HomeMy WebLinkAbout2016-07-26; Public Financing Authority; 49; Approval of amendment to the ground lease option with Grand Pacific Resorts for the property known as The Crossings at Carlsbad West View Lot 9AB# 49
DATE. 7/26/16
DEPT. City Manager
CARLSBAD PUBLIC FINANCING AUTHORITY
AGENDA BILL
APPROVAL OF AN AMENDMENT TO DEPT. DIRECTOR (/{f;__
THE GROUND LEASE OPTION WITH CITY ATTY. fJfJ1 -GRAND PACIFIC RESORTS FOR THE PROPERTY ""'/
KNOWN AS THE CROSSINGS AT CARLSBAD ~~ WEST VIEW LOT 9 CITY MGR.
RECOMMENDED ACTION:
Adopt Resolution of the Board of Directors of the Carlsbad Public Financing Authority approving an
amendment to the ground lease option with Grand Pacific Resorts for the property known as The
Crossings at Carlsbad West View Lot 9.
ITEM EXPLANATION:
On December 9, 2014, the Carlsbad Public Financing Authority ("CPFA") approved a ground lease option
("Lease Option") with Grand Pacific Resorts ("GPR") pursuant to the CPFA releasing a Request for
Proposals for a long term ground lease on the property known as The Crossings at Carlsbad West View
Lot 9 ("Lot 9"). Lot 9 is comprised of two parcels, a 2. 7 acre parcel owned by the City of Carlsbad and a
.45 acre parcel owned by the Carlsbad Municipal Water District ("CMWD"), for a total site area of 3.15
acres.
The Lease Option provided GPR with 24 months, along with two six-month extensions, to satisfy all
conditions of the Lease Option and receive their development entitlements, including environmental
review ("Contingency Period"). During the contingency period, and despite satisfying most conditions
within the Lease Option and diligently working towards satisfying all conditions, GPR was delayed in
receiving approval of their development entitlements. GPR was successful in receiving approval of their
project by the California Coastal Commission on July 15.
Additionally, GPR encountered cultural resource issues. GPR was conditioned to coordinate with the
San Luis Rey Band of Indians ("SLRBI"), who would provide information on what mitigation measures
the tribe desired. GPR conducted said coordination with the SLRBI as was necessary, and redesigned
the structural and foundation plans per SLRBI's recommended modifications. The work with SLRBI, and
the subsequent redesign of the structural and foundation plans caused additional delay for the project.
DEPARTMENT CONTACT: Curtis M.Jackson 760-434-2836 curtis.jackson@carlsbadca.gov
FOR CLERK USE. ~ COUNCIL ACTION: APPROVED CONTINUED TO DATE SPECIFIC 0
DENIED 0 CONTINUED TO DATE UNKNOWN 0
CONTINUED 0 RETURNED TO STAFF 0
WITHDRAWN 0 OTHER-SEE MINUTES 0
AMENDED 0 REPORT RECEIVED 0
Item #22 - AB #49 July 26, 2016 Page 1 of 13
As such, GPR and the city desire to amend the Lease Option to increase the Contingency Period from 24
months to 30 months, with an expiration on June 9, 2017. Construction of the project is required to be
complete 20 months from June 9, 2017.
Additionally, under Phase II of the Lease Option, within 42 months after the rent commencement date,
on the southern portion of Lot 9, GPR was required to elect one of the following two construction
options:
1) Amend the Lease Option to reduce the size of the premises leased, in which .event GPR shall
develop no less than 32 time share vacation units that will be operationally integrated into
the adjacent MarBrisa/Hiltion Grand Vacation Resort; or
2) Develop no less than 32 additional hotel rooms that will be operationally integrated into
the Westin hotel.
GPR has made an early election for the first option, and intends to develop 71 hotel rooms and 36 time
share vacation units.
FISCAL IMPACT:
Future development of Lot 9 will result in a positive fiscal impact to the city and the CMWD. Ground
lease revenue of $159,965 will be generated from the property starting in the first year of the Phase 1
Hotel operations. Starting in year six and ending in year twenty-five, the lease revenue will escalate 2%
annually; starting in year twenty-six and ending in year fifty-five, the lease revenue will escalate 2.5%
annually; generating $15,460,834 in years one through fifty-five. The project will generate additional
revenue from transient occupancy tax and sales tax collected from room stays and on-site taxable sales.
Lease revenue generated from the Lot 9 ground lease will be apportioned between the CMWD and the
city based upon a per square foot ownership basis and leasehold interest, with any applicable taxes or
fees associated with the development of the site distributed to the appropriate taxing authority.
Property taxes will also be realized from the development of the site and the long-term nature of the
ground lease.
ENVIRONMENTAL IMPACT:
The city as the lead agency, and the CPFA as a responsible agency, under the California Environmental
Quality Act ("CEQA") conducted the appropriate environmental review. An Environmental Impact
Report ("EIR") was prepared for the Westin Hotel and Timeshare in accordance with CEQA, the CEQA
Guidelines, and the Environmental Protection Procedures (Title 19} of the Carlsbad Municipal Code
("CMC"). The EIR addressed the environmental impacts associated with all discretionary applications for
the proposed project, including ultimate build-out of the entire project. The analysis contained in the
EIR concluded that all significant impacts would be mitigated to below a level of significance. The City
Council certified the EIR on February 23, 2016.
2
Item #22 - AB #49 July 26, 2016 Page 2 of 13
EXHIBITS:
1. Resolution of the Board of Directors of the Carlsbad Public Financing Authority approving a
ground lease option with Grand Pacific Resorts for the property known as the Crossings at
Carlsbad West View Lot 9.
2. First Amendment Option to Lease Agreement between Carlsbad Public Financing Authority and
Grand Pacific Resorts.
3. Lot 9 Location Map.
4. Lot 9 Surrounding Properties Map.
5. Lot 9 Aerial Map.
6. Lot 9 Site Map.
3
Item #22 - AB #49 July 26, 2016 Page 3 of 13
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
RESOLUTION NO. 72
ADOPT A RESOLUTION OF THE BOARD OF DIRECTORS OF THE
CARLSBAD PUBLIC FINANCING AUTHORITY APPROVING AN
AMENDMENT TO THE GROUND LEASE OPTION WITH GRAND
PACIFIC RESORTS FOR THE PROPERTY KNOWN AS THE CROSSINGS
AT CARLSBAD WEST VIEW LOT 9
WHEREAS, the on December 9, 2014, the Carlsbad Public Financing Authority approved a
ground lease option with Grand Pacific Resorts for the property known as The Crossings at
Carlsbad West View Lot 9; and
WHEREAS, the amendment of this lease option is required due to unforeseen delays
related to the approval of development entitlements and cultural resource issues; and
WHEREAS, the initial term ofthe Lease Agreement expires on December 9, 2016; and
WHEREAS, the First Amendment to the Lease Option Agreement with Grand Pacific
Resorts modifies {1} the Option Term of the agreement from twenty-four (24) months after the
effective date to thirty {30} months after the effective date; and (2) memorializes Grand Pacific
Resorts election to develop seventy-one (71} hotel rooms and thirty-six {36} Time Share units.
NOW, THEREFORE, BE IT RESOLVED by the Public Financing Authority of the City of
Carlsbad, California, as follows that:
1. The above recitations are true and correct.
2. The City Manager's execution of the First Amendment to the Lease Agreement with
Grand Pacific Resort, attached hereto as Exhibit A, is approved.
II
II
II
Item #22 - AB #49 July 26, 2016 Page 4 of 13
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
PASSED, APPROVED AND ADOPTED at a Regular Meeting ofthe City Council ofthe City of
Carlsbad on the 26th day of :!!!.!Y, 2016, by the following vote to wit:
AYES: Hall, Wood, Schumacher, Blackburn, Packard.
