE CITY OF SAN LUIS OBISPO
AND
GARDEN STREET SLO PARTNERS,L.P.
EXCHANGE OF CITY LOT No.2
AND
DEVELOPMENT OF A NEW PARKING FACILITY AND RELATED IMPROVEMENTS
July 2006
r
ATTACHMENT Z
TABLE OF CONTENTS FOR MEMORANDUM OF UNDERSTANDING
BETWEEN
THE CITY OF SAN LUIS OBISPO AND GARDEN STREET SLO PARTNERS,L.P.
FOR
THE 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..........................................................................................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 PARTIES......................................................................................8
6.1 DEVELOPER..........................................................................................................................8
6.2 CITY.......................................................................................................:...............................8
7. OTHER MUNICIPAL PROCESSING............................................................................................8
8. NONBINDING NATURE OF UNDERSTANDINGS.._..........................................................:......8
9. POSSESSORY INTEREST TAXES......................................................._......................................9
EXHIBITS:
EXHIBIT 1 Property Ownership Map
EXHIBIT 2A Preliminary Parking Ownership Map(Ground Floor Level)
EXHIBIT 2B Preliminary Parking Ownership Map(Basement Level Plan)
/0
i
C:IDOCUME-I Wouscr\LOCALS-1\Tcmp\PARKIN-2.D0C
ATTACHMENT 2
MEMORANDUM OF UNDERSTANDING
THIS MEMORANDUM OF UNDERSTANDING(the"MOU") is made and entered into,effective as of
July /8, 2006 (the "Effective Date"), by and between THE CITY OF SAN LUIS OBISPO, a chartered
California municipal corporation (the "C "), 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 1 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 Developer's 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 Plan, 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: 1)
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)
all new,large commercial project should include dwellings; and
I �� 1
ATTACHMENT 2
I. The Project supports goals set forth in the San Luis Obispo Downtown Association's San
Luis Obispo Downtown Strategic Business Plan, especially goal 2.7 to'Till key gaps in the business mix"
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
ATTACHMENT 2
J
1. PROTECT DESCRIPTION. The Project includes the following elements:
1.1 HOTEL. 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 site from 650 square feet to
1,500 square feet, with the average size of each unit being approximately 1,100 square feet.
13 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;
(ii) 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
(iii) 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;
(iii) 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 - 13
ATTACHMENT 2
(iv) Developer has provided a plan that is acceptable to the City and addresses
during construction trash and delivery access to the businesses along Ifiguera Street that currently depend
upon Parking Lot No.2 and the alleyway adjacent to it for these purposes;
(v) Developer 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
(A) The building permits for the Project have been issued to Developer.
23 _ 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.
(a) DURATION OF PROJECT. The 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 part 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.
(c) 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 alfa,the following provisions:
(i) Contractor shall pay prevailing wages.
4 � I�
ATTACHMENT 2
i; 'i
(ii) Developer shall deliver "as-built" plans for the New Parking Facility to
City.
(iii) 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) City's satisfaction that Developer has a source of funding 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.
(ii) 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
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 thepublic 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 (Le., 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
3.1 ADVANCE BY CITY. On a mutually acceptable date within thirty(30) days following the
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 �� .�5
ATTACHMENT 2
Dollars ($2,400,000), which sum is intended to assist Developer in financing the cost of constructing the
New Parking Facility:.
(a) FIXED 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.
(i) 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'sadvancing 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
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 Lease 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 "Amortization 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 -Payment"
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
6 �� �/
ATTACHMENT 2
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 Tax" shall be the amount
by which (x) the City's actual revenue realization from property tax in the fust 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.
(ii) 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-level 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 streetscape 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 part 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. Developer's financial contribution to the costs of such Garden Street Makeover Plan shall be
fifty percent(50%)or more of the aggregate costs thereof.
5. DOCUMENTATION. The parties agree that, at a minimum, the documentation to be created as a
result of this MOU may include the following:
5.1 A Real Property Exchange Agreement;
5.2 A Construction Agreement;
7 � � ` �
ATTACHMENT 2
53 Applications For Regulatory Approval;
5A 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 Lease 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. RESPONSIBILITIES 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 landowndr, 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.
