HomeMy WebLinkAbout12 - City Hall Reuse ENA PA 2012-176CITY OF
NEWPORT BEACH
City Council Staff Report
Agenda Item No. 12
August 13, 2013
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Community Development Department
Kimberly Brandt, AICP, Director
949 - 644 -3226, kbrandt @newportbeachca.gov
PREPARED BY: Kimberly Brandt, Director
APPROVED: is A
TITLE: Approval of an Exclusive Negotiating Agreement with Olson Real
Estate Group, Inc. for the Reuse of the Former City Hall Complex
(PA2012 -176)
3300 Newport Boulevard & 475 32nd Street
ABSTRACT:
A one -year exclusive negotiating agreement between the City of Newport Beach and
Olson Real Estate Group, Inc. regarding the future redevelopment of the former City
Hall complex located at 3300 Newport Boulevard and 475 32nd Street.
RECOMMENDATION:
Approve an exclusive negotiating agreement with Olson Real Estate Group, Inc. of
Irvine, California for an initial term of one year with a maximum cumulative extension of
three months, and authorize the Mayor and City Clerk to execute the exclusive
negotiating agreement and direct staff to take actions necessary to implement the terms
of the agreement.
DISCUSSION:
On July 9, 2013, the City Council selected Olson Real Estate Group, Inc. (RD Olson) to
initiate negotiations regarding the reuse of the former City Hall complex. RD Olson has
proposed to develop a 130 -room boutique hotel and spa to be managed by an
experienced hotel operator, Destination Hotels. RD Olson proposes to target an upscale
market with an average daily rate of approximately $279 per room night in the stabilized
year designated as 2018. The project may include meeting rooms, accessory retail, a
restaurant, lobby bar, rooftop bar, and related guest amenities.
The purpose of the negotiating agreement is to establish a timeframe for the City and
RD Olson to cooperatively work together to refine the development proposal and to
negotiate terms of a subsequent agreement or agreements should the City and RD
Olson proceed to implement the proposal.
1
ENA for Former City Hall Reuse
August 13, 2013
Page 2
Staff is recommending a one -year term for the agreement, with a maximum extension of
three months, which would be subject to approval by the City Manager.
Examples of items to be discussed during the negotiating period include:
1. Scope of development;
2. Assessment of the physical and environmental condition of the site;
3. Plans for the Project depicting proposed building locations, elevations, building
square footages and uses, parking, access points, landscaped areas, and
pedestrian and vehicular circulation;
4. Pro forma for the Project (addressing detailed development and operational
costs, anticipated rents, estimated profit and appropriate return measurements);
5. Financing plan for the Project (addressing the proposed methods of construction
and permanent financing, and amounts and sources of equity and debt capital);
6. Development schedule for the Project; and
7. The fair market rents for a leasehold interest in the Property and terms and
conditions of any conveyance of the leasehold interest.
14WA1:191N ill 4,rr_1 1111:7ZkyllA A
The approval of an exclusive negotiating agreement to discuss a future development
project is not subject to the California Environmental Quality Act ( "CEQA ") pursuant to
Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable
indirect physical change in the environment) and 15060(c)(3) (the activity is not a
project as defined in Section 15378) of the CEQA Guidelines, California Code of
Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical
change to the environment, directly or indirectly. Decisions related to a defined project,
including whether or not to authorize any development or lease of the property, will be
subject to CEQA. The City will conduct appropriate environmental review prior to a
decision by the City to lease the property, amend the City's General Plan, Coastal Land
Use Plan, and /or Zoning Ordinance, approve a site development plan, and /or authorize
construction on the property.
2
ENA for Former City Hall Reuse
August 13, 2013
Page 3
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item). Notice was also sent by email
to interested individuals.
Submitted by:
Kimberly Brand , AICP
Director
ATTACHMENT:
Attachment CC 1 — Exclusive Negotiating Agreement
3
4
City Council
Attachment 1
Exclusive Negotiating Agreement
0
EXCLUSIVE NEGOTIATING AGREEMENT
This EXCLUSIVE NEGOTIATING AGREEMENT (the "Agreement ") is made and
entered into to be effective as of , 2013 (the "Effective Date "), by and between the
City of Newport Beach, a charter city and municipal corporation ( "City"), and Olson Real Estate
Group, Inc., a California corporation doing business as R.D. Olson Development ( "Developer ").
