Housing Successor Agency
MEETING DATE: 7/25/2018
TITLE:
Title
Purchase Agreement Second Amendment and Performance Agreement First Amendment for Downtown Mixed-Use Project
End
FROM:
Stone James, Economic Development Director
RECOMMENDATION:
Recommendation
Staff recommends the City Council, as the Housing Successor Agency, authorize the City Manager to execute a Second Amendment to Purchase and Sale and Escrow Instructions Agreement between the City as the Housing Successor Agency and Cathedral Canyon Development LLC; and authorize the City Manager to execute the First Amendment to the Performance Agreement between the City as the Housing Successor Agency, Cathedral Canyon Development LLC, and the City Urban Revitalization Corporation.
Body
BACKGROUND:
On April 26, 2017 the Housing Successor Agency of the Former Redevelopment Agency of the City of Cathedral City ("City") approved a Purchase and Sale and Escrow Instructions Agreement ("Purchase Agreement") with Cathedral Canyon Development LLC ("CCD") for the future sale of an approximate two-acre site located at the southeast corner of East Palm Canyon Drive and West Buddy Rogers Avenue. Effective the same date, CCD entered into a separate purchase agreement with the City Urban Revitalization Corporation ("CURC") to purchase approximately three acres of vacant land adjacent to the two-acre site. The two Purchase Agreements contain terms of the property sales related to purchase price, deposits, due diligence period, conditions to close of escrow, deadlines for close of escrow and completion of project construction, brokerage commissions and various representations and warranties by the respective parties. On September 27, 2017 a Performance Agreement between City, CURC, and CCD was executed.
The Purchase Agreements and Performance Agreement memorialized pre-conditions to the Close of Escrow for the combined 5-acre site, to provide, among other things, (a) a description of the proposed project to be developed upon the Property (subject to the City's entitlement process), (b) time requirements for processing entitlements and development of the Project, and (c) post-closing obligations.
The First Amendment to the City Purchase and Sale and Escrow Instructions executed on September 27, 2017 provided (i) CCD may extend the close of escrow for up to six months by depositing a fully refundable deposit; (ii) the substitution of a performance schedule in lieu of CCD's commitment to complete construction of the project within 18 months following the close of escrow; (iii) if either party is unable to agree on a Performance Agreement within ninety (90) days following the expiration of the Due Diligence Period, either party could cancel the Purchase Agreements; and (iv) if CCD fails to perform by the outside closing date, all of CCD's deposits will be fully refunded to CCD.
DISCUSSION:
SECOND AMENDMENT TO THE PURCHASE AND SALE AND ESCROW AGREEMENT
The Second Amendment to the Purchase Agreement (Attachment 1) modifies the terms of the April 26, 2017 Purchase Agreement, and the September 27, 2017 First Amendment to Purchase Agreement. The changes are summarized below:
1) Section 1.1: The previous legal description has been replaced with a comprehensive updated legal description prepared by the City's Engineering staff to include all parcels intended to be conveyed to CCD.
2) Section 1.3: Stipulates, upon CCD's initiation, that the City will vacate all interior streets within the project area. This Section also identifies the purchase price will not increase in the event the total land area transferred to the CCD increases as a result of these street vacations.
3) Section 1.4: Deletes language from the Purchase Agreement Section 5.2.1. that required CCD to assume repayment of the Cove Assessment District assessments. The Cove Assessment District was formed to install sewer and storm water public improvements on and around the property. However, since the public infrastructure was never installed on the property, the City has exempted the property from further repayment of assessments.
FIRST AMENDMENT TO THE PERFORMANCE AGREEMENT
The First Amendment to Performance Agreement (Attachment 2) modifies the terms of the September 27, 2018 Performance Agreement as follows:
1) Section 1.1: Replaces Exhibit "A" to incorporate the revised legal description;
2) Section 1.2: Exhibit "F" provides a schedule of project milestones that summarize some of the major steps of an entitlement process.
3) Section 1.3: Acknowledges CCD's desire to purchase the Southern California Edison ("SCE") substation. CCD's failure to acquire the substation will not excuse or delay CCD's full and timely performance of the entirety of its obligations under the Purchase Agreement or the Performance Agreement.
4) Section 2.1: A commercial use of the property would exempt the property from paying a special tax pursuant to CFD No. 2006-1.
5) Section 2.2: CCD agrees to pay one percent (1%) of the project cost or install public art of similar value, subject to full and unconditional discretionary review and approval from the Public Arts Commission and any other required bodies.
6) Section 2.3: If CCD subsequently purchases the SCE substation, the City agrees to cooperate with the Developer in their effort to entitle and construct the new parcel.
7) Section 2.4: Developer agrees to underground all existing SCE utilities on the Property. City agrees to reimburse CCD from the City’s Master Underground Program (“MUP”) funds an amount equal to the lesser of: (1) $500,000, and (2) those actual and verified third party costs and expenses incurred by CCD (and approved by SCE in accordance with the immediately following sentence) in connection with such undergrounding. The City’s obligation to reimburse is subject to (i) SCE verifying the scope of C1186-006 -- 3447249.1 IRV #4819-1095-0246 v3 work, (ii) SCE creating its own cost estimate, and (iii) completion of all Project public improvement work in accordance with all applicable laws, including, but not limited to, California’s prevailing wage laws (Labor Code Section 1720, et seq.). The City will reimburse CCD within 30 days of the successful completion and acceptance of the undergrounding work; confirmation to City’s reasonable satisfaction of the actual third-party costs actually incurred by CCD in connection with the SCE utilities undergrounding work; and CCD's demonstration that it has complied with the entirety of those conditions and obligations set forth in this Section 2.4.
8) Section 2.5: CCD agrees to pay City and CURC for the entirety of those attorney fees incurred by City and CURC from and after June 20, 2018 in connection with the negotiation and preparation of this First Amendment and the amendments to the Purchase and Sale Agreements referenced in Recital A.
FISCAL IMPACT:
There are no fiscal impacts to the Housing Successor Agency due to the proposed amendments beyond (i) what is already anticipated in the April 26, 2017 Purchase Agreement and (ii) payment to CCD of $500,000 of MUP funds.
ATTACHMENTS:
1. Second Amendment to City Purchase and Sale and Escrow Instructions Agreement
2. First Amendment of the Performance Agreement
3. Exhibit "A": Updated legal description
4. Exhibit "F": Project milestone schedule