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HomeMy WebLinkAboutLarkspur Assoc LLC - 1st Amnd to DDA (Larkspur Hotel)PALM DESERT REDEVELOPMENT AGENCY STAFF REPORT REQUEST: APPROVE FIRST AMENDMENT EXTENDING THE DISPOSITION AND DEVELOPMENT AGREEMENT WITH LARKSPUR ASSOCIATES, LLC SUBMITTED BY: JUSTIN MCCARTHY, ACM REDEVELOPMENT RUTH ANN MOORE, ECONOMIC DEVELOPMENT MANAGER DATE: MARCH 12, 2009 CONTENTS: FIRST AMENDMENT TO THE DISPOSITION AND DEVELOPMENT AGREEMENT ELEVATION Recommendation: By Minute Motion, that the Agency Board: 1. Approve the Amendment extending the Disposition and Development Agreement with Larkspur Associates, LLC; and 2. Authorize the Chairman to execute the Amendment incorporating the changes. Executive Summary: The Larkspur Hotel Disposition and Development Agreement is currently in default. The developer, Larkspur Associates, LLC, was in the process of securing financing in October of 2008 in the midst of the collapse of the credit markets. The inability to secure construction financing and the termination of the project's pre-development line of credit brought the project to a halt. The proposed amendment to the Disposition and Development Agreement extends the date to close escrow to November 30, 2009 plus an additional sixty days if permit ready. This extension provides time to secure additional equity investment to meet new stringent loan requirements, complete construction drawings and secure permits, and to obtain construction financing for the hotel. The Larkspur Hotel project is expected to be a positive addition to the EI Paseo Shopping District and is projected to generate $972,000 in annual General Fund revenues. The developer has invested approximately $1.3 million in the project and has indicated the desire to complete the project. To this end, the Developer has identified G \rda\Justin McCarthy\staffrptsUarkspur amendment docx Staff Report Larkspur Amendment Page 2 of 3 March 12, 2009 ORR Builders as contractor and to assist in securing additional equity investors. The Developer has also identified interested high net-worth equity investors and has re- opened negotiations with a lender that has now returned to the market. Discussion: The Agency entered into a Disposition and Development Agreement with Larkspur Associates, LLC (the Developer) on July 29, 2008 to purchase land at the northeast corner of Larkspur and Shadow Mountain to develop, construct and operate an integrated 154-room boutique hotel project. In accordance with the agreement, escrow on the Property would have closed at the end of January, 2009 or an outside date of March 30, 2009. Due to the collapse in the national financial markets last fall, the project was unable to secure financing. The First Amendment extends the Disposition and Development Agreement as follows: • Close of Escrow shall occur before November 30, 2009 subject to a sixty day extension. • The Outside Date to close escrow can be extended for sixty (60) days from November 30, 2009 if (i) final drawings, plans and specifications have been submitted and approved by the Agency and the City, and (ii) the condition and status of such drawings, plans and specifications would permit the City to issue a building permit for the project. • ENA Fees currently in arrears ($118,830) through December 31, 2008 will be paid by the developer prior to execution of the First Amendment by the Redevelopment Agency. • ENA fees from January 1, 2009 forward will accrue and shall be paid to the Agency on the Closing Date or the earlier termination of the Agreement. These fees will be calculated based on the greater of 6% or the City's LAIF rate of return plus 300 basis points (currently 5°/a). The accrued ENA Fee will be secured by a surety acceptable to the Agency to be provided prior to the Agency's execution of the First Amendment. • The Developer shalt provide monthly written status reports of the progress of drawings, plans and specifications. • The Developer shall provide by May 30, 2009, evidence of a commitment of equity financing for the Project equal to at least forty percent (40%) of the total cost of the Project. G:\rda\Justin McCarthy\staffrpts\larkspur amendmenLdocx Staff Report Larkspur Amendment Page 3 of 3 March 12, 2009 There are no guarantees in the current