City and Developer are sometimes hereinafter individually referred to as a "Party" and
collectively as the "Parties."
RECITALS:
The following Recitals are a substantive part of this Agreement:
A. City is a municipal corporation duly organized and validly existing under the laws
of the State of California with the power to carry on its business as it is now being conducted
under the statutes of the State of California and the Charter of the City.
B. City desires to have certain real property redeveloped, which property consists of
approximately 4.27 acres located at 3300 Newport Boulevard in Newport Beach, and is depicted
on Exhibit "A" attached to this Agreement (the "Site ").
C. Developer is an experienced real estate developer who has proposed a
development Proposal on the Site (the "Proposal "). The Proposal, which may be subject to
refinement and modification as mutually agreed to by the Parties during negotiations, is
generally described in the Proposal Description attached hereto as Exhibit `B."
D. The Parties desire to enter into this Agreement to establish a period during which
they will cooperate to explore the feasibility of the developing the Proposal on the Site and
during which time Developer shall have the exclusive right to negotiate with City with respect to
the terms of an agreement or agreements to provide for the Proposal (herein, the "Definitive
Agreement ").
COVENANTS:
Based upon the foregoing Recitals, which are incorporated herein by this reference, and
for good and valuable consideration, the receipt and sufficiency of which is acknowledged by
both Parties, City and Developer agree as follows:
1. Good Faith Negotiations. During the entire Negotiation Period (defined in
Paragraph (2) City and Developer shall negotiate in good faith pursuant to the terms set forth
herein to achieve the objectives and accomplish the tasks described in this Agreement. Nothing
herein shall be deemed a covenant, promise, or commitment by either Party to approve or enter
into a Definitive Agreement with the other Party on any particular terms or conditions. The
Parties' approval and execution of this Agreement is merely an agreement with respect to certain
tasks preliminary to the execution of the Definitive Agreement and an agreement to enter into a
period of negotiations according to the concepts presented herein, reserving full and final
Al2 -00621
8.7.13
rW,
discretion with City and Developer as to the final terms of the Definitive Agreement as required
by law. If for any reason City and Developer have not each executed a mutually acceptable
Definitive Agreement by the expiration of the Negotiation Period, and provided that the Parties
have not committed a material default hereunder, this Agreement shall automatically terminate
and shall be of no further force or effect.
During the period of exclusive negotiation, the City covenants and agrees to negotiate
exclusively with the Developer and shall not solicit another party for the Property or enter into
any agreement with any other party regarding the development of the Property. The City
acknowledges and agrees that but for this exclusivity, the Developer would not have entered into
this Agreement.
2. Term of Agreement. The term of this Agreement (the "Negotiation Period ") shall
be one (1) year after the Effective Date; provided, however, that the City Manager, on behalf of
the City, and Developer shall have the right to approve an extension of the Negotiation Period
for a cumulative maximum of three (3) months without the requirement of any official action by
the City Council or an amendment of this Agreement, if the City Manager and Developer
determine, in their sole and absolute discretion, that satisfactory progress is being made to
achieve the objectives and complete the tasks set forth herein but such extension is necessary to
finalize discussions or negotiations on mutually satisfactory terms.
3. Certain Parameters for Negotiation. The following nonexclusive list of items
related to the Proposal shall be the subject of negotiations during the Negotiation Period:
(a) Scope of development;
(b) Assessment of the physical and environmental condition of the site;
(c) site plan for the Proposal (depicting proposed building locations,
elevations, building square footages and uses, parking, access points, landscaped areas,
and pedestrian and vehicular circulation);
(d) Pro forma for the Proposal (addressing detailed development and
operational costs, anticipated rents, estimated profit and appropriate return
measurements);
(e) Financing plan for the Proposal (addressing the proposed methods of
construction and permanent financing, and amounts and sources of equity and debt
capital);
(f) Development schedule for the Proposal; and
(g) The fair market rents which Developer will pay for a leasehold interest in
the Property and terms and conditions of the conveyance of the leasehold interest to
Developer.
