HomeMy WebLinkAboutD-1 Staff Report - Terminating Negotiations with Charles CO1
SCHEDULED ITEM
D-1
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL AND THE
SUCCESSOR AGENCY TO THE AZUSA REDEVELOPMENT AGENCY
VIA: SERGIO GONZALEZ, CITY MANAGER
FROM: KURT CHRISTIANSEN, FAICP, DIRECTOR OF COMMUNITY AND ECONOMIC
DEVELOPMENT
DATE: MAY 29, 2018
SUBJECT: DIRECTION TO STAFF REGARDING TERMINATION OF NEGOTIATIONS WITH
CHARLES CO REGARDING THE PROPOSED DEVELOPMENT OF REAL
PROPERTY GENERALLY KNOWN AS 600, 604, 622, and 624-630 NORTH SAN
GABRIEL IN THE CITY (BLOCK 37) (APN 8611-004-902, 903, 904, 905, 906, 907,
912, 913 AND 914)
BACKGROUND:
The City of Azusa (“City”) and the Successor Agency to the Azusa Redevelopment Agency (“Successor
Agency”) have been in negotiations with Charles Co (“Developer”) regarding the sale and potential
development of 604, 622, and 624-630 North San Gabriel Avenue since the Spring of 2016. At the May
7, 2018 meeting the City had an item agendized to consider approval of a Disposition and Development
Agreement for the sale and development of the City owned Property. The Successor Agency had an item
agendized to consider the approval of a Purchase and Sale Agreement for the sale of the Successor
Agency owned parcels. At that hearing the Developer was unable to provide documentation to support
that the two single purposes entities the Developer proposed to enter into the DDA and PSA were able to
do business in California. That hearing was continued until June 4 at the Developer’s request to allow
additional time to establish the development entities.
Based upon the two years of negotiations, the inability of the proposed development entities to do
business in California and other reasons outlined below, Staff is seeking direction regarding whether the
Council/Successor Agency wishes to proceed with negotiations and consideration of the proposed
development.
RECOMMENDATION(S):
Staff recommends that the City Council consider the timeline and information contained in this report
and provide direction to staff regarding whether to terminate negotiations with the Charles Company and
related entities and direct staff to return to the Council with recommendations regarding a Request for
Proposal process for this site in the future.
APPROVED
CITY COUNCIL
5/29/2018
Special Meeting
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ANALYSIS:
In Spring 2016 the City, Successor Agency and Developer entered into negotiations regarding the
Developer pursuing a potential development in the City of Azusa. By August 2016, the parties had
settled on a proposed development by Developer of the area known as Block 37. Developer proposed a 4
story, mixed use project with 66 residential units and 10,800 square feet of retail.
Timeline of Actions
December - 2016 - City approves an Exclusive Negotiation Agreement (ENA) with the Developer on
December 5, 2016.
April – 2017 - After approximately 5 additional months, the Developer executed the ENA and it
became effective on April 24, 2017.
June – 2017 - In June 2017 the City and Successor Agency provided the Developer with a draft DDA
and Purchase and Sale Agreement for Developer’s review and comment.
July -2017 - In July, Developer provided initial comments to the PSA and refused to discuss the DDA.
The Developer was objecting to many of the City’s standard provisions. Staff followed up with the
Developer repeatedly over the next few months.
October – 2017 - In October, after having no substantive response from the Developer since July, the
City prepared an extension to the ENA as it was due to expire on October 23, 2017. On October 23,
2017, the Developer executed the ENA extension. The ENA extension provided an additional 90 days
to conclude the negotiations and approve documents for the disposition of the properties. The revised
expiration date was now January 22, 2018.
December – 2017 - On December 13, 2017 the City received substantive comments on the documents
from the Developer.
April – 2018 - The staff and Developer proceed to negotiate until a tentative agreement was reached on
April 4, 2018 that could be presented to the Council/Successor Agency for final approval. Throughout
that time, Developer was informed that the ENA had expired and the Developer was proceeding in the
negotiations at their own risk. Approximately one week after the documents were finalized, the
Developer indicated that it wanted to change out the contracting entity. On April 10, 2018, the
Developer provided documents in the name of Summitrose Investments and Hillrose Investments.
At that time, staff informed the Developer that the City and Successor Agency could not consider the
documents until the Developer could demonstrate that both entities were legally created and eligible to
do business in the State of California. The noticing had already occurred and Developer indicated that
the City would receive the necessary documentation prior to the May 7 hearing.
May - 2018 - On May 7, 2018 the information was not available to the City and Developer requested a
continuance of the hearing. That hearing was continued until June 4th. To date, the Developer has not
been able to demonstrate that the proposed single purpose entities are legally established in California
and able to do business here. Moreover, recent information has come to light indicating that the
original negotiating parties may not be associated with the project.
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On May 17th, the City received a letter from Mark Gabay, a principal with Charles Co, requesting the
June 4th hearing be postponed while they further refine their plans for the project. Mr. Gabay indicated
they will request a new date for the hearing in the future.
At this time, the ENA has been expired for more than four (4) months. The proposed development
entities are not eligible to do business in California and the City and Successor Agency have not
received the documents regarding the establishment of the newly proposed development entities. In
addition, the Developer has also indicated their intent to revise the project. After working with the
Developer for approximately two years, staff believes it is in the best interest of the City, the Successor
Agency, and the community to consider terminating negotiations with Charles Co and direct staff to
return to the Council with recommendations regarding a Request for Proposal process for this site in the
future.
FISCAL IMPACT:
There is no fiscal impact from this action.
Prepared by: Reviewed and Approved:
Kurt E. Christiansen, FAICP Sergio Gonzalez
Economic and Community Development Director City Manager