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Home My WebLink About7/19/2000 - STAFF REPORTS (6) DATE: July 19, 2000 TO: City Council FROM: Assistant Director of Aviation via Director of Aviation AIRPORT PARK PLAZA ASSIGNMENTS AND AMENDMENTS RECOMMENDATION: It is recommended that the City Council approve term extensions totaling 18 years forthree separate leases comprising the Airport Park Plaza, and assignment of the leases to AP- Palm Springs Airport LLC, conditional upon AP-Palm Springs Airport LLC receiving all necessary use permits and agreeing upon an assignment in a form approved by the City Attorney. BACKGROUND: The Airport Park Plaza lease agreements Nos. 2529, 2528 and 2636 between the City of Palm Springs (City) and John Apostle and Helen Apostle, trustees of the Apostle Family Trust (tenant), are being considered for assignment to AP-Palm Springs Airport LLC (assignee). Each lease pertains to a separate parcel upon the property located at 255,265 and 275 N. El Cielo, Palm Springs,which encompass the Airport Park Plaza. As a wholly owned entity of The Abbey Company, 12383 Lewis Street#200,Garden Grove,CA 92840- 4643, AP-Palm Springs Airport LLC is planning on buying the leasehold estate from the present tenant. Company officials representing AP-Palm Springs Airport LLC have indicated that the closing date for this anticipated change in ownership is expected to occur on July 31, 2000. Staff has had limited time to review this proposal and will continue to work with the City Attorney on finalizing all terms and provisions of the lease assignment. The Airport Commission has received limited information regarding this request and is in favor in moving forward with negotiations. We have been informed that The Abbey Company is an Orange County based real estate company and controls a portfolio comprised of 42 retail, office and industrial developments which total circa 3 million square feet and has a market value of circa$276,000,000. The Abbey Center,a 3-building,72,000 s.f.office investment at the comer of Ramon Road and Farrell Drive, opposite the high school, is one of their assets in Palm Springs. A consolidated balance sheet representing the market value of the company is attached for your review. Staff has discussed certain lease provisions that will be incorporated in the amendment for the Airport Park Plaza with Mr.Robert C.LeMoine,Executive Vice President of The Abbey Company. The general parameters of the amendment is as follows: 1. Term: assignee agrees that the term of the separate leases, currently scheduled to terminate in the year 2037,shall remain the same with two lease option extensions(1) 10 year extension and (1) 8 year extension. 2. Exchange Offer assignee has tentatively agreed to pay to the City $200,000 in exchange for the assignment of the amended lease, including the term extensions. ej 0 Airport Park Plaza July 19, 2000 Page 2 3. Improvement:assumption of the leases by assignee shall be conditional and become effective upon assignee receiving all necessary use permits from the Planning Department, Planning Commission or City Council,and in a form approved by the City Attorney. 4. Default:assignee's lender provisions to be Incorporated in the lease assignments in a form approved by the City Attorney. Correspondence from assignee regarding proposed development and use plans for the Airport Park Plaza is attached for your review. Staff recommends the City Council approval of the term extensions of the three leases,and lease assignments to assignee conditional upon assignee receiving all necessary use permits and a positive review as to form of the assignments by the City Attorney. APPROVED: IAAV RRY I � I Assis nt Di for of Aviation DI or of A ation APPROVED: D ID ZY ager Attachments: (1) Minute Order (1) Consolidated Balance Sheet (1) Letter—Abbey Company THE ABBEY COMPANY CONSOLIDATED BALANCE SHEET At March 31,2000 Variance 03/31/00 1241199 $ % ASSETS: CASH 11.343.471 13.458,932 (2,115.461) -16% RESTRICTED CASH 2.037.307 1.974,347 62.960 • 3% TOTAL CASH 13.380.776 15.433,279 (2,052,501) -13% , TENANT RECEIVABLES,NET 860,459 611,308 249.151 41% DEFERRED RENT RECV,NET 314.380 614.939 (300.559) 0% PREPAID EXPENSES&OTHER ASSETS 365,233 544,982 (179.749) 33% TOTAL RECEIV.&PREPAID EXP. 1,540.072 1,771.229 (231.157) -13% TOTAL CURRENT ASSETS 14,920,850 17.204.508 (2,283.658) -13% INVESTMENT IN REAL ESTATE 278.131.035 264,716.568 13,414.467 5% LESS:ACCUMULATED DEPRECIATION (5,563,464) (4,186,245) (1,377,219) 0% INVESTMENT IN REAL ESTATE,NET 272,567.671 260,530.323 12.037.248 5% DEFERRED LEASING,NET 1.114,024 807.079 216.945 0% DEFERRED LOAN COSTS,NET 3.495.465 3.628.591 (133,136) 0% TOTAL DEFR'D CHARGES&OTHER ASSETS 4.609.479 4.625.670 83,809 0% REORGANIZATION COSTS - - - 0% TOTAL ASSETS 292.097.900 282,200,501 9.837,399 3% LIABILITIES AND EQUITY: ACCOUNTS PAYABLE &OTHER ACCD LIAR. 1.319,466 1'890.180 (570.714) 30% ACCRUED INTEREST 630.W9 613,773 • 17,096 3% ACCRUED DISTRIBUTIONS 3,193.290 2.471.194 722,096 29% TOTAL CURRENT LIABILITIES 5,143.625 4.975.147 168,478 3% NOTES PAYABLE 85.558,278 85.315,000 243,278 0% LINES OF CREDIT 19.118.326 9,082,226 10.036,100 111% TOTAL LONG TERM LIABILITIES 104,676.604 94.397.226 10.279,378 11% TENANT PREPAID RENT 939.001 530.630 408.371 77% TENANT SECURITY DEPOSITS&TI ALLOW 1.651.422 1.431,003 220,419 15% TOTAL OTHER LIABILITIES 2.590,423 1,961,633 628,790 32% TOTAL LIABILITIES 112,410.652 101.334.006 11,076.646 11% MEMBERS EQUITY 179687,248 180.926,495 (1.239.247) -1% TOTAL LIABILITIES&EQUITY 292.007.900 282.250.501 9.837,399 3% 3�4 iZ VIA OVERNIGHT DELIVERY July 10, 2000 A . . . . . Ms.Jeri Riddle City of Palm Springs Administrative Offices Department of Aviation Zutr�� 3400 East Tahquitz Canyon Way Palm Springs, California 92262 J 2000 Re: Airport Park Plaza :1;�,; Gr`TRrF? jC3;ATGM 255,265 and 275 North Ell Cielo Road Palm Springs, California Dear Jeri: I understand that Fred talked to my colleague David Gullen on Friday, and they agreed that I should write to you requesting that we be included in the July 19'"agenda with a view to securing City Council approval subject to agreement on your part to the items which I have listed below. However, I am unclear as to whether we need Airport Commission and City Planning Commission approval, but to the extent we do, then I would welcome feedback as to what you need us to do to formalize our request through these two bodies. Subject to receiving all necessary approvals, we propose to amend the subject ground leases for the property to include: a) Entire Development Plan We shall commence, as soon as is practical, the development of a minimum of 31,000 square feet or up to 43,000 square feet (subject to approval by the City Planning Department),of ground floor flex office (50% t)buildings (facing both Civic and El Cielo and connected warehouse/business space (50%t)facing Into a central parking/tuming/loading area). If practical, we will explore the inclusive development of a limited amount of second floor office above the ground floor office space subject to the satisfaction of the overall parking requirements. b) Recalculation of the Existing Parking We shall recalculate the GLA occupied by medical and non-medical tenants as part of the entire development plan for the three separate parcels which will Incorporate an offset for any deficiency in actual parking spaces in accordance with the existing uses on the 255 and 275 parcels. c) 5N While we want to build flex/office/business space for both local and regional tenants, we are encouraged by the Foreign Free Trade Zone, and would not want the City to restrict us by limiting our ability to create space that would be deemed appropriate by the tenants who are likely to benefit most by the Foreign Free Trade Zone designation. Therefore, any use allowed under the "Airport Uses" provision shall be Included in the use provision of the ground leases. 31113 12383 Lewis Street, #200 9 Garden Grove, CA 92840-4643 9 TEL 714.740.8800 9 FAX 714.740.8801 Ms.Jeri Riddle 1 City of Palm Springs July 10,2000 ^— Page 2 d) Ter01 The City of Palm Springs shall extend the term (by option or otherwise) of each of the three ground leases to expire on October 31, 2058, leaving a 55 year term after the completion of our proposed development. e) Ground Lease Consolidation We request that, if practical, the three separate ground leases be consolidated into one new master ground lease. f) Payment and Legal Costs We will pay the City of Palm Springs the sum of$200,000 (Two Hundred Thousand Dollars) in cash once the required amendments to the subject ground lease are approved by the City Council and a building permit is in place for the 31,000 square foot expansion. In addition,The Abbey Company will pay the legal costs of Rutan & Tucker up to a maximum of$25,000 for their services rendered to the City of Palm Springs for services for the 255,265 and 275 N. El Clelo Ground Leases. g) Consent to Assign We are anticipating a closing of the leasehold acquisition circa the 251' of August and,therefore,we request your council's consent to (1) the assignment of the subject ground leases to AP-Palm Springs Airport LLC; (ii) the amendment to the ground leases with respect to the term, use and consolidation described above, the incorporation of provisions required by our lenders and as otherwise reasonably required to use and operate the property; and (iti) the execution of a ground lease estoppel by the City as the landlord confirming the material provisions of the ground leases. I am very grateful for the manner in which you and your colleagues have encouraged my team to pursue this acquisition and development. Should you need any further Input please feel free to call me at 714-919-5656 or my colleague Rob LeMolne at 714 919-5666. Very truly youls, `LDbfiald Chairman/CF , cc: Fred Galante-Rutan&Tucker, Costa Mesa David J. Gullen, Esq.—The Abbey Company 3,�y MINUTE ORDER NO. APPROVING THREE ASSIGNMENT (3) DOCUMENTS FOR LEASE AGREEMENTS 2528, 2529 AND 2636, FOR ASSIGNMENT FROM HELEN APOSTLE, AS TRUSTEE OF THE SURVIVOR'S TRUSTCREATED UNDER THEAPOSTLE FAMILY TRUSTTO AP-PALM SPRINGS AIRPORT LLC, CONDITIONAL UPON AP-PALM SPRINGS AIRPORT LLC RECEIVINGALL NECESSARY USE PERMITS AND AGREEING UPON AN ASSIGNMENT IN A FORM APPROVED BY THE CITY ATTORNEY. I HEREBY CERTIFY that this Minute Order, approving three (3) assignment documents for Lease Agreements 2528,2529 and 2636 for assignment from Helen Apostle, as trustee of the Survivor's Trust created under the Apostle Family Trust to AP-Palm Springs Airport LLC, conditional upon AP-Palm Springs Airport LLC receiving all necessary Use Permits and agreeing upon an assignment in a form approved by the City Attorney,was adopted by the City Council of the City of Palm Springs, California in a meetingthereof held on the 19"'day of July 2000. PATRICIA A. SANDERS City Clerk MINUTE ORDER NO. APPROVING EIGHTEEN (18) YEAR EXTENSIONS TOAGREEMENTS 2528,2529 AND 2636,ALL RELATED TO THE AIRPORT PARK PLAZA LEASE ASSIGNMENTS. I HEREBY CERTIFYthatthis Minute order,approving eighteen (18)year extensions to Agreements 2528, 2529 and 2636, all related to the Airport Park Plaza lease assignments, was adopted by the City Council of the City of Palm Springs, California, in a meeting thereof held on the 19"'day of July 2000. PATRICIA A. SANDERS City Clerk 3 