HomeMy WebLinkAboutTransfer Development from PDH Assoc. LLC. to CNL Hospitality Partners, LP PALM DESERT REDEVELOPMENT AGENCY
MEMORANDUM
DATE: JUNE 8, 2000
TO: EXECUTIVE DIRECTOR,HONORABLE CHAIRMAN AND MEMBERS OF
REDEVELOPMENT AGENCY BOARD
FROM: DAVE YRIGOYEN,REDEVELOPMENT MANAGER
SUBJECT: CONSIDERATION OF TRANSFER OF RESIDENCE INN
DEVELOPMENT FROM PDH ASSOCIATES,LLC,TO CNL
HOSPITALITY PARTNERS,LP
Recommendation:
That the Agency Board authorize the transfer of the Disposition Development Agreement
between the Agency and PDH Associates LLC to CNL Hospitality Partnership, L.P. with the
provisions that:
1. The franchise agreement for the operations of the hotel between CNL and Marriott is the
same as that currently existing between PDH and Marriott;
2. The Child Care Scholarship fee to be paid in full or assumed by CNL; and
3. The Easement Encroachment Agreement be completed to Staff's satisfaction.
Background:
The Disposition Development Agreement between the Agency and PDH Associates provides
that, "after the issuance of a Certificate of Occupancy...PDH shall have the right to transfer the
property to any party provided that:
1. Such transfer will not result in the termination of the existing hotel Franchise Agreement
with respect to the project.
2. The Transferee...has the experience, quality, character, trade record, financial ability and
reputation as determined by the Agency in its reasonable business judgment to manage
and operate the project.
3. The Transferee assumes in writing all obligations of PDH set forth in this agreement."
Staff has reviewed the information provided for CNL Hospitality Partners, L.P. Essentially,the
company is a Real Estate Investment Trust(REIT) authorized by the State of California to
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transact business as CNL Hospitality Partners L.P., as well as with the State of Delaware. A
review of their balance sheet identifies substantial holdings in land and building with
comfortable cash reserves. CNL Hospitality Partners LP is a wholly-owned company of CNL
Hospitality Properties, Inc. CNL Hospitality Properties, Inc., is a REIT that has invested a lot of
money in the limited service extended stay industry primarily Reisdence Inn and Courtyard by
Marriott. Since January 21, 2000,the company has acquired 11 properties in major metropolitan
cities, all operated by Courtyard and Residence Inn Flags. On March 30, 2000,the company had
an Initial Public Offering of 27,500,000 shares of common stock and intends to raise $254
million of proceeds to the company for expansion. CNL Hospitality Partners LP has agreed to
assume the obligations of PDH under the Disposition Development Agreement.
An issue at this point is that CNL and Marriott plan to terminate the existing Franchise
Agreement with PDH rather than to transfer such agreement. The purpose of that provision was
to assure the Agency that the property would be operated as a Residence Inn and Courtyard as
long as possible. It is CNL's intention to enter into an operating agreement with RST4 Tenant
LLC, a Delaware Limited Liability Company which CNL claims is a fully-owned subsidiary of
Marriott International. They indicate that Marriott has agreed to execute a new franchise
agreement in connection with the lease transaction in substantially the same form as the prior
franchise agreement. We have requested and have been promised a copy of the franchise
agreement to review. To date,we have not received that copy or information on RST4 Tenant
LLC.
Additionally, CNL has requested an Easement Encroachment Agreement because the carport
overhang for the Residence Inn entry and the southernmost residential building encroaches on
the City's easement at Cook Street by about two fee. Staff has reviewed CNL's initial proposal
with no concerns, except for language limiting the City's liability on the encroachment portions.
PDH has indicated that they wanted to have their sale close by June 1,2000,however,they had
not submitted all the information for review by the Agenda deadline,therefore they did not make
the last Council meeting in May.
As I stated before,we have still not reviewed the"Marriott Agreement", a key to the first
provision of the transfer obligation. PDH provided official notice of the transfer to us on
May 15,2000, and pursuant to the Disposition Development Agreement,we have 39 days to
approve or disapprove the transfer.
e 0
REVIEWED AND CONCUR: a
cits
Dave ri e 60)
Redeye pment Manager Executive Director
y Minute Motion, authorize the transfer of the Disposition Devel-
opment Agreement between the Agency and PDH Associates, LLC, to l� 0
CNL Hospitality Partnership, L.P. , with the following provisions: y
1) The franchise Agreement for the operations of the hotel between i
RST4, LLC (a wholly owned subsidiary of Marriott) , and Marriott. is
substantially the same as the currently existing between PDH and
Marriott• 21 the Child Care Scholorship fee to be paid in full py
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PDH or assumed by CNL; 3) the Easement Encroachment Agreement S
(see reverse)