2 2
4. Submission of Documents for City Review and Comment. Within thirty (30)
days of the Effective Date of this Agreement, Developer shall submit the following information
to the City or its agents:
(a)
Site plan
(b)
A detailed pro forma;
(c)
A financing plan;
(d)
A scope of development;
(e)
A development schedule;
In the event that the City requests that changes be made, Developer within thirty
(30) days shall resubmit a revised site plan, uses, pro forma, financing plan, scope of
development, and/or development schedule to the City which shall respond to the City's
comments on the initial version of each submission. The City shall review and either approve
such submissions or return the submissions to Developer for further revision as soon as practical
but in any event within fifteen (15) days.
Developer acknowledges and agrees that design and architectural review by the
City and its consultants will be required at each stage of the development of the Proposal and
that sketches, plans, and ultimately working drawings, specifications and similar documents will
be required to be submitted for review and approval pursuant to the Definitive Agreement (the
"City's Design Review "). Developer further acknowledges and agrees that the City, acting not as
a Party but under its general police powers as a charter city and municipal corporation, may
conduct all applicable review and that building design, including, but not limited to, the selection
of building elevations, construction materials, parking layout and landscaping, which will not be
final until approved by the City. Developer further acknowledges and agrees that the City's
Design Review shall be rights exercisable by the City distinct and separate from those additional
rights which the City may exercise under its general police powers as a municipal corporation
and charter city.
5. Land Use & Environmental Requirements. The development of the Proposal
shall be subject to all rules, regulations, standards, and criteria required by law and as set forth in
the City's General Plan, Coastal Land Use Plan, zoning regulations, this Agreement, and the
Definitive Agreement. Developer shall be responsible for obtaining all approvals and
entitlements necessary for the Proposal. Developer shall be also be responsible for all costs
related to the Proposal incurred after the Effective Date, including, but not limited to, City staff
time, consultant fees, and other fees, associated in any way with obtaining necessary approvals
and entitlements for the Proposal including the environmental review associated with the
Proposal including, but not limited to, compliance with the California Environmental Quality Act
(collectively, "Costs "). Developer shall place funds on deposit with the City to pay for the Costs
pursuant to the City's fee schedule.
3 9
6. Physical Condition of the Site. City and Developer shall cooperate and exchange
such information as may be available to either of them regarding the physical condition of the
Site (or applicable portions thereof).
7. Hazardous Material Assessment. Within ten (10) days of the Effective Date, the
City shall provide the Developer without charge, copies of reports, studies, surveys and other
data and information on the physical condition of the Site. The Definitive Agreement may
address applicable clean-up issues, if any. In the event an environmental audit evidences a need
for clean-up of any portion of the Site, the City, by this Agreement, does not agree in any respect
to undertake or complete such clean -up. In the event that during the Negotiating Period the
Developer conducts or causes to be conducted any environmental audits and /or testing on any
portion of the Site, the Developer shall submit copies of any reports resulting from such tests or
studies to the City. Such environmental audits and /or testing shall be conducted at the sole cost
and expense of the Developer. Neither Party makes any representation or warranty as to the
accuracy or completeness of reports prepared by third parties and delivered to the other Party.
Developer shall indemnify, defend and hold harmless City from and against all claims, liabilities
or damages, and including expert witness fees and reasonable attorneys' fees and costs, arising
out of any such testing, inspection or investigatory activity on the Property by Developer. In
addition, following any such testing, inspection or investigatory activity, Developer shall return,
and repair if necessary, the Property to the condition it was in prior to the Developer's
investigatory activities.
8. Miscellaneous.
8.1 Notices. Any notices, requests or approvals given under this Agreement
from one Party to another may be personally delivered, transmitted by facsimile (FAX)
transmission, or deposit 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 FAX transmission or, if mailed, on the third day following the
date of deposit in the course of transmission with the United States Postal Service. Notices shall
be sent as follows: notices between the Parties shall be delivered in writing to the following
addresses:
To City: Dave Kiff
City Manager
100 Civic Center Drive
Newport Beach, CA 92660
With a copy to: Aaron Harp
City Attorney
100 Civic Center Drive
Newport Beach, CA 92660
To Developer: R.D. Olson Development
2955 Main Street, 3'd Floor
Irvine, CA 92614
4 10
With a copy to: Scott S. Pollard, Esq.
2804 Cliff Drive
Newport Beach, CA 92663
8.2 Termination. Each Party reserves the right to terminate this Agreement,
with or without cause, upon ten (10) days prior written notice to the other Party, thereby
withdrawing from such negotiations without any liability to the other Party, except that (i) each
Party shall be obligated to promptly return to the other Party all information and materials which
such Parry has received from the other Party pursuant to this Agreement and (ii) the rights and
obligations of the Parties set forth in Paragraph 8 shall remain in full force and effect. The
Parties, by their respective execution hereof, knowingly agree, notwithstanding anything herein
to the contrary, that, except with respect to the rights and obligations set forth in Section 8
hereof, 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 or her favor at the time of
executing the release, which if known by him or her must have
materially affected his or her settlement with the debtor."
8.3 Developer Documents. In the event of termination of this Agreement, for
any reason including, but not limited to, expiration, termination or breach of this Agreement,
Developer shall deliver to the City, within ten (10) business days, a copy of all surveys,
soils /environmental reports, site plans, pro formas, and other documents prepared by Developer
or third parties that are associated in any way with this Agreement. Notwithstanding the
foregoing, in no event, however, shall Developer be obligated to make available (or cause to be
made available) any proprietary or confidential documents including reports or studies that have
been superseded by subsequent reports or studies, or any of the following confidential and
proprietary materials: (1) information contained in financial analyses or projections (including
Developer's budgets, valuations, cost -basis information and capital account information);
(2) material that is subject to attomey- client privilege or that is attorney work product;
(3) appraisal reports or letters; (4) organizational, financial and other documents relating to
Developer or its affiliates (other than evidence of due authorization and organization, and the
financing plan required under this Agreement); or (5) material that Developer is legally required
not to disclose other than by reason of legal requirements voluntarily assumed by Developer after
the Effective Date. Developer makes no representation or warranty as to the accuracy or
completeness of reports prepared by third parties and delivered to the City.
8.4 Cooperation. The Parties agree to cooperate with each other in promptly
supplying information and analyses relating to the Proposal.
5 11
8.5 Assi ng ment. Neither Party shall have the right to assign any of their rights
or obligations set forth in this Agreement without the written consent of the other Party, which
consent may be withheld in such other Party's sole and absolute discretion. Any assignment
must be in writing and executed by both assignor and assignee in order to be enforceable and
after the effective date of the assignment the assignor shall be released and discharged from any
liability or responsibility hereunder. Notwithstanding the foregoing, following notice to the City,
Developer may assign its interest under this Agreement to an entity controlled by Developer or
Robert D. Olson or which has Developer Robert D. Olson, or an entity controlled by Developer
or Robert D. Olson as a managing member or general partner.
8.6 Entire Agreement, Amendments, and Waivers. This Agreement sets forth
the entire agreement between the Parties with respect to the subject matter set forth herein and
supersedes all prior discussions and negotiations between the Parties with respect thereto. No
amendment to this Agreement shall be effective unless set forth in a writing signed by an
authorized signator of each Party. No waiver of any provision of this Agreement shall be
enforceable against a Party unless it is set forth in a writing executed by such Party.
8.7 Administrative Costs and Expenses; Developer Deposit. Developer shall
be responsible for all costs and expenses incurred by the City related to this Agreement
including, but not limited to, costs of City staff time, consultant fees and attorney fees. Prior to
City's execution of this Agreement, Developer shall deposit with City an initial sum of Twenty-
Five Thousand Dollars ($25,000.00) (the, "Deposit Amount ") that the City will use to reimburse
itself for the costs related to the preparation and implementation of this Agreement. Said funds
shall be maintained in a separate account by the City ( "Deposit Account "). Within ten (10)
business days of a request by the City, Developer shall deposit additional sums to replenish the
Deposit Account so that the amount of funds on deposit with the City is maintained at Twenty -
Five Thousand Dollars ($25,000.00). From and after the Effective Date, the Deposit Account
may be used by the City to pay the City's costs including, without limitation, City staff time,
consultant fees and attorney fees required in connection with the drafting, negotiation and
execution of this Agreement, the Definitive Agreement, or termination of this Agreement ( "City
Transaction Expenses ") provided that City agrees that City Transaction Expenses to be charged
Developer shall not exceed Fifty Thousand Dollars ($50,000.00) prior to execution of the
Definitive Agreement.
