http://blogofsandiego.com/Waterfront.htm#04/05/10 04/05/2010Are the Port District and the Convention Center giving away public money? by Pat Flannery At its monthly meeting tomorrow the Port District will be asked to consent to the assignment and assumption of a lease from Fifth Avenue Landing LLC (FAL) to the San Diego Convention Center Corporation (SDCCC). In another part of the Agenda, on page 4 of 9, it says: "On September 16, 2008, FAL and SDCCC entered into a letter of intent to form a definitive agreement for the purchase and sale of FAL's option to lease agreement for San Diego Unified Port District the premises which expires on April 9, 2010. 54422 MOU Amendment 1. Extend Purchase and Sale Agreement to March 30, 2010. Document NJ)\N l ·G'llJU~ MOU will Terminate on March 5, 2010. _:~~-:::;:::;::~;.:;""-­ The FAL Hotel Option will expire by its own terms on December 2, 2009.. Filed _ Office of the District Clerk .MOU Amendment 2. March 2, 2010 Agenda Item 34. Document 56116 Extend Purchase and Sale Agreement and MOU to April 9, 2010. File Clerk March 12, 2010. Option Amendment No. 5 entered December 2, 2008. Filed Clerk January 16, 2009. This Option Amendment 5. Extended Term of Option to November 30, 2009, maybe extended no later than November 30, 2010. Cost OA5 $20,000. To construct Spinnaker Hotel & CC Expansion. AGREEMENT FOR AMENDMENT OF OPTION AGREEMENT BETWEEN SAN DIEGO UNIFIED PORT 'DISTRICT AND FIFTH AVENUE LANDING, LLC AMENDMENT NO. 5

1nd

Decemh?c ,

THIS AGREEMENT, made and entered into this _t?f_ day of 2008, by and between the SAN DIEGO UNIFIED PORT DISTRICT, a public corporation, ("District"), and FIFTH AVENUE LANDING, LLC, a California limited liability company, ("Optionee"). WITNESS ETH: WHEREAS, District and Optionee, on the 7th day of October 2003; entered into an Option Agreement covering certain tidelands in the city of San Diego, California, which Option Agreement is on file in the Office of the Clerk of District bearing Document No. 46578 ("Option Agreement"); and WHEREAS, attached to the Option Agreement as Exhibit No. "1" is a lease to be executed by the parties if the Option is exercised ("Lease"); and WHEREAS, Optionee extended the term of the Option ("Term") by nine (9) months, through July 31, 2006 by paying additional consideration of Sixty Thousand Dollars ($60,000); and WHEREAS, Optionee extended the Term of the Option by twelve ( 12) months, through July 31, 2007 by paying additional consideration of Sixty Thousand Dollars ( $60,000), which Option Amendment No. 1 dated August 11, 2006 is on file in the Office of the Clerk of District bearing Document No. 50953; and WHEREAS, Optionee extended the Term of the Option by twelve (12) months, through July 31, 2008 by paying additional consideration of Sixty Thousand Dollars

ORIGINAL

($60,000), which Option Amendment No. 2 dated August 22, 2007 is on file in the Office of the Clerk of District bearing Document No. 52299; and WHEREAS,

District on the 6 1h day of May 2008, consented to an assignment of

the Option Agreement to Spinnaker Waterfront Hotel, LLC, (SWH) and subsequent __,-·· Amendment No. 3 to the Option Agreement. Said consent and amendment were subject to the assignment being fully consummated with the close of escrow. On August 25, 2008, District received formal notice from Optionee that the Purchase Agreement with SWH and corresponding escrow were terminated and District therefore rescinded Resolution No. 2008-85 and Ordinance No. 2498 with Resolution No. 2008-200 and Ordinance No. 2524; and

Option Amendment 4. Extended Term of Option to July 31, 2009. WHEREAS, Optionee extended the Term of the Option by twelve ( 12) months, through July 31, 2009 by paying additional consideration of Sixty Thousand Dollars ($60,000), which Option Amendment No. 4 dated August 11, 2008 is on file in the Office of the Clerk of District bearing Document No. 53825; and WHEREAS, District, Optionee and San Diego Convention Center Corporation (SDCCC) entered into a Memorandum of Understanding (MOU) concerning the future expansion of the convention center and hotel project, which requires District to extend the term of the Option Agreement to coincide with SDCCC's twelve ( 12) month due diligence period; and WHEREAS, District's intent in granting this extension and as required in the MOU is to have the hotel project constructed either by itself or in conjunction with an expansion of the convention center. WHEREAS, District and Optionee desire to amend the Option Agreement; NOW, THEREFORE, for valuable consideration, the Option Agreement is hereby amended in the following respects and no others, and except as expressly amended, all terms, covenants and conditions of the Option Agreement shall remain in full force and effect: 1.

Paragraph 2 of the Option Agreement is hereby amended in its entirety to read as follows:

2.

OPTION TERM: The Term commenced on November 1, 2003 ("Effective Date"), and was originally set to expire at 5:00 p.m. on October 31, 2005. Optionee extended the Term through July 31, 2006 by paying additional consideration in the amount of Sixty Thousand Dollars ($60,000), and Optionee again extended the Term

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54422

This Option Amendment 5. Extended Term of Option to November 30, 2009, maybe extended no later than November 30, 2010.

through July 31, 2007 by paying an additional Sixty Thousand Dollars ($60,000), and Optionee again extended the Term through July 31, 2008 by paying an additional Sixty Thousand Dollars ($60,000), and Optionee again extended the Term through July 31, 2009 by paying an additional Sixty Thousand Dollars ( $60,000), which sums shall be retained by the District as consideration for extending the Term whether or not the Option is exercised and shall not be refundable to Optionee under any circumstance. Optionee now desires to extend the Term for four (4) months, through November 30, 2009, and to extend each of the dates in subparagraphs 4.c, 4.d and 4.f. through 4.q., inclusive. Notwithstanding any other provision of this Agreement, Optionee's right to exercise the Option and execute the Lease will terminate and be of no further force and effect if the conditions set forth in this Agreement are not timely satisfied, and the Option is not exercised, before the expiration of the Term, as the same may be extended pursuant to Paragraphs 3.b. or 14 below; provided, however, in no event shall the Term be extended beyond November 30, 2010. 2.

Paragraph 3 of the Option Agreement subparagraph 3.d. to read as follows: d.

is

hereby

amended

to

add

As consideration for the District granting an additional extension of the Term of the Option Agreement for four (4) months, through November 30, 2009, and for extending each of the dates in subparagraphs 4.c., 4.d. and 4.f. through 4.q., inclusive. Optionee shall have paid to District, upon execution of Amendment No. 5 to this Option Agreement, the sum of Twenty Thousand Dollars ($20,000). Said payment shall be in the form of a cashier's check, and shall be retained by the District as consideration for the extension whether or not the Option is exercised and shall not be refundable to Optionee under any circumstance.

3.

Paragraph 4.c. of the Option Agreement is hereby amended to replace the date by which the Hotel Operator is due: The date of "June 30, 2009" is hereby replaced with "November 30, 2009."

4.

Paragraph 4.d. of the Option Agreement is hereby amended to replace the date by which the Lender's Package is due: The date of "June 30, 2009" is hereby replaced with "November 30, 2009."

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j

5.

Paragraph 4.f. of the Option Agreement is hereby amended to replace the dates by which the Minimum Parking Requirements are due as follows: In the second sentence the date "June 30, 2009" is hereby replaced with "November 30, 2009". In the last sentence the two dates of "June 30, 2009" are hereby replaced with "November 30, 2009."

6.

Paragraph 4.g. of the Option Agreement is hereby amended to replace the date by which the Schematic Drawings are due: The date of "June 30, 2009" is hereby replaced with "November 30, 2009."

7.

In the first sentence of Paragraph 4.h. of the Option Agreement the date is hereby amended to replace the date by which the Design Development Drawings are due, as follows: The date of "June 30, 2009" is hereby replaced with "November 30, 2009."

8.

In the first sentence of Paragraph 4.i. of the Option Agreement the date is hereby amended to replace the date by which the Working Drawings for Civil Site Plan and All Building Foundations are due, as follows: The date of "June 30, 2009" is hereby replaced with "November 30, 2009."

9.

In the first sentence of Paragraph 4.j. of the Option Agreement the date is hereby amended to replace the date by which the Project Financing Plan is due, as follows: The date of "June 30, 2009" is hereby replaced with "November 30, 2009."

10.

In the first sentence of Paragraph 4.k. of the Option Agreement the date is hereby amended to replace the date by which the Project Financing is due, as follows: The date of "June 30, 2009" is hereby replaced with "November 30, 2009."

11.

In the first sentence of Paragraph 4.1. of the Option Agreement the date is hereby amended to replace the date by which the Development and Encroachment Permits are due, as follows: The date of "June 30, 2009 is hereby replaced with "November 30, 2009."

12.

In the first sentence of Paragraph 4.m. of the Option Agreement the date is hereby amended to replace the date by which the Performance Bond is due, as follows: The date of "June 30, 2009 is hereby replaced with "November 30, 2009."

13.

In the first sentence of Paragraph 4.n. of the Option Agreement the date is hereby amended to replace the date by which the Construction Contract is 4

54422

4

Water Transportation Sublease of Option Agreement No. 5 to November 30, 2009.

due, as follows:

The date of "June 30, 2009" is hereby replaced with

"November 30, 2009." 14.

In the first sentence of Paragraph 4.o. of the Option Agreement the date is hereby amended to replace the date by which the Hotel Management Agreement is due, as follows: The date of "June 30, 2009" is hereby replaced with "November 30, 2009."

15.

In the first sentence of Paragraph 4.p. of the Option Agreement the date is hereby amended to replace the date by which the Water Transportation Center Sublease is due, as follows: The date of "June 30, 2009 is hereby replaced with "November 30, 2009."

16.

In the first sentence of Paragraph 4.q. of the Option Agreement the date is hereby amended to replace the date by which the Employment Opportunity Program is due, as follows: The date of "June 30, 2009" is hereby replaced with "November 30, 2009."

17.

Paragraph 13.a. of the Option Agreement is hereby amended in its entirety to read as follows: 13.

TERMINATION OF OPTION: a.

In the event that Optionee fails to fulfill and comply with the conditions of Paragraphs 4.a. through 4.r., inclusive, within the time limits provided, or Optionee makes an impermissible transfer of its rights under this Agreement as set forth in Paragraph 9 above, or in the event Optionee fails to exercise the Option, or in the event the Option Term expires without having been duly exercised, this Agreement shall automatically expire and terminate without notice to Optionee and all right of Optionee arising out of the Option shall immediately cease. Provided that this Agreement has expired or been terminated as set forth in the preceding sentence, Optionee understands and agrees that the Quitclaim Deed delivered to District pursuant to Paragraph 31 below shall be recorded by District pursuant to said Paragraph 31 .

5

ic;:44 °'"" )!, 22

5

18.

Paragraph 13.b. of the Option Agreement is hereby deleted in its entirety and replaced with "Intentionally Omitted."

Following execution. by all parties hereto, this Amendment No. 5 shall become effective December 3, 2008.

Port Attorney

SAN DIEGO UNIFIED PORT DISTRICT

r::-o RandaiCOa~

By:~Ellen Core Born Assistant Port Attorney

Director, Real Estate

FIFTH AVENUE LANDING, LLC By: Raymond A. Carpenter, Member

By: San Diego California Properties, LLC, Member

SDUPD Doc No. 320642

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Option Amendment No. 5 entered December 2, 2008. Filed Clerk January 16, 2009. This Option Amendment 5. Extended Term of Option to November 30, 2009, maybe extended no later than November 30, 2010. Cost OA5 $20,000. To construct Spinnaker Hotel & CC Expansion.

(1)

SAN DIEGO UNIFIED PORT DISTRICT

ORDINANCE

2539

54422

Option Amendment No. 5 AN ORDINANCE AMENDING AN OPTION AGREEMENT WITH FIFTH AVENUE LANDING, LLC

The Board of Port Commissioners of the San Diego Unified Port District does ordain as follows: Section 1.

The Option Agreement dated 7 October 2003 between the San Diego

Unified Port District and Fifth Avenue Landing, LLC, a California limited liability company, is hereby amended in accordance with Agreement for Amendment of Option Agreement, Amendment No. 5, on file in the office of the District Clerk. Section 2. This ordinance shall take effect on the 31st day from its passage by the Board of Port Commissioners.

SW

12/2/08

('t) SAN DIEGO UNIFIED PORT DISTRICT DATE:

AGENDA ITEM 42 ~lE

December 2, 2008

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54422

SUBJECT: FIFTH AVENUE LANDING A) RESOLUTION AUTHORIZING MEMORANDUM OF UNDERSTANDING BETWEEN SAN DIEGO UNIFIED PORT DISTIRICT, SAN DIEGO CONVENTION CENTER CORPORATION AND FIFTH AVENUE LANDING, LLC CONCERNING THE FUTURE EXPANSION OF THE SAN DIEGO CONVENTION CENTER; AND GRANTING MUTUAL INDEMNITY; AND, B) ADOPT THE FOLLOWING ORDINANCE CONDITIONED UPON THE BOARD'S APPROVAL OF ITEM A ABOVE: ADOPT ORDINANCE AUTHORIZING AMENDMENT NO. 5 TO FIFTH AVENUE LANDING, LLC OPTION AGREEMENT TO EXTEND THE TERM TO NOVEMBER 30, 2009 EXECUTIVE SUMMARY: Fifth Avenue Landing, LLC (FAL) has an existing Lease and Option Agreement to develop a 250-room Spinnaker Hotel on its leasehold located bay ward of Convention Way and Marina Park Way behind the San Diego Convention Center (Premises). The FAL Lease expires June 30, 2024 and the Option to develop the Spinnaker Hotel is set to expire July 31, 2009. FAL recently entered into a letter of intent and negotiated a purchase and sale agreement with the San Diego Convention Center Corporation (SDCCC) to construct an expansion of the existing convention center as well as develop the Spinnaker Hotel. Letter of Intent for negotiated Purchase and Sale Agreement with SDCCC Spinnaker Hotel and CC Expansion Staff recommends that the Board approve a three-party Memorandum of Understanding (MOU) between the District, SDCCC and FAL. The MOU will allow the SDCCC and the District time to negotiate the terms of a new Lease and Option Agreement, to include market rent with no offsets, for the hotel project and convention center expansion the next year. SDCCC, FAL and the District have also agreed to mutually indemnify one another. As a condition of the MOU, the District is required to extend the FAL Option term by four months to November 30, 2009, in order to allow SDCCC a 12-month due diligence period with FAL. RECOMMENDATION: A) Adopt Resolution Authorizing Memorandum of Understanding between San Diego Unified Port District, San Diego Convention Center Corporation and Fifth Avenue Landing, LLC concerning the future expansion of the San Diego Convention Center; and Granting Mutual Indemnity; and,

ACTION TAKEN: 12-02-08 - Resolution 2008-279 and Ordinance 2539

AGENDA ITEM 42 , I I

Page2of4

· B) Adopt the following Ordinance conditioned upon the Board's approval of Item A above: Adopt Ordinance Authorizing Amendment No. 5 to Fifth Avenue Landing, LLC Option Agreement to Extend the Term to November 30, 2009. FISCAL lMPACT: There will be no direct fiscal impact to the District by granting the MOU. FAL will pay a FAL's Purchase fee of $20,000 to extend the Option expiration four months. agreement with SDCCC provides for a 12-month due diligence period for the SDCCC to assess the feasibility of developing both a hotel of at least 250 rooms and the convention center expansion. COMPASS STRATEGIC GOALS: Pursuing development of the hotel and convention center expansion will create a visitor serving and commercial redevelopment project, while creating additional revenue for the District. This agenda item supports the following Strategic Goal(s).

