HomeMy WebLinkAbout12/04/1990, C-2 - AMENDMENT TO COURT STREET PREDEVELOPMENT AGREEMENT AND AGREEMENT TO LEASE J MEETING DAT
E
city of San IDIS OBISPO
COUNCIL ADEN®A REPORT ITEM NUMBEPV
- FROM: Ken Hampian, Assistant City Administrative Officer
SUBJECT: Amendment to Court Street Predevelopment Agreement and
Agreement to Lease
CAO RECOMMENDATION: By motion, approve and authorize the Mayor to
execute the first amendment of Predevelopment Agreement and
Agreement to Lease, as recommended.
DISCUSSION:
Background
On June 19, 1990 the City entered into the Predevelopment Agreement
and Agreement to Lease with Interwest Investment Group. The
purpose of the Predevelopment Agreement is to set forth conditions
to be met in advance of execution of the ground lease for the. Court
Street project. The first two "action" steps in the Schedule of
Performance to the Predevelopment Agreement are: (1)
Identification of the Development Team, including providing the
financial and experience related documentation required by
Agreement Section 2 . 01 (c) for evaluation by the City; and (2)
Approval or disapproval of the Development Team based on the
information submitted and a thorough background evaluation by the
City.
As outlined in the "Recitals" to the proposed First Amendment of
the Predevelopment Agreement (Attachment 1) , adequate information
was not submitted in order to qualify the initial proposed general
partners within the timeframe provided in the Schedule of
Performance to the Predevelopment Agreement. On October 31, 1990
a written correspondence was received by the City indicating that
the Interwest Investment Group had terminated their relationship
with the initial proposed general partners. Also included in this
correspondence was a request to amend the Predevelopment Agreement
to provide an extension of time in order to qualify new financial
partners, known as RHD & Associates (Attachment 2) .
RHD & Associates consists of the same individuals who are acquiring
and planning to renovate the J.C. Penney's Building in downtown San
Luis Obispo. Staff is recommending that Council approve the
amendment to the agreement in order to complete an evaluation of
this proposed development team. The City will be aided in this
review by its financial advisor for the Court Street Project, Paul
Silvern of Hamilton, Rabinovitz, and Auschuler, Inc.
First Amendment Provisions
Pursuant to direction received from Council in executive session
on November 6, 1990,. the First Amendment to the Predevelopment
Agreement provides for the following main provisions, which have
been agreed upon through negotiations with Interwest:
eij
city Of San tins OBISPO
ONGe COUNCIL AGENDA REPORT _
Page Two
Council Agenda Report
• Provides the Interwest Investment Group with 60 days from the
date of execution of the Amendment to submit all information
needed to comprehensively evaluate the qualifications of the
proposed financial partners.
• Provides for the automatic termination of the Predevelopment
Agreement if all necessary information is not submitted within
the allowed timeframe (by February 4, 1991) .
• Limits the review of qualifications to RHD & Associates only;
no other developers or proposed team members are to be
proposed or considered.
• Retains for the City an appropriate amount of time to review
the development team's qualifications, once all required
information is submitted (approximately 60 days) .
• Allows for the acceptance of alternative financial statements
or information if deemed equivalent to audited financial
statements by the City and its financial advisor.
0 Provides for an increase in the project management fee to be
paid by the Interwest Investment Group in order to cover the i
additional costs estimated to be incurred by the City to
review RHD & Associates (approximately $6, 500) .
CONCURRENCES:
The provisions outlined under the First Amendment of Predevelopment
Agreement and Agreement to Lease were drafted by the City Attorney.
The Amendment has been executed by the Interwest Investment Group.
ALTERNATIVE:
The City Council could reject the proposed amendment to the
Predevelopment Agreement, which in effect, would terminate the
City's relationship with the Interwest Investment Group. Because
the Court Street Project represents an important enhancement to the
economy and amenities of downtown San Luis Obispo, it would not be
in the best interest of the City to take this action at this time.
ATTACHMENTS:
1 - Proposed First Amendment of Predevelopment Agreement
2 - October 31 Correspondence from Interwest Investment Group
KH:agenda.ctst:bw
RECEIVED
OCT 3 1 1990
CITY CREAK
October 31, 1990 SAN Wig OBISPO.CA
Ken Hampian
Assistant City Administrative Officer
P.O. Box 8100
San Luis Obispo, CA 93403=8100
RE: Court Street Centex
Dear Mr. Hampian:
Per our discussion, Interwest Investment Group, Inc. hereby
requests to substitute R.H.D. Associates for Monos, Inc. , Jamie
Sohachesky and Milton Heching as the development team's financial
partner under the Predevelopment Agreement and the 999 Monterey
Partnership. The present status of the 999 Monterey Partnership is
that the Partnership has been terminated due to the financial
partners failure to provide required financial information to the
City. We feel that such a termination and substitution is in the
best interests of the Project and all parties concerned.
CIn accordance with Sections 2. 01(c) and (d) of the
Predevelopment Agreement; we will of course be able to provide all
the required financial and background information on R.H.D.
Associates immediately, except the audited financial statements.
Since the new partners are individuals and able to provide full
confidential financial disclosure to the City, they do not want to
make their detail financial holdings a matter of public record. As
you will see from the financials, we do not expect the financial
ability of R.H.D. Associates to be an issue. It is R.H.D.
Associates ' desire to provide the required financial documentation
this week. We would like to obtain the approval of R.H.D.
Associates as financial partner as quickly as the City can respond.
As you are aware, R.H.D. Associates have been actively
involved in commercial development in San Luis Obispo. Most
recently, they were awarded the development contract for the J.C.
Penney building. They have a tremendously strong and successful
background in large commercial development, including a successful
leasing history. R.H.D. Associates would be an asset to the
development team and the commercial success of downtown San Luis
Obispo.
Regarding the issue of the. City and the development team
sharing a common vision of the Project as required under Section
2 . 01( d) for approval of the C development, team, to expedite matters we would like this issue to be resolved after the initial approval
of the development team. Since the PD has to be submitted for
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approval, the City will have ample opportunity at that point to
determine if we share a common vision for the Project. The ninety
day period allocated for submittal of the PD allows for City to
review the Project and make a feasibility determination. The new
review of the common vision set forth in the PD "can" and will,
take place during the remainder of the approval process, including
staff review, planning commission and architectural review
commission hearings. Because of R.H.D. Associates' prior
commitments with the City, we do not feel that this will be a
problem since they already share a vision with the City as to the
future development of the downtown.
We are also requesting that any further action required by the
development team under the Schedule of Performance be suspended
until approval of the financial partner by the City. We will then
submit the PD within ninety days of that approval.
We feel that the substitution of R.H.D. Associates as the
financial partner would be in the best interests of the City and
the future success of the Project. As set forth in the Recitals to
the Predevelopment Agreement, Interwest executed the Predevelopment
Agreement as the Project Developer in order to allow Interwest
additional time to locate a satisfactory financial partner for the
Project. Any default in performance under the Predevelopment
Agreement has thus far been waived. It is our understanding that
the City's approval of this substitution would cure any defaults in
timely performance that may have occurred. We request that you
allow the substitution of R.H. D. Associates so that we may proceed
with the Project with all defaults cured. We have all the
information you require to determine if they meet the financial and
background qualifications. As a result, we are able to act
immediately so that this substitution will not delay the Project.
The City and Interwest have expended considerable time and
effort on this Project. By allowing the substitution of R.H.D.
Associates as financial partner, we feel that the Project will be
a commercial success for the City. Because of the time constraints
though, we need to know what the City's position is on this matter
as soon as possible.
If you need any further information or would like us to submit
the financial and background information on R.H.D. Associates,
please call me. Thank you for your attention to this matter. We
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hope that you concur that this course of action is the most
Productive approach for the City to, achieve its multiple stated
goals.
Very truly yours,
TmSyks�
U
O •
FIRST AMENDMENT
OF �
PREDEVELOPMENT AGREEMENT
AND
AGREEMENT TO LEASE
That certain Predevelopment Agreement and Agreement to Lease
("Predevelopment Agreement") dated June 19, 1990, by and between
the CITY OF SAN LUIS OBIS PO ("City") and INTERWEST INVESTMENT
GROUP, a California Corporation ("Interwest") , is hereby amended
this day of , 1990.
RECITALS
This Amendment is based upon the following recitals,, facts and
understandings of City and Interwest:
A. On June 19, 1990 the City entered into the Predevelopment
Agreement and Agreement to Lease with Interwest
Investment Group.
B. The purpose of the Predevelopment Agreement is to 'set
forth conditions to be met in advance of execution of the
ground lease.
C. The first two "action" steps in the Schedule of
Performance to the Predevelopment Agreement are: (1)
Identification of the Development Team, including
providing the financial and experience related
documentation required by Agreement Section 2.01(c) for
evaluation by the City; and (2) Approval or disapproval
ATTACHMENT 1
of the Development Team based on the information
Gsubmitted and a thorough background evaluation by the
City.
D. Step C. 1 above was to be completed within 75 days of
execution of the Predevelopment Agreement, or by
September 2 , 1990. Step C.2 above was to be completed,
within approximately 60 days, or by November 1, 1990,
assuming that all required information had been submitted
within an appropriate timeframe to allow the City to
complete its background evaluation.
E. Immediately after the June 19, 1990 execution of the
Predevelopment Agreement, Mr. Jaimie Sohacheski and Mr.
Milt Heching were identified as Interwest's proposed
Development Team partners. A substantial amount of
Obackground information was submitted to the City's
financial advisor, Hamilton, Robinovitz, and Alschuler,
Inc. However, audited financial statements and
documentation related to a proposed corporate entity
interest identified as "MONOS, Inc. " required pursuant
to Section 2. 01 (c) of the Predevelopment Agreement, was
not submitted within the required 75 day timeframe, or
by September 2, 1990.
F. Because, Interwest Investment Group had submitted a
substantial amount of other financial and experience
related information needed concerning the proposed
Development Team by September 2, 1990, and because
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Via-�
Interwest indicated that the remaining information would
be forthcoming, formal default procedures werenot
initiated at that time.
G. On September 21, 1990, the City advised Interwest that
the remaining information was needed no later than
October 10, 1990 if the City was to .have adequate time.
to finalize its review of the proposed team before
November 1, 1990.
H. On October 25, 1990, the Interwest Investment Group
notified the City that a request to extend the
Predevelopment Agreement in order to qualify the
Development Team would be made.
I. On October 26, 1990, the City was verbally advised that
the request to extend would be made in order to provide
for the qualification of new proposed general partners
to replace Mr. Sohacheski and Mr. Heching, whose
relationship with Interwest was to be terminated.
J. On October 31, 1990,, a written correspondence was
received by the City verifying the termination of the
partnership with Mr. Sohacheski and Mr. Heching, and
formally requesting an extension of the Predevelopment
Agreement in order to qualify new general partners, known
as RHD and Associates.
AGREEMENT
In consideration of the foregoing, the mutual and respective
covenants and promises set forth herein, subject to all of the
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terms and conditions hereof, and pursuant to Paragraph 5.03 (a) of
Othe Predevelopment Agreement, City and Interwest agree:
1. Paragraph 2. 01 (c) of the Predevelopment
Agreement is hereby amended in part to provide an
additional period of time to Interwest to submit all of
the information required by Paragraphs 2. 01 (c) and
2 . 01(d) of the Predevelopment Agreement, for a period of
approximately 155 days, but in no event later than the
close of business on Monday, February 4, 1991. In the
event Interwest fails to submit all of the information
required by Paragraphs 2 . 01(c) and 2. 01 (d) of the
Predevelopment Agreement by February 4, 1991, then the
Predevelopment Agreement shall automatically terminate,
without further extension, and without any further action
or notice required by City. and subject to the
provisions
of 8. 02 (d) . In the event the proposed development team
fails to meet the criteria set forth in Section 2. 01 (d) ,
the City may, at its option, terminate the Predevelopment
Agreement pursuant to Section 2. 01 (c) . All other time
frames provided for in the Predevelopment Agreement,
including but not .limited to Paragraph 6.05, shall remain
in full force and effect.
2 . It is understood and agreed by City and Interwest
that the extension of time provided for in Paragraph 1 above
is exclusively for the purpose of evaluating RHD Associates
as the sole financial partner of the proposed development
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team. No further addition or substitution of potential
financial partners shall be considered by the City.
3 . Paragraph 2 . 01 (c) is further amended to provide
that the requirement to submit audited financial
statements of all general partners may be modified to
allow for equivalent, alternative, financial statements
or information if in the sole discretion and professional
judgment of the City Administrative officer, in
consultation with the City's financial advisor, Hamilton,
Rabinovitz and Alschuler, Inc. , such equivalent,
alternative, financial statements or information are
adequate and sufficient to determine the financial
capacity of all general partners to carry out the project
envisioned by the Predevelopment Agreement, and otherwise
meet the criteria of Paragraphs . 2 . 01 (c) and 2.01(d) of
said agreement.
4 . In recognition of the extraordinary and
unanticipated costs to City in reviewing the financial
qualifications of the proposed development team pursuant
to paragraphs 2. 01 (c) and 2 . 01 (d) , Paragraph 3.05 of the
Predevelopment Agreement is amended to provide an
increase in the Project Management fee from Sixty
Thousand Dollars ($60, 000) to Sixty Six Thousand Five
Hundred Dollars ($66,500) , it being acknowledged by City
and Interwest that the increase in fee represents the
costs incurred by the City for consultation with the
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d-02-!0
OCity's financial advisor concerning the f=inancial
qualifications of the proposed development team.
All of the terms, covenants, conditions, provisions and
agreements of the Predevelopment Agreement dated June 19, 1990
between the City and Interwest, as amended herein, shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this
First Amendment of Predevelopment Agreement and Agreement to Lease
on this day of , 1990 at San Luis Obispo,
California.
(Signatures to be acknowledged for recording)
"CITY"
CITY OF SAN LUIS OBISPO
By:
Mayor Ron. Dunin
ATTEST:
CITY CLERK
Pamela Voges
"INTERWEST"
INTERWEST INVESTMENT GROUP,
a California Corporation
By:
Tom Sykes, President
Z—,By:
Marshy l Ochylski, Secretary
(corporate seal)
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