2010120607 - 20 Dittos Lane - Amendment to first amended and restated exclusive right to negotiate agreementI oW N o,� MEETING DATE: 12/06/10
ITEM NO:
!p AGENCY AGENDA REPORT
DATE: NOVEMBER 19, 2010
TO: CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY
FROM: GREG LARSON, EXECUTIVE DIRECTOR
SUBJECT: 20 DITTOS LANE
STAFF RECOMMENDS THAT THE AGENCY BOARD ADOPT
RESOLUTION APPROVING FIRST AMENDMENT TO FIRSTAMENDED
AND RESTATED EXCLUSIVE RIGHT TO NEGOTIATE AGREEMENT
THAT WOULD FACILITATE AN EFFORT TO REDEVELOP THE
APPROXIMATELY 1.58 -ACRE PARCEL AT 20 DITTOS LANE
RECOMMENDATION
Staff recommends that the Agency Board adopt resolution approving the First Amendment to
First Amended and Restated Exclusive Right to Negotiate Agreement that would facilitate an
effort to redevelop the approximately 1.58 -acre parcel at 20 Dittos Lane. Staff recommends this
action in order to extend the Negotiating Period under the Agreement through March 31, 2011
and to authorize an update of the ERNA Schedule.
BACKGROUND
In 2008 ROEM Development Corporation approached Town staff indicating an interest in
developing affordable housing in Los Gatos. In April 2009, ROEM Development Corporation
submitted a Statement of Qualifications and a Development Proposal for potential affordable
apartments at 20 Dittos Lane. Since that time staff has held extensive discussions with ROEM
and the Town Council to determine the feasibility of the proposal. The initial development
proposal is available for review at the Town Clerk's office.
PREPARED BY : BUD LORTZ
Project Manager
Reviewed by: ` Assistant Town Manager /Deputy Director Town Attorney /General
Counsel Clerk Administrator /Secretary Finance
Community Development
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NAMGR \AdminWorkFiles\2010 Council Repoits \12 -06 -10 Dittos Lane doc (Bud).doc
PAGE 2
NOVEMBER 19, 2010
CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY
SUBJECT: 20 DITTOS LANE
BACKGROUND(cont'd:
ROEM initially requested a loan of $5,333,000 (4.0% - 33 year) from the Los Gatos
Redevelopment Agency, Funding would come from the Agency's Affordable Housing Fund.
Staff has had an opportunity to conduct a detailed analysis of the terms of the loan and the
financing structure described in the proposal but the terms of the loan have not yet been
negotiated. A subsidy of approximately $200,000 /unit to create affordable housing in Los Gatos
is considered reasonable and appropriate.
DISCUSSION:
Staff prepared two related agreements that would facilitate acquisition and redevelopment in the
Central Los Gatos Redevelopment Project Area for use consistent with the Town's General Plan
and the Redevelopment Plan for the Project Area. Subject to future planning and approvals as
discussed below, the acquisition for eventual redevelopment of the Property would help to
eliminate blighting conditions on the site and in the Project Area and would provide an
opportunity to develop an appropriate number of low and moderate income affordable housing
units for the benefit of the community and in satisfaction of various Community Redevelopment
Law affordable housing requirements. These two agreements were presented for consideration
by the Redevelopment Agency Board and were subsequently approved on September 21, 2009,
include an Assignment and Assumption Agreement (Assignment Agreement) and an Exclusive
Right to Negotiate Agreement (ERNA) which was subsequently amended in February 2010. The
terms of the Assignment Agreement were fulfilled and the property at 20 Dittos Lane was
eventually purchased by the Los Gatos Redevelopment Agency on December 13, 2009. The
ERNA as described below needs to be extended to March 31, 2011 to allow sufficient time for
completing a mutually acceptable Disposition and Development Agreement (DDA) and to
adequately process the EIR and Town land use entitlements. The ERNA as amended in February
2010 includes a milestone schedule exhibit of key actions and dates to complete and approve a
DDA within the negotiating period deadline of December 20, 2010. Section 2 of the First
Amendment now before the Agency Board for consideration authorizes Agency staff to work
with the developer to update the milestone schedule exhibit to reflect the proposed new
negotiating period deadline of March 31, 2011.
ERNA The ERNA that was entered into is between the Agency and a controlled affiliate of
ROEM, Dittos Lane Family Housing, L.P. (ROEM Affiliate). The ERNA established a 270 -day
period which will expire on December 20, 2010. During this time the parties have negotiated
exclusively with each other to seek agreement on the terms of a DDA, under which the Agency
would convey the Property to the ROEM Affiliate, and the ROEM Affiliate would design,
construct and operate an agreed upon development on the Property (Development).
The DDA to be negotiated during the ERNA period would establish, among other matters: (l)
the nature, scope and conceptual design of the Development to be constructed on the Property by
the ROEM Affiliate, including standards, requirements and schedules for timely and high quality
design, construction and operation of the Development, and the number and affordability levels
for the affordable residential units the Development; (2) the pre - conditions (firm financing
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PAGE 3
NOVEMBER 19, 2010
CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY
SUBJECT: 20 DITTOS LANE
DISCUSSION (cont'd):
commitments, development entitlements, executed construction contract, etc.) that the ROEM
Affiliate must satisfy to assure the Agency, prior to the Agency's obligation to convey the
Property to the ROEM Affiliate, that it is ready, willing and able to construct and operate the
Development in accordance with the DDA; and (3) the purchase price or lease terms to be paid
by the ROEM Affiliate for the Property and any financially justified Agency monetary assistance
to the Development.
During the ERNA period, Town/Agency staff and the ROEM Affiliate have sought to prepare
mutually acceptable conceptual designs and a workable financing plan for the Development.
Also during the ERNA period, the Agency has.been in the process of preparing the appropriate
environmental review document in accordance with the California Environmental Quality Act
(CEQA) to evaluate the potential environmental effects of the development of the Development
under the DDA.
If staff and the ROEM Affiliate succeed in negotiating the terms of a DDA, the DDA would be
presented to the Agency Board for consideration at a duly noticed public hearing, along with the
accompanying CEQA document and a Community Redevelopment Law- mandated financial
report that evaluates the necessity and appropriateness of the proposed purchase price or lease
terms and any Agency financial assistance in order to enable a financially feasible project. At
the same time the DDA and CEQA document are presented to the Agency Board, it is
anticipated that the basic Town land use entitlements for the Development would be presented
for consideration of approval by the Town Council.
If the DDA is approved by the Agency Board and the basic Town land use entitlements are
granted by the Town Council, then ROEM would proceed to prepare detailed plans and
specifications, seek all necessary remaining Town and other development permits and approvals,
and seek formal financial commitments for the Development. During this ERNA extension
period, staff proposes to coordinate the Town land use entitlements process and the preparation
of the DDA so that both the land use entitlements and DDA may be considered and, if
appropriate, approved concurrently. This concurrent approach to coordinating the required
actions, in no way, commits or compels the Town to approve the proposed project or the DDA.
Extending the ERNA to March 31., 2011 and possible execution of the DDA will not limit, in any
way, the Town's normal land use approval authority over the Property.
If, at the end of the ERNA period, the Agency Board does not approve a DDA, then the ERNA
obligations to the ROEM Affiliate would terminate and the Agency would be free to seek other
means to develop the Property, including soliciting interest in redeveloping the Property from the
broader development community.
1151 \04 \910950.2
�7. Q '1
NOVEMBER 19, 2010
CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY
SUBJECT: 20 DITTOS LANE
CONCLUSION:
Because ROEM has invested considerable time and effort in evaluating development options for
the Property, staff believes that it would be most efficient and effective to continue to seek to
negotiate a DDA for the Property with the ROEM Affiliate. Staff recommends that the Agency
Board adopt the attached resolution approving the First Amendment to First Amended and
Restated Exclusive Right to Negotiate Agreement that would facilitate an effort to redevelop the
approximately 1.58 -acre parcel at 20 Dittos Lane and allow for the extension of the Negotiating
Period under the Agreement through March 31, 2011. The Redevelopment Agency has
purchased the property which allows for future redevelopment using other means if an
acceptable DDA is not reached with the ROEM Affiliate.
ENVIRONMENTAL ASSESSMENT
Approval of the First Amendment Agreement does not have the potential to result in a direct or
reasonably foreseeable physical change in the environment. The details regarding subsequent
redevelopment of the property are currently unknown and will not be clear until the ROEM
completes the necessary land use entitlement process, at which time the Town will evaluate the
impact, if any, of the project on the environment.
FISCAL IMPACT
Funding for the acquisition of this property was made available through the Los Gatos
Redevelopment Agency's Low and Moderate Housing Fund. The current unrestricted balance of
this fund is approximately $4.7 million, all of which is available for appropriation.
Attachment: Resolution of the Los Gatos Redevelopment Agency Approving the First
Amendment to Tirst Amended and Restated Exclusive Right to Negotiate Agreement related to
20 Dittos Lane.
Distribution: ROEM - 1650 Lafayette St., Santa Clara, CA 95050
1151\04\910950.2
FIRST AMENDMENT TO
FIRST AMENDED AND RESTATED
EXCLUSIVE RIGHT TO NEGOTIATE AGREEMENT
(20 DITTOS LANE DEVELOPMENT)
This First Amendment (the "First Amendment ") to the First Amended and Restated
Exclusive Right To Negotiate Agreement For 20 Dittos Lane Development is entered into as of
December 6, 2010 by and between the Redevelopment Agency of the Town of Los Gatos (the
"Agency ") and Dittos Lane Family Housing, L.P., a California limited partnership (the
"Developer "), on the basis of the following facts, understandings and intentions of the parties:
RECITALS
A. The Agency and the Developer have entered into a First Amended and Restated
Exclusive Right To Negotiate Agreement For 20 Dittos Lane Development, initially executed as
of September 21, 2009, as fully amended and restated as of February 16, 2010 (the
"Agreement "). Capitalized terms used but not defined in this First Amendment shall have the
meanings set forth in the Agreement.
B. The Agency and the Developer desire to enter into this First Amendment in order
to extend the Negotiating Period under the Agreement through March 31, 2011 and to authorize
an update of the ERNA Schedule attached to the Agreement as Exhibit B .
NOW, THEREFORE, the Agency and the Developer agree as follows:
Section 1. Extension of Negotiating Period The first sentence of Section 1.2 of the
Agreement is revised in its entirety to read as follows:
" Subject to earlier termination pursuant to specific provisions of this Agreement, the
negotiating period (the "Negotiating Period ") under this Agreement commenced on the
Effective Date (as set forth in the Opening Paragraph of this Agreement) and shall expire
at midnight Pacific Standard Time on March 31, 2011.
Section 2. Updated ERNA Schedule As further provided in Section 2.1 of the
Agreement, the Developer and the Agency Executive Director, acting on behalf of the Agency,
are authorized to update the ERNA Schedule attached to the Agreement as Exhibit B consistent
with the extension of the Negotiating Period provided in Section 1 of this First Amendment.
Section 3. Effect of First Amendment The provisions of this First Amendment shall
be incorporated into the Agreement and shall become a part thereof. Except as provided in this
First Amendment, all terms and conditions of the Agreement shall continue in full force and
1151 \04 \908581.1
effect. Only those provisions of the Agreement specifically amended herein shall be affected by
this First Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of
the date first above written.
DEVELOPER:
DITTOS LANE FAMILY HOUSING, L.P., a
California limited partnership
By: Roem Development Corporation, a
California corporation, its General Partner
No
AGENCY:
Jonathan Emami, Vice President
REDEVELOPMENT AGENCY OF THE TOWN
APPROVED AS TO FORM: OF LOS GATOS, a public body corporate and politic
By: By:.
Judith J. Propp, Agency Counsel
Greg Larson, Executive Director
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FIRST AMENDMENT TO
FIRST AMENDED AND RESTATED
EXCLUSIVE RIGHT TO NEGOTIATE AGREEMENT
(20 DITTOS LANE DEVELOPMENT)
This First Amendment (the "First Amendment ") to the First Amended and Restated
Exclusive Right To Negotiate Agreement For 20 Dittos Lane Development is entered into as of
December 6, 2010 by and between the Redevelopment Agency of the Town of Los Gatos (the
"Agency ") and Dittos Lane Family Housing, L.P., a California limited partnership (the
"Developer "), on the basis of the following facts, understandings and intentions of the parties:
RECITALS
A. The Agency and the Developer have entered into a First Amended and Restated
Exclusive Right To Negotiate Agreement For 20 Dittos Lane Development, initially executed as
of September 21, 2009, as fully amended and restated as of February 16, 2010 (the
"Agreement "). Capitalized terms used but not defined in this First Amendment shall have the
meanings set forth in the Agreement.
B. The Agency and the Developer desire to enter into this First Amendment in order
to extend the Negotiating Period under the Agreement through March 31, 2011 and to authorize
an update of the ERNA Schedule attached to the Agreement as Exhibit B .
NOW, THEREFORE, the Agency and the Developer agree as follows:
Section 1. Extension of Negotiating Period The first sentence of Section 1.2 of the
Agreement is revised in its entirety to read as follows:
" Subject to earlier termination pursuant to specific provisions of this Agreement, the
negotiating period (the "Negotiating Period ") under this Agreement commenced on the
Effective Date (as set forth in the Opening Paragraph of this Agreement) and shall expire
at midnight Pacific Standard Time on March 31, 2011. "
Section 2. Updated ERNA Schedule As further provided in Section 2.1 of the
Agreement, the Developer and the Agency Executive Director, acting on behalf of the Agency,
are authorized to update the ERNA Schedule attached to the Agreement as Exhibit B consistent
with the extension of the Negotiating Period provided in Section 1 of this First Amendment.
Section 3. Effect of First Amendment The provisions of this First Amendment shall
be incorporated into the Agreement and shall become a part thereof. Except as provided in this
First Amendment, all terms and conditions of the Agreement shall continue in full force and
1151 \04\908581.1
effect. Only those provisions of the Agreement specifically amended herein shall be affected by
this First Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of
the date first above written.
DEVELOPER:
APPROVED AS TO FORM:
Judith J. Propp, Agency Counsel
DITTOS LANE FAMILY HOUSING, L.P., a
California limited partnership
By: Roem Development Corporation, a
California corporation, its General Partner
By:
Jonathan Emami, Vice President
AGENCY:
REDEVELOPMENT AGENCY OF THE TOWN
OF LOS GATOS, a public body corporate and politic
0
Greg Larson, Executive Director
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