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HomeMy WebLinkAboutAyres Holdings, LP - 2010-06-21Council/Agency Meeting Held: Deferred/Continued to: )§-App oved ❑ Conditionally Approved ❑ Denied v, , Ci ' ClerVA Signat�ffe Council Meeting Date: June 21, 2010 Department ID Number: ED 10-11 -�' •' • • d SUBMITTED TO: Honorable Chairman and Agency Members SUBMITTED BY: Fred A. Wilson, Executive Director PREPARED BY: Stanley Smalewitz, Deputy Executive Director/Director of Economic Development SUBJECT: Approve and authorize execution of an Exclusive Negotiation Agreement (Potential Hotel Site) by and between the Redevelopment Agency of the City of Huntington Beach and Ayres Holdings, LLP. for the development of 7872 Edinger Avenue as a hotel site Statement of Issue: Submitted for Redevelopment Agency consideration is a 90 day Exclusive Negotiation Agreement with Ayres Holdings, LLP for the development of 7872 Edinger Avenue as a hotel site. Financial Impact: Not applicable. Recommended Action: Motion to: A) Approve the "Exclusive Negotiation Agreement (Potential Hotel Site)" by and between the Redevelopment Agency of the City of Huntington Beach and Ayres Holdings, LLP;" and, B) Authorize Chairman and Agency Clerk to sign and execute the Agreement; and, C) Authorize the Executive Director or designee to take any action and execute any and all documents and agreements necessary to implement this Agreement. Alternative Action(s): 1. Do not approve the Agreement; and/or 2. Continue the item and direct staff accordingly. -251- Item 16. - Page 'I REQUEST FOR COUNCIL ACTION MEETING DATE: 6/21/2010 DEPARTMENT ID NUMBER: ED 10-11 Analysis: One aspect of the Beach and Edinger Corridor Specific Plan was °a market analysis. The market analysis identified the need for one to two limited service hotels. The Agency owns property located at Edinger Avenue and Parkside Lane consisting of six parcels (1.9 acres), which are potentially suitable for the development of a hotel. The property is located within the boundaries of Subarea No. 1 of the Huntington Beach "Merged" Redevelopment Project Area. Development of the site is consistent with the goals and objectives of the Redevelopment Plan - maximize development opportunities and remove blight. The proposed hotel development would increase property tax increment paid to the Agency, and transient occupancy tax (TOT) and sales tax paid to the City. On October 2, 2009, the Agency published a Request for Proposals (RFP) seeking qualified hotel developers to acquire and develop the site. A selection committee reviewed and scored each proposal received, based on the criteria outlined in the RFP. The committee selected Ayres Holdings, LLP (Ayres) as the highest scoring bidder. The Ayres' development proposal describes construction and operation of a seventy nine thousand (79,000) square feet four story, select service hotel, consisting of one hundred twenty (120) guest rooms, dining and bar facilities, meeting space, gift shop, fitness center, and outdoor pool and spa. The Agency seeks approval to negotiate the terms of a Development and Disposition Agreement (DDA) with Ayres via the attached Exclusive Negotiating Agreement (ENA). The ENA will have Ayres complete a substantial site analysis with a guarantee that the Agency will not market the project to other developers. Through the term of the ENA, the Agency and Ayres shall determine the fair market value of the proposed hotel site, the sales price, and a methodology to finance the acquisition and construction of the proposed hotel project. The terms of the Agreement include: • Ninety (90) day negotiating period; ® Agency shall provide a written appraisal of the fair market value of the site; ® Within sixty (60) days of the execution of this Agreement, the Developer shall submit: ® Project Description ® Concept drawings and elevations • Site plan generally describing the Hotel Project using schematic drawings ® A proposed construction schedule of development ® Economic analysis for the proposed development, including: ® An estimate of development costs, including construction and non - construction costs and ® An estimate of project income, a financial statement, and pro forma statement of project return adequate to enable the Agency to evaluate the economic feasibility of the hotel project ® A description of the proposed method of construction, permanent financing and amounts, and sources of equity and debt capital ® Agency may extend the negotiation period by up to thirty (30) days upon written notice to Developer Item 16. - Page 2 -252- REQUEST FOR COUNCIL ACTION MEETING DATE: 6/21/2010 DEPARTMENT ID NUMBER: ED 10-11 Staff recommends approval of the Exclusive Negotiation Agreement with Ayres Holdings, LLP. Environmental Status: Not applicable Strategic Plan Goal: Enhance