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HomeMy WebLinkAboutD-3 Staff Report - Third Amendment to PSA - Costanzo Investments45635.01849\32385547.2 SCHEDULED ITEM D-3 TO: HONORABLE CHAIR AND MEMBERS OF THE SUCCESSOR AGENCY TO THE AZUSA REDEVELOPMENT AND MAYOR AND CITY COUNCIL VIA: SERGIO GONZALEZ, CITY MANAGER FROM: MATT MARQUEZ, ECONOMIC AND COMMUNITY DEVELOPMENT DIRECTOR DATE: OCTOBER 7, 2019 SUBJECT: CITY COUNCIL APPROVE THE SECOND AMENDMENT TO THE DISPOSITION AND DEVELOPMENT AGREEMENT AND THE SUCCESSOR AGENCY APPROVE THE THIRD AMENDMENT TO THE REAL PROPERTY PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS WITH COSTANZO INVESTMENTS, LLC. FOR THE PARCELS LOCATED AT THE SOUTHEAST CORNER OF AZUSA AVENUE AND NINTH STREET (APNs 8608- 025-902, 8608-025-907, 8608-025-908, 8608-025-909, 8608-025-910 AND A PORTION OF 8608-025-914) SUMMARY: The City and Successor Agency to the Redevelopment Agency are owners of several parcels generally located on the southeast corner of Azusa Avenue and 9th Street in the City (APNs 8608-025-902, 8608- 025-907, 8608-025-908, 8608-025-909, 8608-025-910 and a portion of 8608-025-914) (“Property”). The Successor Agency, pursuant to the Long Range Property Management Plan, desires to sell and the City desires to sell for economic development purposes, their respective portions of the Property to Costanzo Investments, LLC. (“Developer”). On June 19, 2017, the City entered into a Disposition and Development Agreement (DDA) and the Successor Agency enter into a Purchase and Sale Agreement and Joint Escrow Instructions (PSA) with the Developer to sell the property. This action approves a second amendment to the DDA and the third amendment to the PSA. RECOMMENDATION: Staff recommends that the following actions be taken: 1)The City Council approve a Second Amendment to the Disposition and Development Agreement; and 2)The Successor Agency approve a Third Amendment to the Purchase and Sale Agreement and Joint Escrow Instructions; and APPROVED CITY COUNCIL 10/7/2019 Approve Amendments with Costanzo Investments, LLC. October 7, 2019 Page 2 45635.01849\32385547.2 3) Authorize the City Manager to execute both, in a form acceptable to the City Attorney. DISCUSSION: On December 20, 2018 the Developer requested an extension on the milestone schedule under the DDA and PSA. Pursuant to Section 4.5 Schedule of Performance of the DDA, any modification of a date or time of performance of a particular task of up to one hundred eighty (180) days may be approved on behalf of the City by the City Manager in his or her reasonable discretion. City Staff met with the Developer to discuss the time of extension and to establish a revised schedule of performance. As a result, under the City Manager’s discretion, the First Amendment to the DDA and PSA was executed on April 8, 2019. Since then, per the First Amendment, the Developer commenced its efforts to secure an equity partner. However, in order to secure an equity partner for the project the Oversight Board had to approve the Purchase and Sale Agreement. City Staff placed the item on the 1st District Consolidated Oversight Board May 13, 2019 agenda but due to a lack of quorum, the item was not moved. At this meeting, the Board requested various documents related to the sale of the property. City Staff compiled the requested information and returned to the Oversight Board at a later date. On August 12, 2019 Resolution No. 2019-OB03 of the Oversight Board approved the sale of the land from the Successor Agency to the Redevelopment Agency of the City of Azusa to Costanzo Investments LLC contingent on revising the agreement to ensure the First District Consolidated Oversight Board would be indemnified and held harmless. This resulted in an administrative Second Amendment to the Purchase and Sale Agreement. Although the Developer continued to seek potential equity and debt financing partners, equity firms were unwilling to finalize their engagement until the Oversight Board approved the sale of the property. Due to the delay, the Developer did not finalize their engagement letter until after the date established by the schedule of performance. Consequently, the milestones identified in the revised schedule of performance have been delayed. At this time, Staff is recommending that the City Council approve a Second Amendment to the Disposition and Development Agreement and the Successor Agency approve the Third Amendment to the Purchase and Sale Agreement and Joint Escrow Instructions to revise the Performance of Schedule to more accurately reflect the anticipated milestones. The revisions to the DDA include the following changes to the schedule of performance: a. Twelve weeks from execution of this Second Amendment, Developer shall complete design development process and provide the written result of such for review by City; b. Seven months from completion of design development and submission of written result to City, Developer shall submit substantially complete construction drawings to City for review and comment; c. Upon review of construction drawings, City shall submit any comments to Developer and Developer shall respond to such comments within thirty (30) days of receipt; if comments require additional time for review by Developer, City Manager may grant a reasonable Approve Amendments with Costanzo Investments, LLC. October 7, 2019 Page 3 45635.01849\32385547.2 extension of time to Developer; d. Developer shall close escrow and commence construction within seventy five (75) days of City’s from being permit ready; e. Developer shall complete construction within twenty-six (26) months from construction commencement. Additionally, the DDA is being revised to authorize additional changes to the Project to reflect non- substantive project revisions and revised circumstances: a. Developer shall revise vesting tentative map to effectuate vacation of alley and submit for revisions within sixteen weeks of execution of this Second Amendment; b. City shall grant Developer an easement, pursuant to certain terms and conditions, over the entire alley way except the portion the developer acquires as depicted on Exhibit A. City and Developer shall enter into an easement agreement to effectuate this grant of easement which shall, among other things, require Developer to maintain the alleyway to City’s reasonable satisfaction. ; c. City shall grant Developer an encroachment permit, subject to reasonable terms and conditions, for a portion of the alley by Lot 36, as roughly depicted on Exhibit A, for the installation of a transformer; d. Developer shall acquire from City eight feet of width of the alley way closest to the Project Site from Lot 36 through Lot 29 for a purchase price of $28.50 per sq. foot as depicted in Exhibit A; e. City shall grant an easement over the outer portion of Lot 914 as depicted on Exhibit A, if necessary. The Third Amendment to the PSA reflect only the change in close of escrow date. That date is now tied to the closing on the DDA parcels which is 75 days following the approval of the development plans. In 2015 the City adopted the TOD Specific Plan and its corresponding environmental impact report (EIR). The site subject to this agreement is included within the boundaries of the Specific Plan project area and was included in the environmental analysis in accordance with Public Resources Code sections 21166 and State CEQA Guidelines, section 15162. The actions contemplated in this staff report do not constitute a significant change and therefore are consistent with the EIR previously adopted for the TOD Specific Plan. Therefore, no further environmental review is required. FISCAL IMPACT: There is no fiscal impact associated with the recommended actions. Approve Amendments with Costanzo Investments, LLC. October 7, 2019 Page 4 45635.01849\32385547.2 Prepared by: Reviewed and Approved: Carina Campos Matt Marquez Economic Development Specialist Economic and Community Development Director Reviewed and Approved: Sergio Gonzalez City Manager Attachments: 1)Second Amendment to the Disposition and Development Agreement 2) Third Amendment to the Purchase and Sale Agreement and Joint Escrow Instructions 45635.01849\32384036.4 SECOND AMENDMENT TO THE DISPOSITION AND DEVELOPMENT AGREEMENT (Costanzo Investments, LLC/A-2 Property) THIS SECOND AMENDMENT TO THE DISPOSITION AND DEVELOPMENT AGREEMENT (this “Second Amendment”) is dated as of _________, 2019 for reference purposes only, and is entered into by and between the City of Azusa, a California municipal corporation (the “City”) and Costanzo Investments, LLC, a Delaware limited liability company (the “Developer”) (collectively, the “Parties,” and each a “Party”). The Parties enter into this Agreement with reference to the following facts: RECITALS A.The Successor Agency to the Azusa Redevelopment Agency (“Successor Agency”) is the owner of that certain real property located at 826, 858, 832, and 830 N. Azusa Avenue, Azusa (APNs 8608-025-902, 8608-025-907, 8608-025-908, and 8608-025-910) (“SA Property”). B.The City is the owner of that certain remnant parcel known as a portion of APN 8608-025-906 (“City Property”). The SA and City property are collectively referred to as the “Properties.”. C.The Parties acknowledge that as a result of mapping and other changes the original APNs identified above may be modified and will be revised prior to closing. D. The City and Developer entered into that certain Disposition and Development Agreement, dated March 6, 2017, (“Original Agreement”) for the sale and development of the City Property and now desire to revise certain provisions of that Original Agreement to reflect the current terms of the transaction. E Pursuant to Section 4.5 of the Original Agreement, any modification of a time or date for performance of a task that results in an aggregate change of more than one hundred eighty (180) days is subject to the approval of the City Council. The Parties agree the outside close of escrow date under the Original Agreement was April 15, 2019, and the completion of construction date was April 30, 2021. The Parties intend to extend certain milestones under the Original Agreement including those dates. F. The Parties entered into a First Amendment to the Original Agreement on April 8, 2019. This Second Amendment supersedes the terms of the First Amendment. All capitalized terms used herein and not defined shall have the same meaning as within the Original Agreement. G.The City Manager has reviewed Developer’s progress toward the close of escrow and completion of the Project and found that Developer has diligently pursued the Project but requires more time to complete the permitting and financing of the Project. Attachment 1 45635.01849\32384036.4 H. The City Council has reviewed the terms of this Second Amendment and has authorized the City Manager to enter into any agreement to effectuate the implementation of the following items. NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH THE PARTIES ACKNOWLEDGE, AND PURSUANT TO THE PROMISES AND COVENANTS SET FORTH IN THIS SECOND AMENDMENT, THE PARTIES AGREE, AS FOLLOWS: 1. Performance. Notwithstanding Exhibit C of the Original Agreement, the following performance milestones shall govern the Project: a. Twelve weeks from execution of this Second Amendment, Developer shall complete design development process and provide the written result of such for review by City; b. Seven months from completion of design development and submission of written result to City, Developer shall submit substantially complete construction drawings to City for review and comment; c. Upon review of construction drawings, City shall submit any comments to Developer and Developer shall respond to such comments within thirty (30) days of receipt; if comments require additional time for review by Developer, City Manager may grant a reasonable extension of time to Developer; d. Developer shall close escrow and commence construction within seventy five (75) days of City’s from being permit ready; e. Developer shall complete construction within twenty-six (26) months from construction commencement. 2. Miscellaneous. Items to be completed upon completion of Project and at Close of Escrow and authorized to be approved by City Manager: a. Developer shall revise vesting tentative map to effectuate vacation of alley and submit for revisions within sixteen weeks of execution of this Second Amendment; b. City shall grant Developer an easement, pursuant to certain terms and conditions, over the entire alley way except the portion the developer acquires as depicted on Exhibit A. City and Developer shall enter into an easement agreement to effectuate this grant of easement which shall, among other things, require Developer to maintain the alleyway to City’s reasonable satisfaction. ; c. City shall grant Developer an encroachment permit, subject to reasonable terms and conditions, for a portion of the alley by Lot 36, as roughly depicted on Exhibit A, for the installation of a transformer; 45635.01849\32384036.4 d. Developer shall acquire from City eight feet of width of the alley way closest to the Project Site from Lot 36 through Lot 29 for a purchase price of $28.50 per sq. foot as depicted in Exhibit A; e. City shall grant an easement over the outer portion of Lot 914 as depicted on Exhibit A, if necessary. 3. Effective Date of Second Amendment. This Second Amendment shall be effective on the date last signed by the Parties following approval by the City Council, as provided in section 4.5 of the Original Agreement. 4. Effect Upon Original Agreement. Except as expressly amended by this Second Amendment, the Original Agreement remains in full force and effect, unmodified except as otherwise expressly provided herein. Wherever the term "Agreement" appears in the Original Agreement, it shall be read and understood to mean the Original Agreement as amended by this Second Amendment. In the event of any direct conflict or inconsistency between the terms of the Original Agreement and this Second Amendment, the terms of this Second Amendment shall be controlling to the extent of such conflict or inconsistency. 