HomeMy WebLinkAboutR36-Economic Development Agency
ECONOMIC DEVELOPMENT AGENCY
OF THE CITY OF SAN BERNARDINO
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FROM: Emil A, Marzul10
Interim Executive Director
SUBJECT: Waterman Holdings, LLC - Defense, Indemnification
and Hold Harmless Agreement and Easement,
Maintenance and Operation Agreement (Central City
East Redevelopment Project Area)
DATE: July21,2009
SvnoDsis of Previous Commission/Council/Committee Action(s):
On November 2, 2004, Redevelopment Committee Members Estrada and Longville unanimously voted to recommend that the
Community Development Commission of the City of San Bernardino (the "Commission") consider a disposition and development
agreement with Watennan Holdings, LLC, for approvaL
On December 6, 2004, the Commission adopted Resolution No. CDC/2004-49 approving the sale of certain real property by the
Agency to Watennan Holdings, LLC, and authorized the Executive Director to execute the Disposition and Development
Agreement between the Agency and Watennan Holdings, LLC, and the Mayor and Common Council of the City of San Bernardino
simultaneously adopted Resolution No, 2004-386 approving the sale of certain real property (4th and Watennan Avenue - APN:
0135-191-11) within the Central City East Redevelopment Project Area ("Project Area"),
Svnonsis Continued to Next Pa!!e....
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Recommended Motion(s):
'.."-~
Mavor and Common Council
A. Resolution of the Mayor and Common Council ofthe City of San Bernardino approving a Defense, Indemnification
and Hold Hannless Agreement by and between the City of San Bernardino and Watennan Holdings, LLC,
concerning real property (4th and Watennan Avenue - APN: 0135-191-17) (Central City East Redevelopment
Project Area)
B. Resolution ofthe Mayor and Common Council of the City of San Bernardino approving an Easement, Maintenance
and Operation Agreement by and between the City of San Bernardino and Watennan Holdings, LLC, concerning
real property (4th Street and Watennan Avenue - APN: 0135-191-17) (Central City East Redevelopment Project
Area)
Contact Person(s):
Project Area(s)
Supporting Data Attached:
Mike Trout
Phone:
(909) 663- I 044
Central City East
Ward(s):
1"
o Staff Report 0 Resolution(s) 0 Amendment(s)/Agreement(s) 0 Map(s) 0 Letters
FUNDING REQUIREMENTS Amount: $
N/A
Source:
N/A
N/A
Budget Authority:
SIGNATURE:
EmilA.
/
Fiscal Review:
, Interim Executive Director
Commission/Council Notes:
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p:\Agendas\Comm Dev CommissioD\CDC 2009\08-03-09 Waterman Holdings, u.c. DIHH & EMO Agrmts SR.doc
COMMISSION MEETING AGENDA
Meeting Date: 08/03/2009
A!!enda Item Number: I? J,6
i.-
Economic Development Agency Staff Report
Waterman Holdings, LLe - Deftnse, Indemnification and Hold Harmless Agreement,
Easement, Maintenance and Operation Agreement
Page 2
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Synopsis of Previous Commission/CounciIlCommittee Action{s):
On June 7, 2005, Redevelopment Committee Members Estrada and McGinnis unanimously voted to
recommend that the Commission consider the action of June 20, 2005.
On June 20, 2005, the Commission adopted Resolution No. CDC/2005-19 approving Amendment No. I
to the 2004 Disposition and Development Agreement between the Agency and Waterman Holdings, LLC
and authorized the Executive Director to execute Amendment No. I.
On June 19,2006, the Commission adopted Resolution No. CDC/2006-20 approving Amendment No.2
to the 2004 Disposition and Development Agreement between the Agency and Waterman Holdings, LLC
and authorized the Executive Director to execute Amendment No.2.
On November 8, 2007, Redevelopment Committee Members Estrada, Baxter and Johnson unanimously
voted to recommend that the Commission consider the action of Amendment No.3.
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On July 21, 2008, the Commission adopted Resolution No. CDC12008-26 approving Amendment No.3 to
the 2004 Disposition and Development Agreement between the Agency and Waterman Holdings, LLC
and authorized the Interim Executive Director to execute Amendment No.3.
On October 9, 2008, Redevelopment Committee Members Estrada, Baxter and Johnson unanimously
voted to recommend that the Council and the Commission consider the action of Amendment No.4.
On November 3, 2008, the Commission discussed Amendment No.4 and the sale of the Flood Control
Channel Property to Waterman Holdings, LLC, deciding to continue discussion of Amendment No.4 and
the public hearing for the sale of the Flood Control Channel Property to Waterman Holdings, LLC to
November 17,2008.
On November 17, 2008, the Commission continued discussion of Amendment No.4 and the public
hearing for the sale of the Flood Control Channel Property to Waterman Holdings, LLC, to December 15,
2008.