NOES: None.
ABSENT: None.
MATT HALL, Chairman of the Board
ATTEST:
Item #22 - AB #49 July 26, 2016 Page 5 of 13
EXHIBIT 2
FIRST AMENDMENT OPTION TO LEASE AGREEMENT
THIS FIRST AMENDMENT OPTION TO LEJ\SE AGREEMENT (this,
"Amendment") is made and entered into as of thislf3thday of ()tAl~ , 2016, by and
between the THE CARLSBAD PUBLIC FINANCING AUTHORITY, joint powers authority
formed by the City of Carlsbad and the Carlsbad Municipal Water District ("CPF A"), and
GRAND PACIFIC CARLSBAD LOT 9, L.P., a Delaware limited partnership ("Optionee").
WITNESSETH:
WHEREAS, Optionee and CPF A (collectively referred to herein as the "Parties") entered into
that certain Option to Lease Agreement dated December 9, 2014 (the "Option Agreement");
and
WHEREAS, the Parties to desire the Option Agreement to reflect certain changes in the timing
and structure of the transactions contemplated under the Option Agreement.
NOW, THEREFORE, in consideration of the performance and observance of the terms,
covenants and conditions hereafter set forth, the parties hereto mutually agree as follows:
1. DEFINED TERMS: Terms not otherwise defined in this Amendment have the meaning
given in the Option Agreement or Lease (as defined in the Option Agreement).
2. OPTION TERM: The first sentence of Section 2 is amended to provide that the Term
shall be thirty (30) months after the Effective Date, which results in an expiration date of
June 9, 2017. The balance of Section 2 after the first sentence thereof is hereby deleted,
except that the definition of "City" (meaning the City of Carlsbad) shall remain.
3. CONDITIONS PRECEDENT: The Parties acknowledge that the Conditions Precedent
set forth in Sections 5 a., b., c., d, andj. ofthe Option Agreement have been satisfied.
4. LEASES: Section 29 of the Lease requires that (i) within forty two (42) months after the
Rent Commencement Date, Tenant elect either (x) to construct additional hotel rooms on
the Premises or (y) to amend the Lease to reduce the size of the Premises and for Tenant
or an Affiliate of Tenant to enter into the Time Share Addition Ground Lease, and (ii) the
. expansion of the Hotel Addition or the Time Share Addition, whichever is applicable, to
be completed within sixty (60) months after the Rent Commencement Date.
Optionee has made an early election for the Time Share Addition (and not the expansion
of the Hotel Addition) to be constructed and, therefore, at the time the Option is
exercised, the Parties shall enter into (i) the Lease, which shall be revised to ·reduce the
size of the Premises in accordance with Section 29 of the Lease, (ii) the Time Share
Addition Ground Lease, and (iii) the easement agreement referred to in Section 29 of the
Lease (the "Easement Agreement").
- 1 -
Item #22 - AB #49 July 26, 2016 Page 6 of 13
The Parties have also agreed on the following: (A) that the Hotel Addition Outside
Completion Date shall be modified to be the date which is the number of days between
June 9, 2017 and the exercise of the Option in accordance with the terms of the Option
Agreement, plus eighteen (18) months, measured from the later of the Commencement
Date, the removal pursuant to Section 31 of the water tank on the Premises, and
completion of the Archeological Data Recovery Plan approved by the San Luis Rey Band
of Mission Indians, Optionee and the City (with completion being determined by the on-
site archeologist), as such date is extended for each day of delay caused by matters
described in Section 21 of the Lease, (B) if the Hotel Addition is not Substantially
Completed by the modified Hotel Addition Outside Completion Date then so long as
Tenant has used and is continuing to use its diligent efforts to complete the Hotel
Addition, the only consequence shall be the commencement of Rent upon the modified
Hotel Addition Completion Date, and (C) under the Time Share Addition Ground Lease,
the tenant thereunder shall be obligated to commence construction of the Time Share
Addition no later than twenty-four (24) months after the Time Share Addition Ground
Lease is entered into and Substantially Complete the Time Share Addition no later than
eighteen (18) months thereafter, as such period of time is extended for each day of delay
caused by matters described in Section 21 of the Time Share Addition Ground Lease.
To accomplish the foregoing, CPF A and Optionee shall work together to (x) modify the
form of Lease to reduce the size of the Premises in accordance with Section 29 of the
Lease, (y) create the form of the Time Share Addition Ground Lease with the changes
described above and in Section 29 of the Lease, and (z) agree upon a form of the
Easement Agreement so that each of the same is completed reasonably prior to the
anticipated Option exercise date. Optionee shall endeavor to notify CPF A 120 days prior
to the date Optionee anticipates exercising the Option pursuant to the terms of Section 8
of the Option Agreement. When the same have been agreed to, the mutually agreed upon
modified form of Lease and the Time Share Addition Ground Lease shall be deemed to
be attached to the Option Agreement as Exhibit A and all references under the Option
Agreement to the Lease shall be interpreted to refer to such agreed upon modified form
of Lease and form of Time Share Addition Ground Lease and all references under the
Option Agreement to the Memorandum of Lease and the Completion Guaranty shall be
interpreted to refer to the exhibits of the same attached to both such form of Lease and
Time Share Addition Ground Lease.
To implement the foregoing City staff shall be authorized to take all actions reasonably
necessary to finalize the form of the Lease, the Time Share Addition Ground Lease and
the Easement Agreement on terms consistent with the foregoing as need to fully reflect
the intention of this Amendment.
5. NO OTHER AMENDMENT: Except as modified by this Amendment, the Option
Agreement remains if full force and effect.
6. COUNTERPARTS AND SIGNATURE PAGES: For convenience, CPF A and
Optionee may execute this Amendment on separate counterpart pages, which when
-2-
Item #22 - AB #49 July 26, 2016 Page 7 of 13
attached to this Amendment shall constitute one fully-executed complete original
Amendment.
[Balance of page intentionally left blank; signature page follows.]
-3 -
Item #22 - AB #49 July 26, 2016 Page 8 of 13
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and
the year first above written.
CPFA:
Approved as to form and legality:
Celia Brewer, City Attorney
OPTIONEE:
THE CARLSBAD PUBLIC FINANCING
AUTHORITY,
a joint powers authority formed by the City of
Carlsbad and the Carlsbad Municipal Water
District
~~~-e-: =1!:1.=:M::a :t &:H::a:lll£:=={#============
Title: -~C~h~a~i r!....!m~a!..!n~o~f ....!t!:..!..h.!.!:e'-.-!:B~o~a:!..!.r~d:!..._ ___ _
Attest: lbQ~~ ~en,
Barbara Engelson, ·Secretary
(Seal)
GRAND PACIFIC CARLSBAD LOT 9, L.P., a
Delaware limited partnership
[Signature page to First Amendment to Option to Lease Agreement]
Item #22 - AB #49 July 26, 2016 Page 9 of 13
LOCATION MAP
/ /
,: ~"
,.·----·-~: . l ...
PROJECT NAME EXHIBIT
The Crossings at Carlsbad West View Lot 9 3
14~207_13
Item #22 - AB #49 July 26, 2016 Page 10 of 13
Item #22 - AB #49July 26, 2016 Page 11 of 13
~· .. Item #22 - AB #49July 26, 2016 Page 12 of 13
--------------------------
:s; 1r·E· ·M· .. ··A ·tt) · •··••·· ·;:... . :·· ·.r\r-·· ...
EXHIBIT
G . .
The Crossings afC~rlsbad West View Lot 9
PROJECT NAME
Item #22 - AB #49 July 26, 2016 Page 13 of 13