SR-05-12-2015-3K 200-007/901-013Imm City Council Report
Santa Monica,
City Council Regular Meeting: May 12, 2015 �//
Agenda Item: 6 h
To: Mayor and City Council
From: Andy Agle, Director of Housing and Economic Development
Subject: Fourth Street and Arizona Avenue negotiations and professional services
Recommended Action
Staff recommends that the City Council:
Authorize the City Manager to negotiate and execute an amendment to the
exclusive negotiating agreement with the development team consisting of
Metropolitan Pacific Capital, Clarett West, and DLJ West Capital for the Fourth
Street and Arizona Avenue project to extend the term by six months with an
additional three -month option.
Authorize the City Manager to negotiate and execute a second modification to
Professional Services Agreement Number 9539 with Keyser Marston Associates,
Inc., a California -based company, in an amount not to exceed $200,000, and
extend the term of the contract for three years with three, one -year options for
the purposes of providing financial analysis of the Fourth Street and Arizona
Avenue project, Bergamot Station Arts Center project, and other real estate
analytical needs during the term.
3. Authorize budget changes as outlined in the Financial Impacts & Budget Actions
section of this report.
Executive Summary
The current exclusive negotiating agreement (ENA) between the City and the Fourth
Street and Arizona Avenue development team ends on June 19, 2015.
Staff recommends a six -month extension to allow the parties to complete the float -up
process before the Planning Commission and City Council. The term of the ENA is
proposed to be extended by six months until December 19, 2015 with one, three -month
option at the discretion of the City Manager.
Staff also recommends an extension of the contract with Keyser Marston
Associates Inc. to continue providing real estate financial analysis of the Fourth Street
and Arizona Avenue development, as well as the Bergamot Station Arts Center and
other projects, as needed. The contract modification would extend the term of the
contract for three years until June 30, 2018 with three, one -year extensions and
increase the not -to- exceed fee by $200,000 for a total contract amount of $280,000.
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Background
On December 10, 2013 (attachment A), Council authorized an exclusive negotiating
agreement (ENA) with a development team consisting of Metropolitan Pacific Capital,
Clarett West, and DLJ West Capital (4AZ Development Team) to develop City -owned
properties between Fourth and Fifth Streets, south of Arizona Avenue
(4AZ Development). The purpose of an ENA is to provide a development team with an
exclusive period of time to negotiate with staff, refine the project, gather community
input, and complete the initial entitlement float -up process through the development
agreement application. The ENA was executed March 19, 2014, and had a base term
of one year with one, 90 -day option to extend the term, which has been exercised.
The ENA will expire on June 19, 2015.
On January 24, 2012 (attachment B), Council authorized a Professional Services
Agreement (PSA) with Keyser Marston Associates, Inc. (KMA), in the amount of
$80,000 for the purposes of providing professional real estate and financial analysis
regarding complex real estate transactions involving property leasing and
public /private partnerships. KMA has been advising the City on both the 4AZ
Development and the Bergamot Station Arts Center proposal. The PSA had a first
modification that extended the term until June 30, 2015.
Discussion
To date, the 4AZ Development Team has made diligent efforts in fulfilling the
obligations outlined in the ENA. Specific milestones include: returning to Council for
direction on the initial project concepts on June 10, 2014; filing a discretionary
application for a Development Agreement on August 12, 2014; commencing the
engagement process with a community meeting on September 8, 2014; presenting to
the Architectural Review Board for early conceptual review (float -up) on
December 15, 2014; and submitting a good faith deposit. The 4AZ Development Team
has also made substantive efforts in developing the open space management plan and
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parking management plan and is preparing to present to the Planning Commission in
the summer of 2015.
Currently, the team is working with City staff to negotiate conceptual business terms
that would be incorporated into an eventual disposition and development
agreement (DDA). A DDA is the negotiated contract between the City and the
Developer that outlines terms of development and conveyance of the City's property
under a leasehold interest prior to the execution of the Ground Lease. Given the
progress made, staff recommends a six -month extension to the ENA to allow the parties
to complete the float -up process before the Planning Commission and Council, at which
point the Council could consider whether to enter into development agreement (DA) and
DDA negotiations and to extend the ENA. In the event that scheduling float -ups before
the Planning Commission and Council is extended beyond the currently anticipated
schedule, staff recommends that Council authorize the City Manager to extend the ENA
term administratively for an additional three calendar months, or until March 19, 2016.
Pursuant to Council direction on February 10, 2015 (attachment C), the City entered an
ENA with Worthe Real Estate Group for the Bergamot Station Arts Center project.
Pursuant to an existing PSA, KMA has provided financial analysis of the Bergamot
developer's proposal in addition to assisting with negotiations and preparing financial
analysis of the 4AZ Development. Given KMA's deep experience with both
development projects, staff seeks to continue the contract to ensure consistency in the
financial analysis and negotiations for both projects, and to assist as needed in
other assignments. KMA's fees as well as City staff costs for the 4AZ and Bergamot
Station Arts Center projects are reimbursed by each development team through a cost
recovery deposit of $150,000 for each project.
Financial Impacts & Budget Actions
The professional services agreement amendment to be awarded to Keyser Marston
Associates, Inc. is $200,000, for an amended agreement total not to exceed $280,000.
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Award of the professional services agreement amendment requires the following
FY 2014 -15 budget actions:
1. Appropriate $200,000 to expenditure account 012681.555060 (Professional
Services).
2. Increase revenue budget at account 01263.407771 in the amount of $300,000.
Prepared By: Elana Buegoff,
Approved Forwarded to Council
Andy Agle, Director 4 ousing a4fBB�tikS
Attachments:
A. 12/10/2013 4th /5th Arizona ENA
Elaine M Polachek, Interim City MSfr 0815
B. 1/24/2012 PSA for Real Estate and Economic Development Consulting Services
C. 2/10/2015 Bergamot Station Arts Center Guidelines and Advisory Committee
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Reference:
Amended Agreement No. 9844
(CCS)
Amended Agreement No. 9539
(CCS)