8. 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 documents listed 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
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 Q�
8 B � — ' O
ATTACHMENT 2
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
ATTACHMENT 2
IN WITNESS WHEREOF, 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:
t
t4ejyH'Lolo-p—er,City Clerk
APPROVED AS TO FORM:
Jon well,City Attorney
GARDEN STREET SLO PARTNERS, L.P., a
California limited partnership
By DOWNTOWN INVESTORS,LLC,a
California limited liability company,its
general partner
By
its Manager
EmmiTs:
EXHIBIT 1 Property Ownership Map
EXHIBIT 2A Preliminary Parking Ownership Map(Ground Floor Level)
EXHIBIT 2B Preliminary Parking Ownership Map(Basement Level Plan)
10 ��.(�
AnACHMENT 2
Exhibit " 1 "
Existing Property Ownership Map
Higuera Street
P P
N ° N °
I
cayww Garden Alley cnyRrW
r
11
cn
Pafking.Lpt#2 :/�r if B �j`f% c
' AM=-4r4,aa w/is� r/i i. m
m 11
J'
fr f� � r r ��'`✓ ! f
B B
-r /✓ �� y � ,r,///� /.�.� ✓,/rye r fv"
Marsh Street
Ground Level Plot Map Legend
SCIA01-W Ree 08.15.00
ODenotes City-Owned Parcel
Denotes Developer Parcels
1 .
-
iii�7j.rlrrr r
�
rr ,Y r1� i :��� ,r�/�J�'�'✓'�✓'` ' ✓' ff ✓%!" ,`%;J��r �� �/`fP1l� J�••' �l�
�s/.l �jj r r� � / �r f �� l��✓ C . c . :. ®� _. • t: it
SHE M.MR
!��ri� �✓X/•711� I SRI
/rJ
KIP. voll
W
r I I rJ'
���� rj Jf1 i ✓ F / .J . 1.'llr�� r'// r � .
J IVAM
%
• L -T
r r
•
f;f`r`!i`✓ SEEMS �fjr/">'' Fir�"%'✓'�1/'/frr pr"ff�.`f�i'/+1 d./.'If.'.�fi;.e�.f"(��i�ri:�i f fry'�r
• f�:fffl 'Fs'l�✓!_�':%ff/ff.�f ,��ff�r"�/%,r�',!���j.�t"�j/'�'J•y��,�>-�� ��✓��,��r�r�.
lff-✓ jMIl+'fr %1"r r.r ,,�•r}�J.!/ lrrfif✓ F,/'f��o"' '/,l i'�°P}''Tr^ frlrfj` ONE
-r rrr r/-'� j�rftf.},f d/ifs• f-'- .4Jil'r.'- /,r `'fi'i ff" .ri✓f%/� •PL'.
r >' � ,jf•
:� �� �� f�, ., , ,!�/r!,Jr/s�,✓�,�'`i.P rr`��f,�.rr�1
i f�f{f1rf/f'iJ,f��;rffr'/q:r,''f>ff,r><Irrlfl. J!✓Y'rJr reJ> 5:f%%'�"i'�'A3Err�f.iL��r¢!✓>f.J�� r/fes JJi.I'{.:r/..f/�"r"r�rfJ(�.r�f'�/.r,,Pr?;,'�
f�rj�fr�Jr`,/j'��
FIRM.
27 ,r111Ija MAf%r�%,s�1t�r.ff�fr}'f./.1�ff-'rfs�fr�;i�/,r✓y',Efs_'rI.;�:>`}r1;.r%�!i��''%�Sfo//j�"�,f'rrr.J�Jf'1�1f�`f}r}�rf.„"�'rf`.,fr'��
:l•I'ri`,'i
I ff/�r F'ti fifr�fj!'F'f f-s' rrl/ '�.fti1f✓;r'�r� / '_.�
jY//._J.>si,t',✓ 1'pf 0 a o @ a • fjP�f r'i'r A
rMEW
SP �frfi �r/��r/rI fs� �l✓ r /
rV f.r J f ly/lr rJ 11 rVNI. r.Y r J.,^rd'�!ri'/�/ff!'r+%�✓�r✓f f}•- aa�.arses�
as �/ fI/N.ra�•: � r/%/ • 1rf :.Q } r ! • PP Y�✓�P% ffrJ F!
