Housing Successor Agency
MEETING DATE: 11/30/2016
TITLE:
Title
Assignment, Assumption and Consent Agreement and Amendment No. 6 to Property Transfer Agreement for the Downtown Mixed Use Project
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FROM:
Curt Watts, Economic Development Director
RECOMMENDATION:
Recommendation
Staff recommends the City Council, as the Housing Successor Agency to the Former Redevelopment Agency, authorize the City Manager to execute an Assignment, Assumption and Consent Agreement between GreenSpring Capital, Inc., Cathedral Canyon Development, LLC, and Amendment No. 6 to the Property Transfer Agreement by and between Cathedral Canyon Development, LLC and the City of Cathedral City as the Housing Successor Agency to the Former Redevelopment Agency of the City of Cathedral City.
Body
BACKGROUND:
The former Cathedral City Redevelopment Agency acquired an approximate two-acre site located at the southeast corner of East Palm Canyon Drive and West Buddy Rogers Avenue to meet affordable housing needs. The Housing Successor Agency to the Former Redevelopment Agency of the City of Cathedral City ("City") approved a Property Transfer Agreement ("Agreement") with Thermal Land, LLC in August 2013, to transfer this site for development of a mixed use project. Per the Agreement, the site was to be developed primarily for housing purposes with a percentage of the units to be available to, and occupied by, moderate income households. The Agreement has been amended multiple times to extend the deadlines for close of escrow and completion of the project as defined in the Agreement. Council approved an Assignment of the Agreement from Thermal Land, LLC to Saxony Living, LP ("Saxony") on November 18, 2014 and an Assignment of the Agreement from Saxony to GreenSpring Capital, Inc. ("GreenSpring") on October 26, 2016. The most recent approved Assignment is pending execution as a result of prolonged negotiations between Saxony and GreenSpring and modifications in the Agreement requested by GreenSpring which require approval by the Housing Successor Agency.
DISCUSSION:
The current Agreement between the City and Saxony requires that the approximate two-acre site located at the southeast corner of East Palm Canyon Drive and West Buddy Rogers Avenue be entitled, purchased and developed as a 69-residential unit mixed use project ("Project") with five (5) ground floor retail units. Saxony had been processing the Project for entitlements.
Saxony and GreenSpring Capital, a private equity and development entity based in Newport Beach, California, sought, and received on October 26, 2016, the Housing Successor Agency's approval to transfer Saxony's interests and obligations in the Agreement to GreenSpring. Per Section 9 of the Agreement “no Party to this Agreement, without prior written approval by the City, or except as permitted by this Agreement, shall assign or attempt to assign this Agreement or any right herein to any third party …”. GreenSpring proposes to continue processing the Project for entitlements with possible modifications in the residential/retail mix, acquire the Property, and construct the Project.
GreenSpring previously provided proof of financial solvency via various financial statements and authorization of business and personal credit checks. Based on the information provided, GreenSpring was deemed to have the financial ability and expertise to complete the City's required entitlement process for acquisition and development of the Property. GreenSpring has, as it has done in all of its previous development projects, created a single-asset limited liability company, Cathedral Canyon Development, LLC, ("CCD"), for development of the Project (subject to the City's future approval of entitlements and building permits). GreenSpring is currently the only member of CCD and therefore has a 100% interest. Approval of the attached Assignment, Assumption, and Consent Agreement ("Assignment", Attachment 1), will complete the assignment of the Agreement to CCD.
Also, GreenSpring has requested that we make certain modifications in the Agreement to better position the Project for success and re-establish the timeline necessary to complete the entitlement process, acquire building permits, and provide proof of construction financing to allow for the close of escrow and the commencement of Project construction. Although a previous Amendment No. 6 was approved simultaneously with the approval on October 26, 2016 of the Assignment from Saxony to GreenSpring, that Amendment has not been executed. The attached Amendment No. 6 to the Agreement (Attachment 2) has been prepared to be consistent with the new LLC entity and to also include the following:
1) A restructuring of the Purchase Price to increase the $300,000 previously stipulated amount for the Property to $331,000 in exchange for deleting the requirement to produce eleven (11) of the sixty-nine previously proposed residential units (15%) as affordable housing units for persons and families of moderate income;
2) Elimination of the current requirement to pay $150,000 at Close of Escrow "to pay off any and all assessments for sewer related to the Property's inclusion in the Cove Improvement District", thereby making the payment of the annual charges for these assessments the future responsibility of the Buyer following Close of Escrow; and
3) Include an 18-month extension of the previously established timeline for Close of Escrow, followed by an 18-month deadline for Project Completion along with an option allowing the Buyer to extend the Close of Escrow deadline an additional six (6) months upon depositing into escrow an amount equal to 50% of the Purchase Price (i.e. additional deposit of $165,500) to be applied toward the Purchase Price at Close of Escrow. NOTE: Prior to Close of Escrow the Buyer must complete the entire project entitlement process for the Expanded Project and provide proof that Buyer has sufficient funds, or loan(s) to purchase the Property and develop the Project as approved by the City.
FISCAL IMPACT:
The Assignment transferring GreenSpring's interests and obligations in the Agreement to Cathedral Canyon Development, LLC and Amendment No. 6 restructuring the Purchase Price, eliminating the requirement to produce eleven (11) moderate income residential units and extending time deadlines contained in the newly assigned Agreement, will further the Project's ability to be entitled and developed. The Housing Successor Agency will receive an additional $31,000 as a result of these changes and the sewer assessment charges will become the future responsibility of the Buyer following Close of Escrow. All other financial terms of the Agreement will remain unchanged with the approval and execution of the Assignment and Amendment No. 6.
ATTACHMENTS:
1. Assignment, Assumption and Consent Agreement
2. Amendment No. 6 to Property Transfer Agreement and Escrow Instructions