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COMMUNITY REDEVELOPMENT
AGENCY STAFF REPORT
DATE: FEBRUARY 6, 2008 LEGISLATIVE ACTION
SUBJECT: APPROVAL OF SECOND AMENDMENT TO A SUBLEASE WITH VIP
MOTOR CARS, INC., 4095 EAST PALM CANYON DRIVE, (A0399C) TO
RESET THE TRIGGER DATE FOR CALCULATING THE FINANCIAL
ASSISTANCE FORMULA FOR THE RENOVATION AND EXPANSION
OF THE AUTO DEALERSHIP, AND AUTHORIZING THE EXECUTIVE
DIRECTOR TO EXECUTE ALL DOCUMENTS RELATED TO THE
AGREEMENT
FROM: David H. Ready, Executive Director
BY: Community & Economic Development Department
SUMMARY
This action amends the Sublease on the subject property, which the Agency leases
from FDH Enterprises, Inc. and subleases to VIP Motors, Ltd. in order to restructure the
Agency assistance under which the Agency has furthered the dealership's expansion.
The amendment fixes a problem created in the assistance formula due to delays in the
land acquisition by extending the Agreement's "Trigger Date' by a year. It does not
extend the term nor increase the total amount of financial assistance.
RECOMMENDATION:
COMMUNITY REDEVELOPMENT AGENCY RECOMMENDATION:
1. Adopt Resolution No. , "A RESOLUTION OF THE COMMUNITY
REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS,
CALIFORNIA, APPROVING THE SECOND AMENDMENT TO THE SUBLEASE
AGREEMENT (AGREEMENT NO. A0399C) WITH VIP MOTOR CARS, LTD. TO
RESET THE TRIGGER DATE TO JANUARY 1, 2007 FOR PROPERTY
IMPROVEMENTS AT AN AUTOMOBILE DEALERSHIP AT 4095 EAST PALM
CANYON DRIVE, MERGED PROJECT AREA #1
2. Authorize the Executive Director to execute all necessary documents. A0399C
ITEM NO. �`'. Aa
STAFF ANALYSIS:
FDH Enterprises purchased VIP Motors (Palm Springs Mercedes, Infiniti and BMW) at
the end of 1998 and proceeded to improve the business, which had underperformed
under the previous owner. The Agency entered a DDA with the dealership in January,
2000 to rebate $1,000,000 over a period of up to 12 years based on their sales tax
performance, as an incentive for them to remain and expand in Palm Springs. The
formula effectively paid the dealer a "sales tax increment" from redevelopment tax
increment over an established base.
California Redevelopment Law allows agencies to pay for improvements on properties
they lease, though, which lead to the structure of the original DDA: the DDA provides
that the Agency lease the real property from FDH Enterprises, Inc., the property owner,
and then sublease it to VIP Motor Cars, Ltd. at the same lease rate, minus an amount
equal to the sales tax "increment" (the amount of sales tax the dealership generated
over a base amount determined by the Agency). The reduced rent to VIP worked as a
tenant improvement allowance; in this case the subtenant (VIP) performed the
improvements on the property and was reimbursed a portion of its cost by the tenant
(the Agency). The rebate was a separate calculation and payment from the lease
payment, and was paid on an annual (not monthly) basis to the dealer.
Currently four brands are sold at the location: Mercedes-Benz, BMW, and Infiniti, and
the super-luxury Maybach brand in the Mercedes showroom. VIP Motors may
have other opportunities to add other brands not currently in the market.
BMW's sales nationally and locally have grown significantly over the past several years
due to the introduction of new products. With assistance from the Agency in land
assembly, the dealership has developed a new state-of-the-art BMW facility on the
adjacent parcel. That facility opens this month. The expansion of the BMW facility is
covered by a separate agreement. In May, 2005 the Agency approved an amendment
to add approximately $1,700,000 in additional assistance over the life of the Agreement
in return for extending the lease and sublease of the property, which helps ensure the
dealer will remain and operate in Palm Springs for that period of time. In that
Amendment the Agency reduced the annual assistance payment but extended the term.
The reduction in annual payment was accomplished by removing the BMW sales
figures from the calculation of assistance once the BMW moved from the site to the
adjacent parcel. The formula is based on paying, through tax increment, an amount
approximately equal to the incremental sales tax over the base year.
Based on the original formula, the dealer received approximately $264,000 in 2005.
The new formula would pay an amount of approximately $169,000 in the first year of the
new formula payment.
