CC 2015-02-10_11c MOU with NKT Commercial - S_Courtland and GrandTO:
FROM:
BY:
SUBJECT:
DATE:
MEMORANDUM
CITY COUNCIL
TERESA MCCLISH~;MMUNITY DEVELOPMENT DIRECTOR
MATTHEW DOWNING~SISTANT PLANNER
CONSIDERATION OF A MEMORANDUM OF UNDERSTANDING WITH
NKT COMMERCIAL REGARDING DEVELOPMENT OF THE VACANT
LOT AT THE SOUTHWEST CORNER OF EAST GRAND AVENUE AND
SOUTH COURTLAND STREET
FEBRUARY 10, 2015
RECOMMENDATION:
It is recommended the City Council approve a Memorandum of Understanding (MOU)
with NKT Commercial regarding negotiating a Development Agreement for the
development of a mixed use project on the vacant lot at the southwest corner of East
Grand Avenue and South Courtland Street and provide general direction to staff and the
developer.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
There will be an unknown, but potentially significant amount of staff time associated with
the negotiation and preparation of a Development Agreement.
BACKGROUND:
Several development proposals have been submitted for the subject property in the last
fifteen (15) years. Most recently, at the regular meeting of December 9, 2014, the City
Council reviewed a proposed commercial and residential project, considered all the
facts and public testimony, took tentative action to deny the proposed project without
prejudice, and directed staff to return with a resolution with appropriate findings
supporting the denial. At the regular meeting of January 13, 2015, the City Council
moved to continue the project's consideration to a date uncertain to allow an opportunity
for the developer and the City to identify an appropriate path forward and/or mechanism
that would result in an economically viable project that meets the City's vision and
development standards for the site.
ANALYSIS OF ISSUES:
During the January 13, 2015 Council meeting, several preliminary ideas were discussed
by the Council, including the development of an MOU. The purpose of the MOU would
be to show that both the City and the developer are interested in and committed to
Item 11.c. - Page 1
CITY COUNCIL
CONSIDERATION OF A MEMORANDUM OF UNDERSTANDING WITH NKT
COMMERCIAL REGARDllNG DEVELOPMENT OF THE VACANT LOT AT THE
SOUTHWEST CORNER OF EAST GRAND AVENUE AND SOUTH COURTLAND
STREET
FEBRUARY 10, 2015
PAGE2
identifying an acceptable path-forward that would result in a project meeting three (3)
key goals:
1. Provide NKT Commercial with sufficient flexibility to induce investment related to
a project;
2. Generate economic revitalization of the East Grand Avenue corridor through a
high quality gateway development project; and
3. Preserve the adjacent neighborhood's residential character.
Based upon the Council's discussion on January 13, the subject, non-binding MOU was
developed, which sets forth a general framework for the parameters and terms to be
negotiated, hopefully resulting in a Development Agreement between the property
owner and the City in accordance with California Government Code Sections 65864 et
seq. and Arroyo Grande Municipal Code Section 16.16.150. It is important to note that
even with this non-binding MOU, the property owner could decide to pursue a separate
land use entitlement before the Development Agreement is negotiated.
ALTERNATIVES:
The following alternatives are provided for the Council's consideration:
1. Approve the proposed MOU;
2. Modify as appropriate and approve the MOU;
3. Do not approve the MOU; or
4. Provide direction to staff.
ADVANTAGES:
Adopting the MOU shows the City's commitment to finding the appropriate path toward
obtaining a viable commercial project that will generate economic revitalization of the
East Grand Avenue corridor, while preserving the adjacent neighborhood's residential
character. It also provides the property owner flexibility to induce investment in the
property.
DISADVANTAGES:
The MOU is non-binding and negotiations for a Development Agreement may fail.
However, approving the MOU is a show of good faith that the City is truly interested in
achieving a development on the site.
ENVIRONMENTAL REVIEW:
In accordance with the California Environmental Quality Act (CEQA), the State CEQA
Guidelines, and the Arroyo Grande Procedures for the Implementation of CEQA, staff
has determined that adopting the prepared MOU is exempt from environmental review
in accordance with Section 15061 (b )(3) of the CEQA Guidelines that states the activity
is covered by the general rule that CEQA applies only to projects which have the
potential for causing a significant effect on the environment.
