HomeMy WebLinkAboutMOU between The County of San Luis Obispo, The City and 1144 Higuera InvestmentsMEMORANDUM OF UNDERSTANDING BETWEEN
THE COUNTY OF SAN LUIS OBISPO, THE CITY OF SAN LUIS OBISPO
AND 1144 HIGUERA INVESTMENTS LLC
This MEMORANDUM OF UNDERSTANDING ("MOU") is hereby made and entered into by and
between the County of San Luis Obispo ("County"), the City of San Luis Obispo ("City"), and
1144 Higuera Investments LLC, and 1166 Higuera Street LLC, a California limited liability company
herein after, collectively known as ("1144"), this 2L day of JWJ—, 2019.
A. INTRODUCTION:
The City currently operates three parking structures in the downtown at 842 Palm Street,
871 Marsh Street and 919 Palm Street and is currently in the process of completing the design for
a fourth parking structure at the corner of Palm and Nipomo to serve the parking needs at the
south end of the City's Downtown. The parties hereto are interested in exploring the feasibility of
an additional fifth parking structure at the northeast end of the downtown district in order to
provide needed spaces to support new development, accommodate employees working in the
downtown and upper Monterey areas, minimize off street parking in adjacent properties and
neighborhoods and provide additional options for residents and visitors.
The County is committed to retaining governmental services in the City downtown area and has
identified the real property consisting of APN 002-436-005 and APN 002-436-008 (the "Clinton
Parcel") and portions of APN 002-436-013 (the "Adler Parcel"); and, APN 002-436-018 (the "Blum
Parcel"), as the same are more particularly depicted on Exhibit "A" (collectively sometimes referred
to as the "NKT Site") as an ideal site to construct a parking structure for the benefit of current and
future general government facilities located in the vicinity and to support the parking needs of the
County government center to be redeveloped at 1144 Monterey Street.
1144 desires to utilize parking spaces on the existing NKT Site, and 82 designated parking spaces
in a future parking structure, for development located on adjacent properties owned by 1144
and/or its affiliates. 1144 will acquire ownership of the entire NKT Site for purposes of this MOU
and the proposed parking structure project.
The construction of a parking structure on the NKT Site would also serve to provide improved
parking services forthe benefit of the public, local businesses, tourists and government employees
and will reduce the parking impact on the surrounding residential neighborhoods. The County,
City and 1144 are committed to work together to this end.
B. PURPOSE:
The purpose of this MOU is to identify a basic framework between the County, City and 1144 for
Phase 1 efforts related to developing a mutually -beneficial parking structure upon the NKT Site to
meet current and future community and 1144's needs. This will include the County, City and 1144
working collaboratively on the recommendation of parking structure proposals to both the County
and the City elected officials. If necessary, additional MOU's will be developed for future phases of
this parking structure project.
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MEMORANDUM OF UNDERSTANDING BETWEEN
THE COUNTY OF SAN LUIS OBISPO, THE CITY OF SAN LUIS OBISPO
AND 1144 HIGUERA INVESTMENTS LLC
This MEMORANDUM OF UNDERSTANDING ("MOU") is hereby made and entered into by and
between the County of San Luis Obispo ("County"), the City of San Luis Obispo ("City"), and
1144 Higuera Investments LLC, and 1166 Higuera Street LLC, a California limited liability company
herein after, collectively known as (1144"), this day of _ , 2019.
A. INTRODUCTION:
The City currently operates three parking structures in the downtown at 842 Palm Street,
871 Marsh Street and 919 Palm Street and is currently in the process of completing the design for
a fourth parking structure at the corner of Palm and Nipomo to serve the parking needs at the
south end of the City's Downtown. The parties hereto are interested in exploring the feasibility of
an additional fifth parking structure at the northeast end of the downtown district in order to
provide needed spaces to support new development, accommodate employees working in the
downtown and upper Monterey areas, minimize off street parking in adjacent properties and
neighborhoods and provide additional options for residents and visitors.
The County is committed to retaining governmental services in the City downtown area and has
identified the real property consisting of APN 002-436-005 and APN 002-436-008 (the "Clinton
Parcel") and portions of APN 002-436-013 (the "Adler Parcel"); and, APN 002-436-018 (the "Blum
Parcel"), as the same are more particularly depicted on Exhibit "A" (collectively sometimes referred
to as the "NKT Site") as an ideal site to construct a parking structure for the benefit of current and
future general government facilities located in the vicinity and to support the parking needs of the
County government center to be redeveloped at 1144 Monterey Street.