The amount of rent rebate will continue to be calculated based on a portion of the
dealership's sales tax performance, less the BMW sales, but will be paid from the
(property) tax increment that flows to the Agency. Sales tax, which flows to the City's
000602
General Fund, is the index for the payment but not the source. This structure preserves
a major sales tax source for the General Fund, as well as allowing the General Fund to
keep the growth in sales tax revenue.
However, the 2005 Agreement also anticipated that the Agency land exchange with the
Bureau of Indian Affairs for the adjacent parcel would have been completed that year,
with the construction project underway in late 2005 or early 2006. Due to the length of
time involved in the exchange, construction did not commence until late 2006 and is
now just being completed. The Agreement contemplates a "Trigger Date" at which it
notifies the Agency in writing that it has moved the sales of BMW to the new location
and has begun reporting sales tax from there. The prior Sublease amendment provided
for a Trigger Date of January 1, 2006, provided that on or before February 15, 2007 the
Developer completed the relocation of the BMW dealership off the Site and has
commenced reporting sales from the new location. If this deadline for relocation of
BMW was not met, the formula for rent assistance would be suspended until the
January 1 following completion of such relocation, and shall then proceed thereafter for
each full calendar year per the table. Such language was added to create an incentive
for the Developer to move expeditiously on the project; however, neither party
anticipated the significant delays created by third parties.
This amendment moves the Trigger Date to January, 2007, provided the project is
completed by February 15, 2008. The project is substantially complete and the
Developer has notified the Agency that it will be moved by February 15.
FISCAL IMPACT:
This amendment to the sublease does not create any additional financial assistance to
the project because the total is capped at $1,700,000, paid over a 12 year period.
However, the prior sublease would have caused delayed the reimbursement by another
full year.
,John S. Ray on , Director of Thomas J. Wi s Assistant City
om nity & onomic Development Manager, Development Services
David H. Ready, Execut' ector
Attachments:
1. Resolution
2. Second Amendment to Sublease Agreement (A0399C)
RESOLUTION NO.
A RESOLUTION OF THE COMMUNITY
REDEVELOPMENT AGENCY OF THE CITY OF
PALM SPRINGS, CALIFORNIA, APPROVING THE
SECOND AMENDMENT TO THE SUBLEASE
AGREEMENT (AGREEMENT NO. A0399C) WITH
VIP MOTOR CARS, LTD. TO RESET THE
TRIGGER DATE TO JANUARY 1, 2007 FOR
PROPERTY IMPROVEMENTS AT AN
AUTOMOBILE DEALERSHIP AT 4095 EAST PALM
CANYON DRIVE, MERGED PROJECT AREA#1
NOW THEREFORE BE IT RESOLVED by the Community Redevelopment Agency of
the City of Palm Springs, as follows:
SECTION 1. This Second Amendment to the Sublease Agreement with VIP
Motor Cars, Ltd., to reset the Trigger Date to January 1, 2007 for
property improvements at an automobile dealership at 4095 East
Palm Canyon Drive, Merged Project Area #1, is hereby approved.
SECTION 2. The Executive Director, or his designee, is hereby authorized to
execute on behalf of the Agency the Amendment, in a form
approved by Agency Counsel.
PASSED, APPROVED, AND ADOPTED THIS DAY OF FEBRUARY, 2008.
STEVE POUGNET, CHAIRMAN
ATTEST:
James Thompson, City Clerk
CERTIFICATION
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.
CITY OF PALM SPRINGS )
I, JAMES THOMPSON, City Clerk of the City of Palm Springs, do hereby certify that
Resolution No. is a full, true and correct copy, and was adopted at a
regular meeting of the Palm Springs City Council on the day of
2008, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
James Thompson, City Clerk
City of Palm Springs, California
01010965
SECOND AMENDMENT TO SUBLEASE AGREEMENT
RECORDING REQUESTED BY
AND WHEN RECORDED, MAIL TO:
Community Redevelopment Agency of the City of Palm Springs
3200 E. Tahquitz Canyon Way
Patin Springs, CA 92263
Attn: Executive Director
(Space above this line far recorder's use only)
Tm5 Document is reeorded at the request of the
Redevelopment Agency of the City of Palm Springs
and is therefore exempt from the payment of recording
fees pursuant to Government Code Section 6103
SECOND AMENDMENT TO SUBLEASE AGREEMENT
THIS SECOND AMENDMENT TO LEASE AGREEMENT ("Amended Sublease") is
entered into as of _,2008 by and between the COMMUNITY
REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS, a public body, corporate
and politic ("Agency"), and VIP MOTOR CARS, LTD, a California corporation, wholly owned
by VIP MOTOR CARS ACQUISITION, INC. (collectively"VIP").