♦F d it J f i r > ,rr r i
f � >f J` r / �ri�+�I. P f f � :r `✓!%fr� .>�
rff ✓'f ,JI/'" 1�r f P� J r
rrI ..�i. ,r'}r/: rP�J'' '!°r �r •`}lSf/�{Ii".
.!,.:r.�i'��f/✓} Tj rs/.i1.%�ffi.11r}s• ,{
MMi
.I✓ rJ± ri{?'f 5J rt
1104,10"M/. � IN
Tf,1 f fJ''r% � now' Jf rJ
- r yf_>j• /rd✓ r` !fJ MIN r1f..PrJf
'G/lr+•�111fl�ssiri f� ll/��JGiI�' �� i'fri'1'/fY�ff'�!f�Trr%�
'r"r .'z'" t-'l'✓ J'+� 'r��l,/' �(f/r. frr
� `/t
mmvt.
ATTACHMENT 9
PARKING LOT 2 - GARDEN STREET TERRACES
PROPOSED TERM SHEET
1. PURPOSFy 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.
B7 -a�f
G:\Gnrdm Strect TerracmN40U\Proposcd Tam Sheet.HMRcv.2010.5.21.Fina]Draft.docz Page 1
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-SITE PUBLIC PARKING REMOVED.
The parties acknowledge that City Lot 2 currently contains sixty-two (62) spaces and
the 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 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., 62 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 each fiscal year by the amount of
increase in the Consumer Price Index, if any, for the year immediately preceding, but in
no event shall the increase be less than three percent (3%) per year.
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.
4.1. TERM. The term of such loan shall not exceed 30 years.
GAGarden S=et TarracesWOUTroposed Tenn Sh=t.HMRe .2010.5.21.Fina]Dra9.do" Page 2
ATTACHMENT 3
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.
5. 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.
G:\Gvdm Streit TenacesNMOUTmposed Tenn Shect.HMRev.2010.5'.2I.FinaQhaft.docx Page 3
r
r _
council memoizanbum
DATE: June 1, 2010
TO: City Council
VIA: Katie Lichtig, City Manager RED FILE
- MEETING AGENDA
FROM: Christine Dietrick, City Attorney IDA 6 1 o ITEM 0,J2 Lt:�'
SUBJECT: Garden Street Terraces Term Sheet
Based on an oversight in the review of the proposed Term Sheet for Parking Lot 2 - Garden
Street Terraces, the developer has requested a minor adjustment to the CPI increase for the base
rent as reflected in the attached legislative draft of the proposed Term Sheet.
Staff has no objection to the attached modification.
Attachments
Page 2, clause 3.5, Parking Lot 2—Garden Street Terraces Proposed Term Sheet
GAGarden Street Ter accAMOUAProposed Term Sheet.HMRev.2010.5.21.FinalDraft.doc
A*7,P CoP`/ Eir1A�L
CjeOUNCIL ADD DIR
3eA130f*A*Q C''RIN DIR
1TAe*&A1V7-4"AfdV-C�'FIRE CHIEF
0-ATTORNEY (mow DIR
C'CLERWORIG M'POIJCE CHF
0EPT HEADS nEO OIR
TViL bIR
HR DIR_
MW >9AA!�5 CauuC(L
C�
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-SITE PUBLIC PARKING REMOVED.
The parties acknowledge that City Lot 2 currently contains sixty-two (62) spaces and
the 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 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., 62 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, try—for each of the 3_years
immediately preceding, but in no event shall the increase be less than two percent (2%)
thFee pereen` (3%)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
St—'rG'ndca Strm Tetnec W0U\PromgW Tmn Sheer HMRcv 2010 5 21 Fin'dlhn0
Pagc 2
Minor Modification to EXHIBIT A —
Mitigation Measures Class II Impacts
01 June 2010
Mitigation Measure MM NO-3c—Revise to read,
"All "applicable common outdoor residential activity areas directly facing
Broad and Marsh streets shall ., 4 fee
stueVV12
.✓ feet plexiglass) selid ba ff er- a nstf tea between the eefiyity afea
and Bfead and Mafsh —stfeets provide construction and/or other
methodologies to reduce outdoor activity area noise levels to below 60
CNEL. This requirement is optional for all applicable private outdoor
residential activity areas (e.g., residential balconies, courtyards, etc.)"
0:1Garden Street Terrace Mixed Use ICorrespondence12010-6-(.Revisions to Mitigation Measure MM NO 3c.doc