D

Promote the Port's maritime industries to stimulate regional economic vitality. Enhance and sustain a dynamic and diverse waterfront. Protect and improve the environmental conditions of San Diego Bay and the Tidelands. Ensure a safe and secure environment for people, property and cargo. Develop and maintain a high level of public understanding that builds confidence and trust in the Port. Develop a high-performing organization through alignment of people, process and systems. Strengthen the Port's financial performance. Not applicable. September 16, 2008 Letter of Intent to form an agreement for Spinnaker Hotel.

l8l D D D O

18J D

DISCUSSION: A series of negotiations led up to the proposed MOU. On September 16, 2008, FAL and SDCCC entered into a letter of intent to form a definitive agreement for the purchase and safe of FAL's Lease and Option Agreement for the Premises. The key terms of the purchase and sale agreement included: • • •

SDCCC has a due diligence period of 12 months with FAL to investigate the site; SDCCC to pay FAL a non-refundable sum of one million dollars, upon execution of the purchase and sale agreement, not applicable to the purchase price; SDCCC and FAL to enter into 66-year subleases for the Water Transportation Center (WTC) for land and water side operations;

66 Year Sublease for Water Transportation Center (WTC). San Diego Unified Port D1stnct Board Meeting - December 2, 2008

AGENDA ITEM 42 Page 3 of4

• •

Project to include at least a 250 room hotel development and phase three of the convention center expansion; and, SDCCC to pay FAL $13.5 million at the close of escrow.

To activate the purchase and sale agreement, SDCCC and FAL requested the District: consent to the Purchase and Sale Agreement; approve an Assignment of the Option and Lease Agreement from FAL to SDCCC; extend the expiration of the FAL Option two years beyond the Resolution; release FAL and current Guarantors concurrent with Assignment of Option and Lease Agreement and consent to 66-year subleases between SDCCC and FAL for the WTC. The District did not agree to approve the proposed purchase and sale agreement, without an agreem·ent with the District for redevelopment of the property. District staff conferred with FAL and SDCCC and negotiated a MOU, which will allow SDCCC and FAL to revise the purchase and sale agreement in accordance with the terms of the MOU, execute the revised purchase and sale agreement, provide SDCCC with the time to conduct their due diligence and will allow District and SDCCC staff time to negotiate a new Lease and Option Agreement for the hotel and convention center expansion projects. Staff's intention is that the negotiations be handled like any other Option and Lease transaction and will include market rent, in accordance with BPC Policy No. 355, based on full proforma revenues with no offsets. The WTC Lease will be negotiated directly with the District and: the final Lease terms will be subject to Board approval at a later date. The proposed MOU terms are summarized below: 1. District will negotiate a new Option and Lease Agreement to include market rate rents, in accordance with BPC Policy No. 355, with SDCCC and FAL, for the Premises and other District property on and over Convention Way and Marina Park Way for the hotel and expansion of the San Diego Convention Center project; 2. The hotel must be included as part of any project on the site and market rents shall be paid to the District. SDCCC shall have prepared a feasibility study for the project which shall be completed within six months from the execution of this MOU; 3. SDCCC shall adhere to all District processes and procedures pertaining to assignment of leases and options and District qualifications for lessees, including submission of a lessee questionnaire; 4. FAL shall continue to pay the rent due District under the terms of the Lease. If District consents to a sublease with FAL for the Water Transportation Center, all rent from the sublease shall be paid to District; 5. Upon execution of this MOU, District will agree to extend the term of the Option Agreement to November 30, 2009 to allow SDCCC a 12-month due diligence period with FAL;

San Diego Unified Port District Board Meeting - December 2, 2008

AGENDA ITEM 42 Page4of4

6. SDCCC, FAL and the District shall mutually indemnify one another for any and all liability, claims, judgments, damages, proceedings, orders, directives, costs, including reasonable attorneys' fees, or demands to the extent such actions are caused by such party's own negligence or willful misconduct; and, 7. This MOU shall commence effective on the date set forth above and shall continue for a period of 12 months. In conjunction with the terms of the MOU, Staff has revised the FAL Option to extend the expiration and conditions precedent dates from July 31, 2009 to November 30, 2009 and FAL will pay a fee of $20,000 for this extension. The extension to the Option will allow SDCCC a 12-month period to conduct due diligence with FAL and additional time to comply with the conditions precedent and to further refine their development plans. The existing and proposed Option Agreement terms are summarized on the attached OPTION AGREEMENT INFORMATION SUMMARY. Port Attorney's Comments: The Port Attorney has reviewed and approved the requested document for form and legality. The indemnity provision requires the parties to the MOU to defend and indemnify each other for negligent actions or willful! misconduct. Such a provision seeks to make each party legally responsible for their own actions to the extent that such actions trigger a litigation response. Environmental Review: This proposed Board action is not subject to CEQA, as amended. Equal Opportunity Program: Not applicable. PREPARED BY:

Shahriar Afshar Senior Asset Manager, Real Estate Penny Maus Assistant Asset Manager, Real Estate

San Diego Unified Port District Board Meeting - December 2, 2008

'

\

('i)

San Diego Unified Port District

Oo'"m•"tft Flied

5421.0

C Q22UIJ8

Office of the l'!listrlet Clerk

MEMORANDUM OF UNDERSTANDING BETWEEN SAN DIEGO UNIFIED PORT DISTRICT (DISTRICT), SAN DIEGO CONVENTION CENTER CORPORATION (SDCCC) AND FIFTH AVENUE LANDING, LLC (FAL) CONCERNING SDCCC'S ACQUISITION Of FAL PROPERTY FOR A HOTEL PROJECT AND THE FUTURE EXPANSION OF THE SAN DIEGO CONVENTION CENTER

The following recitals are a substantive part of this Memorandum of Understanding (MOU): WHEREAS, the District owns property behind the San Diego Convention Center, bay ward of Convention Way and Marina Park Way in San Diego, California. The District entered into a Lease of the aforementioned property with SEA GROUP CONSTRUCTION, INC., a California corporation, entered into a Lease of certain tidelands on the 9th day of October, 1984 in the city of San Diego, California, which Lease is on file in the Office of the Clerk of District bearing Document No. 17439; and WHEREAS, SEA GROUP CONSTRUCTION, INC., a California corporation, assigned said Lease to RAYMOND ALLEN CARPENTER .on the 15th day of December, 1987, which Assignment and Assumption of Lease Agreement is on file in the Office of the Clerk of District bearing Document No. 21596; and WHEREAS, District and RAYMOND ALLEN CARPENTER, heretofore on the 18th day of April, 1989, entered into an Agreement for Amendment of Lease, Amendment No. 1, which Amendment is on file in the Office of the Clerk of District bearing Document No. 23678;and WHEREAS, District and RAYMOND ALLEN CARPENTER, heretofore on the 9th day of January, 1990, entered into an Agreement for Amendment of Lease, Amendment No. 2, which Amendment is on file in the Office of the Clerk of District bearing Document No. 24712; and WHEREAS, District and RAYMOND ALLEN CARPENTER, heretofore on the 29th day of April, 1991, entered into an Agreement for Amendment of Lease, Amendment No. 3, which Amendment is on file in the Office of the Clerk of District bearing Document No. 26859; and

'

WHEREAS, RAYMOND ALLEN CARPENTER assigned an undivided fifty percent (50%) interest in said Lease to CALIFORNIA PROPERTIES, a California general partnership, on the 7th day of October, 1991, which Assignment and Assumption of Lease Agreement is on file in the Office of the Clerk of District bearing Document No. 27602; and 1

ORIGINAL

WHEREAS, RAYMOND ALLEN CARPENTER and CALIFORNIA PROPERTIES, a California general partnership, assigned said Lease to FAL, a California general partnership, on the 7th day of October, 1991, which Assignment and Assumption of Lease Agreement is on file in the Office of the Clerk of District bearing Document No. 27603; and WHEREAS, District and FAL, a California general partnership, heretofore on the 8th day of September, 1992, entered into an Agreement for Amendment of Lease, Amendment No. 4, which Amendment is on file in the Office of the Clerk of District bearing Document No. 28828; and WHEREAS, District and FAL, a California general partnership, heretofore on the 30th day of November, 1993, entered into an Agreement for Amendment of Lease, Amendment No. 5, which Amendment is on file in the Office of the Clerk of District bearing Document No. 30620; and WHEREAS, District and FAL, a California general partnership, heretofore on the 23rd day of August, 1994, entered into an Agreement for Amendment of Lease, Amendment No. 6, which Amendment is on file in the Office of the Clerk of District bearing Document No. 31752; and WHEREAS, District and FAL, a California general partnership, heretofore on the 26th day of September, 1995, entered into an Agreement for Amendment of Lease, Amendment No. 7, which Amendment is on file in the Office of the Clerk of District bearing Document No. 33405; and WHEREAS, District and FAL, a California general partnership, heretofore on the 7th day of January, 1997, entered into an Agreement for Amendment of Lease, Amendment No. 8, which Amendment is on file in the Office of the Clerk of District bearing Document No. 35363; and WHEREAS, District and FAL, a California general partnership, heretofore on the 17th day of March 2000, entered into an Agreement for Amendment of Lease, Amendment No. 9, which Amendment is on file in the Office of the Clerk of District bearing Document No. 40018; and WHEREAS, FAL, a California general partnership, assigned said Lease to FAL, a California limited liability company, on the 1st day of July 2003, which Assignment and Assumption of Lease Agreement is on file in the Office of the Clerk of District bearing Document No. 46576; and WHEREAS, District and FAL heretofore on the 7th day of October 2003, entered into an Agreement for Amendment of Lease, Amendment No. 10, which Amendment is on file in the Office of the Clerk of District bearing Document No. 46577; and WHEREAS, District and FAL heretofore on the 8th day of August 2006, entered into an Agreement for Amendment of Lease, Amendment No. 11, which Amendment is on file in the Office of the Clerk of District bearing Document No. 50952; and

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54210

J._

WHEREAS, District and FAL heretofore on the 13th day of February 2007, entered into an Agreement for Amendment of Lease, Amendment No. 12, which Amendment is on file in the Office of the Clerk of District bearing Document No. 51512; and WHEREAS District and FAL also entered into an Option Agreement on the 7th day of October, 2003, which Option is on file in the Office of the Clerk of District bearing Document No. 46578 (Option); and WHEREAS, District and FAL heretofore on 11th day of August, 2006, entered into an Agreement for Amendment of Option, Option Amendment No. 1, which Amendment is on file in the Office of the Clerk of District bearing Document No. 50953; and WHEREAS, District and FAL heretofore on 22nd day of August, 2007, entered into an Agreement for Amendment of Option, Option Amendment No. 2, which Amendment is on file in the Office of the Clerk of District bearing Document No. 52299; and WHEREAS, District on the 5th day of May 2008, consented to an assignment of the Option Agreement to Spinnaker Waterfront Hotel, LLC (SWH) and subsequent Amendment No. 3 to the Option Agreement. Said consent and amendment were subject to the assignment being fully consummated with the close of escrow. On August 25, 2008, District received formal notice from FAL that the Purchase Agreement with SWH and corresponding escrow were terminated and District therefore rescinded Resolution No. 2008-85 and Ordinance No. 2498 with Resolution No. 2008-200 and Ordinance No. 2524; and WHEREAS, District and FAL heretofore on 11th day of August, 2008, entered into an Agreement for Amendment of Option, Option Amendment No. 4, which Amendment is on file in the Office of the Clerk of District bearing Document No. 53825; and WHEREAS, SDCCC desires to acquire the Lease and Option from FAL for development of a hotel and for the future expansion of the San Diego Convention Center; and WHEREAS, SDCCC and FAL have entered into a Purchase and Sale Agreement dated October 20, 2008 which has a condition requiring District consent to the assignment of Lease and Option, approval of an extension of the Option and consent to a sublease for the Water Transportation Center, to allow SDCCC to begin its twelve-month due diligence period; and WHEREAS, District is willing to assist SDCCC and FAL in satisfying the requirements of the Purchase and Sale Agreement to the extent possible by entering into this MOU; NOW THEREFORE, the parties hereto agree to enter into this MOU effective as of this 2nd day of December 2008: I

1. District will negotiate a new Option to Lease Agreement, to include market rate rents as outlined by Board of Port Commissioners Policy No. 355, with SDCCC and FAL for the FAL site and other District property on and over Convention Way and Marina Park Way for a hotel project and for expansion of the San Diego Convention Center.

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5421.0

2. The hotel must be included as part of any project on the site and market rate rents as outlined by Board of Port Commissioners Policy No. 355 shall be paid to the District. SDCCC shall have prepared a feasibility study for the project which shall be completed within six months from the execution of this MOU. 3. SD CCC shall adhere to all District processes and procedures pertaining to assignment of leases and options and District qualifications for lessees, including submission of a lessee questionnaire. 4. FAL shall continue to pay the rent due District under the terms of the Lease. If District consents to a sublease and/or direct lease with FAL for the Water Transportation Center, all rent from such sublease and/or direct lease shall be paid to District. 5. Upon execution of this MOU, District will agree to extend the term of the Option to coincide with the term of SDCCC's twelve-month due diligence period. 6.

Each party shall, to the fullest extent permitted by law, defend, indemnify, and hold harmless every other party and that such party's (or parties') officers, employees, and agents for any and all liability, claims, judgments, damages, proceedings, orders, directives, costs, including reasonable attorneys' fees, or demands (Liabilities) arising directly or indirectly out of the obligations undertaken in connection with this MOU to the extent such Liabilities are caused by a party's own negligence or willful misconduct. , This indemnity obligation shall apply for the entire time that any third party can make a claim against or sue any party hereto for Liabilities arising out of this MOU.

7. This MOU shall commence effective on the date set forth above and shall continue for a period of twelve ( 1 2) months. SAN DIEGO CONVENTION CENTER

SAN DIEGO UNIFIED PORT DISTRICT

L~

~a~

Carol Wallace President and CEO

Randa J. Conii}l{O Director, Real Esta:

FIFTH AVENUE LANDING, LLC Member

APPROVED AS TO FORM AND LEGALITY: Port ttorney

Ellen Corey orn Assistant Port Attorney

IES, LLC, Member

SDUPD Doc No. 319302

4

54210

i

Reference Copy: Document No. 54210 Re Memorandum of Understanding

] ] By and Among the San Diego Unified ] ] Port District, San Diego Convention ] ] Center Corporation, and Fifth Avenue ] ] Landing, LLC ....................] ~~~~~~~~~~~~~~l.

RESOLUTION

2008-279

WHEREAS, the San Diego Unified Port District (District) and Fifth Avenue Landing, LLC, a California limited liability company, (Fifth Avenue Landing) are parties to a Lease dated 9 October 1984, as assigned and amended, for premises located bayward of Convention Way and Marina Park Way in the City of San Diego, said lease is on file in the office of the District Clerk as Document No. 17439; WHEREAS, an Agreement for Amendment of said Lease, Amendment No. 12, is on file in the office of the District Clerk as Document No. 51512; and WHEREAS, the District and Fifth Avenue Landing are also parties to an Option Agreement dated 7 October 2003, as amended, to lease certain District premises located bayward of Convention Way and Marina Park Way, in the City of San Diego, for the purposes of a hotel that meets or exceeds the service quality standards of a Conrad Hotel and related activities, said Option Agreement is on file in the office of the District Clerk as Document No. 53825; and WHEREAS, the San Diego Convention Center Corporation (SDCCC) desires to acquire the Lease and Option from Fifth Avenue Landing for the development of hotel and for the future expansion of the San Diego Convention Center; and WHEREAS, Fifth Avenue Landing and SDCCC have entered into a Purchase and Sale Agreement dated October 20, 2008, which has a condition requiring the District consent to the assignment of said Lease and Option, approve a Twelve (12) month extension of said Option and consent to a sublease and/ or direct lease for the Water

Page 1 of2

2008-279

Transportation Center to allow SDCCC to begin its Twelve (12) month due diligence period; and WHEREAS, the District and Fifth Avenue Landing and SD CCC desire to enter into a Memorandum of Understanding to allow SD CCC and the District time to negotiate the terms of a new Lease and Option Agreement, NOW, THEREFORE, BE IT RESOLVED by the Board of Port Commissioners of the San Diego Unified Port District, as follows: That the Executive Director of the District or his authorized representative is hereby authorized and directed to enter into a Memorandum of Understanding (MOU), on behalf of the District, by and among Fifth Avenue Landing and the San Diego Convention Center Corporation in order to allow the District to negotiate a new Option to Lease Agreement with SDCCC and Fifth Avenue Landing for the Fifth Avenue Landing site and other District property on and over Convention Way and Marina Park Way in the City of San Diego for a hotel project and for expansion of the San Diego Convention Center. BE IT FURTHER RESOLVED that the Board of Port Commissioners of District hereby acknowledges that each party shall, to the fullest extent permitted by law, defend indemnify, and hold harmless every other party and that such party's (or parties') officers, employees, and agents for any and all liability, claims, judgments, damages, proceedings, orders, directives, costs, including reasonable attorneys' fees, or demands (Liabilities) arising directly or indirectly out of the obligations undertaken in connection with said MOU to the extent such liabilities are caused by a party's own negligence or willful misconduct. This Indemnity obligation shall apply for the entire time that any third party can make a claim against or sue any party hereto for liabilities arising out of said MOU.

ADOPTED this __2_n_a___ day of _ _ _ _D_e_ce_mb_e_r_ _ _ _ _ , 2008.

SW

12/2/08

Page 2 of2

Attachment to Agenda Sheet No. 42 OPTION AGREEMENT INFORMATION SUMMARY Optionee:

Fifth Avenue Landing, LLC, a California limited liability company, whose members are Raymond A. Carpenter (50%) and San Diego California Properties, LLC (50%). San Diego California Properties is comprised of Arthur Engel (60%), Herbert Engel (25%), and David Engel (15%).

Optioned Property:

Sayward of Convention Way and Marina Park Way and consisting of 221,000 sq. ft. land, 783 sq. ft. air rights for pedestrian bridge and 360,899 sq. ft. water (which includes 207,600 sq. ft. option area that is not available for inclusion in lease until District receives Closure Letter rescinding Campbell Clean-up and Abatement Order).

Project:

Hotel of 20-23 stories (lobby to count as one-story) containing 240-250 guest rooms that meets or exceeds service quality standards of a Conrad Hotel; a minimum of 198 parking spaces; water transportation center; transient berthing facility accommodating 20 to 30 large yachts; pedestrian bridge; public promenade; and one-acre public park/plaza.

Term:

24 months commencing November 1, 2003 plus $10,000 for first three-month extension, plus $20,000 for second three-month extension, plus $30,000 for third three-month extension, plus force majeure events which, combined with the three extensions, could extend option to a maximum of 42 months (i.e., April 30, 2007), Option extended to July 31, 2007, Option extended to July 31, 2008 and July 31, 2009.

'

*AMENDED*

Consideration:

FOUR MONTH EXTENSION TO NOVEMBER 30, 2009. None

Reimbursement For Planning Costs:

Lessee is required to reimburse the District for the cost of the De Minimus Port Master Plan Amendment that was processed by the District for realignment of Convention Way and relocation of parking for the project. FAL subsequently reimbursed the District $40,000 planning cost when Amendment No. 2 was approved by the Board in August 2007.

Optionee Conditions Precedent to Option Exercise:

Environmental and Port Master Plan Amendment (PMPA) processing if necessitated because of Project revisions; conceptual development plan; schematic drawings; design development drawings; working drawings for civil site plan and all building foundations; addition of space in Convention Center Parking Facility to valet park 100 to 110 automobiles if required due to Convention Way being widened; hotel management agreement; · water transportation center sublease; construction contract; performance bond; grading and foundation _Q_ermits obtained for all structures; encroachment _Q_ermit to connect

San Diego Unified Port District Board Meeting - December 2, 2008

Attachment to Agenda Sheet No. 42 pedestrian bridge to Convention Center; Equal Employment Opportunity Program; $75,000 payment to District by 11 /26/03 for FAL's share of past EIR and PMPA costs; lease guarantee for three years by Raymond A. Carpenter and Arthur E. Engel; and project financing. *AMENDED*

CONDITIONS PRECEDENT ALL NOVEMBER 30, 2009.

Hotel Operator:

Hotel operator to be determined at a future date.

Miscellaneous:

In consideration of additional construction cost of unique "spinnaker" hotel tower design, Optionee is not required to satisfy monetary aspects of BPC Policy No. 609, but must provide a reasonable amount of pedestrian-level public art in its project.

San Diego Unified Port District Board Meeting - December 2, 2008

DATES

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\ ft San Diego Unified Port Distnct Board Meeting - December 2, 2008

MOU Amendment 1. Extend Purchase and Sale Agreement to March 30, 2010. MOU will Terminate on March 5, 2010. The FAL Hotel Option will expire by its own terms on December 2, 2009

('J-) San Diego Unified Port District Document No.

55846

D_EC___ ! ____ 4..... 20. . . .

, I

Filed _ _ 09...,_._ _ Office of the District Clerk

AMENDMENT NO. 1 TO MEMORANDUM OF UNDERSTANDING BETWEEN SAN DIEGO UNIFIED PORT DISTRICT (DISTRICT), SAN DIEGO CONVENTION CENTER CORPORATION (SDCCC) AND FIFTH AVENUE LANDING, LLC (FAL) CONCERNING SDCCC'S ACQUISITION OF FAL PROPERTY FOR A HOTEL PROJECT AND THE FUTURE EXPANSION OF THE SAN DIEGO CONVENTION CENTER The following recitals are a substantive part of this Memorandum of Understanding (MOU): WHEREAS, SDCCC desires to acquire the Lease from FAL for development of a hotel and for the future expansion of the San Diego Convention Center; and WHEREAS, SDCCC and FAL have entered into a Purchase and Sale Agreement dated October 20, 2008; and WHEREAS, District, SDCCC and FAL entered into a MOU dated December 2, 2008 on file in the Office of the Clerk of District bearing Document No. ·5421 O; and WHEREAS, District and FAL agreed that the term of the Option will be allowed to expire on December 2, 2009; and WHEREAS, SDCCC and FAL have agreed to extend the term of their Purchase and Sale Agreement from December 2, 2009 to March 30, 2010 for the purpose of allowing sufficient time to negotiate agreements with the District relating to the Purchase and Sale Agreement. The agreements deemed necessary will be determined by the District and may include, but are not limited to: (i) Amended, Restated and Combined Lease for FAL, (ii) Assignment and Assumption of Amended, Restated and Combined Lease to SDCCC, (iii) Lease and/or Sublease to FAL for the water transportation center, and (iv) Consent to Encumbrance; Now Therefore, the parties agree: 1. The MOU is hereby amended as follows: The term of the MOU is hereby extended and shall terminate on March 5, 2010.

'f• ,N' ,. :

1

ORIGINAL

1

·i1

2. All other terms, covenants, and conditions of said MOU shall remain in full force and effect and shall be applicable to this amendment. SAN DIEGO CONVENTION CENTER CORPORATION, INC.

SAN DIEGO UNIFIED PORT DISTRICT

Carol Wallace President and CEO

Charles D. Wurster Executive Director

FIFTH AVENUE LANDING, LLC Member

APPROVED AS TO FORM AND LEGALITY: Port Attorney

Ril\{rr;ond A. Car ~nter, Meiiiber

DEPUTY PORT ATTORNEY ~

SAN DIEGO CALIFORNIA PROP RTIES, LLC Member

Art

2 SDUPD Docs No. 390021

55846

Reference Copy 55846

Re Amendment No. 1 to Memorandum of Understanding By and Among the San Diego Unified Port District, San Diego J

l

J

Convention Center Corporation, and

l Fifth Avenue Landing, LLC ............ ] ]

_______________ RESOLUTION

2 00 9 - 231

WHEREAS, the San Diego Unified Port District (District) and Fifth Avenue Landing, LLC, a California limited liability company, (Fifth Avenue Landing) are parties to a Lease dated 9 October 1984, as assigned and amended, for premises located bayward of Convention Way and Marina Park Way in the City of San Diego, said lease is on file in the office of the District Clerk as Document No. 17439; WHEREAS, an Agreement for Amendment of said Lease, Amendment No. 12, is on file in the office of the District Clerk as Document No. 51512; and WHEREAS, the District and Fifth Avenue Landing are also parties to an Option Agreement dated 7 October 2003, as amended, to lease certain District premises located bayward of Convention Way and Marina Park Way, in the City of San Diego, for the purposes of a hotel that meets or exceeds the service quality standards of a Conrad Hotel and related activities, said Option Agreement is on file in the office of the District Clerk as Document No. 53825; and WHEREAS, the San Diego Convention Center Corporation (SDCCC) desires to acquire the Lease and Option from Fifth Avenue Landing for the development of hotel and for the future expansion of the San Diego Convention Center; and WHEREAS, Fifth Avenue Landing and SDCCC have entered into a Purchase and Sale Agreement dated October 20, 2008, which has a condition requiring the District consent to the assignment of said Lease and Option, approve a Twelve (12) month extension of said Option and consent to a sublease and/or direct lease for the Water Transportation Center to allow SDCCC to begin its Twelve (12) month due diligence period; and Page 1 of2

2009-231

WHEREAS, pursuant to Resolution 2008-279, adopted 2 December 2008, the Executive Director of the District or his authorized representative was authorized and directed to enter into a Memorandum of Understanding (MOU), on behalf of the District, by and among Fifth Avenue Landing and SDCCC in order to allow the District to negotiate a new Option to Lease Agreement with SDCCC and Fifth Avenue Landing for the Fifth Avenue Landing site and other District property on and over Convention Way and Marina Park Way in the City of San Diego for a hotel project and for expansion of the San Diego Convention Center, said MOU in on file in the office of the District Clerk as Document No. 54210; and WHEREAS, SDCCC and Fifth Avenue Landing have agreed to extend the term of said Purchase and Sale Agreement from December 2, 2009, to March 30, 2010, for the purpose of allowing sufficient time to negotiate agreements with the District relating to said Purchase and Sale Agreement; and WHEREAS, it is desired that the term of said MOU be extended to March 5, 2010, NOW, THEREFORE, BE IT RESOLVED by the Board of Port Commissioners of the San Diego Unified Port District, as follows: That the Executive Director of the District or his authorized representative is hereby authorized and directed

to

enter into Amendment No. 1 to Memorandum of

Understanding (MOU), on behalf of the District, by and among Fifth Avenue Landing and SDCCC in order to provide a new termination date of said MOU of March 5, 2010. BE IT FURTHER RESOLVED that all of the conditions contained in said MOU and Resolution 2008-279 shall continue in full force and effect except as to the termination date of said MOU which has been extended in accordance with Amendment No. 1.

ADOPTED this _ _l_s_t_ _ day of _ _ __:D:.....e...cc_e..:.;mb......:::.e;;;;.r_ _ _ _ _, 2009.

SW

12/1/09

Page 2 of 2

AGENDA ITEM 37 SAN DIEGO UNIFIED PORT DISTRICT

Reference Copy 55846

DATE:

December 1, 2009

SUBJECT:

RESOLUTION AUTHORIZING AMENDMENT NO. 1 TO MEMORANDUM OF UNDERSTANDING BETWEEN SAN DIEGO UNIFIED PORT DISTRICT, SAN DIEGO CONVENTION CENTER CORPORATION AND FIFTH AVENUE LANDING, LLC TO EXTEND THE TERM

EXECUTIVE SUMMARY:

In October 2008, the San Diego Convention Center Corporation (SDCCC) entered into a purchase and sale agreement with Fifth Avenue Landing, LLC (FAL) to acquire FAL's leasehold interest in District property located bay ward of Convention Way. The FAL Lease expires June 30, 2024 and FAL's Option to develop the 250-room Spinnaker hotel on the same property expires December 2, 2009. SDCCC is pursuing the property as a portion of the site for its proposed hotel and phase Ill expansion project for the San Diego Convention Center.

To accommodate SDCCC's due diligence process with FAL, on December 2, 2008, the District entered into a Memorandum of Understanding (MOU) with FAL and SDCCC, which expired on November 30, 2009. FAL and SDCCC negotiated an amended and restated purchase and sale agreement on November 17, 2009 and on November 18, 2009 have requested the District consent to the assignment of the FAL leasehold on December 1, 2009 along with consent to a leasehold encumbrance, a new

lease for the water parcel with FAL, a sublease for the land portion of FAL and Amendment No. 13 to the FAL lease. In order to allow the District time to review FAL and SDCCC's request, and prepare appropriate documents for the transaction, it is recommended that the Board approve

Amendment No. 1 to the MOU lo extend the term to March 5, 2010. The extension will allow sufficient time for the District to negotiate the required leases, including a new option to lease agreement for the hotel and phase 111 expansion of the convention center. The Board's approval of this Amendment No. 1 would be conditioned upon the approval of FAL and SDCCC's Board The FAL hotel Option will expire by its own terms on December 2, 2009.

The FAL Hotel Option will expire by its own terms on December 2, 2009. RECOMMENDATION:

Adopt Resolution authorizing Amendment No. 1 to the MOU between the District, SDCCC and FAL concerning SDCCC's acquisition of the FAL's leasehold interest on the property for a hotel project and the future expansion of the San Diego Convention Center, conditioned upon approvals from FAL and the SDCCC Board.

ACTION TAKEN 12/01/2009 RESOLUTION 2009-231. San Diego Unified Port District Board Meeting - December 1, 2009

AGENDA ITEM 37 Page 2 of 4

FISCAL IMPACT: There wrll be no direct fiscal impact to the District by authorizing the Amendment No. 1.

COMPASS STRATEGIC GOALS: This agenda item supports the following Strategic Goal(s).

D D D

Promote the Port's maritime industries to stimulate regional economic vitality. Enhance and sust<3in a dynamic and diverse waterfront. Protect and improve the environmental conditions of San Diego Bay and the Tidelands. Ensure a safe and secure environment for people, property and cargo. Develop and maintain a high level of public understanding that builds confidence and trust in the Port. Develop a high-performing organization through alignment of people, process and systems. Strengthen the Port's financial performance. Not applicable.

D

D D D [8J

DISCUSSION:

Letter of Intent for Purchase and Sale Agreement.

Purchase and Sale Agreement On September 16, 2008, FAL and SDCCC entered into a letter of intent to form a definitive agreement for the purchase and sale of FAL's Option to Lease agreement for the premises. The key terms of the purchase and sale agreement included: • • • • •

SDCCC has a due diligence period of 12 months wrth FAL to investigate the site; SDCCC to pay FAL a non-refundable sum of $1 million, upon execution of the purchase and sale agreement, not applicable to the purchase price; SDCCC and FAL to enter into 66-year sublease for the water transportation center for land and water side operations; Project to include at least a 250-room hotel development and phase Ill of the convention center expansion; and, SDCCC to pay FAL $13.5 million at the close of escrow.

Memorandum of Understanding To activate the purchase and sale agreement, SDCCC and FAL requested the District's consent to the transaction. The District did not agree to approve the proposed purchase and sale agreement without an agreement with the District for redevelopment of the property. On December 2, 2008, the Board authorized the District to enter into the MOU with FAL and SDCCC to provide SDCCC with the trme to conduct their due

San Diego Unified Port D1stnct Board Meeting - December 1, 2009

AGENDA ITEM 37 Page 3 of4

diligence and allow District and SDCCC staff time to negotiate a new option to lease agreement for the proposed hotel and phase Ill expansion of the convention center. Amended and Restated Purchase and Sale Agreement

On November 17, 2009, FAL and SDCCC entered into the Second Amendment to their Amended and Restated Purchase and Sale Agreement and Escrow Instructions. The agreement provides for: • • • • • • •

SDCCC to close escrow to acquire the FAL leasehold by December 2, 2009; SDCCC to pay FAL $1 million at the close of escrow, FAL to accept a promissory note from SDCCC for the remaining balance of $12.5 million, secured by the leasehold interest; SDCCC will pay FAL $500,000 annually for four years with the balance of $10.5 million due on the fifth anniversary of the closing date; If SDCCC defaults, then FAL will take back the leasehold from SDCCC; The FAL Option for the 250 room hotel will terminate by its own terms; and, Release of FAL and its guarantors, Raymond Carpenter and Arthur Engel, from the Lease

On November 18, 2009, FAL and SDCCC requested Board consent and approval on December 1, 2009 for the following documents agreements: • • • •

Amendment No. 13 to the FAL Lease, removing the water parcel; Assignment of the amended FAL Lease to SDCCC; Sublease from SDCCC to FAL for the landside improvements to the water transportation center; New District lease to FAL for the water parcels of the water transportation center;

•

•

Consent to lease encumbrance on the new SDCCC lease (promissory note held by FAL on the new SDCCC lease); and, Release of FAL and its guarantors, Raymond Carpenter and Arthur Engel, upon closing.

The District did not agree to recommend that the Board consent to the proposed agreements and proposed an amendment to the existing MOU to allow the parties sufficient time to negotiate agreements with the District relating to the purchase and sale agreement.

San Diego Unified Port D1stnct Board Meeting - December 1, 2009

AGENDA ITEM 37 Page 4 of4

Amendment No. 1 to MOU Amendment No. 1 to the MOU extends the term from November 30, 2009 to March 5. 2010. All other terms and conditions will remain in full force and effect. Conclusion Staff will continue to work with SDCCC to address District concerns regarding inclusion

of a hotel 1n extension of regarding the SDCCC and

the project to assure revenues to the District in accordance with the the MOU, and work with District stakeholders to address concerns difficult and challenging entitlement road ahead. The next steps for FAL to cooperate with the District under the terms of the MOU by

negotiating the necessary agreements for the District to consent to the assignment and commence environmental review for SDCCC.

Port Attorney's Comments: The Port Attorney has reviewed and approved the requested document for form and legality.

Environmental Review:

This proposed Board action is not subject to CEQA, as amended. Equal Opportunity Program: Not applicable. PREPARED BY:

Karen J. Weymann Director, Real Estate Shahriar Afshar Senior Asset Manager, Real Estate

San Diego Unified Port D1slnct Board Meeting - December 1, 2009

Attacrment to Agenda Sheet No 37

San Diego Unified Port District Parties:

San Diego Convention Center Corporation

SAME

Fifth Avenue Landing, LLC Project:

Proposed Hotel and Phase Ill Expansion of the San Diego Convention Center

SAME

December 2, 2008 - November 30, 2009

Expires March 5, 201 o

c-~~~~~~~~·

Term:

..... .1

an D1ego- Urnfled Port

Dmt~cl

Board Meeting

DQQ,fflber

t

2009

Attachment to Agenda Sheet No. 37

37

San Diego Unified Port District Board Meeting – December 1, 2009

MOU Amendment 1. Extend Purchase and Sale Agreement to March 30, 2010. MOU will Terminate on March 5, 2010. The FAL Hotel Option will expire by its own terms on December 2, 2009.. . MOU Amendment 2. March 2, 2010 Agenda Item 34. Document 56116 Extend Purchase and Sale Agreement and MOU to April 9, 2010. San Diego Unified Port District File Clerk Macrh 12, 2010.

5 61~6 Filed_H_A_R_1_2_20_10_ _ Document No.

Office of the District Clerk

AMENDMENT NO. 2 TO MEMORANDUM OF UNDERSTANDING BETWEEN SAN DIEGO UNIFIED PORT DISTRICT (DISTRICT), SAN DIEGO CONVENTION CENTER CORPORATION (SDCCC) AND FIFTH AVENUE LANDING, LLC (FAL) CONCERNING SDCCC'S ACQUISITION OF FAL PROPERTY FOR A HOTEL PROJECT AND THE FUTURE EXPANSION OF THE SAN DIEGO CONVENTION CENTER

The following recitals are a substantive part of this Memorandum of Unde,,rstanding (MOU): WHEREAS, SDCCC desires to acquire the Lease from FAL for development of a hotel and for the future .expansion of the San Diego Convention Center; and WHEREAS, SDCCC and FAL have entered into a Purchase and Sale Agreement dated October 20, 2008; and WHEREAS, District, SDCCC and FAL entered into a MOU dated December 2, 2008 on file in the Office of the Clerk of District bearing Document No. 5421 O; and WHEREAS, District and FAL agreed that the term of the Option will be allowed to · expire on December 2, 2009; and WHEREAS, SDCCC and FAL have agreed to extend the term of their Purchase and Sale Agreement from December 2, 2009 to March 5, 2010 for the purpose of allowing sufficient time to negotiate agreements with the District relating to the Purchase and Sale Agreement. The agreements deemed necessary will be determined by the District and may include, but are not limited to: (i) Amended, Restated and Combined Lease for FAL, (ii) Assignment and Assumption of Amended, Restated and Combined Lease to SDCCC, (iii) Lease and/or Sublease to FAL for the water transportation center, and (iv) Consent to Encumbrance; WHEREAS, District, SDCCC and FAL entered into Amendment No. 1 to MOU dated December ,1, 2009 on file in the office of the Distri.ct Clerk bearing Document No. 55846; WHEREAS, SDCCC and FAL have further agreed to extend the term of their Purchase and Sale Agreement from March 5, 2010 to April 9, 2010 for the purpose of allowing sufficient time to negotiate agreements with the District relating to the Purchase and Sale Agreement.

ORI GINA~

Now Therefore, the parties agree: 1. The MOU is hereby amended as follows: The term of the MOU is hereby extended and shall terminate on April 9, 2010. 2. All other terms, covenants, and conditions of said MOU, as amended, shall remain in full force and effect and shall be applicable to this amendment. SAN DIEGO CONVENTION CENTER CORPORATION, INC.

SAN DIEGO UNIFIED PORT DISTRICT

c~~~p-

Carol Wallace President and CEO

Executive Director

FIFTH AVENUE LANDING, LLC Member

APPROVED AS TO FORM AND LEGALITY:

Raymond A. Carpenter, Member

:.1EPUTY PORT AITORNP SAN DIEGO CALIFORNIA PROPERTIES, LLC Member

Arthur E. Engel, Member

2 SDUPD Docs No. 407330

561.1.6

Now Therefore. the parties agree: 1. The MOU is herP,by amended as tolluws: The term of the MOU is hereby extended and shalf terminate ofl April 9.· 201 0.

2. A!l other terms, covenants, and conditions of said MOU, as amended, shall remain in iull force, and effect and shall be applictibie to this amendment.

SAN DIEGO UNIFIED PORT DISTRICT

SAN DIEGO CONVENTION CENTER

CORPORATION, INC.

Car-0. wail ace

Cl~rle~ D~· Wurster Executive Director

President and CEO

FIFTH AVENUE LANDING, LLC

APPROVED AS TO FORM ANO

Membe<

LEGALITY. . Port.Attorney

.

'

~~. ;_:: ~ .. :~ --~_/..:.:_:.~:.:.... .; ..: . .-..-=--.!::_

SAN DIEGO CALIFORNIA PROPE~S. LlC / j

Memb~

/~1 /~~ //
.~rthur F:. Engel, M~

2

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561.1.6

·--:---~-------·~--_,.

