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HomeMy WebLinkAboutR33-Economic Development Agency CITY OF SAN BERNARDINO ECONOMIC DEVELOPMENT AGENCY FROM: Emil A. Marzullo Interim Executive Director SUBJECT: Joint Public Hearing - Maya Cinemas Nortb America, Inc. - 2008 Disposition and Development Agreement (Central City North Redevelopment Project Area) DATE: November 12,2008 SvnoDSis oCPrevious Commission/CounciVCnmmittee Action(s): On November 6, 2008, Redevelopment Committee Members Estrada, Johnson and Baxter unanimously voted to recommend that the Mayor and Cnmmon Council and the Community Development Commission consider this action for their respective approvals. Recommended Motion(s): Open/Close Joint Public Hearing (Mavor and Common Cnuncil) Resolution of the Mayor and Common Council of the City nf San Bernardino consenting to the disposition of certain real property by the Redevelopment Agency nf the City of San Bernardino ("Agency") to Maya Cinemas North America, Inc. ("Developer") (450 North "E" Street - APN: 0134-131-24,25,26,27 and 28) (Central City North Redevelopment Project Area) (Community Develonment Commission) Resolution of the Community Development Commission of the City of San Bernardino approving the sale of certain real property by the Redevelopment Agency of the City of San Bernardino ("Agency") to Maya Cinemas North America, Inc. ("Developer"), and authorizing the Interim Executive Directnr of the Agency to execute the 2008 Disposition and Development Agreement by and between the Agency and the Developer (450 North "E" Street-APN: 0134-131-24, 25, 26, 27 and 28) (Central City North Redevelopment Project Area) Contact Person(s): Colin Strange Central City North Redevelopment Project Area Phone: (909) 663-1044 Project Area(s): Ward(s): 1" Supporting Data Attached: o Staff Report 0 Resolution(s) 0 Agreement(s)/Contract(s) 0 Map(s) 0 Letter(s) o Summary Report Budget Authority: N/A N/A FUNDING REQUIREMENTS: Amount: $ -0- Source: Signature: Emil A. Marzullo, ~ . Executive Director Fiscal Review: 15~ ~~~ ~~~ Barbara Lindseth, Administrative S ices Director Cnmmission/Council Notes: P:\Aaendas\Comm Dev Commiuion\CDC 2008\11.17.08 Maya Cinemas DDA SR.doc COMMISSION MEETING AGENDA Meeting Date: 11/17/2008 Agenda Item Number: ~; '3 ECONOMIC DEVELOPMENT AGENCY STAFF REPORT JOINT PUBLIC HEARING - MAYA CINEMAS NORTH AMERICA, INC.- 2008 DlSPOSmON AND DEVELOPMENT AGREEMENT (CENTRAL CITY NORTH REDEVELOPMENT PROJECT AREA) BACKGROUND: At the July 24, 2008, Redevelopment Committee meeting, Maya Cinemas North America, Inc. ("Maya Cinemas"), made a PowerPoint presentation of their proposal to revitalize the 104,900 square foot building housing the former CinemaStar 20 screen multi-plex theaters ("CinemaStar") located at 450 North "E" Street in the Central City North Redevelopment Project Area, as well as a proposal to develop the 59,636 square feet (approximately 1.3 acres) of vacant Agency property in front of the theater. Maya Cinemas conducted a brief presentation about their company and other theatre developments, introduced and discussed some concepts and possibilities to revitalize and renew the current theater operations and facilities. Their proposal was to purchase the building and property formerly leased to CinemaStar and to purchase and develop the vacant Agency property in a manner befitting its prominence and key location in Downtown with an office/retail/commercial project. After the presentation, Agency Staff was authorized to initiate discussions with Maya Cinemas to develop a Redevelopment Project Study and Exclusive Right to Negotiate Agreement ("ERN") leading to a Disposition and Development Agreement ("DDA") for the building and property then leased to CinemaStar, (the "Phase One Property"), as well as the vacant Agency property in front ofthe theater (the "Phase II Property and Phase III Property"). As a separate matter, CinemaStar proposed at that time to request an assignment of the lease to Maya Cinemas, this would then enable the Agency to enter into a DDA with Maya Cinemas for the redevelopment of the properties. However, after two months of negotiations, Maya Cinemas and CinemaStar were unable to finalize any lease assignment. Owing to the fact that the 14 months offorbearance of rent to CinemaStar now totaled $574,000, the Agency forbearance was not extended beyond September 30, 2008. CinemaStar was formally placed on notice of such denial of any further