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HomeMy WebLinkAboutItem 09 - First Amendment to THRIVE DDA & Consent to Assignment of Leases & Rents Authorization Community Development Agency santa-ana.org/cd Item # 9 City of Santa Ana 20 Civic Center Plaza, Santa Ana, CA 92701 Staff Report June 7, 2022 TOPIC: First Amendment to THRIVE DDA and Consent to Assignment of Leases and Rents Authorization AGENDA TITLE: Approve First Amendment to the Disposition and Development Agreement with THRIVE Santa Ana, Inc. for the Development of a Microfarm at 1901 W Walnut Avenue and Authorize the City Manager to execute a Consent to Assignment of Leases and Rents Agreement RECOMMENDED ACTION 1. Authorize the City Manager to execute First Amendment to Disposition and Development Agreement (agreement no. A-2020-044) with THRIVE, Santa Ana, Inc. to extend the term for one year, allow right of entry for soil remediation, update the schedule of performance, and amend the ground lease, subject to non-substantive changes approved by the City Manager and City Attorney. 2. Authorize the City Manager to execute a Consent to Assignment of Leases and Rents Agreement with THRIVE, Santa Ana, Inc., subject to non-substantive changes approved by the City Manager and City Attorney. DISCUSSION On March 3, 2020 the City Council approved Disposition and Development Agreement (DDA) with THRIVE Santa Ana, Inc. (THRIVE) for the development of a microfarm at 1901 West Walnut Street, APN# 007-332-08, a 0.38-acre City-owned property. The DDA was designed to achieve the development of the site in a coordinated and comprehensive manner. The terms of the DDA stipulate that THRIVE, as the developer, must obtain entitlements, construction financing, permanent financing, evidence of equity, and obtain building permits, prior the City executing a Ground Lease attached to the DDA. Once the terms of the DDA are met, the City Manager is authorized to execute the Ground Lease for a negotiated 99-year term, at a lease rate of $1 per month. The DDA allowed for a one-year administrative extension, which was requested by THRIVE and approved by the City. This extends the DDA through June 18, 2022. THRIVE First Amendment to THRIVE DDA and Consent to Assignment of Leases and Rents Authorization June 7, 2022 Page 2 2 7 2 3 is requesting additional time to meet the required milestones. THRIVE is also requesting right of entry during the DDA period to commence soil remediation that is now necessary for the site due to a change in the plans from utilizing raised planter beds to farming in the ground. To accommodate these requests, a First Amendment to the DDA (Exhibit 1) is required. Additionally, in an effort for THRIVE to secure $100,000 of financing, THRIVE is requesting that the City authorize a Consent to Assignment of Leases and Rents (Exhibit 2). The Ground Lease stipulates that THRIVE may secure funding for this project by assigning THRIVE’s interest under the lease. This agreement identifies Clearinghouse Community Development Financial Institution (CCDFI) as an assignee as a lender to THRIVE. A summary of the proposed amendments to the DDA and Ground Lease, and terms of the Consent to Assignment of Leases and Rents are outlined in the table below: AGREEMENT SUMMARY OF KEY TERMS DDA Amendments One-year extension (through June 18, 2023). Lease must be executed by December 15, 2022. Allows right of entry for soil remediation prior to execution of the lease. Updated schedule of performance to align with the one-year extension. Ground Lease Amendments (Part of DDA) Stipulates the purchase option is only available to THRIVE, Santa Ana, Inc, and does not allow a third-party lease assignee to purchase the property. Consent to Assignment of Leases and Rents The City consents to THRIVE’s assignment of the Ground Lease to lender Clearinghouse Community Development Financial Institution (CCDFI) to facilitate project financing, as allowable by the DDA and Ground Lease. The City will not terminate the Ground Lease with THRIVE without allowing CCDFI the opportunity to cure defaults. To be executed along with Ground Lease. Project Description THRIVE proposes to develop a microfarm to grow and distribute fresh produce and ornamentals, and host weekly open-air markets and community activities that promote health. The site would include a work area, produce pick-up table, and lunch tables. In First Amendment to THRIVE DDA and Consent to Assignment of Leases and Rents Authorization June 7, 2022 Page 3 2 7 2 3 partnership with a local food cooperative, items would be sold through a community- supported production model, wherein members pay a monthly subscription to receive a box of produce at their