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HomeMy WebLinkAboutDDA Fourth Amendment Extensions - WVC Rancho Mirage Inc - Westin Desert Willow VillasCITY OF PALM DESERT STAFF REPORT REQUEST: APPROVAL OF AN AGREEMNT AUTHORIZING A ONE YEAR EXTENSION OF THE TERMS AND CONDITIONS OF THE 4T" AMENDMENT TO DISPOSITION AND DEVELOPMENT AGREEMENT BETWEEN SUCCESSOR AGENCY TO THE PALM DESERT REDEVELOPMENT AGENCY AND WVC RANCHO MIRAGE, INC. AS IT RELATES TO THE MINIMUM PROJECT AMENITY FEE FOR THE WESTIN DESERT WILLOW VILLAS TIMESHARE PROJECT SUBMITTED BY: Martin Alvarez, Director of Economic Development DEVELOPER: WVC Rancho Mirage, Inc. Westin Desert Willow Villas 75 Willow Ridge Palm Desert, CA 92260 DATE: January 8, 2015 CONTENTS: Agreement Starwood Vacation Ownership Correspondence Recommendation By Minute Motion: Approve an Agreement with WVC Rancho Mirage, Inc. (Starwood Vacation Ownership) extending the terms and conditions of the 4th Amendment to the existing Disposition and Development Agreement as it relates to the payment of the Project Amenity Fee; and 2. Authorize the Executive Director to execute the Agreement. Executive Summary Approval of staffs recommendation will authorize the Executive Director to execute an agreement with WVC Rancho Mirage, Inc. (Stanwood Vacation Ownership) approving a one-year extension to the terms and conditions of the 4th Amendment to the Disposition and Development Agreement (DDA) between the former Redevelopment Agency and WVC Rancho Mirage, Inc. as it relates to the payment of the Project Amenity Fee (PAF). The agreement will limit the PAF payable in 2015 to only those units actually completed and not on the original pre -determined aggressive timeshare build out schedule. The effect of the agreement, assuming 18 new timeshares are constructed in 2015 for a total of 154 units, will require the payment of Project Amenity Fees in the amount of $897,947.00 compared to Staff Report WVC Rancho Mirage, Inc. PAF Agreement January 8, 2015 Page 2 of 3 PAF for 250 units ($1,457,707) under the original payment schedule. In 2016, the PAF will revert to the previously agreed upon schedule, which will require the payment of PAF for 295 units whether they are built, or not. Background In 1997, the former Redevelopment Agency (RDA) entered into a Disposition and Development Agreement (DDA) with Intrawest Resort Ownership, selling them land to build timeshare units at Desert Willow Golf Resort. In 2007, WVC Rancho Mirage, Inc. also known as Starwood Vacation Ownership, acquired a portion of Intrawest's property and became the successor to the Disposition and Development Agreement between the former Agency and Intrawest, Inc. and was granted approval to build up to 300 timeshare units. One of the conditions of the original DDA set out a requirement for the payment of a Project Amenity Fee (PAF) to the golf course owner (City of Palm Desert) based on a fixed schedule coinciding with the projected rate of development for the timeshare units. The PAF is used to fund the City's 241 Fund. The 241 Fund represents a capital fund created to fund improvements and long-term capital projects at Desert Willow Golf Resort. In 2011, recognizing the severe down turn in the economy and in the sales of timeshares, the former RDA and Starwood negotiated a 4th Amendment to the DDA modifying the original Project Amenity Fee and limited the payment of the Project Amenity Fee to only those units actually built and not on the original PAF payment schedule based on an aggressive build schedule during the economic boom. Based on the former Agency's original negotiated PAF, the developer was put in the position where it would have to pay PAF fees for units that were not yet built; let alone sold. The revised PAF payment schedule under the 4th Amendment was in place for five years between 2011 and 2014. Even through the economic down turn, Starwood has continued to build timeshare units at a slower pace and has shown a commitment to moving the project forward. To date, Starwood has completed 136 units. Starwood has been a good neighbor and partner to Desert Willow Golf Resort. Staff is recommending approval of the attached agreement granting a one year extension to the terms and conditions of the Fourth Amendment to the DDA as it relates to Project Amenity Fees payment schedule. The one year extension to the PAF payment schedule will give Starwood the opportunity to investigate options such as modifications to the building designs to increase efficiency of use and service, changes in materials, a revised schedule of completion and site reconfigurations. Starwood expects to bring revised plans to the City in the Fall of 2015. The continuation of timeshare construction promotes a number of City interests. It assists the City by supporting Desert Willow through the support of golf revenue, increased permit fees, property taxes and promotes growth in the City's General Fund through transient occupancy taxes and sales taxes paid by timeshare guests. G VdaWarim Alvarez\Starwood\Starwood PAF Amendemnt 1-8-15 docx Staff Report WVC Rancho Mirage, Inc. PAF Agreement January 8, 2015 Page 3 of 3 Fiscal Analysis Under the terms of the 4th Amendment to the DDA, Starwood will pay $792,992.00 in PAF for the 136 completed units, due at the end of 2014. If the original PAF payment schedule were in effect in 2014, the developer would have had to pay PAF for 250 units ($1,457,707), even if all 250 units were not completed. It is projected that Starwood will build one timeshare building (18 units) in 2015. If the proposed agreement is approved, Starwood would be limited to paying PAF on the 154 completed units equaling $897,947.00, compared to $1,720,094.00 (295 units) under the original payment schedule. Since capital projects at Desert Willow are budgeted based on the availability of funds in Fund 241, staff does not anticipate any kind of shortfall between needs and resources. However, it should be noted that 241 Funds are available to the General Fund, and thus the amendment does reduce potential funds available. Submitted By: Department Head: artin Alvarez Director of Economic Development Rd- eivi 4 Paul Gibson, Director of Finance roved: hn M. Wohlmuth, City Manager Rudy A osta Assistant City Manager G \rdaWartin Alvarez\Starwood\Starwood PAF Amendemnt 1-8-15.docx Ortu:eca 11IF CITY MANAGER January 2015 I I I Y Of PH [ M 9ESERi 73-510 FREI) WARING DRIVE PAI.M DI:.SI?RT, CALIFORNIA 92260-2578 TEL:76o 346—o6ii FAX: 760 340-0574 info@palm-dcsrrt.org VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED WVC Rancho Mirage, Inc. 8803 Vistana Center Drive, Suite 360 Orlando, Florida 32821 Attention: General Counsel and Jorge Boone Re: Disposition and Development Agreement dated February 13, 1997 by and between the Successor Agency to the Palm Desert Redevelopment Agency, as successor -in -interest by operation of law to the former Palm Desert Redevelopment Agency, and WVC Rancho Mirage, Inc., as successor -in -interest by assignment to Intrawest Resort Ownership Corporation, as amended by that certain First Amendment to Disposition and Development Agreement dated August 1, 1997, that certain Second Amendment to Disposition and Development Agreement dated January 23, 2003, that certain Third Amendment to Disposition and Development Agreement dated March 22, 2007, and that certain Fourth Amendment to Disposition and Development Agreement dated January 13, 2011 (the "Fourth Amendment") (as so amended, the "DDA") Ladies and Gentlemen: The City of Palm Desert, California (the "City"), as the Resort Golf Course Owner and the named third party beneficiary under the DDA, hereby waives for the period of January 1, 2015 through December 31, 2015 its right to receive that portion of the Starwood Minimum Project Amenity Fee in excess of the amount thereof calculated on the basis of Completed Units located on the Starwood Property as described in the first sentence of Section 1 of the Fourth Amendment. Except as otherwise expressly provided herein, the City has not waived, and shall not be deemed to have waived, any of its rights or remedies under the DDA. qLJ runto ON nnnEn rutr WVC Rancho Mirage, Inc. January , 2015 Page 2 Capitalized terms not otherwise defined herein shall have the meaning set forth in the D DA. Sincerely, John M. Wohlmuth City Manager cc: E.P. Hemphill, Esq. ACCEPTED AND AGREED: WVC RANCHO MIRAGE, INC., a Delaware corporation Bv: Print Name: Title: CITY 01 P 0 1 M 0 1 S I P I .............