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Home My WebLink About5/30/2007 - STAFF REPORTS - RA1 i o�p P.I.M Spy iy 0 V n °f^ceaia Commmunity Redevelopment Agency Staff Report DATE: MAY 30, 2007 CONSENT CALENDAR SUBJECT: APPROVAL OF CONSENT TO ASSIGNMENT OF EXCLUSIVE AGREEMENT TO NEGOTIATE WITH NEXUS DEVELOPMENT CORPORATION-CENTRAL DIVISION AND ESTOPPEL AND RECOGNITION AGREEMENT IN FAVOR OF LEHMAN BROTHERS HOLDINGS INC., A ❑ELAWARE CORPORATION FOR A 5.7 ACRE AGENCY-OWNED PARCEL AT THE SOUTHEAST CORNER OF ANDREAS ROAD AND CALLE EL SEGUNDO FOR THE PURPOSE OF DEVELOPING A HARD ROCK HOTEL, MERGED REDEVELOPMENT PROJECT AREA#2 FROM: David H. Ready, Executive Director BY: Community & Economic Development Department SUMMARY: The Agency currently has an Exclusive Agreement to Negotiate ("ENA") with Nexus Development Corporation-Central Division, a California Corporation, for the 5.7 acre parcel at Calle El Segundo and Andreas Road for the purpose of developing a Hard Rock Hotel. The Agency awarded the ENA at the October 5, 2005 meeting and approved an extension in September, 2006. Since that time the Developer has proceeded with the design and development of the project, as well acquiring the two adjacent parcels to try to assemble the site. The Developer has obtained a Mezzanine Loan from the Lender, Lehman Brothers, of $8,000,000 for pre-development costs. The terms of the Mezzanine Loan require that the Lender have recourse rights in the event of a default by the Borrower through partnership participation. The Developer will create a single purpose limited liability corporation to develop the property, 0 & M HR, LLC, a Delaware limited liability corporation, and O & M HR Associates, LLC, a Delaware limited liability corporation (the "Borrower"), which will include rights assigned to the Lender. The Developer owns one hundred percent (100%) of the membership interests in the Project Owner, and has ITEM NO. _-;� pledged a security interest in the partnership to the Lender, assigning its rights, privileges, powers and interests in, to and under the ENA to Lender pursuant to an Assignment of Agreement. The Lender requires the Developer to receive from the Agency approval of the Consent to Assignment to be able to assign their rights to the Lender. It is not unusual for a development firm to create an LLC for the purpose of developing and financing its project- Typically mezzanine loans are not secured by real property interests (e.g., deeds of trust) but through recourse to the partnership interest. This pre-development loan will allow the project to move forward through the development process; once the project is at the entitlement stage the Lender (either this lender or another) and the Project Owner will structure their construction financing. RECOMMENDATION: COMMUNITY REDEVELOPMENT AGENCY RECOMMENDATION: 1. Adopt Resolution No. , "APPROVAL OF CONSENT TO ASSIGNMENT OF EXCLUSIVE AGREEMENT TO NEGOTIATE WITH NEXUS DEVELOPMENT CORPORATION-CENTRAL DIVISION AND ESTOPPEL AND RECOGNITION AGREEMENT IN FAVOR OF LEHMAN BROTHERS HOLDINGS INC., A DELAWARE CORPORATION FOR A 5.7 ACRE AGENCY- OWNED PARCEL AT THE SOUTHEAST CORNER OF ANDREAS ROAD AND CALLE EL SEGUNDO FOR THE PURPOSE OF DEVELOPING A HARD ROCK HOTEL, MERGED REDEVELOPMENT PROJECT AREA#2" 2. AUTHORIZE THE EXECUTIVE DIRECTOR TO EXECUTE THE AMENDMENT IN A FORM ACCEPTABLE TO THE AGENCY ohn S Ray d, Director of Tom Wils m nity & conomic Development Assistant ity Manager DAVID H. READY Executive Director Attachments: 1. CRA Resolution 2. Consent to Assignment of Exclusive Agreement to Negotiate RESOLUTION NO. 1326 A RESOLUTION OF THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS, CALIFORNIA, APPROVING A CONSENT TO ASSIGNMENT OF EXCLUSIVE AGREEMENT TO NEGOTIATE AND ESTOPPEL AND RECOGNITION AGREEMENT WITH NEXUS DEVELOPMENT CORPORATION-CENTRAL DIVISION, IN FAVOR OF LEHMAN BROTHERS HOLDINGS INC., FOR A 5.7 ACRE AGENCY-OWNED PARCEL AT THE SOUTHEAST CORNER OF ANDREAS ROAD AND CALLE EL SEGUNDO FOR THE PURPOSE OF DEVELOPING A HARD ROCK HOTEL, MERGED REDEVELOPMENT PROJECT AREA##2. A0500C. THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS HEREBY RESOLVES AND APPROVES AS FOLLOWS. SECTION 1. The Consent to Assignment of Exclusive Agreement to Negotiate and Estoppel and Recognition Agreement with Nexus Development Corporation-Central Division in Favor of Lehman Brothers Holdings Inc., a Delaware Corporation, is hereby approved. SECTION 2. The Executive Director is hereby authorized to execute on behalf of the Agency, the Consent to Assignment, in a form approved by Agency Counsel. ADOPTED AND APPROVED THIS 30" DAY OF MAY, 2007 David H. Ready, Executive Director ATTEST: James Thompson, Assistant Secretary Resolution No. 1326 Page 2 CERTIFICATION STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss. CITY OF PALM SPRINGS ) I, JAMES THOMPSON, Assistant Secretary of the Community Redevelopment Agency of the City of Palm Springs, hereby certify that Resolution No. 1326 is a full, true and correct copy, and was duly adopted at a special meeting of the Community Redevelopment Agency of the City of Palm Springs on the 30ffi day of May 2007, by the following vote: AYES: NOES: ABSENT: ABSTAIN: James Thompson, Assistant Secretary Community Redevelopment Agency City of Palm Springs, California CONSENT TO ASSIGNMENT OF EXCLUSIVE AGREEMENT TO NEGOTIATE: NEXUS DEVELOPMENT CORPORATION AND ESTOPPEL AND RECOGNITION AGREEMENT THIS CONSENT TO ASSIGNMENT OF EXCLUSIVE AGREEMENT TO NEGOTIATE: NEXUS DEVELOPMENT CORPORATION AND ESTOPPEL AND RECOGNITION AGREEMENT ("Consent") is made and entered into as of May. 2007, by the COMMUNITY REDEVELOPMENT AGENCY OF T14r CITY OF PALM SPRINGS ("Agency"), in favor of LEHMAN BROTHERS HOLDINGS INC., a ,Delaware corporation ("Lender"), having an address at 399 Park Avenue, 3th Floor,New York,New York 10022. WITNESSE'I1.1 : WHEREAS, Lender is making a loan (the "Loan") in the original principal amount of $8,000,000 to 0& M HR Associates,LLC,a Delaware limited liability company("Borrower'); WHEREAS, 0 & M HR, LLC, a Delaware limited liability company("Project Owner"), as successor in interest to Nexus Development Corporation—Central Division, a California corporation, and the Agency have entered into that certain Exclusive Agreement to Negotiate: Nexus Development Corporation dated as of December 8, 2005 (as amended by that certain Amendment No. 1 to Exclusive Negotiation Agreement:Nexus Development Corporation dated September 6,2006,the"ENA"); WHEREAS, Borrower owns one hundred percent(100%) of the membership interests in Project Owner,and Project Owner will benefit from the making of the Loan; WHEREAS, in connection with the Loan, Project Owner is assigning and granting a security interest in all of Project Owner's right,title and interest in and to the ENA(the"Assignment");and WHEREAS, the Agency desires to consent to the Assignment and acknowledges that Lender is relying on this Consent in making the Loan. NOW, THEREFORE, for goad and valuable consideration,the receipt and sufficiency of which are hereby acknowledged,the Agency hereby covenants and agrees as follows for the benefit of Lcndur: 1. The Agency hereby consents to the Assignment. Tile Agency acknowledges and agrees that, in the event Lender delivers written notice to the Agency that Lender is exercising its rights in connection with the Assignment, Lender (or any nominee or designee of Lender) may acquire the Borrower's membership interests in Project Owner, and that such acquisition shall not be a default under the ENA. If the Borrower's membership interests in Project Owner are so acquired, the Agency will continue to perform all of the Agency's obligations under the ENA in accordance with the terms of the ENA provided that Lender performs the obligations of Project Owner in accordance with the ENA. 2. The Agency represents and warrants to Lender that: (i)the ENA is currently in full force and effect; (ii) there exist no defaults under the ENA nor any state of facts which, with the giving of notice, passage of time or bath, would constitute a default thereunder; and (iii) the ENA constitutes The valid and binding agreement of the Agency, enforceable in accordance with its terms. 3. The Agency agrees to deliver copies of all default notices delivered to Project Owner under the ENA to Lender at the same time such notice is given to Project Owner. Subject to the provisions of Paragraph 1, the Agency agrees that it will not terminate the ENA For any reason without giving written notice to Lender of such intention to terminate and allowing Lender reasonable time to cure any defaults. 4. All notices hereunder shall be in writing and shall be deemed to have been duly given if mailed by United States registered or certified mail, with return receipt requested, postage prepaid, or by United States Express Mail or courier service to the parties at the following addresses (or at such other addresses as shall be given in writing by any Person to the others pursuant to this Paragraph)and shall be deemed complete upon receipt or refusal to accept delivery as indicated in the return receipt or in the receipt ofsuch mail or courier service: If to Project Owner: If to the Agency: c/o Nexus Development Corporation Community Redevelopment Agency I MacArthur Place,Suite 300 of the City of Palm Springs Santa Ana,California 92707 3200 E.Tahquitz Canyon Way Attention: Ryan A.Vogt-Lowell,Esq. Palm Springs,CA 92263 and Matt Kaufman Atin:Executive Director Facsimile No: (714) 546-5660 Facsimile:(760)323-8350 If to Lender: Lehman Brothers Holdings Inc. 10250 Constellation Boulevard,24th Floor Las Angeles,California 90067 Attention: Ashley Bickford Facsimile No.: 212 520-0495 5. The statements herein made shall be binding upon and inure to the benefit of the Agency and Lender and their successors and assigns. Each person executing this Consent is duly empowered to do so on behalf of the Agency. 6. THIS CONSENT SHALL BE GOVERNED BY, AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH,TI-IE LAWS OF THE STATE OF CALIFORNIA. 7. If any parry hereto commences litigation against any other party hereto for the specific enforcement of the terms,conditions and covenants hereof,or otherwise seeks damages or enforcement of any other remedy available to a party pursuant to the terms hereof and/or applicable law, the prevailing parry shall pay all costs and expenses incurred by the other party as a result thereof(including, but not limited to,reasonable attorney's fees and expenses). S. This Consent may be executed in any number of counterparts, each of which shall be an original,but all of which shall constitute One and the same instrument. [Signature Page Follows] 100209569 3.doc IN WITNESS WHEREOF, the parties hereto have executed this Consent as of the day and year first above written AGENCY: COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS By. Name: Title: APPROV50 S TO FORM: � r i Title: ; (V,� 3 PROJECT OWNER ACKNOWL EDGEMENT The undersigned hereby consents and agrees to each and every slaremem contained in the foregoing Consent, and consents to any action that may be taken by Lender or the Agency pursuant to the Consent which is inconsistent with any other agreement between the undersigned and Lender or the Agency. Daied; By: Name: Title: