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HomeMy WebLinkAbout6/6/2001 - STAFF REPORTS (5) `J DATE: APRIL 4, 2001 TO: COMMUNITY REDEVELOPMENT AGENCY FROM: DIRECTOR OF REDEVELOPMENT APPROVAL OF AN EXCLUSIVE AGREEMENT TO NEGOTIATE WITH JOHN WESSMAN D/B/A WESSMAN DEVELOPMENT COMPANY ON A PARCEL AT THE NORTHWEST CORNER OF TAHQUITZ CANYON WAY AND PALM CANYON DRIVE, THE DESERT FASHION PLAZA RECOMMENDATION: It is recommended that the Agency approve the Exclusive Agreement to Negotiate with John Wessman, dba Wessman Development Company on a 13+ acre parcel at the northwest comer of Tahquitz Canyon Way and North Palm Canyon Drive, the Desert Fashion Plaza. SUMMARY: Excel Legacy Corp.,the owner of the Desert Fashion Plaza, placed the mall up for sale inAugust2000. Since that time,the Agency has negotiated with several potential buyers of various levels of experience and with different visions for the property. None have closed escrow. Wessman has proposed a plan that reduces the retail density,upgrades the remaining mall for re-tenanting,and allows the"surplus"parking to be used for public purposes. Staff is recommending, based on the Developer's track record of accomplishments in Palm Springs,that the Agency negotiate exclusively with him for a period of six months and allow him to negotiate with Excel on the purchase price. BACKGROUND: In February, 1998, the City/Agency was approached by Arizona (AZ) Partners, a small real estate development firm located in Phoenix, regarding the Desert Fashion Plaza. The DeBartolo Company, now merged with Melvin Simon, had allowed the property to be foreclosed upon by its lenders, and AZ Partners was the purchaser. AZ had ambitious plans for the center, including removing the roof, attracting a 16-screen (later a 12-screen) cineplex with stadium seating, and constructing a 2400-seat live Broadway theatre, all to complement the new retail space that would be leased. The project, because of the theatre uses, represented an intensification of uses at the site. A year later, AZ Partners' financier, Excel Legacy Corp., grew impatient about the slow progress the team was making in getting the project approved by the City, and removed them from the project. AZ was successful in signing a lease with Metropolitan Theatres (which is still in place). Excel scrapped most of AZ's plan and spent several months designing its own, and brought it to the City in November 1999. Their plan eliminated the Broadway theatre but kept the movie theatres. It also was an open air design with a significant number of restaurants and other entertainment-related uses, and was expected to cost (with acquisition) over$70 million. However, by June 2000, Excel realized it could not reconcile its cost projections with its revenue projections and ceased work on the project. Excel notified the City in June 2000 that it would prepare an RFP and place the property up for sale. The price Excel set for the property is in excess of$20 CA} -D million, more than $6 million greater than what AZ (with Excel) paid for the property in late 1997. The high price has affected the subsequent conversations the Agency has had with interested developers. All the recent developers' plans have been far more modest than either AZ's or Excel's because the potential margins are much lower. It is also very clear that no developer will receive market rents for the property at the rear of the mall —the distance from Palm Canyon, and therefore the dropoff in traffic— is much too severe. More interest is paid to other types of uses and what can (and can't) happen at the rear of the property, where it either meets and impacts the Hyatt Regency or the Desert Museum. The Museum, too, has expressed a unspecified interest in participating in the redevelopment of the mall, especially if it can gain a view corridor to Palm Canyon Drive and control over what happens on its front doorstep. The Developer's proposal is still relatively undeveloped. However, the key elements of the proposal are to (1) eliminate a significant amount of square footage at the site, but keeping and upgrading that space closest to Palm Canyon drive, (2) making major changes to the facade of the project, and (3) using the underutilized parking in the center (that which is already actually underutilized and that which would, technically, be freed up from the reduced density) to help the City address part of the parking needs in the downtown area. The agreement is for a period of six months to allow for negotiations of the DDA. During that period, the Developer, working with the City and Agency, shall: 1. Prepare a conceptual plan and elevations of the project; 2. Pay for(with the Agency) an appraisal of the property based on "as is" and on the cost necessary in order to achieve a standard return at stabilization; 3. Determine the potential property line dividing the Developer's property from the property potentially acquired by the Agency; 4. Agree on a mix of land uses within the project that provide a healthy financial return but do not overtax the property's parking resources; and 5. Develop a financing pla or the project. J HN S. YMOh1D) Director-of Redevelopment APPROVED Executive Director ATTACHMENTS: 1. Resolution 2. Exclusive Agreement to Negotiate REVIEWED BY DEPT.OF FINANCE EXCLUSIVE AGREEMENT TO NEGOTIATE WESSMAN DEVELOPMENT COMPANY THIS EXCLUSIVE AGREEMENT TO NEGOTIATE ("AGREEMENT') , is made this day of , 2001, by and between the PALM SPRINGS COMMUNITY REDEVELOPMENT AGENCY ("AGENCY"), and JOHN WESSMAN, D/B/A/ WESSMAN