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HomeMy WebLinkAbout11/16/2005 - STAFF REPORTS (22) City Council Staff Report November 16, 2005 - Page 6 Amendment No. 3 to SDC, LLC Exclusive MINUTE ORDER NO. APPROVAL OF AMENDMENT NO. 3 TO AGREEMENT NO. A4713 WITH SDC, LLC, PROVIDING A SIX-MONTH EXTENSION OF THE EXCLUSIVE AGREEMENT TO NEGOTIATE FOR DEVELOPMENT OF THE TAHQUITZ CREEK RESORT HOTEL PROJECT I HEREBY CERTIFY that this Minute Order approving Amendment No. 3 to Agreement No. A4713 with SDC, LLC providing a six-month extension of the Exclusive Agreement to Negotiate for development of the Tahquitz Creek Resort Hotel Project was adopted by the City Council of the City of Palm Springs, California, in a meeting thereof held on the 16th day of November 2005. James Thompson, City Clerk City Council Staff Report November 16, 2005 - Page 7 Amendment No. 3 to SDC, LLC Exclusive AMENDMENT NO. 3 TO EXCLUSIVE AGREEMENT TO NEGOTIATE #A4713 WITH SDC, LLC FOR DEVELOPMENT OF THE TAHQUITZ CREEK RESORT HOTEL PROJECT THIS AMENDMENT NO. 3 TO EXCLUSIVE AGREEMENT TO NEGOTIATE #A4713 ("Amendment No. 3") is entered into this day of 2005 (the "Effective Date") by and between the CITY OF PALM SPRINGS ("City") and SDC, LLC ("Developer"). RECITALS The parties enter into this Amendment No. 3 on the basis of the following facts, understandings, and intentions: A. On June 4, 2003, City and Developer entered into that certain Exclusive Agreement to Negotiate #A4713 ("Original Agreement") pursuant to which Developer and City agreed to negotiate the business terms and design details of hotel and timeshare facilities which will maximize the value from and of the Tahquitz Creek Golf Course ("Tahquitz Creek GC") and cause the modernization of the Tahquitz Creek GC clubhouse ("Project") within a portion of the existing Tahquitz Creek GC and the adjacent Whitewater Wash to be located upon all or a portion of the real property designated in the Original Agreement as the "Project" or the "Site" as shown in the "Site Map" attached hereto as Exhibit "A" and incorporated herein by this reference. The exact boundaries of the Site have not yet been ascertained. B. On May 19, 2004, City and Developer extended the Period of Exclusive Negotiation under the Original Agreement for one (1) year until June 3, 2005. C. On May 18, 2005, City and Developer extended the Period of Exclusive Negotiation an additional six (6) months until December 3, 2005. D. City and Developer desire, for the period set forth herein, to continue negotiating diligently and in good faith to identify the final boundaries of the Site and to develop a mutually acceptable business proposal for future inclusion in a Lease and Development Agreement ("LDA") whereby the Developer would develop the Project's various elements including but not limited to a hotel and/or timeshare units and new or remodeled clubhouse and maintenance facilities. E. City and Developer desire to further amend the terms of the Original Agreement as more particularly described herein. NOW, THEREFORE, the recitals contained above are incorporated herein by reference and the Original Agreement is hereby amended as follows: 1. Section 2.A. "Period of Exclusive Negotiation" is hereby amended to read as follows: "The City and Developer agree that the period of negotiation shall extend until June 3, 2006 unless automatically extended further per the terms and provisions of Section 2C hereof. The City and Developer agree that, for such period or extended period, the City will not enter into any agreement with any other entity for the development of the Site nor shall Developer pursue a similar project within three miles of the Project site." 2. Section 2.C. "Extension of Time" is hereby amended to read as follows: City Council Staff Report November 16, 2005 -Page 8 Amendment No. 3 to SDC, LLC Exclusive "This Agreement may be extended as follows: 1. For ninety (90) days, for the purpose of drafting a Lease and Development Agreement, if the following conditions have been met prior to June 3, 2006: a. City and Developer have agreed upon the boundaries of the Site upon which the Project will be located; and b. City and Developer have agreed upon the major business terms for the Project, as prepared and submitted for review by Developer to City, describing the physical components and proposed financing of all elements of the Project to include but not be limited to a hotel and/or timeshare units, new or remodeled clubhouse and maintenance facilities. 