1144 desires to utilize parking spaces on the existing NKT Site, and 82 designated parking spaces
in a future parking structure, for development located on adjacent properties owned by 1144
and/or its affiliates. 1144 will acquire ownership of the entire NKT Site for purposes of this MOU
and the proposed parking structure project.
The construction of a parking structure on the NKT Site would also serve to provide improved
parking services for the benefit of the public, local businesses, tourists and government employees
and will reduce the parking impact on the surrounding residential neighborhoods. The County,
City and 1144 are committed to work together to this end.
B. PURPOSE:
The purpose of this MOU is to identify a basic framework between the County, City and 1144 for
Phase 1 efforts related to developing a mutually -beneficial parking structure upon the NKT Site to
meet current and future community and 1144's needs. This will include the County, City and 1144
working collaboratively on the recommendation of parking structure proposals to both the County
and the City elected officials. If necessary, additional MOU's will be developed for future phases of
this parking structure project.
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C. THE UNDERSTANDING:
1) The Underlying Parcels: Acquisition and Subdivision/Adjustments:
a) The Adler Parcel: The parties intend that 1144 shall acquire the fee title to a
portion of APN 002-436-013 shown as the "Adler Parcel" on Exhibit "A", at 1144's sole cost and
expense. The costs incurred by 1144 in the acquisition of the Adler parcel shall be referred to
herein as the "Adler Parcel Acquisition Costs." The parties acknowledge and agree that the costs
of the acquisition of the Adler Parcel shall include the costs of the necessary lot line adjustment
associated with the subdivision of APN 002-436-013 so as to merge the Adler Parcel with the
adjacent Clinton Parcel (APN 002-436-005 and APN 002-436-008), as well as the actual costs of the
acquisition of the Adler Parcel by 1144. 1144 will keep the County and City informed of anticipated
and actual Adler Parcel Acquisition Costs and acquisition progress.
b) The Clinton Parcel: 1144 has acquired the fee title to APN 002-436-005 and
APN 002-436-008, shown as the "Clinton Parcel" on Exhibit "A" at 1144's sole cost and expense.
1144 represents the acquisition cost for the Clinton Parcel by 1144 was the sura of $3,600,000.00
(the "Clinton Acquisition Costs"). The Clinton Acquisition Costs are subject to confirmation by the
County and City prior to entering into the lease option described in paragraph 3. The Clinton
Acquisition Costs do not include the Remediation Work described in paragraph 2.
C) The Blum Parcel: 1144 is currently the owner of the Blum Parcel
APN 002-436-018 as depicted on Exhibit "A," a lot line adjustment/lot split shall be required in order
to establish the Blum Parcel as a separate legal parcel. For purposes of this agreement, the costs
and expenses incurred by 1144 in establishing the Blum Parcel as a separate legal parcel shall be
deemed a part of the Adler Parcel Acquisition Costs.
d) Administrative Cooperation: The City shall reasonably cooperate, and
proceed in good faith in processing any applications submitted by 1144, so that either: (i) the NKT
Site consists of legal parcels known as the Adler Parcel, the Blum Parcel and the Clinton Parcel as
depicted on Exhibit "A", or (ii) said parcels are merged into a single separate legal parcel:, or, (iii)
any combination of the foregoing.
2) Remediation: The Parties acknowledge and agree that the NKT Site will require
certain environmental remediation, as the same is more particularly specified within the Stantec
Report dated March 2, 2018 entitled "Results of Supplemental Phase 11 Environmental Site Assessment
1166 Higuera Street, San Luis, California", (the "Remediation Work") and estimated to be
accomplished forthe cost of approximately $275,000.00, and is contemplated to be completed by
1144 as soon as practical following 1144's acquisition of the Clinton Parcel (the "Clinton
Acquisition"). The Clinton Acquisition is anticipated to close by March 31, 2019. Immediately
following the Clinton Acquisition, 1144 shall cause the Remediation Work to be performed at
1144's expense. For purposes of repayment under the Ground Lease, 1144's actual costs of
performing the Remediation Work shall be deemed to accrue interest at 8% per annum following
the completion of the Remediation work (the "Cost of Remediation Work") and shall be included,
for purposes of the Ground Lease, discussed below, as either a lump sum payment payable upon
the execution of the Lease Option, or added to the underlying total base amount for the
determination of the annual leasehold base rent payment. 1144 will keep the County and City
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informed of progress of the Remediation Work and the anticipated and actual Cost of Remediation
Work. Neither County or City shall be liable for the Costs of the Remediation Work unless the
County and/or the City hereto enter into a Ground Lease with 1144 for the NKT Site. Upon
satisfactory completion of the Remediation Work, the County shall provide 1144 with a "No Further
Action" letter for the NKT Site for parking garage purposes. Following the completion of the
Remediation Work, the parties acknowledge that the Lease Option and Ground Lease between
1144 and the County and/or City (the "Lessee") shall specifically provide that the Lessee accepts
the NKT Site "As -Is" and 'Where Is," and that said Lessee shall thereafter be solely responsible for
any and all environmental matters associated with the NKT Site for parking garage purposes.