Economic Development Attachment(s): 1. Exclusive Negotiation Agreement (Potential Hotel Site) by and between the Redevelopment Agency of the City of Huntington Beach and Ayres Holdinqs, LLP. -253- Item 16. - Page 3 ATTACHMENT #1 EXCLUSIVE NEGOTIATION AGREEMENT (Potential Hotel Site) By and Between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH and AYRES HOLDINGS, L.P. EXCLUSIVE NEGOTIATION AGREEMENT z (Potential Hotel Site) This EXCLUSIVE NEGOTIATION AGREEMENT (Potential Hotel Site) (this "Agreement'), dated for purposes of identification only as of �Le-A)E" o%/ 2010 (the"hate of Agreement"), is hereby entered into by and between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic (the "Agency") and AYRES HOLDINGS, L.P., a California limited partnership (the "Developer"). RECITALS A. The Agency has acquired real property which is potentially suitable for the development of a hotel, as is described on Exhibit "A" hereto, and incorporated herein by this reference (the "Potential Hotel Site"). The Potential Hotel Site consists of a 1.9 acres consisting of six parcels of land located at 7872 Edinger Avenue in the City of Huntington Beach ("City"). B. The Agency desires to redevelop the Potential Hotel Site. On October 2, 2009, Agency published a Request for Proposals for development of the Potential Hotel Site. In response, Developer submitted a proposal ("Development Proposal'), which was the highest scoring bid. Notwithstanding the fact that the Development Proposal was the highest scoring bid, the Agency desires to further negotiate (and specifically has not accepted) the financial terms set forth in the Development Proposal. C. The Development Proposal describes construction and operation by Developer of a four story, select service hotel and spa with approximately seventy nine thousand (79,000) square feet, consisting of one hundred twenty (120) guest rooms, dining and bar facilities, meeting space, gift shop, indoor spa, fitness center and outdoor pool and spa (collectively, the "Hotel Project'). D. The Agency and the Developer (individually referred to as a "Party" and collectively referred to as the "Parties") desire to enter into this Agreement to determine the fair market value of the Potential Hotel Site, a possible sales price therefore, and a methodology to finance the acquisition and construction of the proposed Hotel Project (collectively, the "Terms to be Negotiated"). E. The primary purpose of this Agreement is to establish a period during which the Parties shall exclusively negotiate the Terms to be Negotiated. It is not the purpose of this Agreement to negotiate and/or enter into a binding agreement for the sale of the Potential Hotel Site to Developer (the "Definitive Agreement"). NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS: Section 1. Negotiating Period. The Parties agree to use commercially reasonable best efforts to negotiate diligently and in good faith with one another for a ninety (90) day period commencing upon the Effective Date of this Agreement (as hereinafter defined in Section 16) (the "Negotiating Period"), in order to agree upon mutually acceptable Terms to be Negotiated. Section 2. Agency Appraisal. Within thirty (30) days of the Effective Date of this Agreement, Agency shall provide a written appraisal of the fair market value of the Potential Hotel Site prepared by an independent, licensed appraiser. Agency shall pay the cost of the appraisal in an amount not to exceed Five Thousand Dollars ($5,000). The cost of the appraisal will be reimbursed to the Agency by the Developer if and when a Definitive Agreement for the conveyance of the Potential Hotel Site is entered into by the Parties. Section 3. Developer's Submission of Documents for Agency Review and Continent. Within sixty (60) days of the Effective Date of this Agreement, the Developer shall use commercially reasonable best efforts to submit the following information to the Agency or its agents with respect to the Hotel Project: • Project Description • Concept drawings and elevations • Site plan generally describing the Hotel Project using schematic drawings • A proposed construction schedule of development • Economic analysis for the proposed development, including: ■ An estimate of development costs, including construction and non - construction costs ■ An estimate of project income, a financial statement and pro forma statement of project return adequate to enable the Agency to evaluate the economic feasibility of the Hotel Project • A description of the proposed method of construction and permanent financing and amounts and sources of equity and debt capital In the event that the Agency requires that changes be made, the Developer shall resubmit a revised site plan(s), pro forma(s), financing plan(s) and/or development schedule(s) to