RECITALS
A. On January 15, 2000, the Agency and VIP entered into a sublease pursuant to
which VIP agreed to sublet that real property located in the City of Palm Springs, State of
California, commonly known as 3919, 4057 and 4095 E. Palm Canyon Drive, and more
particularly described in the legal description attached hereto and incorporated herein as Exhibit
"A" ("Site") from.Agency ("Sublease Agreement").
B. The Sublease Agreement has a twelve (12) year term.
C. Developer has acquired additional property within the City and is relocating the
BMW dealership now on the Site to the new property and from the time of such relocation,
BMW would not be included in the rent assistance formula.
D. At this time, the parties desire to execute this Second Amendment to Sublease
Agreement to reset the Trigger Date for the rent assistance formula provided to VIP, ("Amended
Sublease") required by the relocation of BMW, due to a delay in land acquisition beyond the
parties' control.
NOW, THEREFORE, the parties hereto agree as follows:
The foregoing Recitals are incorporated herein by reference and the Sublease Agreement
is hereby amended as follows:
C1
1. Triseer Date. The following revisions to the rent assistance provided in the Sublease
Agreement shall only apply after the "Trigger Date." Until the 'Trigger Date, all the existing
provisions of the Sublease shall continue in full force and effect. Moreover, all existing
provisions of the Sublease not specifically modified herein shall continue in full force and effect
even after the Trigger Date until termination of the Sublease. The Trigger Date shall be January
1, 2007 provided that on or before February 15, 2008 Developer completes relocation of the
BMW dealership off of the Site and has commenced reporting sales from the new location, and
the schedule for rent assistance pursuant to Exhibit"131" shall be adjusted by one year.
2. In Section 4.2 "Determination of Increment Rent Assistance," subsection (a) is amended
to read as follows:
As used herein, the term "Sales Tax Revenue" shall mean the sales and use
taxes paid or payable by the State Board of Equalization to the City that are
generated from sales from the Site upon which sales or use taxes are imposed
pursuant to applicable California law, including but not limited to California
Revenue and Taxation Code Section 6000, et. seq., and shall include the sales
or use taxes imposed on the leasing of vehicles (including but not limited to
the sales or use taxes paid For the capitalized cost reduction on vehicle leases)
which are included in VIP's quarterly sales tax filings to the State Board of
Equalization. Sales tax data for VIP's BMW dealership will be excluded after
their relocation, and the Base Revenue will also be adjusted accordingly.
Developer shall provide auditable sales tax information to show effect of
BMW adjustment. All calculations hereunder shall be as of the first Rill sales
tax reporting period following the Trigger Date. For example, if the Trigger
Date is January 1, 2007, then the first full year of sales tax reporting shall be
2007 and the first payment date will be February 15, 2008.
All other terms and conditions of the Amended Sublease remain in effect_
IN WITNESS WHEREOF, the parties hereto have executed this Amended Sublease to
be effective as of the date first written above.
[SIGNATURES ON FOLLOWING PAGE]
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"AGENCY"
ATTEST: COMMUNITY REDEVELOPMENT
AGENCY OF THE CITY OF PALM
SPRINGS, a public body corporate and politic
Agency Secretary Executivc Director
APPROV 7;ZRM�:
Douglas olland, Agency Counsel
n VTP"
VIP MOTOR CARS, LTD, a California
corporation wbolly owned by VIP MOTOR
CARS ACQUISITION, INC.
By:
Title:
By:
Title:
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STATE OF CALITORNlA )
) ss.
COUNTY OF RIVERSIDE )
On before me, 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 signatures(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.
Notary Public
[SEAL]
STATE OF CALIFORNIA )
ss.
COUNTY OF RIVERSIDE )
On before me, 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 achnowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signatures(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.
Notary Public
[SEAL]
UOUQ 9
STATE OF CALIFORNIA )
) ss.
COUNTY OF RIVERSIDE )
On before me, 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 signatures(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.
Notary Public
[SEAL]
STATE OF CALIFORNIA )
ss.
COUNTY OF RIVERSIDE )
On before me, 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 bis/her/their signatuies(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.
Notary Public
[SEAL]
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