Item 11.c. - Page 2
CITY COUNCIL
CONSIDERATION OF A MEMORANDUM OF UNDERSTANDING WITH NKT
COMMERCIAL REGARDllNG DEVELOPMENT OF THE VACANT LOT AT THE
SOUTHWEST CORNER OF EAST GRAND AVENUE AND SOUTH COURTLAND
STREET
FEBRUARY 10, 2015
PAGE3
PUBLIC NOTIFICATION AND COMMENTS:
The agenda was posted at City Hall on February 5, 2015. The agenda and staff report
were posted on the City's website on February 6, 2015.
Item 11.c. - Page 3
MEMORANDUM OF UNDERSTANDING
REGARDING NEGOTIATION OF
DEVELOPMENT AGREEMENT FOR
MIXED USE PROJECT
THIS MEMORANDUM OF UNDERSTANDING ("MOU") dated as of this __ day of
January, 2015, is by and between the City of Arroyo Grande ("City"), a municipal
corporation, and NKT Commercial, LLC, a California limited liability company ("Property
Owner'') (each individually a "Party" and, collectively, the "Parties"),
RECITALS
WHEREAS, Property Owner is the owner of real property consisting of approximately
4.47 acres identified as Subarea 3 of the Berry Gardens Specific Plan located in the
City of Arroyo Grande, State of California and legally described in Exhibit A, attached
hereto and incorporated herein by this reference (hereinafter referred to as the
"Property"); and
WHEREAS, Property Owner and City desire to facilitate the development and
construction of a mixed use (commercial and office/residential) project on the property
(the "Project") in order to accomplish three shared important goals: 1) Provide NKT with
sufficient flexibility to induce investment related to the Project; 2) Generate economic
revitalization of the Grand Avenue corridor through a high quality Gateway development
project; and 3) Preserve the adjacent neighborhood's residential character; and
WHEREAS, in furtherance of the Project, Property Owner and City desire to reach a
Development Agreement in accordance with the provisions contained in California
Government Code Sections 65864 et seq. and Arroyo Grande Municipal Code Section
16.16.150; and
WHEREAS, prior to executing a Development Agreement, the Parties wish to enter into
this non-binding MOU to set forth a framework for the parameters and terms to be
negotiated.
NOW, THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, City and Property
Owner agree as follows:
Section 1. Recitals. The above recitals are hereby incorporated into the body of this
MOU as though set forth in full herein.
Section 2. Preservation of City and Property Owner Discretion. By execution of this
MOU, City is not committing itself to or agreeing to undertake any acts or activities
requiring the subsequent independent exercise of authority or discretion of City or any
body or department thereof. Property Owner is not committing itself to or agreeing to
undertake any acts or activities. Execution of this MOU is merely an agreement to enter
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into a period of good faith negotiations according to the terms hereof, reserving final
discretions and approval by the City and Property Owner as to any Development
Agreement, Project Entitlements (as defined below), and all necessary and required
proceedings and decisions in connection therewith relating to the Project.
Nothing in this MOU creates a binding obligation, and no binding agreement will exist
unless the Parties sign a final and definitive agreement. Each Party expressly
acknowledges and agrees that this MOU creates no obligation on the part of any Party
to: (i) enter into a Development Agreement; (ii) grant any approvals or authorizations
required for the Project; (iii) agree to any specific terms or obligations; or (iv) proceed
with the development of the Property. All of the terms set forth in this MOU are
preliminary in nature and subject to approval by the City and Property Owner and
memorialization in an executed Development Agreement. The Parties acknowledge that
the Project may be revised as the environmental and planning processes proceed.
In particular, the Parties further acknowledge the following statutory and local ordinance
requirements which must be complied with in order for the Project to proceed:
a. The provisions of the California Environmental Quality Act, Public Resources
Code Sections 21000 et seq. ("CEQA"), including but not limited to project
alternatives or mitigation measures, as well as the alternative of not going
forward with the Project;
b. The provisions of Government Code Sections 65864 et seq. and Arroyo
Grande Municipal Code Section 16.16.150 relating to the approval of
development agreements, including the requirement for public hearings and
requiring that certain findings be made;
c. The provisions of Government Code Sections 65300 et seq. and Arroyo
Grande Municipal Code Section 16.16.020 relating to the approval of general
plan amendments.
d. The provisions of Government Code Sections 65450 et seq. and Arroyo
Grande Municipal Code Section 16.16.030 relating to the approval of specific
plan amendments.
e. The provisions of Government Code Sections 66410 et seq. and Arroyo
Grande Municipal Code Section 16.20.10 et seq. relating to divisions of land.
f. The provisions of Government Code Sections 65901 and Arroyo Grande
Municipal Code Section 16.16.050 relating to conditional use permits.
Section 3. Good Faith Negotiation of a Development Agreement. During the term of
this MOU, Property Owner and City shall negotiate in good faith the terms and
conditions of the Development Agreement, subject to the retained discretion described
in Section 2, above. Any such Development Agreement resulting from negotiations
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hereunder shall only become effective after, and if, the Development Agreement has
been considered and approved by the City in accordance with Government Code
Sections 65864 et seq. and Arroyo Grande Municipal Code Section 16.16.150 and
approved by Property Owner. If such Development Agreement is approved and
executed by City and Property Owner, it shall thereafter govern the rights and
obligations of the Parties with respect to the Project. Best efforts will be exercised by
both the City and Property Owner to complete the referenced Development Agreement
within 60 days of the adoption of this MOU. It is contemplated that the Development
Agreement will include the following terms:
a. Term. The term of the Development Agreement will be negotiated but in
no event shall the term be for a period less than 3 years, and it shall also include
provisions to comply with the requirement in Government Code Section 65865.1 relating
to periodic review of the Development Agreement.
b. Project Development. The Development Agreement will include the
specifics regarding the Project that Property Owner would agree to develop and
construct. Alternative 1 is expected to include the following:
(1) No less than 70% of the land area will be developed with commercial
uses and supporting parking with parking not less than required by the City municipal
code, including allowable reductions, and no more than 30% of the land area will be
developed with high density residential units, continuing care retirement community
units, (or similar assisted living facilities) and supporting parking, either with
apartments for rent, assisted living units for hire or rental, or residential units for sale
with a density of no less than 20 units per acre;
(2) Any stand alone office or residential/retirement or assisted living
development will be at the rear of the Project, away from East Grand Avenue, and may
only commence after building construction has commenced on the front portion of the
Project and after all public improvements that are the responsibility of the Property
Owner have been completed;
(3) Commercial building square footage is estimated to be approximately
55,000 square feet if the Project is entirely commercial, and in no case less than 38,500
square feet;
(4) No individual buildings may exceed 40,000 square feet;
(5) Commercial buildings may include office, including medical use, and
other commercial uses identified in the City municipal code; however, the office use
must be located behind and/or above retail and may not exceed 55% of the land area;
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(6) No less than two retail commercial buildings shall be located on East
Grand Avenue;
(7) Vertical mixed use is strongly encouraged but not a requirement of the
Project;
(8) The Project architecture will be consistent with the Berry Gardens
Specific Plan, the Design Guidelines and Standards for Mixed-Use Districts, and the
East Grand Avenue Enhancement Plan, or as agreed to by the City and Property
Owner.
Alternative 2 is expected to consist of the project that was reviewed
by City Council o.n December 9, 2014, as modified by a minimum of 5,000 s.f. of
additional commercial or office space and a corresponding reduction of area devoted to
single family detached housing, or continuing care retirement community units, (or
similar assisted living facilities) and supporting parking.
It is recognized and acknowledged that the Project descriptions contained in this MOU
are not complete at this point. The Development Agreement shall include provisions
relating to the density and intensity of use, maximum height and size of proposed
buildings which shall be consistent with this MOU, a plan of development and provisions
for reservation or dedication of land for public purposes.
c. City Approvals. The Project is anticipated to require the following review:
Staff Advi,sory Committee, Architectural Review Committee, Traffic Commission,
Planning Commission and City· Council. The Project is anticipated to require the
following approvals and entitlements: Mitigated Negative Declaration, Specific Plan
Amendment, Vesting Tentative Tract Map and Conditional Use Permit.
d. Project Public Improvement Requirements. Anticipated improvements to
streets and the intersection will be limited to the improvements contained in the prior
conditions of approval for the MH1 and NKT project.
e. Development Impact Fees and Reimbursement for Costs incurred by the
City. The timing of payment of applicable development impact fees shall occur following
entitlement at the time of issuance of a permit for construction activities on the site, as
permitted in the City municipal code. In addition, a Specific Plan Amendment will be
required. Property Owner agrees to pay the costs incurred by the City in preparing the
revised Specific Plan.
Section 4. Notices. To be effective, all notices, requests, demands, and other
communications required or permitted under this MOU shall be in writing and shall be
delivered either in person or by certified mail, postage prepaid, return receipt requested.
Notice is deemed effective on delivery if served personally on the Party to whom notice
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is to be given and delivery is confirmed by a receipt. Notice is deemed effective on the
second day after mailing if mailed to the Party to whom notice is to be given, by first
class mail, registered or certified, return receipt requested, postage prepaid, and
properly addressed as set forth below. Any correctly addressed notice that is refused,
unclaimed, or undeliverable because of an act or omission of the Party to be notified
shall be deemed effective as of the first date that said notice was refused, unclaimed, or
deemed undeliverable by the postal authorities. The addresses for purposes of giving
notice are as set forth below but each Party may change its address by written notice in
accordance with this paragraph.
If to Property Owner:
lfto CITY:
NKT Commercial, LLC
Attn: Nicholas Tompkins
684 Higuera Suite 8
San Luis Obispo, Ca. 93401
City of Arroyo Grande
Attn: City Manager
300 E. Branch Street
Arroyo Grande, CA 93420
Section 5. Authorizations. All officers and individuals executing this and other
documents on behalf of the respective Parties do hereby certify and warrant that they
have the capacity and have been duly authorized to so execute said documents on
behalf of the entity so indicated.
Section 6. Headings and Captions. The captions and headings of this MOU are inserted
for convenience only and shall not be deemed a part of this MOU and shall not be used
in interpreting this MOU or in determining any of the rights or obligations of the Parties.
Section 7. Severability. If any term, provision, covenant, or condition of this MOU shall
be or become illegal, invalid, null, void, unenforceable, or against public policy, in whole
or in part, or shall be held by any court of competent jurisdiction to be illegal, invalid,
null, or void, or against public policy, the term, provision, covenant, or condition shall be
deemed severable, and the remaining provisions of this MOU shall remain in full force
and effect and shall not be affected, impaired, or invalidated. The term, provision,
covenant, or condition that is so invalidated, voided, or held to be unenforceable shall
be modified or changed by the Parties to the extent possible to carry out the intentions
and directives set forth in this MOU.
Section 8. Counterpart Execution. This MOU may be executed in any number of
counterparts, each of which shall be an original, but all of which together shall constitute
one and the same instrument.
Section 9. Entire Agreement. This MOU constitutes the final, complete, and exclusive
statement of the terms of the MOU between the Parties pertaining to the MOU and
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supersedes all prior and contemporaneous agreements, promises, representations,
warranties, understandings, or undertakings by either of the Parties, either oral or
written, of any character or nature. No Party has been induced to enter into this MOU,
nor is any Party relying on, any representation or warranty outside those expressly set
forth herein.
Section 10. Ambiguities. Each Party and its counsel have participated fully in the
preparation, review and revision of this MOU. Any rule of construction to the effect that
ambiguities are to be resolved against the drafting Party shall not apply in interpreting
this MOU.
IN WITNESS WHEREOF, the Parties have executed this Memorandum of
Understanding which shall be deemed effective as of the first date set forth above.
CITY OF ARROYO GRANDE
JIM HILL,
MAYOR
ATTEST:
KELLY WETMORE,
CITY CLERK
APPROVED AS TO CONTENT:
BOB McFALL
INTERIM CITY MANAGER
APPROVED AS TO FORM:
TIMOTHY J. CARMEL,
CITY ATTORNEY
NKT COMMERCIAL, LLC
NICHOLAS TOMPKINS,
MANAGING MEMBER
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