the Agency which shall respond to the Agency's comments on the initial version of each submission. The Agency shall review and either approve such submissions or return the submissions to the Developer for further revision as soon as practical but in any event within twenty (20) days. The Developer acknowledges and agrees that design and architectural review by the Agency and its consultants will be required at each stage of the development of the Hotel Project and that sketches, plans, and ultimately working drawings, specifications and similar documents will be required to be submitted for review and approval pursuant to any Definitive Agreement (the "Agency's Design Review"). The Developer further acknowledges and agrees that the City, acting under its general police powers as a municipal corporation, may conduct a similar review and that building design, including, but not limited to, the selection of building elevations, construction materials, parking layout and landscaping will not be final until approved by City. The Developer further acknowledges and agrees that the Agency may exercise the Agency's Design Review distinct and separate from those additional rights which the City may exercise under its general police powers as a municipal corporation. Section 4. Agency Evaluation of Developer's Proposal. Upon Agency receipt of the last of Developer's submissions as provided in Section 3 hereof, Agency shall use commercially reasonable best efforts to conduct or cause to be conducted a complete economic evaluation of Developer's ENA Final 2 submittals and proposed Hotel Project. If the Parties are able to mutually agree upon the Terms to be Negotiated, then prior to the expiration of the Negotiating Period, Agency may, upon written notice to Developer, elect to commence negotiation and the drafting of a Definitive Agreement. If the Parties are unable to mutually agree upon the Terms to be Negotiated, then prior to the expiration of the Negotiating Period, Agency may, upon written notice to Developer, elect to extend the negotiation period by up to thirty (30) days (the "Extended Negotiating Period'). In either event, this Agreement shall automatically terminate upon the expiration of the Negotiating Period or the Extended Negotiating Period in accordance with Section 7.3 hereof. Section 5. Environmental Requirements. Certain state and local environmental requirements (including without limitations, the California Environmental Quality Act, Public Resources Code Section 21000, et seq.) may be applicable to the Hotel Project. Pursuant to such requirements, certain environmental documents may be required to be prepared prior to consideration by the Agency Board of a Definitive Agreement. The Developer agrees to cooperate with the Agency in obtaining information to determine the environmental impacts of the proposed Hotel Project and the scope of the environmental documentation necessary to evaluate such environmental impacts. If the Parties are able to mutually agree upon the Terms to be Negotiated and elect to commence negotiation and drafting of a Definitive Agreement, the Developer agrees to pay at Developer's sole cost and expense all costs incurred by the Agency, if any, to prepare or cause to be prepared such environmental impact documents as Agency may cause to be completed. Agency agrees to cooperate with the Developer to act as lead agency. Section 6. Cooperation. The Parties agree to cooperate with each other in promptly supplying information and analyses relating to the Hotel Project. Section 7. Effect of this Agreement; Termination. Section 7.1 Nature of Agreement. Neither this Agreement nor the Development Proposal is a complete statement of all terms and conditions of the proposed Hotel Project nor any possible conveyance or financing of the Proposed Hotel Site. Neither Party intends, by setting forth herein the provisions of a possible transaction, to create for itself or any other person or entity any legally binding obligation or liability, except as specifically stated herein. No subsequent oral agreement or conduct of the Parties (including partial performance) will be deemed to impose any such obligation or liability. This Agreement is not intended to constitute a binding agreement by the Agency to convey all or any portion of the Proposed Hotel Site, to financially participate with the Developer in the assembly or acquisition of land or construction or other costs for the Hotel Project or any other endeavor of Developer, or to construct or operate the Hotel Project, nor is it intended to constitute a binding agreement to agree on the Terms to be Negotiated or to agree on or enter into a new exclusive negotiation agreement or Definitive Agreement or any other contract. Except as set forth in a Definitive Agreement, if one is