On December 15, 2008, the Commission adopted Resolution No. CDC/2008-46 approving Amendment
No.4 to the 2004 Disposition and Development Agreement between the Agency and Waterman Holdings,
LLC concerning the sale of the Flood Control Channel Property to Waterman Holdings, LLC, authorized
the Interim Executive Director to execute Amendment No.4 and the Mayor and Common Council of the
City of San Bernardino simultaneously adopted Resolution No. 2008-459 approving the sale of the Flood
Control Channel Property.
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p:\Aa:endas\/:,omm Dev Commission.\CDC2009\08.,()3~ Waterman. Holdinp. u.c - DnnI.&.EMO Agrmts SR.doc
COMMISSION MEETING AGENDA
Meeting Date: 0810312009
A.n~nilQ Tt~... NII...h~r.
ECONOMIC DEVELOPMENT AGENCY
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STAFF REPORT
WATERMAN HOLDINGS, LLC-
DEFENSE, INDEMNIFICATION AND HOLD HARMLESS AGREEMENT AND
EASEMENT, MAINTENANCE AND OPERATION AGREEMENT
(CENTRAL CITY EAST REDEVELOPMENT PROJECT AREA)
BACKGROUND:
On December 6, 2004, the Mayor and Common Council of the City of San Bernardino (the "Council")
and Community Development Commission of the City of San Bernardino (the "Commission") approved
the sale of approximately 3.9 acres of land owned by the Redevelopment Agency of the City of San
Bernardino (the "Agency") located at the southwest corner of 4th Street and Waterman Avenue (APN:
0135-191-1 I) (the "Property") pursuant to a 2004 Disposition and Development Agreement (the "DDA")
by and between the Agency and Waterman Holdings, LLC (the "Buyer/Developer"). Waterman
Holdings, LLC is a single asset LLC created solely for the ownership of the Property and for the
development of the project for the County of San Bernardino. The principals of Waterman Holdings,
LLC are as foJlows: Jian Torkan (50%) and Emanuel Separzadeh, Jacob Separzadeh, John Separzadeh,
Michael Separzadeh, Mouris Separzadeh and Yafa Azizzadeh (50%). The sole managing member of
Waterman Holdings, LLC is Jian Torkan and has unilateral authority to act on its behalf. The other
parties to Waterman Holdings, LLC are silent investor parties.
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The DDA, as approved, required for the Buyer/Developer to construct a minimum of 16,864 square feet
of office space for the County Preschool Services Department (the "PSD") on the most westerly 2 acres of
the Property ("Phase I") with an option to construct an additional building for another County Department
on the remaining 1.6 acres on the easterly portion of the Property ("Phase II"). During the interim period
until the option on the Phase II site was exercised, the DDA required the Agency to install and maintain
perimeter fencing, landscaping and an irrigation system for the Phase II site. The Agency would sell the
Phase I Property for the fair market value and the Buyer/Developer would have the option to purchase the
Phase II Property at a later date. The Agency pledged 60% of the tax increment that the completed
Project would generate over a period of ten years to off-set the below market rental rate that the County
required of the Buyer/Developer.
On May 17, 2005, the San Bernardino County Board of Supervisors approved a ten-year lease with the
Buyer/Developer to construct 17,000 square feet of office space for the PSD.
On June 20, 2005, the Commission approved Amendment No. 1 to the DDA, whereby the location of
Phase I and Phase II were redefined. As a result, the Phase I project was then to be located at the
southwest corner of 4th Street and Waterman Avenue.
In the interim, two items arose that would necessitate a change to the original DDA; first, it was
determined that the pledge of tax increment to the Buyer/Developer needed to be restructured because the
last date to incur tax increment debt payable from direct pledge of tax increment revenues in the Project
Area was January 1, 2004. Second, the County needed a larger building constructed for a different
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P:\Aa:endas\Comm Dev Commission\CDC 2009\0&.03.09 Watemwt Holdinp. LLC - DlHH &: EMO Agrmts SR.doc;
COMMISSION MEETING AGENDA
Meeting Date: 08/0312009
.4.oenrlSll Item Number:
Economic Development Agency Staff Report
Waterman Holdings, LLe - Defense, Indemnification and Hold Harmless Agreement,
Easement, Maintenance and Operation Agreement
Page 2
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County Department and consequently, the Buyer/Developer would now require both the Phase I and
Phase II sites (APN: 0135-191-1 I) (the "Agency Property") be combined as a single site.
