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HomeMy WebLinkAboutSR - Amndmnt 3 - WVC Rancho Mirage, Inc.PALM DESERT REDEVELOPMENT AGENCY STAFF REPORT REQUEST: APPROVAL OF AMENDMENT NO. 3 TO THE DDA BETWEEN THE PALM DESERT REDEVELOPMENT AGENCY AND WVC RANCHO MIRAGE, INC. TO ALLOW THE CONSTRUCTION OF UP TO 280 (215 CURRENTLY ENTITLED) NEW TIMESHARE UNITS SUBMITTED BY: APPLICANT: DATE: CONTENTS: Recommendation: LAURI AYLAIAN, REDEVELOPMENT MANAGER STARWOOD / WVC RANCHO MIRAGE, INC. 8801 VISTANA CENTRE DRIVE, SUITE 140 ORLANDO, FL 32821 MARCH 22, 2007 THIRD AMENDMENT TO DISPOSITION AND DEVELOPMENT AGREEMENT By Minute Motion, that the Agency Board approve Amendment No. 3 to the Disposition and Development Agreement between the Palm Desert Redevelopment Agency and WVC Rancho Mirage, Inc. and authorize the Executive Director to execute same. Executive Summary: Approval of the staff recommendation allows construction of up to 300 Starwood Vacation Ownership units (with initial development of 280 units) and a 38,000 square foot clubhouse at the Desert Willow Golf Resort in place of 215 units previously approved under a Development Agreement (DA) and Disposition and Development Agreement (DDA) with Resort Ventures LLC ("Intrawest"). Approval will also provide increased revenue to the City in the form of annual Project Amenity Fees (PAFs), Transient Occupancy Tax (TOT), and One Time Access Fees (OTAFs), and will remove a number of restrictions that now exist on the advance booking of golf rounds at the Mountain View Course. This report accompanies a staff report before the City Council requesting approval of the Development Agreement associated with the project. Discussion: In 1997, the City and the Redevelopment Agency approved a Development Agreement (DA) and a Disposition and Development Agreement (DDA) with Intrawest Resort Ownership Corporation ("Intrawest") that allowed Intrawest to construct a clubhouse and 311 timeshare units on certain parcels at the Desert Willow Golf Resort. The agreements also provided discounted golf rates and access to advance booking of golf rounds at the Mountain View course, and gave Intrawest ownership of a portion of the Desert Willow clubhouse. GArda\Maria Hunt\W PDATA\AYLAIAN\STFRPTS\032207 Starwood DDA Amend3.doc Staff Report Amendments to DDA for Starwood Vacation Ownership Units at Desert Willow Page 2 of 3 March 22, 2007 Intrawest has not been successful in constructing and marketing its timeshare project, and as of June 2006 had only built 55 of the 311 units to which it was entitled. At that time, they elected to sell the property, their portion of the Desert Willow Clubhouse, and the entitlements for 215 of the timeshare units to WVC Rancho Mirage, Inc. ("Starwood"). Starwood now proposes to increase the number of units that they will build at Desert Willow from 215 to 280. They would like to leave open the possibility of increasing this number to 300 units without coming back to amend the DDA again. This concept was acceptable to the Planning Commission and is acceptable to staff, provided that the final 20 units, if constructed, go through all approval processes that are necessary to amend the accompanying DA from 280 to 300 units. In consideration of their request for increased density, staff has negotiated revisions to the DDA that will provide additional one time and recurring revenue to the City, and will restore access to advance booking of golf rounds, which increases the profitability and flexibility of the golf course operations. In anticipation of their request for increasing the number of timeshare units, as a good faith gesture, Starwood also deeded over to the City the portion of the Desert Willow Clubhouse that they purchased from Intrawest. Financial Implications: The addition of 65 units to the timeshare project will result in increases to three revenue streams to the City: Project Amenity Fees (PAF), One Time Access Fees (OTAF), and Transient Occupancy Taxes (TOT). The modifications to the DDA require that the developer pay the same PAF ($3,500 per unit per year, escalated annually) and OTAF ($12,000 per unit, escalated from 1997 to the date when the unit is actually constructed) as was required for the original 311 units approved previously. Additionally, rooms not occupied by Starwood's Vacation Ownership owners can be rented on a nightly basis, with guests paying 9% TOT during their stay. Historically, such rentals account for about 20% of the room occupancies at Starwood's properties. In 2007 dollars, this would amount to approximately $368,000 in TOT annually. Collectively, the additional 65 units allowed under the proposed DA will result in an estimated increase in net present value cash flow to the City of $34,906,784 over the next twenty years. Golf Operations: Staff has reviewed the potential impact of the proposed development on the quality of the golf experience at Desert Willow and on the operations of the golf course. The proposed changes in architecture and site plan and the resulting changes in view, sight lines, and cart paths will not detract from the current golf experience. In fact, the massing of buildings currently proposed is preferable to that approved under the original DDA with Intrawest for several reasons. The current plan moves all buildings closer to the center of the site and, consequently, farther from the fairways and from errant golf balls. It also consolidates the buildings so that there are clear mountain -view corridors between the buildings. Restoration of advance booking rights for golf rounds will facilitate operations and increase the profitability of the course. The golf course manager will now be able to book group play far in advance of the actual date of play, which assures that the greens fees will be at higher rates than are realized when booked on short notice. Additionally, previous restrictions on booking of 2 Staff Report Amendments to DDA for Starwood Vacation Ownership Units at Desert Willow Page 3 of 3 March 22, 2007 tournament play are lifted under the proposed modification to the DDA. Intrawest, who is not a party to the modified DDA, will retain some rights regarding advance booking of rounds. However, Starwood presently has greater rights (in proportion to the greater number of timeshare units to which they are entitled), and they will relinquish those rights under this modification to the DDA. There is no way to avoid the fact that golf play will be adversely impacted during the construction of the proposed project. Construction trucks and activity will be visible from the course, and construction noise will be noticeable in some areas. However, this situation will occur even if only 215 units are constructed. Staff has added language in the Conditions of Approval for the DA that enhance the Agency's ability to review, approve, and/or reject the construction traffic patterns on the site so as to minimize the unavoidable disruptions. In consideration of the increased revenue, enhanced aesthetics, and improved operation and profitability of the golf course, staff recommends approval of the Third Amendment to the Disposition and Development Agreement between the Palm Desert Redevelopment Agency and WVC / Rancho Mirage, LLC. Submitted by: Cauri Aylai� Redev(eleoment Manager sti McCarthy, A*elopment 04��v Carlos L.OrtqVa, Executive Director m Department Head: Dave Yrigoy/n.' Director of Re elopment/Housing Paul S. Gibson, Director of Finance Awwed 3 .9a .o`I BY RDA VERIFIED BY Original on file with City Clerk's Office * Approved Amendment No. 3, as modified to reflect 300 units. 3-2 (Benson, Finerty NO) 3 THIRD AMENDMENT TO DISPOSITION AND DEVELOPMENT AGREEMENT THIS THIRD AMENDMENT TO DISPOSITION AND DEVELOPMENT AGREEMENT ("Third Amendment"), dated as of _, 2006 ("Effective Date") is entered into by and between the PALM DESERT REDEVELOPMENT AGENCY, a public body, corporate and politic (the "Agency") and WVC RANCHO MIRAGE, INC., a Delaware corporation ("Starwood"). RECITALS This Third Amendment is entered into with reference to the following facts: A. Agency and Intrawest Resort Ownership Corporation, a corporation organized and existing under the laws of the Province of British Columbia, Canada ("IROC"), entered into a Disposition and Development Agreement dated February 13, 1997, as amended by that certain First Amendment to Disposition and Development Agreement dated August 1, 1997, and as further amended by that certain Second Amendment to Disposition and Development Agreement dated January 23, 2003 (as amended, the "DDA") regarding the sale and development of certain real property in the City of Palm Desert ("IROC Property") as a resort club and time shares (the "Intrawest Project"). All capitalized terms used herein without definition when first used shall have the definitions set forth for them in the DDA. B. On or about October 12, 1998, IROC assigned and conveyed to RESORT VENTURES, L.P., a California limited partnership ("RV") all of IROC's rights, title, interest and obligations under and to the DDA and all related project documents. C. On or about June 26, 2006, RV sold to Starwood all of its rights, title and interest in and to that portion of IROC Property described on Exhibit "A" attached hereto and incorporated herein by this reference (the "Starwood Property"), and the Agency gave its consent to the transfer from RV to Starwood of any and all rights and obligations under the terms of the DDA to the extent that such rights and/or obligations arise from ownership of the Starwood Property. D. Upon acquiring the Starwood Property, Starwood applied for and the City approved a conceptual master plan (hereinafter referred to as the "Starwood Master Plan") which provides for the development of up to 300 2-bedroom lock -off time share units, each of which shall be between 1,250 and 1,500 square feet, and a sales facility/clubhouse of approximately 40,000 square fee, all in 19 two- and three- story buildings, along with recreational amenities (hereinafter collectively referred to as the "Starwood Project"). E. Agency, RV and Starwood now desire to amend to DDA as it applies to the Starwood Property as provided herein to reflect the changes needed in light of Starwood's acquisition of the Starwood Property. Amend 3 F. The purpose of the DDA and this Third Amendment is to effectuate the Redevelopment Plan for Project Area 2 of the Agency (the "Redevelopment Plan") by facilitating improvements to real property within Project Area 2. G. The Agency is a public body, corporate and politic, exercising governmental functions and powers, and organized and existing under the Community Redevelopment Law of the State of California. H. Construction of the Starwood Project will assist in the elimination of blight in Project Area 2, provide additional jobs, and substantially improve the economic and physical conditions in Project Area 2 in accordance with the purposes and goals of the Redevelopment Plan. I. The land uses specified in the DDA and this Third Amendment and the provisions relating to construction of the Starwood Project are consistent with the provisions of the Redevelopment Plan and each of its applicable elements. J. A material inducement to the Agency to enter into this Third Amendment is the agreement by Starwood to fulfill the obligations set forth herein. AGREEMENT NOW, THEREFORE, in consideration of the above recitals and of the mutual covenants contained herein the parties agree as follows: 1. Section 1.1.11 is hereby modified in its entirety to read as follows: "Club Guest means a guest of a Club Member who is occupying a Completed Unit at time of play of a golf round at the Resort Golf Course and is listed in the Intrawest Resort Club or Starwood Vacation ownership program at Desert Willow project registry as a guest of a Club Member." 2. Section 1.1.12 is hereby modified in its entirety to read as follows: "Club Member means (i) a member of either the Intrawest Resort Club or the Starwood Vacation ownership program or their spouse, if any, or a member of another vacation club entity, whose members are entitled to the use of a Completed Unit, and who is occupying a Completed Unit at time of play of a golf round at the Resort Golf Course, or (ii) an owner of a Timeshare interest in a Completed Unit which interest entitles such member to the use of a Completed Unit in the Desert Willow Resort Club." 3. Section 1.1.19 is hereby modified in its entirety to read as follows: Amend 3 2 "1.1.19 Designated Party or Designated Parties means a person or persons designated by either RV or Starwood for discounted green fees and cart rentals on the Resort Golf Course as provided in Section 5.5.1; provided however, a Club Member or Club Guest may not be a Designated Party." 4. Section 1.1.75 is hereby modified in its entirety to read as follows: "Unit means an individual condominium unit as designated on a condominium plan recorded for any portion of the Property, together with an undivided interest in land corresponding to each such individual condominium unit." 5. With respect to the Starwood Property only, Article 3 of the DDA is hereby modified in its entirety to read as follows: "Section 3.1 Develooment of the Starwood Project. Starwood shall construct the Starwood Project in accordance with the Starwood entitlements, all requirements of the City's Municipal Code, and any and all applicable federal, state and local laws, rules and regulations in connection with such construction, any conditions of approval required by the City (including conditions of approval for the subdivision of the Starwood Property), the Plans and Specifications, and all terms, conditions and requirements of the DDA and this Third Amendment. Section 3.2 Aaencv's Right to Review Plans and Specifications. In connection with construction of the Starwood Project, Starwood shall comply in all respects with Plans and Specifications approved by the Agency or the City in accordance with the DDA and/or this Third Amendment. The Agency shall have the right to review all Plans and Specifications for the Starwood Project to ensure that all improvements constructed as a part thereof are constructed to a high quality as described in the Starwood Entitlements in the Agency's reasonable judgment. Section 3.3 Preliminary Drawings. Starwood shall prepare and submit to the Agency, for the Agency's review and written approval, Preliminary Drawings based on the Starwood Entitlements. The Preliminary Drawings shall include, but not be limited to, floor plans, a site plan, elevations, and specifications for the Completed Units. Section 3.4 Landscaoinv- and Finish Grading. Starwood shall prepare and submit to the Agency, for the Agency's review and written approval, final landscaping and finish grading plans for the Starwood Project. Section 3.5 Final Construction Drawings and Related Documents. After receipt of the Agency's approval of Preliminary Drawings and landscaping and finish grading plans, Starwood shall prepare and submit Amend 3 3 to the Agency, for the Agency's review and written approval, Final Construction Drawings for the Starwood Project which shall include complete construction documents, site development elevations, and related documents. The Final Construction Drawings shall be in sufficient detail necessary to obtain building permits. Section 3.6 Approval of Construction Plans. The Agency shall approve or disapprove such plans, drawings and related documents referred to in Section 3.2 through 3.5 above within ten (10) business days of the Agency's receipt thereof. In the event Agency fails to approve or disapprove any plans, drawings or related documents within the above referenced time, then any such plans, drawings or related documents shall be deemed approved by the Agency. Any disapproval shall state in writing the reasons for disapproval. Starwood, upon receipt of a disapproval, shall revise such portion of the plans, drawings or related documents in a manner that satisfies the reasons for disapproval and shall resubmit such revised portions to the Agency as soon as possible after receipt of the notice of disapproval. The Agency shall approve or disapprove such revised portions in the same manner as provided in this Third Amendment for approval or disapproval of plans, drawings, and related documents initially submitted to the Agency. Any items submitted to and approved by the Agency shall not be subject to subsequent disapproval by the Agency. Section 3.7 Chanp-es in Construction Drawings. If Starwood desires to make any material changes in the Final Construction Drawings and related documents after their approval by the Agency, Starwood shall submit the proposed changes to the Agency for its approval. If approved, the Agency shall notify Starwood thereof in writing within 30 days after submission to the Agency. Starwood shall revise such portions as are disapproved and resubmit them to the Agency within 30 days of receipt of written disapproval. Section 3.8 Cost of Construction. The cost of constructing the Starwood Project and all related fees as provided in the DDA as modified by this Third Amendment shall be borne by Starwood. Section 3.9 Local, State and Federal Laws. Starwood shall carry out the construction of the Starwood Project in conformity with all applicable laws, including without limitation all applicable federal and state occupation, safety and health standards. Starwood represents and warrants that all improvements constructed as a part of the Starwood Project shall be constructed in compliance with applicable current City and State of California standards and laws. Amend 3 4 Section 3.10 Citv and Other Governmental Agencv Permits and Approvals. Before commencement of construction or development of any work of improvement on the Starwood Property, Starwood shall, at its own expense, secure, or cause to be secured, any an all permits which may be required by the City or any other governmental agency having jurisdiction over such construction or development. Section 3.11 Anti -discrimination During Construction. Starwood, for itself and its successors and assigns, agrees that it shall not discriminate against any employee or applicant for employment because of age, sex, marital status, race, handicap, color religion, creed, ancestry, or national origin in the construction of the Starwood Project. Section 3.12 Taxes, Assessments. Encumbrances and Liens. Starwood shall pay when due all real property taxes and assessments assessed or levied on all or any portions of the Starwood Property owned by Starwood. Section 3.13 No Agencv Created. In performing the DDA, as amended by this Third Amendment, Starwood is an independent contractor and not the agent of the Agency, RV or the City. Neither the Agency, RV nor the City are agents of Starwood. Neither the Agency, RV nor the City shall have any responsibility whatsoever for payment to any contractor or supplier of Starwood. Starwood shall not have any responsibility whatsoever for payment to any contractor or supplier of the Agency., RV or the City. Section 3.14 Plans And Data. If this Agreement is terminated due to Starwood's breach hereof and the Agency then acquires title to the Starwood Property, then concurrently with the conveyance of the Starwood Property to Agency, Starwood shall also deliver to the Agency, without cost or expense to the Agency and without warranty, all of Starwood's right, title and interest, as they then exist, in copies of any and all maps, engineering, subdivision approvals, permits, entitlements, rights, studies, reports, surveys, and data pertaining to the Starwood Project and its development (collectively, "Site Designs") which Starwood has the legal right to convey, together with a bill of sale therefor. The "Site Designs" shall not include architectural drawings or any plans, reports, etc. which at the time of conveyance, remain the property of the consultant producing such plans, reports, etc. The Site Designs shall then be the property of the Agency and may be used by the Agency, free of all claims or interests of Starwood or any other person, other than the interest therein held by Starwood's construction lender. Agency agrees that upon request by Starwood, it will subordinate its rights to the Site Designs as described in this section 3.14 to the lien thereof in favor of Starwood's construction lender. Upon acquisition thereof in accordance with the terms of this Amend 3 5 section 3.14, the Agency shall have the right to the non-exclusive use of, or the right to grant a license for the non-exclusive use of, the Site Designs to any person for completion of the Starwood Project on the Starwood Property. 3.15 Project Entrance. The parties hereto agree that the main entrance for the Starwood Project (the "Portola Entrance") shall be on Portola Avenue, in substantially the location shown on Exhibit "A" attached hereto and incorporated herein by this reference. The Agency agrees to cooperate with Starwood in granting such easements across Agency property as may reasonably be required in order to construct, maintain and utilize the Portola Entrance and the landscaping, utilities, signage and other improvements associated therewith. Starwood agrees that in conjunction with its construction of the Portola Entrance, Starwood shall also construct a tunnel for golf carts to assure safe crossing of vehicular and golf cart traffic. The location and specifications for said tunnel shall be subject to the approval of the Agency, in the exercise of its reasonable discretion. Except as to the Starwood Property, Article 3 of the DDA remains in full force and effect. 6. Pursuant to Section 5.2 of the DDA, a "One Time Access Fee" ("OTAF") of $12,000 per Standard Unit (subject to CPI adjustment) was charged and collected for the 215 units originally contemplated under the DDA. Pursuant hereto, Starwood shall acquire a vested right to build an additional 65 units beyond the number originally contemplated in the DDA (said additional 65 units are hereinafter referred to as the "Added Units"). In consideration for the Agency's agreement to allow the Added Units, Starwood agrees that for each Added Unit, Starwood shall pay to the Agency an OTAF equal to the OTAF per Standard Unit described in Section 5.2.2 of the DDA, including all adjustments to the OTAF applicable under Section 5.2.2 since the original effective date of the DDA. The OTAF due for each Added Unit shall be paid by Starwood to the Agency upon the later of. (a) the issuance by the City of Palm Desert of a certificate of occupancy for said Added Unit, or (b) the closing of the first sale of a time share interest in said Added Unit to an unrelated third party consumer. 7. Section 5.4.2 of the DDA is hereby modified to provide that the Project Amenity Fee payable for each 2 bedroom lock -off unit built on the Starwood Property shall be equal to $3,500.00 per year ("Starwood PAF Per Unit"), provided however that beginning on the last day of the 12`" Payment Period, and annually thereafter, the Starwood PAF Per Unit shall be increased in accordance with the increase in the CPI since the last adjustment of the Starwood PAF Per Unit. Said CPI Adjustments in the Starwood PAF Per Unit shall be calculated in the same manner as the CPI Adjustment for the Starwood Minimum Project Amenity Fee, as described in paragraph 8 below. Amend 3 6 8. Section 5.4.4 of the DDA is hereby clarified to provide that the obligation to pay the Project Amenity Fee shall be allocated between RV and Starwood as follows: RV, as successor in interest to IROC shall be liable for that portion of the Project Amenity Fees equal to the difference between (i) the Minimum Project Amenity Fee due for 96 Units during such Payment Period (as set forth on the table in Section 5.4.4), and (ii) the Project Amenity Fees actually paid or payable on Completed Units located on the RV Property pursuant to Section 5.4 for such year. Starwood shall be liable for that portion of the Project Amenity Fees equal to (i) the Starwood Minimum Project Amenity Fee during such Payment Period (as set forth below), less (ii) the Project Amenity Fees actually paid or payable on Completed Units located on the Starwood Property for such year. The Minimum Project Amenity Fee payable by the Starwood Property ("Starwood Minimum Project Amenity Fee") shall be due on the last day of each Payment Period in the following sums: Cum. Starwood Min. Pavment Period # Units # Units Amenitv Fee I 1 th Payment Period (2007) 0 0 $100,000.00 12th Payment Period (2008) 0 0 $100,000.00 13th Payment Period (2009) 35 35 $122,500 plus CPI adjustment 14th Payment Period (2010) 40 75 $262,500 plus CPI adjustment 15th Payment Period (2011) 40 115 $402,500 plus CPI adjustment 16th Payment Period (2012) 45 160 $560,000 plus CPI adjustment 17th Payment Period (2013) 45 205 $717,500 plus CPI adjustment 18th Payment Period (2014) 45 250 $875,000 plus CPI adjustment 19th Payment Period (2015) 30 280 $980,000 plus CPI adjustment Each Payment Period thereafter 280 $980,000 plus CPI adjustment In the event that Starwood is ultimately permitted to build more than 280 units on the Starwood Property, then during the 20`h Payment Period, and each Payment Period thereafter, the Starwood Minimum Project Amenity Fee shall be increased by $3,500 (plus CPI adjustment) for each unit built on the Starwood Property in excess of 280 units. The CPI Adjustments for each Payment Period shall be a fraction, the numerator of which is the CPI for the calendar month two months preceding the last month of the applicable Payment Period, and the denominator of which is the CPI for the calendar month fourteen months preceding the last month for the First Payment Period; provided however, the cumulative CPI Adjustment applicable to any Payment Period shall not be less than 3 % per annum nor shall it be greater than 4% per annum, compounded. The Starwood Minimum Project Amenity Fee is payable as provided above without regard to the number of Units then completed on the Starwood Property. Notwithstanding anything to the contrary contained herein, Starwood shall not personally be obligated to pay the Starwood Project Amenity Fee if and to the extent a Completed Unit for which any Starwood Project Amenity Fee is payable has been transferred to another party and the Master CC&R's or the Subject Property CC&R's require the owner of such Completed Units to pay the Project Amenity Fee. Thus, Starwood's Amend 3 7 obligation for the Starwood Minimum Project Amenity Fee shall be reduced by the Project Amenity Fees that are payable by the owner or owners of the Completed Units (other than Starwood) on the Starwood Property. To secure payment of the Starwood Minimum Project Amenity Fee, the Subject Property CC&R's for the Starwood Property shall subject each Unit or Completed Unit to a first position lien in favor of the Resort Golf Course Owner and its successors -in - interest in the Resort Golf Course as described in section 5.4.6 of the DDA. 9. The Agency's recourse against Starwood for failure to pay any Project Amenity Fees shall be limited to Starwood's interest in the Starwood Property; provided however, that the Agency may elect to proceed to obtain a money judgment against Starwood for Project Amenity Fees actually due from Starwood as provided herein. This limitation on recourse shall be personal to Starwood and shall not apply to any transferee of Starwood or any other owners of Units. 10. Section 5.4.5 of the DDA is hereby modified in its entirety to read as follows: "5.4.5 Notwithstanding anything provided to the contrary in this Section 5.4, neither RV nor Starwood shall be obligated to pay the Project Amenity Fee if and to the extent a Completed Unit for which any Project Amenity Fee is payable has been transferred to another party and the Master CC&Rs or the Subject Property CC&Rs require the owner of such Completed Unit to pay the Project Amenity Fee. Thus, RV's obligation for the Minimum Project Amenity Fee shall be reduced by the Project Amenity Fees that are payable by the owner or owners who purchased Completed Units from IROC or RV, and Starwood's obligation for the Minimum Project Amenity Fee shall be reduced by the Project Amenity Fees that are payable by the owner or owners who purchased Completed Units from Starwood." 11. Section 5.5 of the DDA is hereby amended to provide that the benefits related to the Resort Golf Course provided to IROC and subsequently RV as IROC successor in interest under the terms of said Section 5.5 for its Club Members, Club Guests and Designated Parties shall also be provided to Starwood for its Club Members, Club Guests and Designated Parties. Starwood shall supply the Resort Golf Course operator with satisfactory identification of its Club Members, Club Guests and Designated Parties at the time tee time reservations are made. The benefits related to the use of the Resort Golf Course as provided in the DDA are not hereby expanded, but rather, shall be pro -rated between IROC and Starwood in accordance with their respective number of completed units in accordance with that certain Golf Agreement between RV and Starwood dated June 22, 2006. The foregoing notwithstanding, Starwood agrees that it shall not utilize its full rights under DDA Section 5.5.6 to make advance tee time reservations. Amend 3 8 Rather, Starwood's rights with respect to advance tee time reservations and golf course usage shall be as follows: 1) Starwood shall have the right to make advance tee times on the Mountain View Course for 1-12 players at any time from zero (0) to ninety (90) days prior to the date of play. A credit card number will be required to hold the reservation. Cancellations will be required at least 72 hours in advance of the reservation to avoid charges. No show and Short shows will be charged at the booked rate. 2) Starwood shall have the right to make advance tee times on the Mountain View course for 13 or more players up to 365 days in advance of play, as long as the rounds are available. A signed Group Event Contract with a credit card guarantee will be required. A final confirmation of the number of players will be due 10 days in advance of the reservation date. If notification is not given on the final number of players, the number of players agreed to on the contract will be the responsibility of the group. 3) Starwood members and guests shall be given green fee discounts of 10% off the posted rates year round. 4) Desert Willow Golf Resort will have unlimited access to book tournaments on the Mountain View Golf Course. Desert Willow Golf Resort will use its best efforts to provide an alternate and comparable tee time at comparable rates for any Starwood member/guest with an advance reservation pursuant to item #1 above whose advance reservation must be cancelled because of a tournament booking. The Agency further agrees that it shall not use all or any portion of the advance tee time reservation rights relinquished by Starwood herein as an incentive to attract other development to the City, nor shall the Agency contract away any portion of Starwood's advance tee time reservations to any other property owner. 12. Article 6 of the DDA is hereby modified such that the limitations on transfers and security interests imposed on RV as successor in interest to IROC in said Article 6 shall apply to RV as they relate to the portion of the Property retained by RV, and shall apply to Starwood as they relate to the Starwood Property. 13. Sections 7.3 and 7.4 of the DDA are hereby modified such that the non-discrimination provisions contained therein shall apply to RV as successor in interest to IROC with respect to its activities on that portion of the Property retained by RV, and shall apply to Starwood with respect to the Starwood Property. 14. The parties hereto acknowledge and agree that the exclusive right to build, operate and sell Timeshares within the Desert Willow Project which was Amend 3 9 granted to IROC under the terms of paragraph 9 of the Second Amendment to the DDA has now expired. 15. Section 8.1 of the DDA is hereby modified to add the following events as being among the occurrences which shall constitute a Default under the DDA: 8.1.6 Starwood's Transfer (as defined in Section 6.1) or the occurrence of any involuntary Transfer of the Starwood Property or any part thereof or interest therein, or any rights or obligations of Starwood under this Agreement, in violation of this Agreement. 8.1.7 Starwood's failure or refusal to keep in force and effect any material permit or approval with respect to construction of the Starwood Project, and Starwood's failure to cure such breach within thirty (30) calendar days after notice from the Agency of Starwood's breach; provided, however, if such breach is not reasonably curable within such thirty (30) day period, then Starwood shall be deemed in Default only if Starwood does not commence to cure such breach within such thirty (30) day period and thereafter fails to diligently prosecute such cure to completion. 16. The Agency specifically agrees that Starwood shall be entitled to use the name "Desert Willow" as a part of the name of the Starwood Project to be constructed on the Starwood Property. 17. Section 8.8 is hereby modified in its entirety to read as follows: "Section 8.8 Termination After the Close of Escrow. If the Agency terminates this Agreement due to a default by either RV or Starwood, such termination shall be effective only as against the defaulting party and this Agreement shall remain in effect as to any party not in default. Such a termination against a defaulting party shall not operate to terminate the obligations of the defaulting party or its successors or assigns with respect to payment of any One -Time Access Fees, Annual Access Fees, or Project Amenity Fees applicable to the defaulting party or its successors or assigns." 18. Section 9.1 of the DDA is hereby modified to provide that the forms of insurance described in said section 9.1 shall be obtained and maintained by RV with respect to that portion of the Property retained by RV, and shall be obtained and maintained by Starwood with respect to the Starwood Property. Amend 3 10 19. From and after the execution of this Third Amendment, Starwood hereby agrees to indemnify, defend, protect and hold harmless the Agency and the City and any and all agents, employees and representatives of the Agency and the City, from and against all losses, liabilities, claims, damages (including foreseeable or unforeseeable consequential damages), penalties, fines, forfeitures, costs and expenses (including all reasonable out-of-pocket litigation costs and reasonable attorney's fees) and demands of any nature whatsoever, related directly or indirectly to, or arising out of or in connection with: (i) the development of the Starwood Project on the Starwood Property or the use, ownership, management, occupancy or possession of the Starwood Property by Starwood, (ii) any breach or Default by Starwood hereunder, or (iii) any of Starwood's activities on the Starwood Property (or the activities of Starwood's agents, employees, lessees, representatives, licensees, guests, invitees, contractors, subcontractors, or independent contractors on the Starwood Property), regardless of whether such losses and liabilities shall accrue or are discovered before or after termination or expiration of this Agreement, except to the extent such losses or liabilities are caused solely and exclusively by the gross negligence or intentionally wrongful acts of the Agency. Starwood shall defend, at its expense, including reasonable attorneys' fees, the Agency and the City, and the Agency's and the City's council members, board members, officers, agents, attorneys, consultants, independent contractors, servants and employees in any legal action based upon such alleged acts or omissions. The Agency and the City may in their discretion participate in the defense of any such legal action. 20. Miscellaneous. 20.1 Notices. For purpose of giving notices and demands to Starwood in the manner provided in Section 10.1 of the DDA, all such notices shall be addressed to Starwood as provided below: WVC Rancho Mirage, Inc. 8803 Vistana Center Drive, Suite 360 Orlando, FL 32821 ATTN: General Counsel and Jorge Boone 20.2 Amendment of DDA Agreements. The parties hereto shall cause all DDA Agreements and related documents to be modified, as necessary, to reflect the terms and conditions of this Third Amendment. The Agency shall cause the City to take any and all Amend 3 appropriate actions with respect to the any Project agreements to which the City is a party to reflect the terms and conditions in this Third Amendment. 20.3 Reaffirmation and Allocation of Obligations. Nothing contained herein shall be deemed to make RV and Starwood jointly and severally liable for their respective obligations under the DDA, but rather, RV and Starwood shall be liable for their respective and/or proportionate share of the liabilities and obligations under the DDA as it applies to the property owned by each of them, and a breach of the DDA by RV or Starwood shall not constitute a breach by the other. 20.4 Binding Effect. This Third Amendment shall bind and benefit the heirs, successors, and assigns of Starwood and the Agency, respectively. 20.5 No Waiver. None of the terms or provisions of this Third Amendment may be waived, altered, modified, limited, or amended except by an agreement expressly referring hereto and to which the parties to be bound consent in writing. 20.6 Governing Law. This Third Amendment shall be governed by the laws of the State of California. 20.7 Reliance on Counsel/Entire Agreement. In executing this Third Amendment, no Party has relied on any inducements, promises, or representations by any other Party or its attorney, other than those set out in this Third Amendment and the Consent and Estoppel Certificate dated June 19, 2006. This instrument constitutes the entire, integrated understanding of the Parties with respect to the subject matter contained herein, and there are no other prior or contemporaneous oral or written agreements or understandings except as expressly set forth herein. 20.8 Severabilitv. Each and every provision of this Third Amendment is and shall be construed as a separate and independent covenant and agreement. If any term or provision of this Third Amendment or the application thereof shall to any extent be held to be invalid or unenforceable, the remainder of this Third Amendment, or the application of such term or provision to circumstances other than those to which it is invalid or unenforceable, shall not be affected hereby, and each term and provision of this Third Amendment shall be valid and shall be enforced to the extent permitted by law. 20.9 No Default/Waiver of Default. Agency acknowledges and agrees that as of the date hereof (i) it hereby waives any default under Amend 3 12 the DDA which could affect Starwood, the Starwood Property or any of the obligations assumed hereunder by Starwood, and (ii) except as referenced in (i) above, neither the Agency nor the City is presently in default under the DDA or the related Project Agreements in any manner that would affect Starwood, the Starwood Property or any of the obligations assumed hereunder by Starwood, nor does any circumstance exist as of the date hereof which, with the giving of notice and/or the passage of time, would constitute such a default. 20.10 Execution in Counterparts. This Third Amendment may be executed in two or more counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. 20.11 Effect of Third Amendment. This Third Amendment is effective as to the Starwood Property and to the relationship between Agency and Starwood. Except as modified by this Third Amendment, the DDA, and each term contained therein remains in full force and effect. In the event of a conflict between the DDA and the terms of this Third Amendment relating to the Starwood Property or the relationship between the Agency and Starwood, this Third Amendment shall control. IN WITNESS WHEREOF, the parties hereto have entered into this Third Amendment as of the day and year first written above. "STARWOOD" "AGENCY" WVC RANCHO MIRAGE, INC., a PALM DESERT REDEVELOPMENT Delaware corporation AGENCY, a public body, corporate and Politic By: Its: Richard S. Kelly, Chairperson By: Its: ATTEST: Rachelle D. Klassen, Secretary Amend 3 13 STATE OF CALIFORNIA ) )ss COUNTY OF RIVERSIDE ) On , before me, the undersigned, a Notary Public in and for said State, personally appeared (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 that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(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. STATE OF CALIFORNIA ) )ss COUNTY OF RIVERSIDE ) On , before me, the undersigned, a Notary Public in and for said State, personally appeared (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 that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(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. Amend 3 14 EXHIBIT A LEGAL DESCRIPTION OF STARWOOD PROPERTY Amend 3 15