entered into, no Party shall be legally bound to consummate the sale, purchase, construction or operation of the Potential Hotel Site or a Hotel Project as outlined herein unless and until a Definitive Agreement or other contract has been executed and delivered by the Parties. Any Definitive Agreement or other document, to be legally binding on the Agency, must satisfy various conditions of the Agency, including, without limitation, approval by the board of ENA Final 3 directors of the Agency in accordance with all applicable laws, including, without limitation, California Health and Safety Code Section 33343. Section 7.2 Exclusive Nature of Negotiations. The Parties intend that certain aspects of the negotiations conducted pursuant to this Agreement be negotiated exclusively between the Parties. Accordingly, during the Negotiating Period the Agency shall negotiate exclusively with the Developer with respect to the development of the Proposed Hotel Site. Section 7.3 Termination of this Agreement. Prior to the expiration of the Negotiating Period, Developer reserves the right to terminate this Agreement, with or without cause, upon ten (10) days prior written notice to Agency, thereby withdrawing from such negotiations without any liability to Agency, except that Developer shall be obligated to promptly return to Agency all information and materials which Developer has received from Agency pursuant to this Agreement. Agency shall have the right to terminate this Agreement prior to the expiration of the Negotiating Period, with cause, upon ten (10) days prior written notice to Developer, thereby withdrawing from such negotiations without any liability to Developer, except that Agency shall be obligated to promptly return to Developer all information and materials which Agency has received from Developer pursuant to this Agreement. The Parties, by their respective execution hereof, knowingly agree, notwithstanding anything herein to the contrary, that neither of them shall have any right to specific performance of this Agreement, nor any other equitable or damage remedies under the law. Each Party makes such release with full knowledge of Civil Code Section 1542 and hereby waive any and all rights thereunder to the extent of this release, if such Section 1542 is applicable. Section 1542 of the Civil Code provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." If this Agreement is not sooner terminated pursuant to the foregoing paragraphs, this Agreement shall automatically terminate upon the expiration of the Negotiating Period or Extended Negotiating Period and neither Party shall remain bound hereby. Sections 2, 7.1, 7.3, 7.4, 8, 9,10,11,12,13,14 and 15 shall survive the termination or expiration of this Agreement. Section 7.4 Mutual Confidentiality. To the extent permitted by applicable law, the Parties shall maintain all information concerning this Agreement and any pending or subsequent negotiations between the Parties as confidential, disclosing information only to those individuals and representatives as designated by the other Party provided that such individuals acknowledge and agree to maintain the confidentiality of such information. Section 8. Notices. Any notices, requests or approvals given under this Agreement from one Party to another may be personally delivered, or deposited with the United States Postal Service for mailing, postage prepaid, to the address of the other Party as stated in this paragraph, and shall be deemed to have been given at the time of personal delivery or, if mailed, on the third day following ENA Final 4 the date of deposit in the course of transmission with the United States Postal Service. Notices shall be sent as follows: If to the Agency: The Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Attn: Stanley Smalewitz With Copies to: The Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Attn: City Attorney If to Developer: Ayres Holdings, L.P. 355 Bristol Street, Suite A Costa Mesa, California 92626 Attention: Bruce D'Eliscu Section 9. Governing Law. This Agreement shall be governed by the laws of the State of California. To the extent permitted by law, any legal action brought under this Agreement must be instituted in the Superior Court of Orange County, State of California in an appropriate court in that county, or in the Federal District Court in the Central District of California. Section 10. Attorneys' Fees. If any legal action is brought to.enforce, construe, interpret or invalidate the terms of this Agreement, the prevailing party shall be entitled to all costs and expenses incurred in any such action, including court costs and reasonable attorneys' fees, in addition to any other relief to which such party may be entitled. Section 11. Interpretation. This Agreement shall be interpreted as a whole and