HomeMy WebLinkAbout9/12/2001 - STAFF REPORTS DATE: SEPTEMBER 5, 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 I. 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 twelve 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 projectCi?Qjq
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 twelve 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. C(he z
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.
JOH RAYMON�
Dir of Redev �ment
APPROVED
Executive Director
ATTACHMENTS:
1. Resolution
2. Exclusive Agreement to Negotiate
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 for the 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 mixed use
retail/restaurant/office/hotel/residential project (hereinafter sometimes referred to as the "Mixed Use
Project" or"Project") capable of receiving market rents and spurring the redevelopment 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 center on the
site into an attractive, first rate Mixed Use Project.
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 for the redevelopment of a mixed use
center on the Site specified herein. The developmentwill 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.
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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
shall work with the City's design guidelines to create an attractive and exciting Mixed Use Project with
a distinct identity. The parties will develop a mutually satisfactory mix of uses which shall, subject to
Section 4B, 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:
1. Developer shall exert commercially reasonable efforts to (a) make
arrangements with Saks Fifth Avenue to terminate its existing lease and convey
fee title to its existing building (which now sits vacant) to Developer, and (b)
obtain a substitute department store type tenant to occupy such space.
2. Developer shall exert commercially reasonable efforts to obtain a significant
anchor tenant such as Borders or Barnes&Noble to locate at the central traffic
circle, as shown on Developers proposed site plan,a copy of which is attached
hereto as Exhibit"B", which is necessary to draw customers into the site.
3. Consideration will be given to leasing additional space in the existing center to
the adjacent Hyatt Hotel for hotel type purposes.
4. The design shall accommodate outdoor special events.
To the extent commercially reasonable, the Project will 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 5C the Agency is under no obligation
to provide such assistance. The Project is not financially feasible if the Developers 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 Developers Project pro
formas and the evaluation of all Project revenues and costs.
The pro formas shall postulate at least 2-3 cost scenarios ranging from minimal-to high
levels of cost and consistent levels of assistance. Any assistance advanced or paid out during the life
of the Project, would ultimately be performance driven, payable only from tax revenue generated by
the Project.
E. Schedule. The Developers goal is to redevelop the center by September 30, 2004.
Due to the need forthe Agency to possibly acquire the center through condemnation,the property may
be delivered in a later phase.
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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 Mixed Use Project(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.
H. Parking. During the period of this Agreement Developerwill keep the existing parking
lots and structures open and available for public parking.
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 city limits of the City of Palm Springs or any adjacent jurisdiction
within 5 miles of the Project, without approval of Agency.
SECTION 2. PERIOD OF NEGOTIATIONS.
The period of negotiation shall be three hundred sixty(360)days from the date this Agreement
is signed by the Agency, and this Agreement shall terminate after the 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 not yet 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.
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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 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.
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 reasonably necessary forthe design of the Projectto meet the Agency's
reasonable requirements. In addition, Developer shall take all commercially reasonable 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.
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 borne by Agency.
B. Zoning. The Agency will undertake all acts necessary to cause the City to zone or
rezone such portions of the property as may be necessary to permit the development of a Mixed Use
Project on the site. Anything herein to the contrary notwithstanding,upon request from Developer,the
Agency will also undertake all acts necessary to cause the City to zone or rezone portions of the
property located in west areas of the site for hotel uses and/or residential uses, including single family
homes, condominiums and residential timeshare uses. Any change in zoning is subject to a Public
Hearing process at the Planning Commission and City Council. Failure to rezone the property does
not constitute a breach of this Agreement.
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SECTION 5. 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, 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 shall be the property of the party that paid
for the creation of same. 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 enterinto any agreementthat 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 offer which cannot be withdrawn prior to September7,2001,
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.
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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]
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"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 I NOTARY JURAT(S) FOLLOW]
7 cra . a. 10
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
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RESOLUTION NO. 1144
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, for a period of six months, in a
form approved by the Agency Counsel, is hereby approved.
ADOPTED this 12th day of September 2001.
AYES: Members Hodges, Jones, Oden, Reller-Spurgin and Chairman Rleindi.enst
NOES: None
ABSENT: None
ATTEST: COMMUNITY REDEVELOPMENT AGENCY
OF THE CITY OF PALM SPRINGS, CALIFORNIA
By
Assistant Secretary Chairman
REVIEWED & APPROVED AS TO FORM
—L2L G/L-rIle
�e a� -/6
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 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 ('01, sCi