2. For an additional sixty (60) days, if a Lease and Development Agreement has been prepared by the City and executed by the Developer and has been submitted to the City but has not yet been approved by the City Council; or 3. For an additional thirty (30) days if the major business terms have been agreed to and the City Manager determines that further negotiations are likely to result in a Lease and Development Agreement; or 4. By mutual agreement of the parties, as evidenced in writing. 3. Full Force and Effect. Except as expressly stated herein, all other terms of the Original Agreement shall remain in full force and effect. IN WITNESS HEREOF the City and Developer have executed this Second Amendment as of the date first written above. "CITY" ATTEST: CITY OF PALM SPRINGS, CALIFORNIA, a municipal corporation By: By: City Clerk City Manager APPROVED AS TO FORM: Mailing Address: City of Palm Springs City Attorney 3200 Tahquitz Canyon Way Palm Springs, CA 92262 Attn: Community & Economic Development Director City Council Staff Report November 16, 2005- Page 9 Amendment No. 3 to SDC, LLC Exclusive "DEVELOPER" SDC, LLC By: (Notarized Signature) Print Name: Print Title: City Council Staff Report November 16, 2005 - Page 10 Amendment No. 3 to SDC, LLC Exclusive F x - I 1 1 0 t 1 �' _ '• _ spry ' )i'1 �� N W J I 1 21 F 1 77 u II e , RYp24� .vY. pg i I 1 a I Sys Ees Exhibit"qMAP ;�Q P A LM Sp4 �2 c U N x x # C M ogPiEO +,e <,FORN�P CITY COUNCIL STAFF REPORT DATE: NOVEMBER 16, 2005 UNFINISHED BUSINESS SUBJECT: AMENDMENT NO. 3 PROVIDING AN EXTENSION OF EXCLUSIVE AGREEMENT TO NEGOTIATE (AGREEMENT NO. A4713) WITH SDC, LLC FOR DEVELOPMENT OF THE TAHQUITZ CREEK RESORT HOTEL PROJECT FROM: David H. Ready, City Manager BY: Community & Economic Development Department SUMMARY This Amendment No. 3 provides a six-month extension of the Exclusive Agreement to Negotiate (Agreement No. A4713) with SDC, LLC for development of the Tahquitz Creek Resort Hotel Project to be located at the Tahquitz Creek Golf Course on Golf Club Drive. RECOMMENDATION: Adopt Minute Order No. , Approving Amendment No. 3 to Agreement No. A4713, with SDC, LLC providing a six-month extension of Exclusive Agreement to Negotiate for development of the Tahquitz Creek Resort Hotel Project to be located at the Tahquitz Creek Golf Course on Golf Club Drive. A4713. STAFF ANALYSIS: On June 4, 2003 the City entered into a one-year Exclusive Agreement to Negotiate with SDC, LLC for development of the Tahquitz Creek Resort Hotel and Timeshares to be located at the Tahquitz Creek Golf Course on Golf Club Drive. The Exclusive Agreement to Negotiate acknowledged the current long-term management agreement and lease with Arnold Palmer Golf Management Company relating to the daily management of Tahquitz Creek Golf Course and provided for the potential future Lease and Development Agreement to be structured consistent with that management agreement. Upon completion of exclusive negotiations, the specific terms of the deal were to be included in the Lease and Development Agreement for subsequent consideration and approval by the City Council. All other approval processes normally required of a project of this type were also required (i.e. environmental review, Planning Commission approval, etc.). //�� Item No. 4.A. City Council Staff Report November 16, 2005—Page 2 Amendment No. 3 to SDC, LLC Exclusive As originally envisioned, the project was to include both timeshare units and a hotel. During the initial negotiation period, the City's concurrent ongoing discussions with the Desert Water Agency ("DWA") relative to a 6.25-acre City-owned parcel that was previously optioned to DWA, but needed for a portion of the timeshare portion of the project, were inconclusive. As a result, the ability of the City and SDC, LLC to proceed beyond preliminary design concepts for the combined hotel and timeshare project was limited. Nonetheless, SDC, LLC continued its aggressive efforts toward securing a future hotel and timeshare operator for the eventual project although no firm commitments could be made by the City prior to site control being accomplished. Optimistically, in May 2004, the one-year term of the exclusive negotiation period was extended an additional year to allow for the Developer and City to continue discussions relative to the design, future operators and financial arrangements for the project. During this extended period of negotiations, a number of site control issues remained in flux due to the potential sale of the City's wastewater treatment plant to DWA. These issues included the DWA's prior purchase option covering the 6.25-acre portion of the current driving range and the project's required use of all or some significant portion of the settlement ponds 5 & 6 located at the northern edge of the golf course. Due to these continued uncertainties, the parties made a decision to eliminate the timeshare portion of the project and to limit the current discussions to the design and construction of the new hotel, relocation of current maintenance facilities and the construction of a new clubhouse facility. The City's objectives in the project continued to include the development of a quality hotel that would capitalize on the Palm Springs name, the quality golf courses and other amenities in the community; to increase hotel room nights in the City, thereby increasing Transient Occupancy Tax ("TOT") revenues; and to maximize the usage of its 36 holes of City-owned golf. The developer continued preliminary design discussions with an architectural team and worked to secure interest in the site from an established national hotel operator. Meanwhile, the Developer's preliminary financial projections for construction and operation of the hotel were reviewed by the City's financial consultant, Keyser Marston & Associates ("KMA"). Separate from the exclusive negotiations with the developer on the hotel, the City Council in December 2004 approved a contract with National Golf Foundation ("NGF") to conduct an operations audit and review of the Tahquitz Creek Resort and Legends golf courses, currently managed by Arnold Palmer Golf Management Company. NGF's findings were presented to the City Council in April 2005 and included implementing a schedule of capital improvements for the two courses and entering into an agreement for construction of an on-site hotel, preferably of the upscale variety, that will also incorporate a new clubhouse. In May 2005, the Exclusive Agreement to Negotiate with SDC, LLC was extended an additional six months through December 3, 2005 to provide additional time to consider implications of the continuing site control issues, the overall impact of scaling back to a "hotel only" concept on the project's ability to finance all desired improvements, and an inquiry by Ironwood Golf Group to assume Palmer's management responsibilities at the course. Appropriate input by the eventual operator of the course would be beneficial in the design and amenities of the golf course facilities, which in turn, impact the economics of the Lease and Development Agreement. Subsequent to the extension of City Council Staff Report November 16, 2005—Page 3 Amendment No. 3 to SDC, LLC Exclusive Exclusive Agreement, the Ironwood proposal was withdrawn and additional negotiations with the developer were directed toward refinement of conceptual plans and developing more complete cost estimates for the entire development project including the hotel, clubhouse, maintenance facilities and the course improvement recommendations from NGF. A copy of the current conceptual site plan for the proposed hotel and clubhouse is attached. The project's Council subcommittee consisting of Mayor Oden and Councilmember Mills met on October 27, 2005 to review the status of the project. Staff was directed to explore replacing the hotel element of the project with timeshare units to improve the project's financial capacity to assist in funding the desired replace ment/renovation of the clubhouse and maintenance facilities, to address desired course improvements and to reduce the City's annual golf course "operating deficit". Preliminary staff analysis has concluded that substituting timeshare units for the proposed hotel would not improve and may actually diminish the project's capacity to meet these financial goals. SDC, LLC and the City have expended considerable time and effort to design a project to address the various financial objectives while being confronted with a significant number of challenges. Both parties are still optimistic that continued negotiations can arrive at a mutually acceptable scenario to address many, if not all, of the desired financial objectives for this project. Staff is therefore proposing a six-month extension of the Exclusive Agreement to attempt to reach agreement on a final footprint of the project site and an acceptable business proposal from the developer for funding the project. If those goals are met within the six-month period, an automatic additional three-month extension would be granted to allow time to draft the Lease and Development Agreement for subsequent consideration and approval by the City Council. FISCAL IMPACT: IFinance Director Revie ` G None. /I Jahn S. aym d, Director Curt Watts unl y & c omit del-opmJent Redevelopment Administrator �b ' ,iF! 1, (___ � i yr Tom Wilson, A Nstant City Manager Development Services �77, Ems, David H. Ready, City Mager Attachments: 1, Current Conceptual Hotel & Clubhouse Plans 2. Minute Order 3. Amendment No. 3 to Exclusive Agreement to Negotiate City Council Staff Report November 16, 2005—Page 4 Amendment No. 3 to SDC, LLC Exclusive i JJ — /�:�/ 4\,!G � � ��,��°�� i - ✓ice C9 L } c dl T Y A — ]_ ' wJ� .4ry ,i� tY9 yie ii ° 1 ,T_,ariP INI r F k � L t h J ry fl' �}tr f y}p• � I City Council Staff Report November 16, 2005—Page 5 Amendment No. 3 to SDC, LLC Exclusive Y r � t' !I�t% 7r'wYcw I i rs. � x r `4 j nt {i.d ✓ -12>�J{.W K i E [�k eau { ii Tel ZI � �iYpIRIYlYl1� €�� S iz 15V 555YI91 Y IX l ��ifall L V 4 346 Mi F 4I ,^e q I I, IF y till { . t � h tT F S pp F f( � l�f 1M1� '4 �`ti t IOF1 {i s t g14 till' ? - I ,, vh-�u:g I;LG3,�lrr r City Council Staff Report October 19, 2005- Page 6 Amendment No. 3 to SDC, LLC Exclusive MINUTE ORDER NO. APPROVAL OF AMENDMENT NO. 3 TO AGREEMENT NO. A4713 WITH SDC, LLC, PROVIDING A SIX-MONTH EXTENSION OF THE EXCLUSIVE AGREEMENT TO NEGOTIATE FOR DEVELOPMENT OF THE TAHQUITZ CREEK RESORT HOTEL PROJECT I HEREBY CERTIFY that this Minute Order approving Amendment No. 3 to Agreement No. A4713 with SDC, LLC providing a six-month extension of the Exclusive Agreement to Negotiate for development of the Tahquitz Creek Resort Hotel Project was adopted by the City Council of the City of Palm Springs, California, in a meeting thereof held on the 16th day of November 2005. James Thompson, City Clerk City Council Staff Report October 19, 2005 - Page 7 Amendment No. 3 to SDC, LLC Exclusive AMENDMENT NO. 3 TO EXCLUSIVE AGREEMENT TO NEGOTIATE #A4713 WITH SDC, LLC FOR DEVELOPMENT OF THE TAHQUITZ CREEK RESORT HOTEL PROJECT THIS AMENDMENT NO. 3 TO EXCLUSIVE AGREEMENT TO NEGOTIATE #A4713 ("Amendment No. 3") is entered into this _ day of 2005 (the "Effective Date") by and between the CITY OF PALM SPRINGS ("City") and SDC, LLC ("Developer"). RECITALS The parties enter into this Amendment No. 3 on the basis of the following facts, understandings, and intentions: A. On June 4, 2003, City and Developer entered into that certain Exclusive Agreement to Negotiate #A4713 ("Original Agreement") pursuant to which Developer and City agreed to negotiate the business terms and design details of hotel and timeshare facilities which will maximize the value from and of the Tahquitz Creek Golf Course ("Tahquitz Creek GC") and cause the modernization of the Tahquitz Creek GC clubhouse ("Project") within a portion of the existing Tahquitz Creek GC and the