in accordance with its fair meaning and as if each Party participated equally in its drafting. Captions are for reference only and are not to be used in construing meaning. The recitals are deemed incorporated into this Agreement. Section 12. Real Estate Commissions. Each of the Parties represents and warrants to the other Party that no real estate commission, broker's fees, or finder's fees which may accrue by means of the acquisition of any interest in the Potential Hotel Site is due to any person, firm or entity except as set forth herein. Each Party agrees to indemnify and hold the other Party harmless with respect to any judgment, damages, legal fees, court costs, and any and all liabilities of any nature whatsoever arising from a breach of such representation. Section 13. Amendment of Agreement. No modification, rescission, waiver, release or amendment of any provision of this Agreement shall be made except by a written agreement executed by each of the Parties. ENA Final 5 Section 14. Entire Agreement. This Agreement constitutes the entire understanding and agreement of the Parties concerning this subject. This Agreement integrates all of the terms and conditions mentioned herein or incidental thereto, and supersedes all prior negotiations, discussions and previous agreements between the Parties concerning all or any part of the subject matter of this Agreement. Section 15. Implementation of Agreement. The Agency shall maintain authority to implement this Agreement through the Executive Director. The Executive Director shall have the authority to issue interpretations, waive provisions, and/or enter into certain amendments of this Agreement on behalf of the Agency so long as such actions do not materially or substantially change the uses or development contemplated hereunder, or add to the costs incurred or to be incurred by the Agency as specified herein, and such interpretations, waivers and/or amendments may include extensions of time to perform. All other materials and/or substantive interpretations, waivers, or amendments shall require the consideration, action and written consent of the Governing Board of the Agency. Section 16. Effective Date of this Agreement. This Agreement shall take effect immediately upon the execution of this Agreement by the Agency (the "Effective Date"). [SIGNATURE PAGES FOLLOW] ENA Final 6 IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT AS OF THE RESPECTIVE DATES SET FORTH BELOW. Date: %UA)� 5 c;/ , 2010 ATTEST: Cr low y Clerk APPROVED: ve Director "BUYER" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH M i' 'MAN A% APPROVED AS TO FORM: Lyz C Age cy Counsel APPROVED AS TO FORM: LEIBOLD MCCLENDON & MANN, P.C. Agency Special Counsel By: A4141jf-,1,t arbara Zeid Ielbo d ✓ INITIATED AND APPROVED: Deputy cutive Director [SIGNATURE PAGE TO EXCLUSIVE NEGOTIATION AGREEMENT] [PAGE 1 OF 21 ENA FINAL (2)Final "DEVELOPER" AYERS HOLDINGS, L.P., a California limited p rship Dated: June 1 , 2010 By: Its: Donald B . r , jr. [SIGNATURE PAGE TO EXCLUSIVE NEGOTIATION AGREEMENT] [PAGE 2 OF 21 ENA Final EXHIBIT A Property Description APN: 142-081-06, 142-081-09, 142-081-10, 142-081-11, 142-081-12, 142-081-28 (See attached map) ENA Final Exhibit "A" Site Map THIS MAP WAS PREPARED FOR ORANGE COUNTY ASSESSOR DEPT. PURPOSES ONI Y. THE ASSESSOR MAKES NO GUARANTEE AS TO ITS ACCURACY NOR ASSUMES ANY LIABILITY FOR OTHER USES. NOT TO BE REPRODUCED. 107-78 ALL R(CHTS RESERVED. 0 COPYRLGHT ORANGE COUNTY ASSESSOR 7008 - BEACH (HUNIINGTON BEACH) Y y N �l TRAiCT I I I ri I 1 O 1 1 I 118 1 I 25 1 1 25 i 1 I I I I Q ss ss )l so' 1 so• a• I1 J { 12O 6 7 . 1 B 9� !0 , lz 9. 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I77 11 4B1 I 1 P1 M•i ly'I°91 I 1 1 1 1 1 I 1 j aj I 9 1 1 tvl I 1 4 I I 1 1 1 1 1 a l l I 2g 1 I I I I I I I I I 1 1 l I I 1 1 1 701 711 7 1 731 741 75 I I 761 I I l i i l l 1 1 1 1 1 1 1 7Bj 791 80I ell I I �4105 a O a 86 105 2 a O 87 19 fOf �� a Y B IOJ a US 083 B 17 102 jqL.----16------g ------0--- B0 91 too � 15 1a ns9J 96 Q_`2s_J t3 NO. 417 96 PAR. 1 , + PAR. 2 95 90-4f rl• 12 142— 0 8 so• i LANE NOTE — ASSESSOR'S BLOCK 8 ASSESSOR'S MAP C^"{ PARCEL NUMBERS BOOK 142 PAGE 08 —`JI SHOWN IN CIRCLES COUNTY OF ORANGE City ®f Huntington Beach 2000 Main Street • Huntington Beach, CA 92648 OFFICE OF THE CITY CLERK JOAN L. FLYNN CITY CLERK June 23, 2010 Ayres Holdings, L. P. Attn: Bruce D'Eliscu 355 Bristol Street, Suite A Costa Mesa, CA 92626 Dear Mr. D'Eliscu Enclosed for your records is a duplicate original of the Exclusive Negotiation Agreement between the Redevelopment Agency of the City of Huntington Beach and Ayres Holdings, L. P. regarding a potential hotel site at 7872 Edinger Avenue. Sincerely, JF:pe Enclosure G:fo11owup .agrmtltr Sister Cities: Anio, Japan • Waitakere, New Zealand (Telephone: 714-536-5227 )