DEVELOPMENT COMPANY("DEVELOPER"). RECITALS The parties entered into this Agreement on the basis of the following facts,understandings,and intentions: A. The Agency is a public body, corporate and politic, exercising governmental functions and powers and organized and existing under the Community Redevelopment Law of the State of California (Health and Safety Code Sections 33000, et seq.). B. TheAgency desires to effectuate the Redevelopment Plan forthe Palm Springs Merged Redevelopment Project Area No. 1 (formerly, the Central Business District Project Area) by providing for the redevelopment of the Desert Fashion Plaza, the largest single property in the project area, at the northwest comer of Tahquitz Canyon Way and Palm Canyon Drive ("the Site"). C. The Developer desires to redevelop the center into an attractive,first-rate retail center capable of receiving market rents and spurring the development of adjacent parcels. The term "Developer"as used herein includes the principals, partners, and joint venturers of Developer and all obligations of Developer herein shall be the joint and several obligations of such principals, partners, and joint venturers. D. The Agency and Developer desire,forthe period set forth herein,to negotiate diligently and in good faith to prepare an agreement whereby the Developer would redevelop the shopping center on the site. NOW,THEREFORE,and in consideration of the mutual covenants hereinafter contained,it is mutually agreed upon by the parties as follows: SECTION 1. NATURE OF NEGOTIATIONS. A. Good Faith. The Agency and the Developer agree that for the period set forth in Section 2 herein theywill negotiate diligently and in good faith to prepare and enter into an agreement (the"DDA")consistent with the provisions of this Agreement forthe development of single family homes on the Site specified herein. The development will be subject to all rules, regulations, standards, and criteria set forth in the Redevelopment Plan, the City's General Plan, applicable specific plans and zoning regulations, and with this Agreement. B. Site. The Project shall be located upon the following real property,as shown in the"Site Map,"attached hereto as Exhibit"A"and incorporated herein by this reference. C. Construction and Ownership Concept. The Developer's interest shall be fee. The design shall be consistent with the Agency's and the City's design guidelines. Developer's architect ek4--b 3 shall work with the City's design guidelines to create an attractive and exciting retail center with a distinct identity. Notwithstanding an Agency financial participation in the project, the Developer is responsible for financing and constructing all improvements upon the Site. The shopping center shall be consistent with the City's General Plan and Zoning Code. The Site will be subject to a declaration of covenants, conditions, and restrictions to govern the development and ownership of the development. D. Financial Provisions. The Developer is responsible for acquisition of the site and financing and constructing all improvements upon the Site. Developer shall pay forall necessary public improvements and pay all City's fees for processing the Project,without assistance from the Agency. E. Schedule. The Developer's goal is to redevelop the center by December31,2002. The DDA shall contain a Schedule of Performance. Due to the need to possibly acquire the center through condemnation, the property may be delivered in a later phase. F. Use and Transfer Restrictions. The DDA will generally be subject to restrictions on use and transfer during construction and for a specified period thereafter through recorded restrictions(i) to assure that the use will be consistent with and promote reasonable quality retail development, (ii)to prevent speculation, (iii)to assure that any transferee has the resources,capability and experience to successfully complete construction of the development, (iv)to assure long-term maintenance of the property in a productive and attractive condition, and(iv)to provide an adequate financial return to the Agency. G. Property Acquisition. The Developer has proposed acquiring a the 13+acre property from Excel, the current owner, at fair market value. The acquisition of the site may also involve an involuntary acquisition of property. To the extent provided by law,the DDA will contain provisions that the Agency will consider the use of its power of eminent domain for site assemblage should voluntary negotiations be unsuccessful but Agency shall have no liability whatsoever to Developer if Agency should decide not to undertake condemnation. Nothing herein shall be deemed to obligate Agency to undertake such acquisition by condemnation. If the Agency shall undertake such acquisition, Developer shall be solely liable for the cost thereof,including the legal costs,attorney fees,the amount of just compensation, irrespective of the amount, or the award of attorney fees to the defendant, if awarded. Appraisal of Properties. The Agency shall commission, and the Developer shall reimburse the Agency for half the cost of, an appraisal of the property based on how much money would be necessary to invest in the property in orderto achieve a standard return at market rents upon stabilization. The Agency's share of the appraisal cost shall be paid from the Good Faith Deposit described in Section 5. Agency Parcel. One of the elements of the Developer's proposal is that the Agency could acquire a portion of the property at the rear of the site, including at least 