8.8 Assurances to Act in Good Faith. The City and Developer each agree to
take all actions contemplated by this Agreement, including timely depositing funds as required
herein, and shall use their respective best efforts to negotiate a Definitive Agreement in
accordance with the provisions of this Agreement. In the event that one Party fails to exercise
good faith in the negotiations contemplated by this Agreement, the other Party may be entitled to
recover those costs identified as Costs in Paragraph 5 and the Deposit Amount defined in
Paragraph 8.7 from the Party that failed to exercise good faith.
8.8 Attorney's Fees. In the event of any litigation between the Parties arising
out of or concerning this Agreement, the prevailing Party shall not be entitled to recover from the
other Party its actual and reasonable attorney's fees.
6 12
8.9 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.
8.10 Governing Law. This Agreement shall be governed by the laws of the
State of California. 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.
8.11 Purpose of Agreement. It is expressly understood and agreed by the
parties that this is an Agreement regarding the conduct of exclusive good faith contract
negotiations only and does not convey any interest in the Site whatsoever. This Agreement is not
intended to constitute a binding agreement by the City to lease the Property or commit the City
to develop all or any portion of Site, to financially participate with the Developer in the
development of the Proposal, nor is it intended to constitute a binding agreement to enter into a
Definitive Agreement or any other contract. No Party shall be legally bound to consummate
construction of the Proposal unless and until a Definitive Agreement or other contract has been
executed and delivered by the Parties. Notwithstanding any other provision hereof, neither the
Developer nor the City shall be under any obligation to approve or execute any Definitive
Agreement during or upon conclusion of the Negotiating Period. Any Party may refuse to
approve and execute any Definitive Agreement at its sole and absolute discretion, with or
without cause. In the event that a Definitive Agreement is approved and executed by the Parties,
this Agreement shall be superseded by such Definitive Agreement. It is expressly understood
that notwithstanding this Agreement, the Proposal may be modified or not implemented at all
depending on a number of factors including but not limited to compliance with the California
Environmental Quality Act.
8.12 No Commissions. The City shall not be liable for any real estate
commission or any broker's fees which may arise in relation to the Proposal. The City represents
that it has engaged no broker, agent, or finder in connection with this transaction, and the
Developer agrees to hold the City harmless from any claim by any broker, agent, or finder
retained by the Developer.
Agreement.
8.13 Time of Essence. Time is of the essence of each provision set forth in this
[SIGNATURES ON FOLLOWING PAGE]
7
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement to be effective as of
the date first set forth hereinabove.
APPROVED AS TO FORM:
Aaron 4C. Harp, City Att mey l l�
City of Newport Beach
ATTEST:
Leilani Brown, City Clerk
CITY OF NEWPORT BEACH,
A Municipal Corporation
By:
Keith D. Curry, Mayor
City of Newport Beach
DEVELOPER:
Its:
Its:
14
EXHIBIT A
DESCRIPTION OF THE SITE
1 �
1
1 ♦
1 ♦
1
1 ♦
I
Former City Hall Site
I
3300 Newport Boulevard i
1 475 32 "d Street
1
1 I
I I
I �l
15
EXHIBIT B
PROPOSAL DESCRIPTION
The proposal consists of the development and operation of an upscale boutique hotel
and spa with approximately 130 rooms. The proposal includes meeting rooms,
accessory retail spaces, a restaurant, lobby bar, rooftop bar, guest pool and recreational
areas, and all required appurtenant facilities including, but not limited to on -site parking,
landscaping, utilities, and adjoining public improvements. The proposal also includes
public open spaces consisting of pedestrian plazas, landscape areas, and other
amenities proposed to be located along Newport Boulevard and 32 "d Street. A
conceptual illustration of the proposal is shown below.
Conceptual Site Plan
1-0