3) Ground Lease option: On or before December 2, 2019, and conditioned on
completion of the Remediation Work, a lease option regarding the NKT Site (the "Lease Option")
shall be executed between 1144 and the County and/or City in exchange for an option
consideration, payment by the County and/or City in the amount of $288,000, as shall be adjusted
by adding an additional amount equal to 8% of the Cost of the Remediation Work, plus an
additional amount equal to 8% of the Adler Parcel Acquisition Costs (collectively the "Lease Option
Consideration"). The payment of the Lease Option Consideration shall be paid by the County
and/or City on December 2, 2019. The Lease Option consideration so paid shall not be applied to
any rent due or accruing under the anticipated ground lease for the NKT Site. The Lease Option
shall include a complete "ready for execution" but unexecuted copy of the Ground Lease as an
exhibit, with all necessary terms, covenants and conditions,
4) Adler Remediation: 1144 shall investigate the environmental condition of the Adler
Parcel portion of the NKT Site and shall pay the costs associated with any environmental
remediation required for purposes of the construction of the parking garage. All such costs and
expenses shall become a part of the Adler Parcel Acquisition Costs for purposes of the Lease
Option and the Ground Lease. 1144 will keep the County and City informed of investigations into
environmental condition, remediation progress and anticipated and actual Adler Parcel
Acquisition Costs. Neither City or County shall be liable for the Adler Parcel remediation costs
unless the City and/or the County hereto enter into a Ground Lease with 1144 for the NKT Site.
D. THE GROUND LEASE:
1) Under the Lease Option, the County and/or City shall have the option to enter into a
ground lease for the NKT Site (the "Ground Lease', the consideration to be payable by the Lessee
and due under the Ground Lease, and the terms of the Ground Lease shall include the following:
a) The initial Annual Base Rent shall be either: (i) $288.000.00, plus 8% of the
Adler Acquisition Costs plus 8% of the actual Cost of Remediation Work; or, (ii) in the event that
the Lessee elects to make a lump sum payment of all of the Costs of Remediation Work, together
with interest accruing at 8% from the date of completion of the Remediation Work, then the initial
Annual Base Rent Shall then be the sum of $288,000.00 plus 8% of the Adler Parcel Acquisition
Costs.
b) The Ground Lease shall commence prior to construction, and in no event
later than January 1, 2022. The Annual Base Rent due under the Ground Lease shall be increased
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every five (5) years by 10% of the Annual Base Rent due for the year immediately prior to each
increase. In addition to Annual Base Rent, the Ground Lease shall be an absolute triple net lease.
C) As additional consideration due 1144 under the Ground Lease, 1144 shall
reserve rights, and be granted an exclusive easement for ingress, egress and the use of 82 parking
spaces at locations designated by 1144 within the parking structure to be constructed on the
NKT Site in conjunction with lease negotiations. The obligation associated with the maintenance
and repair of the NKT Site spaces shall be addressed in the lease between the parties.
d) At the termination of the Ground Lease, 1144 shall have the right to either
(1) accept all existing improvements and fixtures as part of the real property, or (2) require the
lessee to remove the improvements, structures and fixtures at lessee's sole cost and expense.
2) The Ground Lease shall include the following terms:
a) An initial 50 -year term;
b) Lessee, at its sole option, shall have options to extend the lease term for four
(4) consecutive ten (10) year terms, and one (1) nine (9) year term, not to exceed a total lease term
of ninety-nine (99) years. Extension options shall be exercised by Lessee no later than nine (9)
months before expiration of the initial lease term, or any prior lease term extension,
c) The Annual Base Rent for the initial ten (10) year option extension of the lease
term shall be based on the fair market rental value of the vacant lot value for the Clinton, Blum,
and Adler Parcels, but shall not be less than 92x/0, or more than 103%, of the Annual Base Rent
due for the year immediately preceding the initial lease term extension.
Thereafter, the Annual Base Rent due during any lease term extension shall
be increased every five (5) years by 10% of the last Annual Base Rent due immediately prior to
such increase;
d) Upon 1144's unequivocal decision to sell the NKT Site during the term of the
Lease, Lessee shall have a first right to negotiate purchase of the NKT Site. 1144 shall provide the
Lessee with written notice of 1144's unequivocal decision to sell the NKT Site, and Lessee shall
have one hundred and eighty (180) days from the date of said written notice to negotiate and
agree to the terms for purchase of the NKT Site. If the parties fail to reach an agreement within
that period, 1144 may thereafter sell the NKT Site to any third party. Notwithstanding the
foregoing, 1144, and the owners of 1144, shall have the right to transfer any rights under this
agreement, the Lease Option, the Lease, or any ownership interests in the NKT Site, or 1144, to
any other person or entity for estate planning or related purpose, without triggering the Lessee's
rights under this paragraph. The parties acknowledge and agree that the rights of Lessee under
the first right to negotiate purchase of the NKT Site under this paragraph shall applicable only to
an unequivocal decision to sell the NKT Site during the term of the Ground Lease.
e) If hereafter agreed to by 1144 and the County and/or City, an option for the
County and/or City to purchase the NKT Site following the expiration of the initial term, in
accordance with the parties' agreement; and,
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f) Such other terms as reasonably agreed between the parties,
3) The Ground Lease to the County and/or City shall be limited for the exclusive use of
building and the operation of a parking structure, and agreed upon accessory uses, on the NKT
Site by the County and/or City of San Luis Obispo. At all times prior to the commencement of
construction of such a parking structure on the NKT Site, 1144 shall have the right to utilize the
NKT Site for parking, including the right to sublease portions of the NKT Site to third parties for
parking purposes, without any obligation to compensate either the County or the City for the
exercise of such rights provided such use does not unreasonably interfere with any pre -
construction activities of the County and/or City. 1144, at 1144's sole cost and expense shall self
maintain and operate the NKT Site with respect to such use prior to the commencement of
construction of the contemplated parking structure on the NKT Site.
E. TERMINATION:
In the event that County and/or City fails to: (i) timely execute a Lease Option acceptable to 1144
and pay the Lease Option Consideration to 1144 prior to December 2, 2019, or (ii) timely execute
the Ground Lease and pay the initial Base Rent in accordance with the terms of the Lease Option,
then, except as set forth between the County and City under Section F below, the parties shall have
no further obligations between them associated with this MOU or the NKT Site whatsoever,
including but not limited to acquisition or remediation costs. In addition, any party, upon thirty
(30) days written notice to all of the other parties, may withdraw from or terminate this MOU as to
that party, in its entirety, or in part and for any reason whatsoever, with or without cause, and,
except as set forth between the County and City under Section F below, the withdrawing party
shall have no further obligations to the other parties associated with this MOU or the NKT Site
whatsoever, including but not limited to acquisition or remediation costs.
F. CITY -COUNTY RELATIONSHIP:
The Parties anticipate that the County and the City shall share 50% of actual costs incurred by the
County associated with the Phase 1 milestones, as outlined in Exhibit C. County agrees to include
in any third party consultant services agreements that the work developed by the consultant is
jointly owned by County and City and that both parties have ownership rights to that work. In the
event of termination of or withdrawal from this MOU by the County or City, the withdrawing/
terminating agency shall only be liable for any costs incurred up to the date of the withdrawal/
termination. The County and City agree that any parking structure constructed at the NKT Site will
be subject to City design review in accordance with Titles 2 and 17 of the City's Municipal Code.
G. COMMUNICATION AND COOPERATION:
In the course of this endeavor the County, City and 1144 will share information engage in dialogue
and mutually cooperate towards the various acquisitions, actions, agreements and construction
herein contemplated.
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H. PHASE 1 MILESTONES:
The approach to develop mutually -beneficial parking alternatives to meet future parking demand
and improve parking services will be completed through completion of the following Phase 1
milestones. If any party anticipates missing the target completion date for their task, that party
shall notify the other parties prior to the target completion date for their milestone, with a revised
anticipated completion date.
MILESTONES COMPLETION DATE
1.
Execute MOU - City of San Luis Obispo (City)
5/21/19
2.
Execute MOU - County of San Luis Obispo (County)
5/21/19
3.
Provide updated draft term sheet for ground lease (1144)
6/1/19
4.
Complete Site Remediation Work (1144)
6/28/19
5.
Initiate Environmental studies (City/County)
7/2/19
6.
Prepare initial financial analysis of proposed parking alternatives (City)
7/28/19
7.
Prepare RFP for Construction Manager/Master Architect (County)
8/2/19
8.
Complete parking conceptual design (County)
8/19/19
9.
Complete Geotech/Survey (County)
9/2/19
10.
Complete property acquisition (1144)
10/1/19
11.
Select Construction Manager/Master Architect (County)
10/15/19
12.
Present CM/MA contract for City and County approval to proceed
11/19/19
13.
Lease Option and Ground Lease completed - Initial Payment
12/2/19
(Lease Option fully executed with attached Ground Lease)
EXHIBITS:
1. Exhibit A: Site Map
2. Exhibit B: Preliminary Project Schedule
3. Exhibit C: Cost estimate for Programming / Conceptual design work
I. PRINCIPAL CONTACTS:
The principal contacts for this MOU are:
County:
Name
Cindy Treichler, Capital Planning/Facilities Manager
John Diodati, Deputy Director
Rob Ruiz, Engineer IV
Brian Stack, Deputy County Counsel
City:
Name
Tim Bochum, Deputy Director
Rachel Cohen, Associate Planner
Charlene Rosales, Economic Development Manager
Christine Dietrick, City Attorney
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Role:
County Lead
County Support
County Technical
County Legal
Role:
City Lead
City Technical
City Support
City Legal
1144:
Name Role:
Nick Tompkins, Owner 1144 Lead
Farmer & Ready, ALC 1144 Legal
Claire Simolis 1144 CFO
J. LIMITED OBLIGATION DOCUMENT:
With the exception of Section F and the sharing of costs between County and City for work
associated with the Phase 1 milestones until expiration or termination/withdrawal,
notwithstanding anything herein to the contrary, the Parties agree that this MOU is non-binding
in nature and does not contractually obligate, either expressly or impliedly, any party to enter into
an option to lease the NKT Site, lease the NKT Site, pay for acquisition or remediation costs, or to
construct or otherwise fund the construction and operation of a parking structure
K. COMMENCEMENT/EXPIRATION DATE:
This MOU is executed as of the date of last signature and is effective only through
December 2, 2019 at which time it will expire as to all future matters unless extended, in writing,
by all parties.
L. LIABILITIES:
It is understood that no party to this MOU is the agent of the others nor is liable for the wrongful
acts or negligence of the others. Each party shall be solely responsible for its negligent acts or
omissions and those of its officers, employees, agents, howsoever caused, to the extent allowed
by law.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the last written date
below.
FOR County:
Date: V81k_ = I -
%SavAgent County Administrative Officer
FOR City:
Date: 5�[ j
Dere iJohnson, City Manager
FOR 1144:
Date: S
Nick Tompkins, Manager
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APPROVED AS TO FORM AND LEGAL EFFECT:
Farmer & Ready, ALC
County Counsel
Deputy •v 07 •
J. CHRISTINE DIETRICK
City Attorney
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Exhibit C:
Hieuera St. Parking Structure
Cost Estimate thru selection of CM/PM (off -ramp one)
TASK Estimated Cost
Consultant Fees: (including County administrative charges)
Conceptual Design- Parking Layout
$32,000
Geotech report
$37,000
Site Survey
$16,000
Hazmat report (soil assessment)
See Note 1 below
Staff Time:
MOU/PW Admin
$10,000
Conceptual Design -Informal RFP & Design Phase
$10,000
Prepare CM/PM RFP
$20,000
$40,000
Bidding/Consultant Selection Process
Contingency
$15,000
TOTAL COST:
$180,000
Note 1:
1. It is assumed that Developer will deliver a clean site to the County/City.
2. If needed, the Geotech and site survey can be secured after the CM/PM
is on board