Loading...
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 I 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 0 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 2 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 3 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 ' 4 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 5 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) �� 6