The Buyer/Developer will purchase the Agency Property for $512,424, which is equal to the fair market
value of the Agency Property based upon the final surveyed square footage. Escrow has been opened
under the terms of the original DDA and the Buyer/Developer has deposited the sum of $20,000 into
escrow and the balance of $492,424 will be paid upon the closing of the escrow. Per Amendment No.2,
the Agency will pledge to the Buyer/Developer from general Agency revenues under a Promissory Note
and not as a pledge of tax increment revenues, an amount equal to 60% of the 1 % tax revenues generated
by the proposed Project (estimated development cost is $6 million) for a period of ten years. As per the
original DDA, the 60% pledge was authorized by the Commission in an effort to off-set or compensate
the Buyer/Developer for the below market rate per the ten-year lease with the County. The Agency's
payment obligation will commence upon presentation of a cancelled check by the Buyer/Developer and as
of the fiscal year following completion of the Project by the Buyer/Developer and said payment will be
paid after each December 10lh and April 10lh tax payment.
On June 19, 2006, the Commission approved Amendment No. 2 to the DDA, whereby the
Buyer/Developer will develop on the Agency Property, a 2-story building containing a minimum of
45,000 square feet of office space, to include parking and landscaping, and to lease to the County
Transitional Assistance Department ("TAD") (the "Project"). TAD provides jobs and employment
services to residents and job training programs.
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Additionally, in Amendment No.2, the Agency pledged to reimburse the Buyer/Developer an amount
equal to 60% of the 1 % of new property taxes generated by the Project for a period of ten years from the
general revenues of the Agency.
On July 21,2008, the Commission approved Amendment No.3 to the DDA, wherein the Agency would
reimburse the Buyer/Developer an amount not to exceed $399,500 for the actual costs for the required
Off-Site Improvements. This reimbursement would be paid from the sale proceeds of the Agency
Property 30 days following the completion of the Project as evidenced by a Certificate of Occupancy
issued by the City of San Bernardino (the "City") and verification that the Off-Site Improvements have
been constructed by the Buyer/Developer and accepted by the City. The cost reimbursements to the
Buyer/Developer would not exceed the lesser of the actual cost paid for, the Off-Site Improvements or
$399,500 utilizing prevailing wage rates. All other terms and conditions of the DDA, as amended by
Amendments No, 1 and No.2, would remain unchanged.
On November 3, 2008, the Commission met to consider the approval of Amendment No.4 for the sale of
the Flood Control Channel Property to the Buyer/Developer. At the meeting, there was discussion and
concern about the plans and necessary assurances that the Buyer/Developer would obtain any and all
approval/permits from any federal, state and/or local agency prior to construction of the one-story parking
structure over the Flood Control Channel Property. The decision of the Commission was to continue the
approval of Amendment No.4 and the sale of the Flood Control Channel Property to November 17, 2008,
to allow Agency Staff time to make the necessary revisions to Amendment No.4.
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P:\Ascndas\Comm Dev Commission'lCOC 2009\08-03-09 Walennan Hoklillgs. LLC. DIHH &. EMO Agrmts SR.doc
COMMISSION MEETING AGENDA
Meeting Date: 08/0312009
Agenda Item Number:
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1
Economic Development Agency Staff Report
Waterman Holdings, LLe - Defense, Indemnification and Hold Harmless Agreement,
Easement, Maintenance and Operation Agreement
Page 3
.......
On November 17, 2008, the Commission continued the approval of Amendment No.4 and the sale of the
Flood Control Channel Property to December 15, 2008.
On December 15,2008, the Commission approved Amendment No.4 to the DDA, which outlined certain
conditions that the Buyer/Developer was required to meet prior to the transfer of the Flood Control
Channel Property from the Agency to the Buyer/Developer. Additionally the Council approved the sale
of the Flood Control Channel Property to the Buyer/Developer.
CURRENT ISSUE:
Item No. 20 of Amendment No.4 added Section 2.15 to the DDA in connection with the Flood Control
Channel Property. Section 2.15 placed several requirements on the Buyer/Developer that needed to be
accomplished before escrow for the Flood Control Channel Property could be closed. To date, the
Buyer/Developer has met all the requirements except for two items. Those two remaining items, which
the Buyer/Developer is required to execute, is a "Defense, Indemnification and Hold Harmless
Agreement" and an "Easement, Maintenance and Operation Agreement" with the City.
Additionally, Section 2.15 requires that both of these agreements, by and between the Buyer/Developer
and the City, be approved by the Council at a public meeting.
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ENVIRONMENTAL IMPACT:
The proposed new project description has been reviewed under the California Environmental Quality Act
("CEQA") and it has been determined that the project qualifies for a Categorical Exemption, Class 32
(Guidelines Section 15332).
FISCAL IMPACT:
The Agency will receive $36,000 from the Buyer/Developer for the sale of the Flood Control Channel
Property.
RECOMMENDATION:
That the Mayor and Common Council adopt the attached Resolutions.
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Emil A. Marzullo, Interim Executive Director
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P:\Agendas\Comm Dev Commission\CDC 2009\0s.o3.09 WatermanHoldinas, LLC -nnnl &EMO Agrmts SR.doc
. COMMISSION MEETING AGENDA
Meeting Date: 08/0312009
AopnilSll Ttpm Numher: