HomeMy WebLinkAbout1/4/2017 - STAFF REPORTS - 5.A. QALM Sp
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cR<fFOKN�P, City Council Staff Report
DATE: January 4, 2017 NEW BUSINESS
SUBJECT: APPROVAL OF A PARTIAL RELEASE OF THE PERFORMANCE DEED
OF TRUST FOR BLOCK B-1 IN LIEU OF BLOCK A-1 OF THE
DOWNTOWN PALM SPRINGS PROJECT
FROM: David H. Ready, City Manager
BY: Office of the City Attorney
SUMMARY
This action amends the City Council's prior action on December 14, 2016, to authorize
the City Manager to execute a Substitution of Trustee and Deed of Partial
Reconveyance document to release the Performance Deed of Trust on Block A-1 (new
surface parking lot behind West Elm), in exchange for Block B-1 (future Virgin Hotel
site).
RECOMMENDATION:
1) Rescind the City Council's action on December 14, 2016, authorizing the City
Manager to execute a Substitution of Trustee and Deed of Partial Reconveyance by
and between the City of Palm Springs (Beneficiary) and Palm Springs Promenade,
LLC, (Trustor) for Block A-1; and
2) Authorize the City Manager to execute a Substitution of Trustee and Deed of Partial
Reconveyance by and between the City of Palm Springs (Beneficiary) and Palm
Springs Promenade, LLC, (Trustor) for Block B-1 ; (A6144)
STAFF ANALYSIS:
On December 2, 2009, the City Council adopted Ordinance No. 1764, adopting the
Museum Market Plaza Specific Plan, Case No. 5.1204, (the "Specific Plan").
On September 7, 2011, the City Council adopted Resolution No. 23018, authorizing the
City and Palm Springs Promenade, LLC, (the "Developer') to enter into a Project
Financing Agreement ("PFA" — Agreement No. 6144) applicable to the financing,
development, redevelopment, creation and refurbishment of public and private
improvements within the Specific Plan area. The PFA included, among other things, a
ITEM NO. .5-A
City Council Staff Report
January 4, 2017-- Page 2
Release of Deed of Trust—Block B-1
Downtown Palm Springs Project
Site Plan and Project Description depicting the proposed improvements, including new
public streets described as Main Street, Andreas Road, and the Belardo Road
extension. The currently approved configuration of the Specific Plan area is shown
below.
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City Council Staff Report
January 4, 2017 --Page 3
Release of Deed of Trust—Block B-1
Downtown Palm Springs Project
Section 2(b)(10) of the PFA required that the Developer provide to the City a
Performance Trust Deed to encumber the Specific Plan area, which was recorded
concurrently with the close of escrow with the City's acquisition of the various parcels
from the Developer. The Performance Trust Deed was used to secure the Developer's
performance required under the PFA, with respect to completion of the Private
Improvements and Public Improvements identified in the PFA. The Performance Trust
Deed was recorded as Document No. 2012-0298857 on June 27, 2012, encumbering
the various parcels of land located within the Specific Plan area, with the City as
Beneficiary.
On September 17, 2014, the City Council approved Amendment 4 to the PFA; Section 8
of Amendment 4 related to the Performance Trust deed, and states:
As part of the PFA, Developer provided City with a Performance Trust Deed to
secure obligations of Developer under the PFA to complete Private
Improvements. The parties acknowledge that plans for development of the
Project have evolved and changed over time, and that such changes, while
significantly improving the overall Project, greatly increase Developer costs. Such
increased costs can only be funded by substantial construction loans, and such
loans can only be obtained if the City released the Performance Deed of Trust.
The City is strongly in support of such changes and has agreed, and hereby does
agree, to incrementally reconvey the Performance Trust Deed on a parcel by
parcel basis concurrently with the recordation of any loan to fund all Private
Improvements on each such parcel to be constructed within the DFP Area, so
long as 100% of the costs to complete such improvements are fully funded by the
construction loan and/or Developer funds as determined by the lender and
reviewed by the City Manager or the City Manager's designee at a location in the
Coachella Valley identified by the lender. In turn, Developer has agreed, and
hereby does agree, that expenditures from any such loan will require prior
approval of the IFC Agent, as contemplated by original requirements of the PFA.
On December 14, 2016, the City Council took action to authorize the City Manager to
execute a partial release of the Performance Deed of Trust for Blocks B and C, in light
of the fact that the Developer has obtained construction loans to complete the retail
buildings on those parcels. The City Council also authorized the City Manager to
execute a partial release of the Performance Deed of Trust for Block A-1 where the
Developer recently completed a surface parking lot.
On December 20, 2016, the Developer notified the City that its construction lender was
requiring as security collateral Block B-1 (the site of the future Virgin Hotel). Initially, the
Developer was offering to its construction lender Blocks A-1 and B as security collateral,
however, as noted in the Developers letter, its construction lender is requiring the
underground parking garage that has been constructed underneath all of Block B as
collateral, and is not accepting as collateral Block A-1. A copy of the Developer's
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City Council Staff Report
January 4, 2017 -- Page 4
Release of Deed of Trust— Block B-1
Downtown Palm Springs Project
request is included as Attachment 1.
Therefore, to ensure the Developer can close escrow on its construction loan to
complete the retail buildings on Blocks B and C, staff recommends that the City Council
retain Block A-1 as security under the Performance Trust Deed, and in exchange,
release Block B-1 as requested by the Developer.
The security maintained by the City is preserved, in that the size of Block A-1 is 0.87
acres and the size of Block B-1 is 0.84 acres. Rescinding the release of Performance
Deed of Trust for Block A-1 in exchange for a release of the Performance Deed of Trust
for Block B-1 results in maintaining the same amount of security to ensure the
Developer's performance under the PFA.
It is important to note that the partial release of the Performance Deed of Trust for Block
B-1 has no effect on the remainder of the Performance Deed of Trust which will
continue to encumber Parcels A-1, D, F and G.
A copy of the Substitution of Trustee and Deed of Partial Reconveyance for Block B-1 is
included as Attachment 2.
Staff is requiring that as a condition of the City's execution of the release of the
Performance Deed of Trust, that the reconveyance documents be submitted to the
Developer's escrow, and as a condition of escrow, recorded only at such time and
immediately preceding recordation of the Developer's construction loan. To the extent
that the escrow does not close and the construction loan is not funded, the City's
reconveyance documents are required to be returned to the City and not recorded, and
to remain of public record and an encumbrance on the property.
ENVIRONMENTAL IMPACT:
The requested City Council action is not a "Project" as defined by the California
Environmental Quality Act (CEQA). Pursuant to Section 15378(a), a "Project" means the
whole of an action, which has a potential for resulting in either a direct physical change
in the environment, or a reasonably foreseeable indirect physical change in the
environment. The requested action is to authorize execution of partial releases of the
Performance Deed of Trust, and is exempt from CEQA pursuant to Section 15378(b), in
that a "Project" does not include: (5) Organizational or administrative activities of
governments that will not result in direct or indirect physical changes in the environment.
FISCAL IMPACT:
None.
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City Council Staff Report
January 4, 2017 -- Page 5
Release of Deed of Trust— Block B-1
Downtown Palm Springs Project
SUBMITTED:
Douglas Holland, Esq. Marcus L. Fuller, MPA, P.E.,
City Attorney Assistant City Manager/City Engineer
7�:
David H. Ready, Esq., Ph.D.
City Manager
Attachments:
1 . Developer request letter
2. Substitution of Trustee and Deed of Partial Reconveyance (1)
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ATTACHMENT 1
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PALM SPRINGS PROMENADE, LLC
555 5. SUNRISE WAY SUITE 200
PALM SPRINGS, CA 92264
T: 760-325-3050 F: 760-325-5848
December 20, 2016
Mr. Marcus Fuller
City of Palm Springs
3200 E. Tahquitz Canyon Way
Palm Springs, CA 92262
Re: Downtown Project Performance Deed of Trust for Block B-1
Dear Marcus,
In order to move forward with the newly started construction of the Block B-0 & Block C-0
buildings we are hereby requesting that the City releases the Performance Deed of Trust for
Block B-1 as it is a requirement of our lender. The bank requires that all of the Block 8
underground garage be used as collateral for the loan. The Performance Deed of Trust has
been released for Block A-1 and we are asking that the City releases Block B-1 and no longer
require the release of Block A-1.
I appreciate your consideration on this matter and please contact me if you would like to
discuss further.
ce y,
Mich Braun
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ATTACHMENT 2
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RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
Palm Springs Promenade, LLC
555 S. Sunrise Way, Suite 200
Palm Springs, CA 92264
APN 513-560-044
SUBSTITUTION OF TRUSTEE AND DEED OF PARTIAL RECONVEYANCE
The undersigned, City of Palm Springs, a California charter city and municipal
corporation, as the owner and holder of the Note secured by that certain Deed of Trust
dated June 27, 2012, made by Palm Springs Promenade, LLC, a California limited
liability company, as Trustor to Fidelity National Title Company, a California corporation
as trustee for City of Palm Springs, a California charter city and municipal corporation,
as beneficiary, which Deed of Trust was recorded on 06/27/2012, as Instrument No.
212-0298857 of Official Records in the Office of the County Recorder of Riverside,
California, hereby substitutes itself, City of Palm Springs, a municipal corporation and
charter city, as Trustee in place of the current Trustee thereunder.
City of Palm Springs, a California charter city and municipal corporation, hereby accepts
said appointment as trustee and under the above Deed of Trust, and as successor
Trustee, and pursuant to the request of said owner and holder and in accordance with
the provisions of said Deed of Trust, DOES HEREBY PARTIALLY RECONVEY,
WITHOUT WARRANTY, TO THE PERSON OR PERSONS LEGALLY ENTITLED
THERETO, the estate as shown on Exhibit "A" attached hereto and made a part hereof,
now held by it under said Deed of Trust.
The remaining property described in said Deed of Trust shall continue to be held by said
Trustee under the terms thereof as provided in said Deed of Trust. This Partial
Reconveyance is made without affecting the personal liability of any person or any
entity for the payment of the indebtedness mentioned as secured thereby or the unpaid
portion thereof, nor shall it affect any rights or obligations of any of the parties of said
Deed of Trust as to the remaining property.
IN WITNESS WHEREOF, City of Palm Springs, a California charter city and municipal
corporation, as the owner and holder of the above described Note and beneficial
interest, and as Successor Trustee, has caused this instrument to be executed, as to
each respective interest.
[SIGNATURES ON NEXT PAGE]
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City of Palm Springs, a California charter
city and municipal corporation
Dated:
David H. Ready, City Manager
Attest: Approved as to form:
Kathleen D. Hart, MMC Douglas C. Holland, City Attorney
Interim City Clerk
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EXHIBIT "A"
Parcel 3 of Parcel Map No. 36446 filed in the office of the County Recorder, County of
Riverside, State of California, on December 15, 2014 in Book 238 of Parcel Maps at
pages 31 through 34.
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