5. Counterparts. This Second Amendment may be executed in one or more counterparts, including the transmission of counterparts by facsimile or electronic mail, each of which shall be deemed an original but all of which, taken together, shall constitute one in the same Second Amendment. [Signatures on following page] 45635.01849\32384036.4 SIGNATURE PAGE TO THE SECOND AMENDMENT TO THE 2017 DISPOSITION AND DEVELOPMENT AGREEMENT (Costanzo Investments, LLC/A-2 Property) IN WITNESS WHEREOF, the City and the Developer have executed this SECOND AMENDMENT TO THE DISPOSITION AND DEVELOPMENT AGREEMENT by and through the signatures of their duly authorized representative(s) set forth below: CITY: CITY OF AZUSA, a California municipal corporation By: Name: Sergio Gonzalez Its: City Manager Date: _____________________ Attest: By: City Clerk DEVELOPER: COSTANZO INVESTMENTS, LLC, a Delaware limited liability company By: Name: Chris Costanzo Its: Managing Member Date: _________________________ APPROVED AS TO FORM: By: City Attorney 45635.01849\32384036.4 EXHIBIT A TO SECOND AMENDMENT TO THE DISPOSITION AND DEVELOPMENT AGREEMENT (Costanzo Investments, LLC/A-2 Property) EXHIBIT ATHE AVENUE800 N. Azusa AvenueAzusa, CALEGENDPROJECT BOUNDARY SIDEWALK DEDICATION SIDEWALK DEDICATION ALLEY VACATION AND LAND PURCHASEGRANT EASEMENT9TH STREET AZUSA AVENUEALLEYLOT 25LOT 26LOT 27 LOT 28 LOT 29 LOT 30 LOT 31 LOT 32 LOT 33 LOT 34 LOT 35 LOT 36 PARCEL 914PARCEL 907PARCEL 909PARCEL 910 PARCEL 908 PARCEL 902 PORTION OF PARCEL 914GRANT EASEMENTENCROACHMENT PERMIT -1 - 45635.01849\32384519.3 THIRD AMENDMENT TO REAL PROPERTY PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (Costanzo Investments, LLC/A-2 Property) THIS THIRD AMENDMENT TO REAL PROPERTY PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (“Amendment”) is made and entered into as of this ____________, 2019, by and between Costanzo Investments, LLC, a Delaware limited liability company (“Buyer”), and the Successor Agency to the Azusa Redevelopment Agency, a public body, corporate and politic (“Seller”), with respect to the following: RECITALS : A.Seller and Buyer are parties to that certain Real Property Purchase and Sale Agreement and Joint Escrow Instructions dated March 6, 2017 (“Agreement”), regarding the sale of real property generally located at 826, 858, 832, and 830 N. Azusa Avenue, Azusa (APNs 8608-025-902, 8608-025-907, 8608-025-908, and 8608-025-910) (“SA Property”). B.Seller and Buyer desire to amend the Agreement to extend the Outside Date for the Close of Escrow to coincide with the Close of Escrow pursuant to that certain Disposition and Development Agreement entered into by Buyer and City of Azusa. C.Seller and Buyer entered into a First Amendment to the Agreement on April 8, 2019, to extend the Outside Date for Close of Escrow. Seller and Buyer administratively entered into that Second Amendment to the Agreement to expand Buyer’s indemnification to include the First District Consolidated Oversight Board. The Executive Director has reviewed Developer’s progress on the Project and has determined that an additional extension of time is appropriate. Capitalized terms used but not otherwise defined herein shall have the meaning given to such terms within the Agreement. NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH THE PARTIES ACKNOWLEDGE, AND PURSUANT TO THE PROMISES AND COVENANTS SET FORTH IN THIS SECOND AMENDMENT, THE PARTIES AGREE, AS FOLLOWS: 1. Escrow Closing Date. Pursuant to Section 3.5.7 of the Escrow Instructions of the Agreement, Seller and Buyer hereby mutually agree to extend the Outside Date for the Close of Escrow to no later than seventy five (75) days following City completion of the plan check. 2. Miscellaneous. (a) Effect of Amendment. Except to the extent the Agreement is modified by this Amendment, the remaining terms and conditions of the Agreement shall remain unmodified and in full force and effect. In the event of any conflict between the terms Attachment 2 - 2 - 45635.01849\32384519.3 and conditions of the Agreement and the terms and conditions of this Amendment, the terms and conditions of this Amendment shall prevail and control. (b) Entire Agreement. The Agreement, together with this Amendment, embodies the entire understanding between the parties hereto with respect to its subject matter and can be changed only by an instrument in writing signed by the parties hereto. (c) Counterparts. This Amendment may be executed in one or more counterparts, including the transmission of counterparts by facsimile or electronic mail, each of which shall be deemed an original but all of which, taken together, shall constitute one in the same Amendment. [SIGNATURE PAGE TO FOLLOW] 45635.01849\32384519.3 SIGNATURE PAGE TO THE THIRD AMENDMENT TO THE 2017 REAL PROPERTY PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (Costanzo Investments, LLC/A-2 Property) IN WITNESS WHEREOF, the parties hereto have executed this SECOND AMENDMENT TO REAL PROPERTY PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS as of the day and year first-above written. “SELLER” Successor Agency to the Azusa Redevelopment Agency, a public body, corporate and politic By: Name: Sergio Gonzalez Title: City Manager “BUYER” Costanzo Investments, LLC, a Delaware limited liability company By: Name: Chris Costanzo Title: Managing Member ATTEST By: City Clerk APPROVED AS TO FORM: BEST BEST & KRIEGER LLP By: General Counsel