home, or to be available for pickup. An on-site parking lot would host the open-air markets. THRIVE Fiscal Update THRIVE reports that the estimated costs for project completion are $544,496. Of this amount, THRIVE reports having secured $294,496 of funding for construction, will be able to secure $100,000 with the approval of the Consent to Assignment of Lease and Terms, and is in the process of identifying and securing the additional $150,000 needed. THRIVE’s expenses for the project to date are $68,687, inclusive of surveys, environmental report, permit fees, architectural and engineering costs, and loan fees. Project Update The project site has been vacant for over 15 years. It was acquired by the City in 2007, and the former Orange County Rescue Mission structure was demolished in 2011. The site was rezoned in 2019 to C2 (General Commercial), and the proposed microfarm is a permitted use. The construction plans for the microfarm were formally submitted to the Planning and Building Agency (PBA) for review on March 30, 2022 and corrections were provided to THRIVE on May 6, 2022. PBA is now awaiting resubmittal from THRIVE. In addition, THRIVE has provided street improvements, grading, and water quality management plans to the Public Works Agency which are currently under review. First Amendment to THRIVE DDA and Consent to Assignment of Leases and Rents Authorization June 7, 2022 Page 4 2 7 2 3 Background THRIVE is a community land trust dedicated to the stewardship of land for the permanent benefit of local residents. THRIVE was established in 2017 by local nonprofit leaders and residents to acquire land in Santa Ana for the purposes of providing community benefits, such as affordable housing, parks, urban microfarms, and marketplaces for small businesses. Since 2016, nonprofit groups such as Santa Ana Building Healthy Communities, who are now part of the THRIVE Board of Directors, have conducted community engagement to educate local residents and inform them about the benefits of community land trusts which include promotion of health and wellness, supporting long-term housing affordability, and building generational wealth. THRIVE conducted community outreach for the site, inclusive of over 20 events and surveys of the surrounding area. Based on the outreach conducted, THRIVE determined that a microfarm would be a community benefit for the area. This project would be the first acquisition and development project by THRIVE. A Community Benefits Report prepared by THRIVE describes the positive impacts of a microfarm to the community. These benefits include the following: 1) making organic produce and other healthy options more available in the local neighborhood; 2) implementing a membership-based model to provide monthly baskets of vegetables, fruit and other garden products to members at a low cost; 3) creating worker cooperative jobs; and 4) encouraging participation from local residents which can contribute to the local neighborhood economy, civic engagement, and prevention of costly health conditions including obesity and mental health illnesses. Surplus Land Government Code Section 54234 regarding surplus land stipulates that if a local agency, as of September 30, 2019, has entered into an exclusive negotiation agreement (ENA) to dispose of property or legally binding agreement, the new provisions effective January 1, 2020 do not apply, provided that the disposition is completed not later than December 31, 2022. As the property is under an ENA since September 17, 2019, the new provisions do not apply and this property is not subject to the Surplus Lands Act so long as the Ground Lease is executed prior to December 31, 2022. To ensure compliance with the requirements, the Ground Lease must be executed by December 15, 2022, to allow the City sufficient time for processing. FISCAL IMPACT Upon completion of milestones in the DDA by THRIVE, the City will execute a ground lease with THRIVE. The City will receive $1 per month from THRIVE for the term of the lease. First Amendment to THRIVE DDA and Consent to Assignment of Leases and Rents Authorization June 7, 2022 Page 5 2 7 2 3 EXHIBIT(S) 1. Amendment to Disposition and Development Agreement and Lease 2. Consent to Assignment of Leases and Rents Submitted By: Steven Mendoza, Assistant City Manager Approved By: Kristine Ridge, City Manager EXHIBIT 1 RECORDED AT REQUEST OF CLERK, CITY COUNCIL CITY OF SANTA ANA WHEN RECORDED RETURN TO: City of Santa Ana 20 Civic Center Plaza (M-___) P.O. Box 1988 Attention: City Clerk Exempt from Filing Fees Gov. Code Sections 27383, 6103 FIRST AMENDMENT TO DISPOSITION AND DEVELOPMENT AGREEMENT by and between the City of Santa Ana, a California charter