400 parking spaces. During the period of negotiation, Developershall determine a feasible and practical boundary between the Developer's property and potential Agency property. The price the Agency would pay for such parcel will be based on a pro rata calculation to be determined during the negotiation period. H. Exclusivity. The Agency agrees for the period set forth in Section 2 that it will not negotiate with or enter into any agreement with any other entity for development of the Site, and the Developer agrees not to negotiate with any other person or entity regarding the development of a regional shopping centerwithin the territorial jurisdiction of Palm Springs without approval of Agency. SECTION 2. PERIOD OF NEGOTIATIONS. The period of negotiation shall be one hundred eighty(180)days from the date this Agreement is signed by the Agency, and this Agreement shall terminate afterthe expiration of such period unless extended as follows: A. For sixty (60) days if an agreement has been prepared by the Agency and executed by the Developer,and has been submitted to the Agency but has notyet been approved by the Agency Board; or B. For thirty(30)days if the major business terms have been agreed to and the Executive Director determines that further negotiations are likely to result in a written agreement; or C. By mutual agreement of the parties. Developer understands and acknowledges that if negotiations culminate in an agreement,such agreement shall be effective only afterand if the agreement has been considered and approved by the Agency Board after public hearing thereon as required by law. SECTION 3. DEVELOPER'S RESPONSIBILITIES. During the period of negotiation, Developerwill prepare such studies, reports, and analysis as shall be necessary to permit Developer to determine the feasibility of its participation in the shopping center redevelopment. The Developer shall fully cooperate in the development of the Project design and financing plan. During the period of negotiation and as requested by the Agency,the Developer shall submit to the Agency the following: A. Full disclosure of Developers principals, partners, joint venturers, negotiators, consultants, professional employees, or other associates of the Developer who are participants or principals of the Project, and all other relevant information concerning the above. B. Statement of financial condition in sufficient detail to demonstrate Developers financial capabilities,those of its principals,partners,joint venturers, and those of its prospective Developers to satisfy the commitments necessitated by the Project. To the extent Developer wants such financial statements to remain confidential,they shall be supplied to the Agency only if the confidentiality of the statements can be maintained. C. All information necessary forthe design of the Project to meettheAgency's reasonable requirements. In addition, Developer shall take all actions necessary to obtain construction and permanent financing. This information shall be sufficient to allow the Agency to evaluate site configuration, architectural design, project quality and similar issues. The Developershall negotiate exclusively with theAgency's negotiating team and with no other persons unless expressly authorized to do so by the Agency's negotiating team. During the period of negotiations, no statements will be made by the Developer to the media without the approval of the eM - bS Agency's negotiating team. No prepared statements shall be released to the media without the mutual consent of the respective negotiating teams. SECTION 4. AGENCY'S RESPONSIBILITIES. A. Preparation of Agreement. If agreement is reached on the business terms for inclusion in the agreement, the Agency shall prepare such agreement for consideration by the Developer. Agency's expenses, including legal expenses for preparation of the Agreement, shall be chargeable against the Good Faith Deposit. B. Zoning. The Agency will undertake all acts necessary to rezone such portions of the property as may be necessary to permit the single family homes on the Site. SECTION 5. GOOD FAITH DEPOSIT. Concurrentlywith the execution of this Agreement,Developershall submitto theAgency a good faith deposit in the sum of Fifteen Thousand Dollars ($15,000.00) in the form of a cash deposit, cashiers'check, irrevocable letter of credit, or otherform of security acceptable to the Agency to insure that the Developer will proceed diligently and in good faith to negotiate and perform all of the Developer's obligations under this Agreement. If the deposit is in cash or a certified cashiers' check, it shall be deposited in an interest-bearing account of the City. Interest, if any, shall be added to the deposit and held as additional security for the Developer's obligations hereunder. Upon termination of this Agreement the balance, less charges deducted from the deposit pursuant to section 4(A),shall be returned to the Developer provided that the Developer has negotiated diligently and in good faith and carried out its obligations hereunder. If Developer has failed to do so, in as much as the actual damages which would result from a breach by Developer of its obligations under this Agreement are uncertain and would be impractical or extremely difficult to determine,Agency shall be entitled to retain the entire amount of said deposit, as liquidated and agreed damages. It is further understood that the DDA will require an increase in the good faith upon execution of the DDA. The aggregate good faith deposit then