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HomeMy WebLinkAbout6/20/2001 - STAFF REPORTS (3) 1� DATE: JUNE 20, 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. No previous developer had even opened an escrow. Wessman has opened escrow on the property and has proposed a plan that removes the roof off the south mall portion, removes during Phase I of development approximately 22,000-24,000 sf of the building directly south of the old 1. Magnin's site, (such site will be reserved for Phase II of development), and upgrades the remaining mall for re-tenanting. 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. 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 has been terminated). 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. C'*i4 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 was in excess of$20 million, more than $6 million greater than what AZ (with Excel) paid for the property in late 1997. In the past five years, Excel has expended in excess of $5,000,000 for holding and pre-development costs of the Project. The higher 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 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 in Phase I and adding that square footage back in Phase II keeping and upgrading that space closest to Palm Canyon drive, (2) remove the covered mall portion on the south mall built in 1965 and putting in a two-way street in its place that will terminate at the parking lot, (3) making major changes to the facade of the project along Palm Canyon, to the new street scene coming back to the parking lot, and to the entrance to the old I. Magnin's; removing all the concrete overhang on the front of the building along Palm Canyon; removing the curbs along Palm Canyon, adding fifteen new parking spaces; creating a street scene similar to Plaza Mercado's, and (4) utilizing the underutilized parking at the rear of the underground parking structure on a short-term basis for downtown employee parking until Phase II is developed. The agreement is for a period of six months to allow for negotiations of a DDA. During that period, the Developer, working with the City and Agency, shall: 1. Prepare a conceptual plan and elevations of the project; 2. Develop a financing plan for the project that includes commercial financing on the part of the Developer, which may include an amount of Agency financing, to allow this high-quality project to move forward and become economically sound. 3. Agree on a mix of land uses within the project that provide a healthy financial return, do not overtax the property's parking resources, and ensure the continued viability of the project. The Developer has already opened escrow on the property and is now developing alternative scenarios for the Mall. Some development ideas may proceed only with Agency assistance. While the Agency has not made any commitments to the Developer in terms of assistance in the project, both parties acknowledge that an Agreement to Negotiate effective during the term of the escrow will facilitate discussion on the overall development and the role of the City and Agency in shaping the project. During the negotiation of this Agreement, the Agency has instructed the Developer that several key points are extremely important. These include: 1. During the period of this Agreement Developer will keep the existing parking in the Mall available on an unrestricted basis. 2. Any potential financial assistance provided to the project from the Agency would be performance driven, payable only from revenue generated by the project. 3. That the Agreement under consideration is only an Exclusive Agreement to Negotiate and does not represent a commitment of the Agency of financial assistance, nor does it commit the Developer to construct the project. 4. Any consideration of financial assistance by the Agency will be based on independent analysis of the Developer's project pro formas and the evaluation of all project revenues and costs. J�HN S. YMO D Directtor f Redev I ment APPROVE. Executive Director' ATTACHMENTS: 1. Resolution 2. Exclusive Agreement to Negotiate ewi4 A3 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. The Agency 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 corner of Tahquitz Canyon Way and Palm Canyon Drive ("the Site"). C. The Developer desires to redevelop the center into an attractive,first-rate high fashion retail center capable of receiving market rents and spurring the development of adjacent parcels. The term"Developer'as used herein includes the principals,partners,andjoint venturers of Developerand all obligations of Developer herein shall be thejoint 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 they will negotiate diligently and in good faith to prepare and enter into an agreement (the"DDA")consistent with the provisions of this Agreement forthe redevelopment of a retail shopping center on the Site specified herein. The developmentwill be subjectto 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 Developers interest shall be fee. The design shall be consistent with the Agency's and the City's design guidelines. Developers architect �rK! /tr# shall work with the City's design guidelines to create an attractive and exciting retail center with a distinct identity. 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. In addition,the design will incorporate the following elements: I. Saks Fifth Avenue will be retained and high fashion tenants will be developed in the portion of the mall adjacent to Saks. II. A significant anchor tenant similar to Borders or Barnes & Noble will be developed atthe central traffic circle,which is necessary to draw customers into the site. III. Consideration will be given to additional space which would be usable by the Hyatt Hotel. IV. The design shall accommodate outdoor special events. V. The projectwill be developed in such a mannerto minimize disruption on Palm Canyon Drive and to preserve current tenants on the Palm Canyon frontage. D. Financial Provisions. Except as otherwise provided herein, the Developer is responsible for acquisition of the site and financing and constructing all improvements upon the Site. Developer shall pay for all necessary public improvements and pay all City's fees for processing the Project. In the event that the project is not financially feasible without Agency assistance, the Agency will consider such assistance, provided that pursuant to Section 6C the Agency is under no obligation to provide such assistance. The project is not financially feasible if the Developer's economic return is less than that generally received for such a project of similar scale and risk. The Agency's consideration of such assistance will be based on independent analysis of the Developer's project pro formas and the evaluation of all project revenues and costs. The pro formas shall postulate atleast2-3 cost scenarios ranging from minimal-to high levels of cost and consistent levels of assistance. Any assistance provided from the Agency would be performance driven, payable only from revenue generated by the project. E. Schedule. The Developer's goal is to redevelop the center by September 30, 2003. 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 DDAwill generally be subjectto 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 c9A Aso* 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. H. Parking. During the period of this Agreement Developer will keep the existing parking available on an unrestricted basis. I. 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 center within the territorial jurisdiction of Palm Springs or any adjacent restriction withing 5 miles of the project, without approval of Agency. SECTION 2. PERIOD OF NEGOTIATIONS. The period of negotiation shall be one hundred eighty(180)days from the datethis 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 bythe Developer,and has been submitted to the Agency but has notyetbeen approved bytheAgency Board; or B. Forthirty(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 after and 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, Developer will 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 Developer's 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. do #& B. Developer shall submit to Agency financial information sufficient to demonstrate Developer's financial capability to do the Project. To the extent Developer wants such financial information to remain confidential, it shall be supplied to the Agency only if the confidentiality of the information can be maintained. C. All information necessary for the design of the Project to meet the Agency'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. D. Financial pro formas forthe Project as necessary to negotiate any financial assistance from the Agency as provided in Section 1 D. Such financial information is subject to public disclosure. With respect to matters covered by this Agreement, Developer shall negotiate exclusively with the Agency'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 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 Agency's financial consulting and legal expenses for preparation of the Agreement, shall be chargeable against the Good Faith Deposit, but such charges shall not exceed Jhe amount of the Initial 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. Concurrently with the execution of this Agreement,Developershall submitto theAgency a good faith deposit in the sum of Fifteen Thousand Dollars($15,000.00)—herein the"Initial Deposit'—in the form of a cash deposit,cashiers'check,irrevocable letter of credit, or other form 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 C44 hi 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 subject to the rights of the preparers of such documents including, without limitation, the copyright (if any) associated with such documents. 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 or Developerto 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 forAcceptance. This Agreement,when executed by the Developer and delivered to the Agency,shall constitute a binding offerwhich cannot be withdrawn prior to July 15,2001,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: AgQfICy Counsel [SIGNATURES CONTINUED ON NEXT PAGE] 0,4 �� 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] 1.. "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,Assistant Treasurer, or Chief Financial Officer.) [END OF SIGNATURES I NOTARY JURAT(S) FOLLOW] 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/their authorized capacity(ies),and that by his/her/their signature(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/their authorized 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 ��- 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 Wessman Development Company of Palm Springs has requested the Agency to enter into an Exclusive Agreement to Negotiate on the center while they are in escrow 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 , 2001. AYES: NOES: ABSENT: ATTEST: COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS, CALIFORNIA By Assistant Secretary Chairman REVIEWED & APPROVED AS TO FORM c� �fy