economy that the project will be able to secure financing and commence construction. However, the developer wishes to proceed and has demonstrated good faith in pursuit of the project through the funding of $1,340,975 in direct predevelopment expenditures. Of which, $464,544 was paid to the Redevelopment Agency in ENA fees (interest carry) and reimbursement for a portion of its legal fees. The balance includes down payment, design costs, and other predevelopment expenditures for the hotel project. The developer has also funded an additional $361,800 in expenditures to secure additional adjacent property that could potentially benefit the project. The transaction represents a fair market purchase without an Agency subsidy and pursues the City's revenue generation needs. The project also pursues the City's sustainability goals through a Silver LEED construction standard and the provision of solar photovoltaic panels for alternative energy. The Federal Reserve and the U.S. Treasury recently announced the provision of up to $1 trillion in funding for various forms of credit to include commercial backed mortgage securities. Hopefully, this and other actions will assist in improving the availability of credit. Submitted by: (''� °-"' ,,-� � . uth n Mobre f' Economic Develcipment Manager Approval: 0 ��!�I!:�/�I' �/r/�%L�i' � 'a,- - .• -� � / / ,, f �'' ��. . - - . - . � �L�� BY R DA� �'� �-�CiC S� i��i � � � ON �' �� �� � VERIFIED BY ��� / � � Original on file with City Clerk's Office G.\rda\Justin McCarthy\staffrpts\larkspur amendment.docx FIRST AMENDMENT TO DISPOSITION AND DEVELOPMENT AGREEMENT THIS FIRST AMENDMENT TO DISPOSITION AND DEVELOPMENT AGREEMENT (this "Amendment") is made as of March _, 2009 (the "Effective Date"), by and between the PALM DESERT REDEVELOPMENT AGENCY, a California public body, corporate and politic ("Agency"), and LARKSPUR ASSOCIATES, LLC, a Nevada limited liability company ("Developer"), with respect to the following: RECITALS A. Agency and Developer have entered into that certain Disposition and Development Agreement dated as of July 29, 2008 (the "DDA"). Initially capitalized words or terms used but not deiined in this Amendment shall have the meanings assigned to such words or terms in the DDA. B. The Developer has paid to the Agency all ENA Fees accrued from July 11, 2008 to December 31, 2008 in the amount of One Hundred Eighteen Thousand Eight Hundred Thirty Dollars and Forty-Seven Cents ($118,830.47). C. The Developer has delivered to the Agency a surety acceptable in form and substance to the Executive Director of the Agency and insuring the payment of all remaining ENA Fees when due. D. Agency and Developer have agreed to amend the DDA upon the terms, and subject to the conditions, set forth herein. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: AGREEMENT l. Modifications. 1.1 Section 1.1.16 of the DDA is deleted in its entirety and the following substituted therefor: "ENA Fee(sl has the meaning provided in Section 2.11." follows: 1.2 The second sentence of Section 2.3.2 of the DDA is amended to read as "Close of Escrow shall occur before November 30, 2009 (the "Outside Date"); notwithstanding the foregoing, the Outside Date shall be extended for a period of sixty (60) days from November 30, 2009, if by November 30, 2009 (i) the iinal drawings, plans and specifications described in Section 3.2 have been submitted to and approved by the Agency and the City, and (ii) the condition and P6402-0001 \ 1112456v4.doc status of such drawings, plans and specifications would permit the City to issue a building permit for the Project." 1.3 Section 2.11 of the DDA is deleted in its entirety and the following substituted therefor: Section: Section: "Section 2.11 ENA Fee. Notwithstanding anything to the contrary contained herein or in the ENA, this Section 2.11 shall control, from the Effective Date of the First Amendment to the DDA, all aspects of accrual, payment and all other matters pertaining to the ENA Fees. From January 1, 2009 until the Close of Escrow (the "Fee Period"), the Developer shall pay to Agency a fee (the "ENA Fee") per annum calculated as the product of (i) the higher of (a) six percent (6%) or (b) the investment rate of return on monies invested in the Local Agency Investment Fund established and maintained by the State of California (the "City's Investment Rate") (as adjusted from time to time as hereinafter provided), plus three hundred (300) basis points, and multiplied by (ii) Four Million Five Hundred Twenty-Seven Thousand Dollars ($4,527,000). As of the Effective Date of the First Amendment to the DDA, the City's Investment Rate is 2.046% and shall be adjusted during the Fee Period from time to time by written notice from the Agency to the Developer. The ENA Fee shall accrue from January 1, 2009 and shall be paid to the Agency on the Closing Date or the earlier termination of this Agreement." 1.4 Section 3.2 of the DDA is amended to add the following to the end of such "The Developer shall provide on a monthly basis to the Executive Director of the Agency a written status report of the Developer's preparation and submission to the Agency and the City of the drawings, plans and specifications described in this Section 3.2. Each such status report shall be in form and substance reasonably acceptable to the Executive Director and shall be accompanied by written evidence of payment by the Developer to the consultants, architects, engineers and contractors which assisted in the preparation of the drawings, plans and specifications described in such status report." 1.5 Section 3.9 of the DDA is amended to add the following to the end of such "Prior to May 30, 2009, the Developer shall provide to the Agency evidence (satisfactory in form and substance to the Executive Director in the exercise of his sole and absolute discretion) of a commitment of equity financing for the Project equal to at least forty percent (40%) of the total cost of the Proj ect." 1.6 Exhibit B(Schedule of Performance) to the DDA is replaced in its entirety with Exhibit B attached hereto. P6402-0001\1112456v4.doc 2 2. No Third Partv Riehts. Nothing contained in this Amendment shall be construed as giving any person ar entity, other than the parties hereto, any right, remedy or claim under or with respect to this Amendment. 3. No Waiver. The parties acknowledge and agree that if and to the extent that either party has not heretofore required the other to strictly comply with the covenants, agreements and obligations contained in the DDA, such action or inaction shall not constitute a waiver of, or otherwise affect or prejudice in any manner, either party's present or future rights, remedies, benefits or powers under the DDA, as modified herein, including the right to require performance of such covenants, agreements and obligations strictly in accordance with the terms and provisions of the DDA, as modified herein. 4. Final A�reement. This Amendment constitutes the final expression and the entire and exclusive agreement of the parties with respect to the subject matter hereof, and supersedes in all respects any and all other negotiations, representations, correspondence or communications between ar among the parties, whether oral or written. 5. Conflict. If there is any conflict between the terms and conditions of this Amendment and the terms and conditions of the DDA, the terms and conditions of this Amendment shall prevail. 6. Governin� Law. This Amendment shall be governed by and construed in accordance with the laws of the State of California, without giving effect to conflict of laws principles. 7. Severabilitv. If any court of competent jurisdiction determines any provision of this Amendment to be invalid, illegal or unenforceable, that provision shall be deemed severed from the rest, which shall remain in full force and effect as though the invalid, illegal or unenforceable provision had never been a part hereof. 8. Headin�s: Modifications. The headings in this Amendment are for the convenience of reference only and shall not limit or otherwise affect the meaning hereo£ No provision of this Amendment may be changed, discharged, supplemented, terminated or waived except in a writing signed by the parties hereto. 9. Successors and Assi�ns. This Amendment shall be binding upon, and inure to the benefit of, the parties and their respective permitted successors and assigns. 10. Counterparts. This Amendment may be executed in any number of counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, taken together, shall be deemed to be one and the same instrument. [This Space Intentionally Left Blank; Signatures Begin On The Next Page] P6402-0001\1112456v4.doc 3 IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to Disposition and Development Agreement as of the date first set forth above. "Developer" LARKSPUR ASSOCIATES, LLC, a Nevada limited liability company By: Name: Title: "Agency" PALM DESERT REDEVELOPMENT AGENCY, a public body, corporate and politic By: Name: Robert A. Spie�el Title: Chairman ATTEST: Rachelle D. Klassen, Secretary P6402-0001\1112456v4.doc 4 EXHIBIT B SCHEDULE OF PERFORMANCE Action Deposit — Developer shall deliver the Deposit to Escrow Holder. Opening of Escrow — Escrow Holder shall open an escrow for conveyance of the Property. Approval of Title — Developer shall approve or disapprove matters affecting title to the Property. Due Diligence Period — Developer shall determine the feasibility of the Property and the Project, and investigate any and all issues which may affect such feasibility. Close of Escrow — Agency shall convey title to the Property to Developer, and Developer shall accept such conveyance. Submission — Plans and Specifications — Developer shall prepare and submit to Agency for review and approval the Plans and Specifications. Approval — Plans and Specifications — Agency shall approve or disapprove the Plans and Specifications. Feasibility, Funding and Financial Materials — Developer shall furnish the Agency with the materials described in Exhibit I and Agency shall have approved their form and content. Financing Commitment and Permits — Developer shall obtain a financing commitment and any and all Permits required by City and/or any other governmental agency required for the development of the Project. The Agency shall have approved the form and content of the financing commitment and the source(s) of the financing commitment. Date Within 5 days after full execution this Agreement. Within 5 days after full execution this Agreement. Within 15 days after Developer's receipt of preliminary report, survey, and underlying documents noted as title exceptions in the preliminary report. Within 15 days after the Effective Date. Prior to November 30, 2009. Prior to July 30, 2009. Prior to the Close of Escrow No later than 60 days prior to Close of Escrow Prior to the Close of Escrow. P6402-0001\1112456v4.doc Action Hotel Operating Agreement — Developer shall furnish the hotel operating agreement to the Agency and Agency shall have approved the form and content of the agreement and the identity of the hotel operator. The hotel operator shall meet the requirements of Section 4.9(i) of the Development Agreement. Loan/Financing Documents — Developer shall furnish the loan or other financing documents to be used to iinance the development of the Project and construct the Improvements to Agency and Agency shall have approved their form and content. Construction Documents and Construction Budget — Developer shall furnish construction contracts, performance bonds and labor and material labor bonds and a construction budget to Agency and Agency shall have approved their form and content. Certificates of Insurance — Developer shall furnish to Agency duplicate originals or appropriate certificates of insurance policies required by Section 7.1. Commencement of Construction — Developer shall commence construction of the Improvements. Completion of Construction. Date No later than 60 days prior to the Close of Escrow. Prior to the Close of Escrow. Prior to the Close of Escrow. Prior to the Close of Escrow. Within 30 days after the Close of Escrow. Within 550 days after the commencement of construction of the Improvements. P6402-0001\1112456v4.doc 2 #?f��"� � u �ry� Y��"k T F ,r.T f �x. ��.A � l�� 1 R Y � 2. � 1 0� �� } ��•j�. �{ �� % vw!: .0 � . # ;� k�. 1.� � � �� � "I � �� � � -�.. a � � ._: � .. ,y � � } � .� � V �- . k ':�, ''�. � ?n� ._ F� � � � o w �dA �'�`� + �',� ��';�.;� . , � � �� � `� ��� �; � � ? ' !'J� .. �51� � � j4 1S s � , � �; ■1i} .. . ./� i 'r, Y` 1�S�t ���'� : , �,� :A'` .�.-� � ! � t�M , .,,,..��y_,;�.. , .. �` t . �� �� � � � � r : � t � '� �� e�� r � �"'; .� .. r+"� %� ! _ C_�. . �'� � s � ,� :r ;a ,f� 4 w� a � � ' 'r'i ��..,,,� r �ey w, _.. ; � � � �. 4 t�+^....,. 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