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HomeMy WebLinkAbout25J - AGMT - NEGOTIATING AGMT FOR YMCA REUSE0 CITY COUNCIL MEETING DATE: MARCH 18, 2014 TITLE: EXCLUSIVE NEGOTIATING AGREEMENT FOR RENOVATION AND REUSE OF THE YMCA PROPERTY tj CITY MANA R CLERK OF COUNCIL USE ONLY: APPROVED ❑ As Recommended ❑ As Amended ❑ Ordinance on 1" Reading ❑ Ordinance on 2nd Reading ❑ Implementing Resolution ❑ Set Public Hearing For CONTINUED TO FILE NUMBER Authorize the City Manager and City Attorney to negotiate an Exclusive Negotiation Agreement on behalf of the City of Santa Ana with St. Joseph Health and Taller San Jose for the reuse of the YMCA building, and authorize the City Manager and City Attorney to negotiate, finalize and execute a Reimbursement Agreement with the parties in substantially the same form attached hereto, subject to non - substantive changes approved by the City Manager and City Attorney. DISCUSSION The YMCA building, located 205 West Civic Center Drive, was purchased by the City in 1992. The building has been vacant since that time and is in serious disrepair due to age and vandalism. Over the years, the City has, on numerous occasions, considered proposals to renovate this historic building but none were financially feasible. In 2013, with the local economy improving, it was timely to again seek proposals for the site. With Council approval, a Request for Qualifications (RFQ) was released in August 2013 and potential reuses identified by the Development and Transportation City Council Committee (D &TC) which included: retail, office, hotel, residential and entertainment uses. As part of the RFQ, staff originally envisioned a two -step process for selecting a qualified developer. Once the best qualified developers were identified through the RFQ, a separate Request for Proposals (RFP) was anticipated, which would result in the recommended team and their development proposal being considered by the City Council. The depth of submissions received as part of the RFQ process was substantial and as a result, staff advised the D &TC that it was unnecessary to issue an extensive RFP; rather staff would interview the top firms and ask them for additional information regarding financing the reuse and renovation as well as conceptual plans for the YMCA building. Therefore, all proposals were to be evaluated by a city- created selection committee which included representatives from the Community Development and Planning & Building Agencies, and the City's financial consultant, 25J -1 Exclusive Negotiations for YMCA March 18, 2014 Page 2 Keyser Marston Associates. Criteria included experience of the firm and key personnel, financial capacity, development schedule, project concept and completeness of proposal. RFQ Submittal Overview The following firms submitted an RFQ and conceptual plans: • St. Joseph Health /Taller San Jose - medical fitness center • Abode Communities — single room occupancy (SRO) units or low income senior /special need housing • Caribou Industries — new boutique hotel on adjacent parcel including consolidation of YMCA as reception area, gym and health center and multipurpose event center • Vineyard Community Church — homeless support center and emergency shelter • Orange County Coalition - mentoring university, concert hall and ball room • Affirmed Housing Group /Path Ventures — one -stop homeless service center including supportive housing • Irvine Housing Opportunities /LA Housing Partnership — affordable housing for artists, seniors and single veterans Following an extensive review of all of the submittals, the selection committee presented the three top developers (in concept only) to the DUC in December, 2013. The finalists represented a range of development opportunities including a medical facility, an affordable housing project and a boutique hotel. As part of this process, it was agreed that once interviews were conducted, the selection committee would recommend to the City Council the developer with whom to enter into an Exclusive Right to Negotiate. Following the DUC meeting, the selection committee set up interviews with the top three ranking firms, Caribou Industries, Inc., St. Joseph Health /Taller San Jose, and Abode Communities. Subsequent to the DUC meeting, Abode Communities withdrew their application. The remaining two developers were interviewed by the selection committee on February 12, 2014. Exhibit 1 details Caribou's and St. Joseph /Taller San Jose's RFQ summaries and financial overviews. Both proposals represented development teams that have both the experience and vision to undertake the reuse and renovation of the YMCA building; however, the selection committee recommended that the St. Joseph /Taller San Jose team be offered the Exclusive Right to Negotiate for the following reasons: 1. The City Council has a stated objective to implement a strong economic development program in the Downtown, in combination with the goals of the Civic /Professional District land use designation, which provides a linkage between Civic Center and related professional office and non - profit organizations. Both firms have a long history of working 25J -2 Exclusive Negotiations for YMCA March 18, 2014 Page 3 in partnership with many Santa Ana organizations that are instrumental in helping Santa Ana residents. 2. The St. Joseph/Taller San Jose team will provide a much needed fitness center /community venue for the underserved population living near the downtown as well multiple wellness programs for surrounding employers. This is consistent with Santa Ana's proposed 5 -Year Strategic Plan, which includes numerous strategies addressing community health and wellness, as well as the need for recreational opportunities and youth development. 