forbearance and with a request for the immediate payment of the accrued back rent amount. CinemaStar subsequently ceased operations on Sunday, September 28, 2008, and to date, the Agency have not been informed of CinemaStar's plans or intentions with regards to returning the keys to the premises or the removal of their personal property. Due to the fact that CinemaStar theater operations had ceased, the Agency forwarded an immediate termination notice to CinemaStar, but to date, no response has been received. Agency Counsel has been instructed to determine the Agency lease rights as the landlord and to take further action as necessary to obtain possession of the premises as soon as possible in order to return the premises to productive use. An unlawful detainer action was filed on October 20, 2008, and the request for entry of default is being processed by the court. The Agency will be submitting a declaration for judgment which should be forthcoming within 20 days. Maya Cinemas has affirmed their interest and commitment to purchase the Phase I Property immediately, to acquire and develop the Phase II Property within three years and the remaining Phase III Property at some future date and requested that the Agency enter into the ERN as discussed above in order for them to engage the necessary architects, engineers and other contractors necessary to prepare and perform their due diligence investigations, inspections and renovation of the premises and property as soon as possible. P:\Agendas\CommDevCommission\CDC 2008\11-17-08 Maya Cinemas DDA SR.doc COMMISSION MEETING AGENDA Meeting Date: 11/1712008 Agenda Item Number: ~ ~ ? Economic Development Agency Staff Report Maya Cinemas DDA Page 2 Accordingly, on October 9, 2008, the Community Development Commission of the City of San Bemardino ("Commission") approved Resolution No. CDC/2008-4I, authorizing the Interim Executive Director of the Agency to enter into an ERN with Maya Cinemas for the period of one year with the purpose of negotiating and approving a DDA at the earliest opportunity. CURRENT ISSUE: Maya Cinemas intends to remodel and renovate the Phase I Property, as identified in Exhibit "A" attached, for a partial re-opening presently estimated for mid-December, 2008, which will include new seating, carpeting, tile, paintwork and signage and subsequent re-branding of the theater as a new operating entity for marketing purposes as part of the total Phase 1 Project. After the Holiday season, work will continue on extending the lobby, relocating the ticket booth into the building, relocating the concessions, reconfiguring part of the lobby into a private function room and converting one of the large auditoriums into an I-Max theater. This will involve raising the roof over the I-Max area in order to accommodate the huge screen required for an I-Max performance. Included in the initial work will be a fountain/public gathering place to the front of the theater to be identified as Phase IA. It is estimated that this work will be completed by March 2009, resulting in an entirely new cinema experience for the City. Thereafter, the Phase II Property will be developed to include an office/restaurant/retail building adjacent to the California Theatre of the Performing Arts ("California Theatre") to the west, as well as an amphitheater/or some other common gathering area to be constructed and installed adjacent to the building. Finally, the Phase III Property will see the development of the remaining vacant Agency land, as herein identified and more fully described below, for compatible downtown uses in support of the multi-plex theater as well as the Agency owned California Theatre and the Downtown Area, in general. As part of the Agreement, Maya Cinemas will enter into a license agreement with the Agency to gain interim control of the Phase II Property and the Phase 11I Property which they intend to reconfigure with new pavers or other form ofhardscape, and new lighting and landscaping. Not only will this create an exciting new public space or plaza, but it will also relieve the Agency of the expense of having to maintain this area which in excess is on one acre and costs approximately $36,000 per annum. The Phase I Property comprising the theater is now ten years old and has suffered over the last four years from severe deferred maintenance to the extent that the product is no longer competitive in the market place. Virtually all furnishings and fixtures need to be replaced including 4,400 new seats, as well as new carpeting, tile, countertops, paintwork, wall carpeting, and new digital projection equipment and movie screens and sound systems. Regrettably, it has been discovered that there are also a number of Americans with Disabilities Act ("ADA") deficiencies, including the steps to the risers in each auditorium, which must be addressed. Bringing the building back to its original state will require Maya Cinemas to incur expenditures of $5.2 million. In order to take the project to the next level, so gaining market superiority in the region, the Developer has signed a license agreement with I-Max to operate a 3-D I-Max cinema at this location. The closest I-Max to the west is in the City of Ontario and to the east in Cathedral City. The terms of the I-Max license agreement restrict the number ofl-Max movie theaters in anyone geographical region so, according to the license, there can be no additional I-Max theaters in the Inland Empire which will undoubtedly give the San Bemardino multi-plex a distinct advantage over surrounding communities. The value of the I-Max improvements, including the projection equipment, refitting one auditorium for an I-Max screen (which involves raising the roof to accommodate the large screen) and the related licenses amount to a further $2.9 million bringing the total value of the Phase I Property improvements to $8.1 million. The Phase II Property exterior improvements include the installation and maintenance of new hardscape, landscaping and a fountain at a cost of an additional $1.2 million, which will relieve the Agency of the financial burden of having to P:\Agendas\Comm DevCommissionlCDC 2008\] 1-)7-08 Maya Cinemas DDA SRdoc COMMISSION MEETING AGENDA Meeting Date: 1l/1712008 Agenda Item Number: :1l-; ? Economic Development Agency Staff Report Maya Cinemas DDA Page 3 maintain the exterior at a current expenditure of approximately $36,000 per year. The Phase 1 Property acquisition and improvements will likely be financed with a combination of a HUD Section 108 loan and Maya Cinemas' equity, and Agency license agreement for the Phase II and Phase III Property to transfer the maintenance obligations for these areas to Maya Cinemas. The Phase II Property project will consist of the development of an office, retail, restaurant and entertainment use upon the vacant Agency land adjacent to the California Theatre of approximately 11,000 square feet to accommodate both uses of the public and the California Theatre. The remaining Phase III Property shall be developed within seven years with similar uses, but not limited to, retailers, book stores, restaurants, nationally recognized coffee shops and other retail uses with approximately 20,000 to 30,000 square feet of gross building area, plus related lighting, landscaping and related improvements. Maya Cinemas is to commence construction on the Phase II Property improvements within three years or forfeit development rights for the facilities for which construction was not commenced. ENVIRONMENTAL IMPACT: The Agency has reviewed the proposed project under the California Environmental Quality Act ("CEQA") and has determined that the transfer of the CinemaStar property is exempt pursuant to Chapter 2.6, Section 21080 of the Public Resources Code, CEQA Statutes, and Section 15061 (b)(3) of the CEQA statutes. FISCAL IMPACT: Maya Cinemas will acquire the Phase 1 Property for the sum of $4.6 million and additional new money for the rehab will be provided in a new $8.2 - $8.5 million HUD Section 108 loan with the amount outstanding on the Agency HUD 108 loan not to exceed three years, after which the property will be refinanced and the HUD Section 108 loan satisfied. Failure to refinance the Phase 1 Property within the specified time will result in forfeiture of a $450,000 Maya Cinemas letter of credit which will be on deposit with the Agency. The Phase II Property and the Phase III Property will be acquired at market value at the appropriate time, however, these properties were recently appraised by a qualified MAl appraiser at a total of $71 5,000. RECOMMENDATION: That the Mayor and Common Council and the Community Development Commission adopt the attached Resolutions. ~ Emil A. Marzullo, Interim Executive Director P:\Agendas\Comm [lev Commission\CDC 2008\11-17-03 Maya Cinemas DDA SR.doc COMMISSION MEETING AGENDA Meeting Date: II/1712008 Agenda Item Number: ~ ~ ~