required shall be at least Fifty Thousand Dollars ($50,000.00). SECTION 6. MISCELLANEOUS. A. No commissions. The Agency shall not be liable for any real estate commission or any broker's fees which may arise herefrom. The Agency represents that it has engaged no broker,agent, or finder in connection with this transaction, and the Developer agrees to hold the Agency harmless from any claim by any broker, agent, or finder retained by the Developer. B. Ownership of Documents. If the negotiations contemplated by this Agreement do not result in the execution of an agreement, Developer shall transfer to Agency copies of any reports, studies,analysis,site plan layouts,development cost estimates,engineering studies, memorandums, or similar documents regarding the proposed development and prepared during the period of negotiations,which copies shall become the property of Agency. Such transfer shall be made without any representation or warranty by the Developer as to the accuracy or sufficiency of the contents of such documents and shall be made subjectto the rights of the preparers of such documents including, without limitation, the copyright(if any) associated with such documents. 40 WUM C. Purpose of Contract. It is expressly understood and agreed by the parties hereto that this is an Agreement regarding the conduct of contract negotiations only and does not convey any interest in the property whatsoever. it is further agreed and understood that this Agreement does not imply any obligation on the part of the Agency to enter into any agreement that may result in negotiations contemplated herein. D. Amendment. This Agreement may only be amended by a document in writing signed by the parties hereto. E. Time for Acceptance. This Agreement,when executed by the Developer and delivered to the Agency,shall constitute a binding offerwhich cannot be withdrawn priortoApril 30,2001,so that the Agreement may be presented to the Agency Board. Notwithstanding any other provision herein to the contrary,Agency shall not be obligated hereunder unless and until the Agency Board authorizes the Chairman to execute this Agreement. F. Corporate Authority. The persons executing this Agreement on behalf of the parties hereto warrant that(i)such party is duly organized and existing, (ii)they are duly authorized to execute and deliver this Agreement on behalf of said party, (iii) by so executing this Agreement, such party is formally bound to the provisions of this Agreement, and(iv)the entering into this Agreement does not violate any provision of any other Agreement to which said party is bound. IN WITNESS WHEREOF,the parties have executed this Agreement as of the day first above written. "AGENCY" COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS, a public body, corporate and politic Chairman ATTEST: Agency Secretary APPROVED AS TO FORM: Agency Counsel [SIGNATURES CONTINUED ON NEXT PAGE] AdA %.-Iw "DEVELOPER" WESSMAN DEVELOPMENT COMPANY (Check One: _individual, _partnership, _corporation) [NOTARIZED] Signature Print Name: Print Title: [NOTARIZED] Signature Print Name: Print Title: Mailing Address: (Corporations require two signatures; one from each of the following: (A) Chairman of Board, President,any Vice President;AND(B)Secretary,Assistant Secretary,Treasurer,AssistantTreasurer, or Chief Financial Officer.) [END OF SIGNATURES/NOTARY JURAT(S) FOLLOW] Mgt STATE OF CALIFORNIA ) ) ss. COUNTY OF ) ON before me, Notary Public, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/theirauthorized capacity(ies),and that by his/her/theirsignature(s)on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. [SEAL] Signature STATE OF CALIFORNIA ) ) ss. COUNTY OF ) ON before me, Notary Public, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/theirauthorized capacity(ies),and that by his/her/theirsignature(s)on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. [SEAL] Signature EXHIBIT"A" TO EXCLUSIVE AGREEMENT TO NEGOTIATE LEGAL DESCRIPTION OF THE PROPERTY PARCEL 61"'OdWAT-fib/a RESOLUTION NO. OF THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS, CALIFORNIA, APPROVING AN EXCLUSIVE AGREEMENT TO NEGOTIATE WITH JOHN WESSMAN, DBA WESSMAN DEVELOPMENT COMPANY OF PALM SPRINGS, CALIFORNIA FOR THE REDEVELOPMENT OF THE DESERT FASHION PLAZA IN MERGED PROJECT AREA #1 (FORMERLY CENTRAL BUSINESS DISTRICT PROJECT AREA) WHEREAS the Community Redevelopment Agency is responsible for eliminating blight within Merged Project Area #1, formerly the Central Business District Project Area; and WHEREAS in the project area is a deteriorated regional shopping center, the Desert Fashion Plaza, with a low level of maintenance and high vacancy rate; and WHEREAS, the current price for the property set by its current owners has made a significant and lasting redevelopment of the property financially infeasible; and WHEREAS Wessman Development Company of Palm Springs has requested the Agency to enter into an Exclusive Agreement to Negotiate on the center while they negotiate to purchase the property from the owner and prepare a redevelopment plan for the site; and NOW THEREFORE BE IT RESOLVED by the Community Redevelopment Agency of the City of Palm Springs, that the Exclusive Agreement to Negotiate between the Agency and John Wessman, dba Wessman Development Company, in a form approved by the Agency Counsel, is hereby approved. ADOPTED this day of 12001. AYES: NOES: ABSENT: ATTEST: COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS, CALIFORNIA By Assistant Secretary Chairman REVIEWED &APPROVED AS TO FORM C AA �/