adjacent Whitewater Wash to be located upon all or a portion of the real property designated in the Original Agreement as the "Project" or the "Site" as shown in the "Site Map" attached hereto as Exhibit "A" and incorporated herein by this reference. The exact boundaries of the Site have not yet been ascertained. B. On May 19, 2004, City and Developer extended the Period of Exclusive Negotiation under the Original Agreement for one (1) year until June 3, 2005. C. On May 18, 2005, City and Developer extended the Period of Exclusive Negotiation an additional six (6) months until December 3, 2005. D. City and Developer desire, for the period set forth herein, to continue negotiating diligently and in good faith to identify the final boundaries of the Site and to develop a mutually acceptable business proposal for future inclusion in a Lease and Development Agreement ("LDA") whereby the Developer would develop the Project's various elements including but not limited to a hotel and/or timeshare units and new or remodeled clubhouse and maintenance facilities. E. City and Developer desire to further amend the terms of the Original Agreement as more particularly described herein. NOW, THEREFORE, the recitals contained above are incorporated herein by reference and the Original Agreement is hereby amended as follows: 1. Section 2.A. "Period of Exclusive Negotiation" is hereby amended to read as follows: "The City and Developer agree that the period of negotiation shall extend until May 3, 2006 unless automatically extended further per the terms and provisions of Section 2C hereof. The City and Developer agree that, for such period or extended period, the City will not enter into any agreement with any other entity for the development of the Site nor shall Developer pursue a similar project within three miles of the Project site." 2. Section 2.C. "Extension of Time" is hereby amended to read as follows: City Council Staff Report October 19, 2005- Page 8 Amendment No. 3 to SDC, LLC Exclusive `This Agreement may be extended as follows: 1. For ninety (90) days, for the purpose of drafting a Lease and Development Agreement, if the following conditions have been met prior to May 3, 2006: a. City and Developer have agreed upon the boundaries of the Site upon which the Project will be located; and b. City and Developer have agreed upon the major business terms for the Project, as prepared and submitted for review by Developer to City, describing the physical components and proposed financing of all elements of the Project to include but not be limited to a hotel and/or timeshare units, new or remodeled clubhouse and maintenance facilities. 2. For an additional sixty (60) days, if a Lease and Development Agreement has been prepared by the City and executed by the Developer and has been submitted to the City but has not yet been approved by the City Council; or 3. For an additional thirty (30) days if the major business terms have been agreed to and the City Manager determines that further negotiations are likely to result in a Lease and Development Agreement; or 4. By mutual agreement of the parties, as evidenced in writing. 3. Full Force and Effect. Except as expressly stated herein, all other terms of the Original Agreement shall remain in full force and effect. IN WITNESS HEREOF the City and Developer have executed this Second Amendment as of the date first written above. "CITY" ATTEST: CITY OF PALM SPRINGS, CALIFORNIA, a municipal corporation By: By: City Clerk City Manager APPROVED AS TO FORM: Mailing Address: City of Palm Springs City Attorney 3200 Tahquitz Canyon Way Palm Springs, CA 92262 Attn: Community & Economic Development Director City Council Staff Report October 19, 2005-Page 9 Amendment No. 3 to SDC, LLC Exclusive "DEVELOPER" SDC, LLC By: (Notarized Signature) Print Name: Print Title: City Council Staff Report October 19, 2005 -Page 10 Amendment No. 3 to SDC, LLC Exclusive p4kE • , i 1 1 tYl 1 q 1 IFvi i �1 � _ _ �� •Il 1 � � ram, 11;..:C i 1 i 3 p 1 1 1 1 �E; � I a a �t t !t 1 _ ItI 9Y i 1 1 I a it A 1 ea g ' i vy - 1. 1 li 1 •qq Exhibit"Al, MAP �' !