HomeMy WebLinkAbout6/4/2003 - STAFF REPORTS (11) DATE: MAY 21, 2003
TO: CITY COUNCIL
FROM: DIRECTOR OF COMMUNITY & ECONOMIC DEVELOPMENT
APPROVAL OF AN EXCLUSIVE AGREEMENT TO NEGOTIATE WITH SDC, LLC FOR
THE DEVELOPMENT OF A HOTEL AND TIMESHARE PROJECT AT THE TAHOUITZ
CREEK GOLF COURSE
RECOMMENDATION:
It is recommended that the City Council approve an Exclusive Agreement to
Negotiate with SDC, LLC for development of a hotel and timeshare project to be
located at the Tahquitz Creek Golf Course located on Golf Club Drive in the City of
Palm Springs; and that the City Council establish a sub-committee to provide input
during the exclusive negotiation period regarding the project's potential site plan and
design elements.
SUMMARY:
In August 2000, the City of Palm Springs completed an unsuccessful "Request for
Qualifications" process designed to identify developers interested in constructing
and managing a resort hotel at the Tahquitz Creek Golf Resort. Subsequently, in
December 2001, William E. Swank, Sr. representing SDC LLC expressed interest
in opening discussions with the City that could lead to the development of a resort
complex at Tahquitz Creek. City staff and the developer have, on an ongoing basis
since then, discussed the developer's proposed development concept, explored the
potential merits of entering into an Exclusive Agreement to Negotiate for the
proposed project,and completed extensive research to more specifically outline the
potential site boundaries of the proposed project. The developer also initiated
preliminary design discussions with an architectural team and worked to secure
interest in the site from an established national hotel operator. The project is
currently envisioned as including the development of a hotel of at least 140 rooms
and at least 50 timeshare units.
To continue these efforts and provide the necessary "standing" with prospective
hotel and timeshare operators, staff recommends approval of a twelve-month
Exclusive Agreement to Negotiate with the developer. Given the developer's
previous and ongoing efforts toward this project, the Agreement excludes the Good
Faith Deposit typically included in such exclusive rights agreements with the City.
During the negotiation period staff and the developer would attempt to reach
agreement on the specific terms of the deal to be included in a Lease and
Development Agreement for subsequent consideration and approval by the City
Council. The Lease and Development Agreement would include an appropriate
financial deposit to insure that the developer will proceed diligently and in good faith
to perform its obligations thereunder.
It is also recommended that a subcommittee be established to provide input during
the exclusive negotiation period regarding the project's potential site plan and
design elements. The recommended structure of the subcommittee would include
two City Council members appointed by the City Council, two Planning Commission
members appointed by the Planning Commission, and the Director of Community
& Economic Development, the Director of Planning, and the Director of Parks,
Recreation & Facilities (or their respective designates) as staff liaisons. �/1
BACKGROUND:
The City of Palm Springs expanded the operation of its Legends Golf Course in
1995 through construction of the adjacent Tahquitz Creek Golf Resort Course_ The
new Tahquitz Creek Golf Course was designed by renowned golf course architect
Ted Robinson and features modern golf course design amenities typically reserved
by architects for private developments. Both the golf course and associated
clubhouse operations have been managed on behalf of the City by the Arnold
Palmer Golf Management Company (APGMC) since the opening of the Resort
Course in 1995.
In July 2000 the City undertook an informal "Request for Qualifications" process to
identify developers interested in constructing and managing a resort hotel at the
Tahquitz Creek Golf Resort_ The City's objectives in the project were to develop a
quality destination resort that would capitalize on the quality golf courses, the Palm
Springs name 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. Unfortunately, no responses
were received from the development community upon conclusion of the RFQ
process in August 2000.
In December 2001, the City received correspondence from William E. Swank, Sr.
representing SDC LLC expressing an interest in opening discussions with the City
that could lead to the development of a resort complex at Tahquitz Creek. The
project was envisioned as including both a hotel and timeshare component, building
upon the developer's prior successful completion of public/private partnerships for
three hotel projects in cooperation with the City of Palm Desert and the City of La
Mirada. The prospective developer proposed at that time that the City and
developer enter into an exclusive right to negotiate agreement to allow for
conceptual planning and feasibility analysis.
During calendar years 2002 and 2003, City staff met with the developer on
numerous occasions to further explore his proposed development concept and the
potential merits of entering into an Exclusive Right to Negotiate Agreement for the
proposed project. In early 2003 staff and an outside surveying consultant completed
significant research to more specifically outline the potential site boundaries of the
proposed project. During this time, the developer also began preliminary design
discussions with an architectural team and worked to secure interest in the site from
an established national hotel operator.
A significant amount of time and money has been expended toward this project by
the developer since December 2001 without the benefit of an Exclusive Agreement
to Negotiate. To continue these efforts and provide the necessary"standing' with
prospective hotel and timeshare operators, a commitment is now needed for
exclusive negotiations between the City and developer. Staff recommends a twelve-
month time period for the proposed Exclusive Agreement to Negotiate, and given
the developer's previous and ongoing efforts toward this project, that the City waive
the Good Faith Deposit typically included in such exclusive rights agreements with
the City. If the negotiations contemplated by this Agreement result in the execution
of a Lease and Development Agreement,the developer would be required to submit
an appropriate financial deposit to the City under the terms of the Lease and
Development Agreement to insure that the Developer will proceed diligently and in
good faith to perform its obligations thereunder. d
The project is currently envisioned as including the development of a hotel of at
least 140 rooms and at least 50 timeshare units. It is also anticipated that the
project would modernize and/or replace the current club house; relocate the
maintenance facility, bike path and driving range; and complete other improvements
to the golf course as necessitated by the project. More specific project details and
the financial arrangements for the City leasing the site to the developer and the
developer's construction of the various project components would be determined
during the exclusive negotiation period. Upon completion of exclusive negotiations,
the specific terms of the deal would be included in a lease and Development
Agreement for subsequent consideration and approval by the City Council.
The proposed Exclusive Agreement to Negotiate acknowledges the current long-
term management agreement and lease with APGMC relating to the daily
management of Tahquitz Creek Golf Course and provides for the Lease and
Development Agreement to be structured consistent with that management
agreement. All other approval processes normally required of a project of this type
would also be required (i.e. environmental review, Planning Commission approval,
etc.).
Given the nature of the project's impact on public golf course facilities, staff further
recommends the establishment of a subcommittee to provide input during the
exclusive negotiation period regarding the project's potential site plan and design
elements_ The recommended structure of the subcommittee would include two City
Council members appointed by the City Council, two Planning Commission
members appointed by the Planning Commission, and the Director of Community
& Economic Development, the Director of Planning, and the Director of Parks,
Recreation & Facilities (or their espective departmental designates) as staff
liaisons.
HN ._RAY MO D
irec r of Co pity & Economic Development
APPRO ED: �.
Executive Director
ATTACHMENTS:
1. Exclusive Agreement to Negotiate
2, Minute Order
P; n
EXCLUSIVE AGREEMENT TO NEGOTIATE
WITH SDC, LLC FOR THE
DEVELOPMENT OF THE TAHQUITZ CREEK RESORT HOTEL
AND TIMESHARES
THIS EXCLUSIVE AGREEMENT TO NEGOTIATE ("Agreement") is made this J day of
2003, by and between the CITY OF PALM SPRINGS ("City") and SDC, LLC
("Developer").
RECITALS
The parties enter into this Agreement on the basis of the following facts, understandings,
and intentions:
A. The City is a municipal corporation and charter city exercising governmental
functions and powers-
B. The City is the owner of the Tahquitz Creek Golf Course which is located on Golf
Club Drive in the City of Palm Springs, California.
C. The City desires to provide for the development of hotel and timeshare facilities
which will maximize the value from and of the Tahquitz Creek Golf Course ("Tahquitz GC") and
cause the modernization of the Tahquitz GC clubhouse ("Project") within a portion of the
existing Tahquitz GC and the adjacent Whitewater Wash.
D. The Developer is experienced in hotel and timeshare development, as well as
the marketing of the hotels and timeshares in conjunction with golf courses. The term
"Developer," as used herein, includes the principals, partners, and joint venturers of Developer.
All obligations of Developer as set forth herein shall be the joint and several obligations of such
principals, partners, and joint venturers.
E. The City and Developer desire, for the period set forth herein, to negotiate the
business terms and design details of the Project. If the parties are successful, the parties agree
to diligently, and in good faith, negotiate the preparation of agreements ("Lease and
Development Agreement") whereby the Developer would develop and market the Project.
NOW, THEREFORE, and in consideration of the mutual covenants contained herein,
parties mutually agree to the following:
SECTION 1. NATURE OF NEGOTIATIONS.
A. Good Faith. The City 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 a
Lease and Development Agreement for the development of the Project on the"Site" specified
herein. The development will be subject to all rules, regulations, standards, and criteria set forth
in the City's General Plan, applicable specific plans and zoning regulations, and this Agreement.
The Lease and Development Agreement will generally be in the form negotiated by the City with
other development entities.
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B. Site. The Project shall be located upon all or a portion of the real property
designated 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 Project site have not
yet been ascertained. Accordingly, the parties agree that, if necessary for the construction of
the Project, the City will grant the Developer a license to enter upon other City owned property
during the construction of the Project. The developer will not be responsible for the cost of
acquiring the fee interest in any City owned property to be developed for the Project.
C. Nature of the Project. Pursuant to the Lease, the City will lease the Site to
Developer on a long-term basis. Developer shall develop a hotel of at least 140 rooms and at
least 50 timeshare units. The hotel shall be in the category of three star full service. A concept
plan is shown in the "Concept Plan" attached as Exhibit"B" and incorporated herein by this
reference. Developer shall also modernize the club house, relocate a portion of the
maintenance facility, relocate the bike path, relocate the driving range, make improvements to
the golf course necessitated by the Project, make utility modifications and accomplish other
changes as a part of the Project. An effort shall be made to adapt the Project to the existing
Facilities to reduce the need to fund golf course changes. For engineering reasons the existing
sewer lift station must remain in its current location. The design of the Project shall be
consistent with the City's design guidelines. Developer shall also obtain architectural review for
the Project from the City's Design Review Board and Planning Commission. The Developer is
solely responsible for obtaining all approvals and entitlements for the Project, arranging the
financing for the Project, and constructing all improvements upon the Site.
D. Environmental Review. The parties intend to negotiate the terms of the
financial and design aspects of the Project during the term of this Agreement. Should the
parties proceed to negotiate the Lease and Development Agreement, Developer will have the
sole responsibility to pursue and obtain any necessary environmental approvals for the Project-
E. Utilities. The parties agree that they will investigate whether or not the
relocation of the existing overhead utility lines will be feasible.
F. Maintenance Facility and Driving Range. The parties agree that, as part of the
Project, the existing driving range and maintenance facility for Tahquitz Creek GC may be
relocated to new locations within the Tahquitz Creek GC. The new locations shall be agreed
upon by the City and the Developer.
G. Management Agreement. Developer acknowledges that the City and the
Arnold Palmer Management Company are parties to a long-term management agreement and
lease (collectively, "Palmer Agreement") relating to the daily management of the Tahquitz GC.
Developer and City agree that the Palmer Agreement is beneficial and desire the continued
operation of the Palmer Agreement. The parties further agree that the Lease and Development
Agreement and Project shall be structured consistent with the Palmer Agreement-
H. Financial Provisions. Developer shall acquire a long-term lease interest in all
or a portion of the Site at a price to be agreed upon by the parties with the actual net usable
square footage determined through survey. The City shall arrange for the appraisal of the Site,
to be paid for by Developer, to establish the fair rental value. The City may lease the Site to
Developer for less than fair rental value if this idea is adequately supported by the proforma. In
the Lease and Development Agreement, the parties will delineate what each party's obligations
will be with respect to financing and constructing all of the improvements, the necessary public
improvements and the City's fees incurred in processing the Project. Developer shall have the
23040 v3 2 ,,���
sole obligation to finance the construction of the hotel. The City may agree to share a portion of
the financial obligation for the modernization or re-construction of the clubhouse.
1. Schedule. The goal will be to develop the Project for opening by Fourth Quarter
of 2006, with an understanding that the opening of the Project may be phased with the hotel
included in the first phase. The Development Agreement shall contain a Schedule of
Performance.
J. Use and Transfer Restrictions. The Lease and Development Agreement will
generally be subject to restriction 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 the Project and the golf course, (ii) to prevent speculation, (iii) to assure that any
transferee has the resources, capability and experience to successfully develop the Project and,
(iv) to assure long-term maintenance of the Project in an attractive condition.
K. Sewer Plant Sale. The parties acknowledge that the City is considering an offer
to acquire the City's adjacent Sewer Plant. The Sewer Plant shares some facilities used by the
Golf Course (ponds, drainage facilities, reclaimed water, lift station). Developer's conceptual
Site Plan will accommodate all contemplated agreements between the City and the Developer.
SECTION 2. PERIOD OF NEGOTIATIONS
A. Period of Exclusive Negotiation. The City and Developer agree that the period
of negotiation shall be twelve (12) months from the date this Agreement is signed by the City.
The City agrees that, for such period, the City will not enter into any agreement with any other
entity for the development of the Site nor shall the Developer pursue a similar project within
three miles of the Project site.
B3 Early Termination. Within one hundred twenty (120) days from the date hereof,
the parties shall meet and review the status of performance under this Agreement ("Review
Meeting"). Within such period, Developer should have done the following:
1. Prepared a financial proforma for the construction of the Project which identifies
the total number of square feet for the Project and the cost per square foot for the construction
thereof.
2. Prepared a "Conceptual Site Plan" identifying the hotel and timeshare facilities as
well as the other pads to be constructed on the Site, specifying the various uses of each pad as
well as relocation sites for all existing faculties including the driving range, maintenance facility,
etc.
If the parties determine that the Project is not economically feasible, or if City finds
Developer's progress with respect to the foregoing unsatisfactory, City may terminate this
Agreement.
C. Extension of Time. This Agreement may be extended as follows:
1. For 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
23040 v3 3 r ���
2. For thirty (30) days if the major business terms have been agreed to and City
determines that further negotiations are likely to result in a Lease and Development Agreement;
or
3. By mutual agreement of the parties, as evidenced in writing.
D. City Approval. Developer understands and acknowledges that if negotiations
culminate in a Lease and Development Agreement, such Lease and Development Agreement
shall be effective only after and if the Project and Lease and Development Agreement have
been considered and approved by the Planning Commission and City Council after public
hearing thereon as required by law.
SECTION 3. DEVELOPER'S RESPONSIBILITIES.
During the period of negotiation, Developer will prepare such studies, reports, and
analysis as shall be necessary to permit City and Developer to determine the feasibility of the
Project. During the period of negotiation, and as requested by the City, the Developer shall
submit to the City the following:
A. All information necessary for the design of the Project to meet the City's
reasonable requirements. This information shall be sufficient to allow City to evaluate site
configuration, architectural design and similar issues.
B. All information necessary to conduct the Review Meeting required under Section
2.
C. A financial proforma for the Project.
The Developer shall negotiate exclusively with the City's negotiating team and with no
other persons unless expressly authorized to do so by the City's negotiating team. During the
period of negotiations, no statements will be made by the Developer or City to the media without
the approval of the City's negotiating team. No prepared statements shall be released to the
media without the mutual consent of the respective negotiating teams.
SECTION 4. CITY'S RESPONSIBILITIES.
A. City Assistance. The City shall cooperate fully in providing Developer with
appropriate information and assistance.
B. Preparation of Agreement. If an agreement is reached on the design of the
Project and the business terms for inclusion in the Lease and Development Agreement, the City
shall prepare such Lease and Development Agreement for consideration by the Developer.
City's expenses incurred in connection with the preparation of the Lease and Development
Agreement shall be reimbursed by Developer.
C. Environmental Quality Act. The City will assist Developer in preparing an EIR
and any such additional environmental documentation that may be necessary for the Project.
D. zoning. The City will undertake all acts necessary, if any, to rezone such
portions of the Site as may be necessary to permit the Project to be constructed on the Site.
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SECTION 5. LEASE AND DEVELOPMENT DEPOSIT.
If the negotiations contemplated by this Agreement result in the execution of a Lease
and Development Agreement, the Lease and Development Agreement will require that
Developer submit to the City a deposit in the form of a cash deposit, cashier's check,
irrevocable letter of credit, or other form of security acceptable to the City to insure that the
Developer will proceed diligently and in good faith to perform all of the Developer's obligations
under the Lease and Development Agreement ("Deposit"). The amount and terms of the
Deposit shall be outlined in the Lease and Development Agreement.
SECTION 6, MISCELLANEOUS.
A. Brokerage Commissions. The City shall not be liable for any real estate
commission or any broker's fees which may arise in relation to the Project. The City represents
that it has engaged no broker, agent, or finder in connection with this transaction, and the
Developer agrees to hold the City 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, Developer shall transfer to City copies of any
reports, studies, analysis, site plan layouts, engineering studies, memorandums, or similar
documents regarding the proposed development which were prepared during the period of
negotiations, which documents shall become the property of City. 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 copyrights (if any) associated with such documents.
C. Purpose of Contract. It is expressly understood and agreed by the parties that
this is an Agreement regarding the conduct of contract negotiations only and does not convey
any interest in the Site whatsoever. It is further agreed and understood that this Agreement
does not imply any obligation on the part of the City to enter into any agreement that may result
from negotiations contemplated herein.
D. 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)
entering into this Agreement does not violate any provision of any other Agreement to which.
said party is bound-
E. Amendment, This Agreement may only be amended by a document in writing
signed by the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day first
above written.
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"CITY"
By:
City Manager
ATTEST:
City Clerk
APPROVED AS TO FORM:
City Attorney
Mailing Address:
City or Palm Springs
3200 Tahquitz Canyon Way
Palm Springs, CA 92263
Attn:
[SIGNATURES CONTINUED ON NEXT PAGE]
23040 0 6 "
"DEVELOPER"
SDC, LLC
By:
Signature
Print Name:
Print Title:
By:
Signature
Print Name:
Print Title:
Mailing Address:
78060 Calle Estado
La Quinta, California 92253
(760) 777-1557
Attn: William E. Swank, Sr.
(ALL SIGNATURES MUST BE NOTARIZED_)
23040 V3 7 J
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MINUTE ORDER NO.
APPROVING AN EXCLUSIVE AGREEMENT TO
NEGOTIATE WITH SDC, LLC FOR THE DEVELOPMENT
OF A HOTEL AND TIMESHARE PROJECT AT THE
TAHQUITZ CREEK GOLF COURSE
I HEREBY CERTIFYthatthis Minute Order,approving an Exclusive Agreement to Negotiate
with SDC, LLC for the development of a hotel and timeshare project to be located at the
Tahquitz Creek Golf Course located on Golf Club Drive in the City of Palm Springs was
approved by the City Council of the City of Palm Springs, California, in a meeting thereof
held on the 2V' day of May 2003.
PATRICIA A. SANDERS
City Clerk