3. The St Joseph /Taller San Jose team proposal to share operating revenues and expenses lends strength to their financial proposal, and helps ensure that they share in each other's strengths while assisting each other to balance any organizational weaknesses. 4. The St. Joseph /Taller San Jose team is proposing to complete the development within a three -year timeframe, which is two years shorter than the one proposed by Caribou Industries. While the proposed timeline includes aggressive fundraising, the fact that the proposers would be the users of the building is definitely more secure venture than a conceptual hotel development. Based on both their written proposal and subsequent interviews, the selection committee recommends that the City Council authorize the City Manager to negotiate an Exclusive Right to Negotiate Agreement with the St. Joseph Health Care /Taller San Jose team. As part of this negotiation, it is anticipated that a separate Reimbursement Agreement (Exhibit 2) will be negotiated to address project related and legal expenses incurred by the City to advance the project. FISCAL IMPACT There is no fiscal impact associated with this action. Scott Kutner District Manager Community Development Agency SK/MU -GL /kg Exhibit: 1. RFQ Summaries and Project Financials 2. Reimbursement Agreement 25J -3 25J -4 EXHIBIT 7 RFQ SUMMARIES AND PROJECT FINANCIALS FOR TOP TWO PROPOSALS FOR YMCA REUSE CARIBOU INDUSTRIES RFQ SUMMARY Caribou Industries, Inc. (Caribou) owns approximately 4 million square feet of commercial property in Santa Ana including the development site for the proposed One Broadway Plaza project. Other significant projects include the Masonic Temple and Original Mike's restaurant. Caribou also completed the design /build of the Orange County High School of the Arts and the OC Pavilion. Caribou is proposing to consolidate three parcels downtown and build a two -phase hotel and conference facility. They have a long history of development in Santa Ana and have demonstrated an ability to renovate older, challenging buildings. Phase I entails modernization of the YMCA including upgrading the mechanical, electrical and plumbing systems, seismic compliance, Air Quality Management District (AQMD) and asbestos abatement compliance. Phase II entails building out the main lobby in the YMCA as an historic arts display /reception area and hotel front desk. The basement would be restored to a full service gym, including a pool for both hotel guests and public membership use. The basketball court would be converted into a 300 person multi- purpose event center. Additionally, Caribou is proposing to build a 12 -story west wing hotel tower consisting of 133 rooms, 8 penthouse suites, 1 presidential suite, and a combination of 20 -40 hotel room suites on the second and third floor of the YMCA. Additional space would be reserved for conference rooms in a variety of sizes. Pursuant to Caribou's proposal, the new conference facility would serve as a focal point for the community and give local businesses the ability to hold presentations, mini conventions, host live theater and serve as a fund raising venue. Caribou is proposing to complete the proposed project within approximately 60 months. However, they are not in negotiations with a hotel operator at this time, nor have they undertaken a formal market study to assess the potential for hotel development on the site. Caribou indicates that the ultimate construction of the hotel and choice of an operator type will be based on the tenant leasing One Broadway Plaza, and their potential hotel requirements. If Caribou is unsuccessful in attracting a tenant to the proposed One Broadway Plaza project during this period, they may decide to build more of a residential suite /business hotel in an effort to attract government users and existing local businesses. PROJECT FINANCIAL OVERVIEW Caribou proposes to renovate the existing structure, and build an additional hotel building on the site. As proposed, the project would be completed in two phases, with Phase I consisting of the renovation of the YMCA building and Phase II consisting of the construction of the hotel tower. Caribou has not yet decided what type of hotel will be Page 1 of 4 25J -5 developed, but they anticipate it to include between 162 and 182 rooms. Caribou estimates the project costs at approximately $38 million. Caribou indicated that the initial $10 to $13 million will be self- financed in order to perform the asbestos abatement, mold abatement and seismic retrofitting. Prospective lenders for the construction loan are Farmers and Merchant Bank or US Bank. Caribou is currently in negotiations to obtain a tenant for the proposed One Broadway Plaza project. Caribou indicated that there is the possibility that this tenant will be interested in pre - leasing a majority of the proposed hotel rooms. If this occurs, Caribou may develop a first class hotel — along the lines of the W Hotel brand. Caribou anticipates that the average daily rate (ADR) of this type of first class hotel would be approximately $170 - $240. If the tenant for the proposed One Broadway Plaza project is not secured, or is not interested in pre - leasing the proposed hotel, Caribou anticipates that it will develop the project as a more budget - friendly hotel. Caribou projects the ADR of this type of hotel to be in the range of approximately $85. Caribou anticipates that the target market of this type of hotel would be visitors to the courthouse and Civic Center. Based on Caribou's proposal, it is expected the project will be completed 60 months after the execution of the Disposition and Development Agreement (DDA). Caribou proposes to purchase the Site from the City for $1 million, with the payment due at the earlier of the issuance of a certificate of occupancy for the project or 60 months following DDA execution. Caribou would prefer to purchase the site outright, but might be amenable into entering a long -term ground lease. At the interview, Caribou indicated that if the seismic retrofit and all of the exterior and interior construction of the YMCA building is not reasonably complete within the identified timeframe, the YMCA building will be returned to the City. In addition, if the construction lender provides approval, Caribou stated that the City will be allowed to keep the $1 million purchase price as liquidated damages. Caribou acknowledges that without the development of the One Broadway Plaza project, and the attraction of a tenant that wishes to prelease a significant number of first class hotel rooms, it is unlikely that a hotel concept can be supported in the vicinity. As such, a hotel project is speculative in nature, and there is significant risk that the project may not be able to obtain financing needed for renovations. Furthermore, the site would be encumbered over a lengthy five -year timeline, at the end of which the renovation may not have been completed. Page 2 of 4 25J -6 ST. JOSEPH HEALTH CENTER /TALLER SAN JOSE RFQ SUMMARY St. Joseph Health in partnership with Taller San Jose is proposing a neighborhood fitness and wellness center at the YMCA building. The wellness center will focus on promoting a healthier community by integrating exercise and fitness. Comprehensive services will be offered that reinforce healthy behaviors through a variety of programs including disease prevention, rehabilitation, chronic disease management, nutritional counseling and cancer wellness. It will not only be a place to become physically healthy, but also a center to serve individuals that work and live in the area. St. Joseph Health operates five integrated medical fitness centers in the Western United States including Brea, Napa and Eureka, California, as well as Lubbock, Texas. They are the owner and operator of several community health care sites and have successfully established new business ventures in areas in which they serve. They are also in constant contact with community groups to ensure the decisions its ministries make are aligned with community ends. Taller San Jose has been serving Santa Ana for nearly 20 years. It is a local organization which serves Orange County disadvantaged youth through training and skills needed to attain and retain employment. Taller San Jose's goal is to assist students to become self - reliant adults through three key job training academies — office careers, medical careers and construction — as well as support services such as mentoring, legal assistance, and substance abuse recovery support. Their primary population is low income teens and families who may not have access to such programs elsewhere. Last year, Taller San Jose placed 175 unemployed young adults into employment at an average salary of $11.13 per hour. The proposed fitness and wellness center will provide 19,000 square feet for the Taller San Jose facility. Additionally, the proposed partnership will result in potential job opportunities in both the wellness center construction phase and ongoing operations for Taller San Jose students. The St. Joseph /Taller San Jose time line is approximately 24 months. St. Joseph also informed the selection committee that any jobs created through the partnership will be at a "socially just" wage. PROJECT FINANCIAL OVERVIEW St. Joseph/Taller San Jose proposes to renovate the existing structure and subsequently operate a fitness and wellness center at the site. Based on due diligence performed to date, St. Joseph/Taller San Jose estimate the total renovation costs at approximately $17.95 million, with the assumption that the renovation project will be subject to prevailing wage requirements. In addition, the renovation costs include allowances for lead abatement, mold abatement and seismic retrofitting. St. Joseph/Taller San Jose proposes to finance the project costs through cash -on -hand, fundraising and New Market Tax Credits. The development team is currently meeting with prospective entities that would Page 3 of 4 25J -7 help obtain New Market Tax Credits for the project. It is anticipated that St. Joseph Health and Taller San Jose will equally share funding for project costs. However, the two entities will work together to raise the necessary funds to complete the project. If there is a shortfall in the fundraising efforts, St. Joseph Health has the ability to provide a loan to the project to fund the renovation costs, giving the team additional time to continue fundraising. St. Joseph/Taller San Jose proposes that the City donate the fee interest in the site at no cost to the project. Furthermore, St. Joseph/Taller San Jose is not willing to enter into a long -term ground lease. However, the team may accept a provision in the DDA that would provide the City with a first right of refusal if the project is sold after conveyance to the St. Joseph /Taller San Jose development team. These provisions will be negotiated in further detail if St. Joseph/Taller San Jose is selected to enter into an Exclusive Right to Negotiate for the project. Based on a review of the financial statements, it appears that St. Joseph has sufficient cash -on -hand to complete the proposed project if the necessary funds are not raised within the proposed timeline. However, Taller San Jose, as a separate