city in the County of Orange of the State of California, and THRIVE Santa Ana, Inc., a California public benefit corporation. [Dated as of June 7, 2022, for reference purposes only] EXHIBIT 1 1 FIRST AMENDMENT TO DISPOSITION AND DEVELOPMENT AGREEMENT FOR COMMUNITY MICRO-FARM PROJECT AT 1901 WEST WALNUT STREET, SANTA ANA THIS FIRST AMENDMENT to the above-referenced Disposition and Development Agreement is entered into on June 7, 2022, by and between the THRIVE Santa Ana, Inc., a 501(c)(3) tax exempt California public benefit corporation (“Developer”), and the City of Santa Ana, a charter city and municipal corporation organized and existing under the Constitution and laws of the State of California (“City”) (collectively, the “Parties” and each a “Party”). RECITALS A. The parties entered into Disposition and Development Agreement No. A-2020-044, dated March 3, 2020, but recorded and effective June 18, 2020 (“DDA”), by which Developer proposed to develop a community micro-farm (“Project”) on the City property located at 1901 West Walnut Street, Santa Ana, California 92703 (APN 007-332-08) (“Property”). B. On June 17, 2021, the City approved Developer’s request for a one (1) year extension of the DDA Project Completion Date to June 18, 2022. C. In accordance with the terms and conditions of the DDA, the Parties now wish to amend the DDA to: extend the Project Completion Date; expand the Right of Entry to allow Developer to complete soil remediation on the Property; update the Performance Schedule; and, amend certain terms of the anticipated Lease Agreement for the Project. NOW THEREFORE, in consideration of the mutual and respective promises, and subject to the terms and conditions of the DDA, except as hereinafter modified, the parties agree to the following: 1. Section 2.1.45, “Performance Schedule,” shall be amended to replace the schedule for the performance of certain actions by the City or the Developer, attached to the DDA as Exhibit C, with the “First Amended Performance Schedule” attached hereto as Exhibit C- 1 and incorporated herein by reference. 2. Section 2.1.49, “Project Completion Date,” shall be amended to mean the earlier of: (i) the date of issuance of a Certificate of Completion for the Project; or, (ii) June 18, 2023. Notwithstanding this Project Completion Date, which relates to the completion of construction of the Project, the Lease Agreement must be executed between the Parties by December 15, 2022. 3. Section 3.3, Developer Due Diligence Investigations, shall be amended to expand the scope of the Due Diligence Investigations defined in Section 2.1.23, to include allowance for Developer to enter the Property to complete Soil Remediation, at the sole cost and expense of the Developer. The expanded scope of the Due Diligence Investigations to include Soil Remediation shall apply to all subsections within Section 3.3, such that Developer shall be subject to all limitations and requirements that applied to its Due Diligence Investigations, when conducting Soil Remediation on the Property. However, EXHIBIT 1 2 the Limitations detailed in section 3.3.2 shall not apply to the Soil Remediation. Otherwise, while conducting Soil Remediation on the Property, Developer shall be required to provide Indemnity and Insurance, deliver a Completion Notice to the City, accept the Property “As- Is,” and comply with all other terms and conditions found in Sections 3.3.1 through 3.3.6. 4. Exhibit E, Ground Lease Section 2.7, Option to Purchase, shall be amended to prohibit the exercise of the Option to Purchase by any party other than the original Tenant, THRIVE Santa Ana, Inc. Specifically, if any bank or other third party acquires the leasehold rights from Tenant through foreclosure, assignment, or any other means, this Option to Purchase shall be void and removed from the Ground Lease. 5. Except as modified by this First Amendment, all terms and conditions of the DDA shall remain in full force and effect. {signatures on following page} EXHIBIT 1 3 IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to the DDA on the date and year first written above. ATTEST: CITY OF SANTA ANA ________________________ _________________________ DAISY GOMEZ KRISTINE RIDGE Clerk of the Council City Manager APPROVED AS TO FORM: SONIA R. CARVALHO City Attorney ______________________________ Ryan O. Hodge Assistant City Attorney RECOMMENDED FOR APPROVAL: DEVELOPER __________________________ By: __________________________ STEVEN A. MENDOZA ANA URZUA Executive Director President, THRIVE Santa Ana, Inc. Community Development Agency Dated: By: __________________________ CESAR COVARRUBIAS Treasurer, THRIVE Santa Ana, Inc. Dated: Ana S Urzua (May 26, 2022 14:18 PDT) Ana S Urzua May 26, 2022 Cesar Covarrubias (May 26, 2022 15:14 PDT) Cesar Covarrubias May 26, 2022 EXHIBIT 1 4 EXHIBIT C-1 FIRST AMENDED PERFORMANCE SCHEDULE A. Days shall be calendar days, unless otherwise specified. B. Except for the execution of the Lease and prerequisites for the execution of the Lease, the City Manager is authorized by the City to make minor changes to the schedule prior to the Project Completion Date resulting in an aggregate extension of the Project Completion Date of ninety (90) calendar days or less. C. In the event of any conflict between this schedule and the DDA, the terms and provisions of the DDA shall control. E. All defined terms indicated by initial capitalization used in this schedule shall have the meanings ascribed to the same terms in the DDA. Action Date Action to be Completed By 1. Effective Date of Agreement 6/18/2020 3. Submission of updated Financial Pro Forma from Developer to City 3/15/2022 4. Delivery of Due Diligence Completion Notice from Developer to City COMPLETED 7/2/2018 5. Submittal of building permit application(s) from Developer to City COMPLETED 3/30/2022 6. Issuance of building permit(s) by City 12/15/2022 7. Document Construction Financing, Permanent Financing, and Evidence of Equity 12/15/2022 8. Execution of Lease 12/15/2022 9. Groundbreaking ceremony 12/15/2022 10. Commencement of construction and installation of Project 12/15/2022 11. Submission of administrative request for extension of construction deadline, if necessary, from Developer to City 6/18/2023 12. Completion of construction and installation of Project 6/18/2023 13. Submission of Certificate of Completion from Developer to City 6/18/2023 14. Issuance of Certificate of Occupancy by City 6/18/2023 15. Grand opening ceremony 6/18/2023 THRIVE DDA Amendment Final Audit Report 2022-05-26 Created:2022-05-26 By:Sylvia Vazquez (svazquez@santa-ana.org) Status:Signed Transaction ID:CBJCHBCAABAAaAzIuqbWDB_sjfaRtQOxVsjKj25iUmbE "THRIVE DDA Amendment" History Document created by Sylvia Vazquez (svazquez@santa-ana.org) 2022-05-26 - 8:46:42 PM GMT- IP address: 98.153.69.210 Document emailed to Ana S Urzua (ana.urzua@cooperacionsantaana.org) for signature 2022-05-26 - 8:47:58 PM GMT Email viewed by Ana S Urzua (ana.urzua@cooperacionsantaana.org) 2022-05-26 - 9:13:08 PM GMT- IP address: 76.170.12.220 Document e-signed by Ana S Urzua (ana.urzua@cooperacionsantaana.org) Signature Date: 2022-05-26 - 9:18:39 PM GMT - Time Source: server- IP address: 76.170.12.220 Document emailed to Cesar Covarrubias (cesarc@kennedycommission.org) for signature 2022-05-26 - 9:18:41 PM GMT Email viewed by Cesar Covarrubias (cesarc@kennedycommission.org) 2022-05-26 - 10:07:41 PM GMT- IP address: 66.249.84.89 Document e-signed by Cesar Covarrubias (cesarc@kennedycommission.org) Signature Date: 2022-05-26 - 10:14:22 PM GMT - Time Source: server- IP address: 23.240.72.248 Document emailed to Ryan Hodge (rhodge@santa-ana.org) for signature 2022-05-26 - 10:14:24 PM GMT Email viewed by Ryan Hodge (rhodge@santa-ana.org) 2022-05-26 - 10:16:09 PM GMT- IP address: 98.153.69.210 Document e-signed by Ryan Hodge (rhodge@santa-ana.org) Signature Date: 2022-05-26 - 10:18:37 PM GMT - Time Source: server- IP address: 98.153.69.210 Agreement completed. 2022-05-26 - 10:18:37 PM GMT EXHIBIT 2 CONSENT TO ASSIGNMENT OF LEASES AND RENTS THIS CONSENT TO ASSIGNMENT OF LEASES AND RENTS (this “Consent”) is made as of the ______ day of _____________ 2020, by and among THE CITY OF SANTA ANA, California (the “Lessor”), and THRIVE Santa Ana a California non-profit corporation (“Lessee”), for the benefit of CLEARINGHOUSE COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION, a California corporation (“Lender”). RECITALS A. Lessor and Lessee are parties to that certain Ground Lease Agreement dated as of (the “Ground Lease”), for the lease of real property located at 1901 W. Walnut Street, Santa Ana, California (the Property). B. Lessee and Lender have entered into that certain [Loan and Security Agreement] dated as of (the “Loan Agreement”), pursuant to which Lessee has agreed to borrow, and Lender has agreed to lend, $100,000 (the “Loan”) on the terms and conditions set forth in the Loan Agreement. C. As a condition to Lender’s agreement to make the Loan, Lessee has agreed to assign to Lender all of its rights in and to the Ground Lease, and all of its rights in and to the subleases and rents under the Ground Lease pursuant to that certain Assignment of Rents and Leases of even date with the Loan Agreement (the “Assignment of Rents and Leases”). D. The Ground Lease provides, in Section 10, the conditions underwhich the Lessee may Transfer (as defined in the Ground Lease) its interest in the Ground Lease both with and without the prior written consent of Lessor. E. In addition, Lessee and Lender have requested that Lessor not terminate the Ground Lease without affording Lender the opportunity to cure, and to attorn to Lender as the lessee under the Ground Lease if Lessee assigns its interest in the Ground Lease to Lender. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Consent to Assignment of Rents and Leases. Lessor hereby consents to the Assignment of Rents and Leases, and to the assignment of the Ground Lease to Lender on the terms and conditions as set forth in the Assignment of Rents and Leases. 2 2. Right to Cure. If Lessor shall give any written notice of default under the Ground Lease (hereafter “Default Notice”) to Lessee, Lessor shall concurrently send a copy of each such Default Notice to Lender at Clearinghouse Community Development Financial Institution, Attn: Loan Servicing 23861 El Toro Road Suite 401, Lake Forest CA 92630, in accordance with the notice requirements in the Ground Lease. If a monetary default of Lessee shall occur under any provision of the Ground Lease, then Lessor shall take no action with respect to such default if Lender remedies such default not later than thirty (30) days after Lessor’s giving of a Default Notice relating to such default to Lender. If a non-monetary default of Lessee shall occur under any provision of the Ground Lease, then Lessor shall take no action with respect to such default if Lender remedies such default, or commences and diligently prosecutes to completion a remedy of such default, not later than thirty (30) days after Lessor’s giving of a Default Notice relating to such default to Lender. If a default by Lessee under the Ground Lease occurs, then Lender shall, without prejudice to its rights against Lessee, have the right (but not the obligation) to cure such default within the applicable grace periods provided for in this Section 2, and Lessor shall accept such performance on the part of Lessee Lender as though the same had been performed by Lessee. 3. Attornment. If the interests of Lessee shall be transferred to and owned by Lender, its nominee or assignee or purchaser, by reason of foreclosure or other proceedings brought in lieu of or pursuant to a foreclosure, Lender agrees that it shall be bound to Lessor under all the terms, covenants and conditions of the Ground Lease for the balance of the term thereof remaining, and any extensions or renewals thereof, which may be effected in accordance with any option therefor in the Ground Lease, with the same force and effect as if Lender, its nominee, assignee or such purchaser, as applicable, were the lessee under the Lease, and Lessor shall attorn to Lender, or its nominee, assignee or purchaser, as the case may be, as its lessee, said attornment to be effective immediately upon receipt of written notice from Lender, or its nominee, assignee or purchaser, as the case may be, that such party has succeeded to the interest of Lessee under the Lease after which Lender shall be obligated to pay rent to Lessor, or its nominee, assignee or purchaser, as the case may be and to perform all of Lessee’s other obligations under the Ground Lease. The foregoing attornment provisions shall be self-operative and no further instruments shall be required to effect such attornment; however, within five (5) days after the request of Lender, or its nominee, assignee or purchaser, as the case may be, Lessor shall execute, acknowledge and deliver the appropriate document submitted to Lessor confirming such attornment. 4. Amendment. There shall be no modifications or amendments of this Consent except in writing signed by the party to be bound. 5. Miscellaneous. 3 5.1 Counterparts. This Consent may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute and be construed as one and the same instrument. 5.2 Remedies Cumulative; Joint and Several. All remedies which Lender may have against Lessee provided herein, if any, are cumulative and shall be in addition to any and all other rights and remedies provided by law and by other agreements between Lessor and Lessee or others. 5.3 Successor and Assigns. This Consent binds and inures to the benefit of the parties and their respective successors, assigns, heirs, administrators, executors, agents and representatives, including, but not limited to, a purchaser of the Property at a foreclosure sale or otherwise. IN WITNESS WHEREOF, the parties have executed this Consent to Assignment of Leases and Rents as of the date first above written. LESSOR: CITY OF SANTA ANA, CALIFORNIA BY: Name: Title: LESSEE: THRIVE, Santa Ana, a California nonprofit corporation By: Name: Title: