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HomeMy WebLinkAbout06/07/2011, C10 - MODIFICATION OF THE OPTION TO PURCHASE REAL PROPERTY (CHINATOWN OPTION) TO PROVIDE A SIX MONTH SUSP council Mrc°°°D°6/7/2011 j acEnoa RepoRt ftmN°m� Bio C ITY OF SAN LU I S OBIS PO FROM: Michael Codron, Assistant City Manager a Prepared By: Claire Clark, Economic Development Manager SUBJECT: MODIFICATION OF THE OPTION TO PURCHASE REAL PROPERTY (CHINATOWN OPTION) TO PROVIDE A SIX MONTH SUSPENSION OF THE PAYMENT TERM DUE ON JULY 2, 2011, TO FACILITATE NEGOTIATIONS OF AMENDMENTS TO THE OPTION RECOMMENDATION Authorize the Mayor to enter into, on behalf of the City, a modification of the Chinatown Option between the City and SLO Chinatown LLC to provide a six month suspension of the payment term due on July 2, 2011, to facilitate negotiation of a phasing plan and other terms and conditions for the Chinatown project. DISCUSSION The Option for SLO Chinatown LLC to purchase City owned property between Palm, Morro and Monterey Streets for the Chinatown Project was first entered into in 2003 and subsequently modified in 2008. SLO Chinatown LLC has now requested additional changes to the Option to provide for a phased development of City owned property, and to change other terms of the agreement. Presently, the Chinatown Option allows SLO Chinatown LLC to purchase the property from the City only if certain conditions have been met. The Copeland team has indicated to City staff that those conditions can be met for the Monterey Street portion of the site, but cannot be met for the hotel portion of the site because of ongoing effects of the recession on hotel development. The current option agreement does not anticipate or provide for phasing of the Chinatown project. However, phasing of the project with Monterey Street development moving forward in the short term and the hotel moving forward when economic conditions improve should be considered at this time. Under the current agreement, the first accelerated option payment is due to the City on July 2, 2011. If this payment is not made, the option agreement will expire. SLO Chinatown LLC has requested suspension of the payment of the first accelerated option amount so that an amendment to the Option can be negotiated to allow the purchase of City land to move forward based on the phased project approach. A Third Modification to the Option to Purchase Real Property authorizing suspension of the July 2, 2011 payment term is attached hereto. In accordance with direction from Council in closed session, the City's real property negotiators have been directed to negotiate terms governing changes to the Option. C10-1 Chinatown Option Agreement Paae 2 FISCAL IMPACT There will be no direct fiscal impact associated with a six month suspension of the Option terms. In the event negotiations fail to produce new Option terms, the accelerated option payment that is due on July 2, 2011, will become due on January 3, 2012, along with subsequent payments due in accordance with the Option as presently written. These payments would be required to be made to keep the present Option in place. If negotiations result in a proposal for a new or further amendment to the Option, staff will return to the City Council with a recommendation and further fiscal impact analysis. ALTERNATIVE Do not approve a six month suspension of the accelerated option payment. This is not recommended because of the uncertainty it creates for the development of the Chinatown project and the potential loss of the benefits of the public-private partnership that are the goal of this transaction. ATTACHMENTS 1. Modification to Option to Purchase Real Property T\Council Agenda Reyons\Administration CAR\Chinatown\6-7-1 I(option discussion).DOC C10-2 ATTACHMENT THIRD MODIFICATION TO OPTION TO PURCHASE REAL PROPERTY This Third Modification to Option Agreement is made as of July 1, 2011, by and between THE CITY OF SAN LUIS OBISPO, a municipal corporation and charter city ("City"), and SLO CHINATOWN, LLC, a California limited liability company ("Copelands"), as successor in interest to SAN LUIS OBISPO COURT STREET, LLC, a California limited liability company, with respect to that certain Option to Purchase Real Property, dated as of November 5, 2003, between the City and Copelands (the "Original Agreement"). All capitalized terms not otherwise defined herein shall have the meaning given in the Original Agreement. RECITALS A. The City and Copelands entered into a certain Option to Purchase Real Property (the "Original Agreement") as of November 5, 2003, a Modification to Option to Purchase Real Property as of April 3, 2008 ("Modification"), and a Second Modification to Option to Purchase Real Property as of July 1, 2008 ("Second Modification"). B. In order to extend the term of the existing Option under the terns of the Second Modification, Copelands will be required to pay to the City an Accelerated Additional Option Price as determined under the Second Modification on July 2, 2011. C. Copelands has requested that the City enter into negotiations of a proposal to modify the existing Option agreement to facilitate the phased development of the Project and the City Council has authorized staff to conduct such negotiations. D. In order to preserve the status quo and the rights of all the parties under the Original Agreement and subsequent modifications and in order to allow for negotiations concerning the Option and the phasing proposal, the parties wish to enter into this Third Modification to Option Agreement, in order to suspend the due date of the first payment of the Accelerated Additional Option Price currently due on July 2, 2011, until January 3, 2012. AGREEMENT NOW, THEREFORE, the City and Copelands, in consideration of the mutual representations, warranties and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, subject to the terms and conditions hereinafter set forth, and intending to be legally bound, do hereby mutually agree as follows: 1. Copelands obligation to pay the first scheduled Accelerated Option Payment, due July 2, 2011, as set forth in Section 3 (Term of Option) of the Option to Purchase Real Property, as amended by the Second Modification, is hereby suspended until January 3, 2012. 2. If Copelands and the City have not reached an agreement by January 3, 2011 to amend the Original Agreement or to enter into a successor agreement regarding the phased development of the Project, both the first and second scheduled Accelerated Additional Option Price payments, as set forth in Section 3 of the Original Agreement, as amended by the Second i C10-3 ATTACHMEN a Modification, will be due and payable to the City on January 2, 2012 in order to extend the term of the Option, also as set forth in Section 3, as amended by the Second Modification. If no agreement is reached and full payment of the first and second scheduled Accelerated Additional Option Price payments are not paid in full to the City by January 3, 2012, the Option shall expire, the City shall retain all prior payments made to the City by the Copelands, and the City shall retain title to the Property with no further obligation to Copelands regarding the Original Agreement, as modified. 3. Except for the modifications set forth above, the Original Agreement, as amended by the Modification and Second Modification, shall remain in full force and effect. 4. ' This Third Modification may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original and all of which shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties to this Modification have duly executed it as of the day and year first written above. SLO CHINATOWN, LLC, a California limited liability company By: Tom Copeland Its: Manager CITY OF SAN LUIS OBISPO, a municipal corporation and Charter City By: Jan Marx Mayor Attest: By: Elaina Cano City Clerk Approved as to Form- Approved as to Form: 1 By: O. Chrnistine Dietrick Suzanne Fryer City Attorney General Counsel, SLO Chinatown, LLC 2 C10-4