entity, does not have sufficient cash -on -hand to fund the proposed improvements. As such, Taller San Jose will need to embark on an aggressive fundraising campaign in order to raise their share of the estimated project costs. It is possible that Taller San Jose will not be able to meet their fundraising targets with regards to the development timeline of the project. However, St. Joseph stated that they may be willing to loan funds to the project to allow for additional fundraising time for Taller San Jose to obtain the necessary funds for their share of the project costs. Page 4 of 4 25J -8 EXHIBIT 2 FORM /SAMPLE REIMBURSEMENT AGREEMENT This Reimbursement Agreement ( "Agreement ") is made this th day of _, 2014, by and between the CITY OF SANTA ANA, a California charter city ( "City "), and LLC, a [limited liability company] ( "Business "). City and Business are sometimes referred to herein as the "Parties" or individually as a "Party ". RECITALS A. Business' primary location is in and it does B. Business desires to discuss a potential transaction with City. C. The purpose of this Agreement is to provide for Business to reimburse City for fees and costs incurred by City in evaluating the proposed transaction and documenting an agreement if one is reached between the parties. The parties anticipate that such fees and costs should not exceed Thousand Dollars ($_,000). NOW THEREFORE, in consideration of the mutual covenants set forth herein and the mutual benefits to be derived therefrom, the Parties agree as follows: TERMS 1. Incorporation of Recitals. The Parties agree that the Recitals constitute the factual basis upon which City and Business have entered into this Agreement. City and Business each acknowledge the accuracy of the Recitals and agree that the Recitals are incorporated into this Agreement as though fully set forth at length. 2. Reimbursement of Costs. Within three (3) days following the date that both Parties have signed this Agreement, Business shall provide City with a deposit of _Thousand Dollars ($ 00), in immediately available funds. City shall use these funds solely for the purpose of paying fees or costs associated with the proposed transaction and shall, upon Business' request, provide an accounting of the expenses. If additional funds are needed for reimbursement, City shall make a written request to Business and Business shall provide payment to City. 3. Assignability. This Agreement may not be assigned by either Party without the prior and express written consent of the other Party, which consent shall not be unreasonably withheld or delayed. Any attempted assignment of this Agreement not in compliance with the terms of this Agreement shall be null and void and shall confer no rights or benefits upon the assignee. 4. No Prior Agreements and No Oral Modifications. This Agreement represents the entire understanding of City and Business and supersedes all other prior or contemporaneous written or oral agreements pertaining to the subject matter of this Agreement. This Agreement may be modified, only in writing signed by the authorized representatives of both City and Business. 25J -9 5. Binding Upon Successors. This Agreement and each of its terms shall be binding upon City and Business and their respective officers, elected officials, employees, agents, contractors, and permitted successors and assigns. 6. No Third Party Beneficiaries. This Agreement is entered into solely for the benefit of the Parties. No person or entity has any rights or remedies under this Agreement. 7. Attorneys' Fees. In the event that any action or proceeding, including arbitration, is commenced by either City or Business against the other to establish the validity of this Agreement or to enforce any one or more of its terms, the prevailing party in any such action or proceeding shall be entitled to recover from the other, in addition to all other legal and equitable remedies available to it, its actual attorneys' fees and costs of litigation, including, without limitation, filing fees, service fees, deposition costs, arbitration costs and expert witness fees, including actual costs and attorneys' fees on appeal. 8. Jurisdiction and Venue. This Agreement is executed and is to be performed in San Bernardino County, California, and any action or proceeding brought relative to this Agreement shall be heard in the appropriate court in the County of Orange, California. City and Business each consent to the personal jurisdiction of the court in any such action or proceeding. 9. Severability. If any term or provision of this Agreement is found to be invalid or unenforceable, City and Business both agree that they would have executed this Agreement notwithstanding the invalidity of such term or provision. The invalid term or provision may be severed from the Agreement and the remainder of the Agreement may be enforced in its entirety, 10. Headings. The headings of each Section of this Agreement are for the purposes of convenience only and shall not be construed to either expand or limit the express terms and language of each Section. 11. Representations of the Parties. Each person signing this Agreement on behalf of a Party which is not a natural person hereby represents and warrants to the other Party that all necessary legal prerequisites to that Party's execution of this Agreement have been satisfied and that he or she has been authorized to sign this Agreement and bind the Party on whose behalf he or she signs. BUSINESS: , LLC, a limited liability company By: -2- 25J-10 ATTEST: M CITY: CITY OF SANTA ANA, a California municipal corporation EY:.. _ Name: Its: -3- 25J -11 David Cavazos City Manager 25J -12