_____ _:,_ ________ ••·--~--··---·~-w-:._,_,~..,.-•,•-•-•----•7

~~~-.

-,.

Now Therefore, the parti.es agree: 1. The MOU is hereby amended as follows: The term of the MOU is hereby extended and shall terminate on April 9, 2010.

2. All other terms, covenants, and conditlor:is of said MOU, as amenqed, shall remain in full force and effect a11d shall be applicable to this amendment. SAN DIEGO CONVENTION CENTER CO PO RATION, INC.

SAN DIEGO UNIFiED PORT DISTRICT ·

Carol Wallace President and CEO

Charles. D. Wurster Exec.utive Dir~ctc.:ir .

FIFTH AVENUE LANDING, LLC \

APPROVED AS TO FORM AND

' LEGALITY:

fVlember

.

/J"·/,.· w7.u·,: ~- '.l'.

Po7JrrAttorn~y ' I ' ~6/t~

..

..

!~? ' • ,.. 0 il')·-c; ' ' . •Jl:'.,1 u f ORT A, HORNE" \,

Raymond A. Carpenter, Member .

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SAN DIEGO CALIFORNIA PROPERTIESi LLC

Member.

Arthur E. Engel, Member

I

·I

2 SDUPO Docs No, 407330

1

I

I"

56:1:16

Re Amendment No. 2 to Memorandum

Reference Copy Document No. 56116

of Understanding By and Among the San Diego Unified Port District, San Diego] ] Convention Center Corporation, and ] ] Fifth Avenue Landing, LLC . : .......... ]

--~--~--~~----~1. RESOLUTION __.2_0_1_0-_3_9_ _

WHEREAS, the San Diego. Unified Port District (District) and Fifth Avenue Landing, LLC, a California limited liability company, (Fifth Avenue Landing) are parties to a Lease dated 9 October 1984, as assigned and amended, for premises located bayward of Convention Way and Marina Park Way in the City of San Diego, said lease is on file in the office of the District Clerk as Document No. 17439; WHEREAS, an Agreement for Amendment of said Lease, Amendment No. 12, is on file in the office of the District Clerk as Document No. 51512; and WHEREAS, the District and Fifth Avenue Landing are also parties to an Option Agreement dated 7 October 2003, as amended, tci lease certain District premises located bayward of Convention Way and Marina Park Way, in the City of San Diego, for the purposes of a hotel that meets or exceeds the service quality standards of a Conrad Hotel and related ~ctivities, said Option Agreement is on file in the offic~ of the District Clerk as Document No. 53825; and WHEREAS, the San Diego Convention Center Corporation (SDCCC) desires tc:i acquire the Lease and Option from Fifth Avenue Landing for the development of a hotel and for the future expansion of the San Diego Convention Center; and WHEREAS, Fifth Avenue Landing and SDCCC have entered into a Purchase and Sale Agreement dated October 20, 2008, which has a condition requiring the District consent to the assignment of said Lease and Option, approve a Twelve (12) month extension of said Option and consent to a sublease and/ or direct lease for the Water Tr~nsportation

Center to allow SDCCC to begin its Twelve (12) month due diligence

period; and Page 1 of~

2010-39

WHEREAS, pursuant to Resolution 2008-279, adopted 2 December 2008, the Executive Director of the District or his authorized representative was authorized and directed to enter i!'lto a Memorandum of Understanding (MOU), on behalf of the District, by and among Fifth Avenue Landing and SDCCC in order to. allow the District to negotiate a new Option to Lease Agreement with SDCCC and Fifth Avenue Landing for the Fifth Avenue Landing site and other District property on and over Convention Way and Marina Park Way in the City of San Diego for a hotel project and for expansion of the San Diego Convention Center, said MOU in on file in the office of the District Clerk as Document No. 54210; and WHEREAS,

pursua~t

to Resolution 2009-231, adopted 1 December 2009, the

Executive Director of the District or his authorized representative was authorized and directed to enter into Amendment No. 1 to Memorandum of Understanding, on behalf of the District, by and among Fifth Avenue Landing and SDCCC in order to provide a new termination date of said MOU of March 5, 2010, said Amendment No. 1 is on file in the office of the District Clerk as Document No. 55846; and WHEREAS, SDCCC and Fifth Avenue Landing have agreed to extend the term of said Purchase and Sale Agreement from March 5, 2010, to April 9, 2010, for the purpose of allowing sufficient time

to

negotiate agreements with the District relating to said

Purchase and Sale Agreement; and WHEREAS, it is desired that the termination date of said MOU be extended from March 5, 2010, to April 9, 2010, provided, however, said extension of time shall be conditioned upon the approval of the Board of Directors of SDCCC and Fifth Avenue Landing, NOW, THEREFORE,

'. BE IT RESOLVED by the Board of Port Commissioners of the San Diego Unified Port District, as follows: That the Executive Director of the District or his authorized representative 1s hereby authorized and directed to enter into Amendment No. 2 to Memorandum of Understanding, on behalf of the District, by and among Fifth Avenue Landing and SDCCC in order to provide a new termination date of said MOU of April 9, 2010. I

Page 2 of 3

2010-39

BE IT FURTHER RESOLVED that all of the conditions contained in said MOU and Resolutions 2008-279 and 2009-231 shall continue in full force and effect except as to the termination date of· said MOU which has been extended in accordance with Amendm.ent No. 2.. BE IT FURTHER RESOLVED that in the event Fifth Avenue Landing and the Board of Directors of SDCcc· do not approve of extending the termination date of said MOU to April 9, 2010, the authorization contained in this Resolution shall be null and void and of no further force or effect.

ADOPT;ED this _ _2n_a_ _ day of _ _ _ _M_a_rc_h_ _ _ _ _ _ _ , 2010.

SW

3/2/10

(

Page 3 of 3

March 2, 2010 Agenda Item 34. Document 56116.

AGENDA ITEM 34 SAN DIEGO UNIFIED PORT DISTRICT

Reference Copy Document No. 56116

DATE:

March 2, 2010

SUBJECT:

RESOLUTION AUTHORIZING AMENDMENT NO. 2 TO MEMORANDUM OF UNDERSTANDING BETWEEN SAN DIEGO UNIFIED PORT DISTRICT, SAN DIEGO CONVENTION CENTER CORPORATION AND FIFTH AVENUE LANDING, LLC TO EXTEND THE TERM

EXECUTIVE SUMMARY: In October 2008, the San Diego Convention Center Corporation (SDCCC) entered into a purchase and sale agreement with Fifth Avenue Landing, LLC (FAL) to acquire FAL's leasehold interest on District property located bay ward of Convention Way. SDCCC is pursuing the property as a portion of the site for its proposed hotel and phase Ill expansion project for the San Diego Convention Center. To accommodate SDCCC's due diligence process with FAL, on December 2, 2008, the District entered into a Memorandum of Understanding (MOU) with FAL and SDCCC. On December 2, 2009, the parties agreed to extend the MOU to March 5, 2010. The District is currently in negotiations with FAL for a water transportation center lease and with SDCCC for an amended, restated and combined lease for the remainder of the existing leasehold expiring in 2024, which provides for an option for a new long-term lease for the hotel and phase Ill expansion project. In order to allow the District, SDCCC and FAL time to finalize the lease documents, it is recommended that the Board approve Amendment No. 2 to the MOU to extend the term to April 9, 2010:' The Board's approval of this Amendment No. 2 would be conditioned upon the approval of FAL and SDCCC's Board.

RECOMMENDATION: Adopt Resolution authorizing Amendment No. 2 to the MOU between the District, SDCCC and FAL concerning SDCCC's acquisition of the FAL's leasehold interest on the property for a hotel project and the future expansion of the San Diego Convention Center, conditioned upon approvals from FAL and the SDCCC Board.

FISCAL IMPACT: There will be no direct fiscal impact to the District by authorizing the Amendment No. 2.

San Diego Unified Port District Board Meeting - March 2, 2010

ACTION TAKEN: 03-02-2010 - Resolution 2010-39

AGENDA ITEM 34 Page 2 of4

COMPASS STRATEGIC GOALS:

This agenda item supports the following Strategic Goal(s).

D Promote the Port's maritime industries to stimulate regional economic vitality. D Enhance and sustain a dynamic and diverse waterfront. D Protect and improve the environmental conditions of San Diego Bay and the Tidelands.

D Ensure a safe and secure environment for people, property and cargo. D Develop and maintain a high level of public understanding that builds confidence and trust in the Port. Develop a high-performing organization through alignment of people, process and systems. Strengthen the Port's financial performance. Not applicable.

D

D 1:8']

DISCUSSION: Purchase and Sale Agreement Between FAL and SDCCC

On September 16, 2008, FAL and SDCCC entered into a letter of intent to negotiate definitive agreements for the purchase and sale of FAL's lease for the premises. Subsequently, SDCCC and FAL entered into a purchase and sale agreement which has been amended twice. The key terms of the purchase and sale agreement and escrow instructions, as amended, include: • • • • • • •

SDCCC to close escrow to acquire the FAL leasehold by December 2, 2009; SDCCC to pay FAL $1 million at the close of escrow; FAL to accept a promissory note from SDCCC for the remaining balance of $12.5 million, secured by the leasehold interest; SDCCC will pay FAL $500,000 annually for four years with the balance of $10.5 million due on the fifth anniversary of the closing date; If SDCCC defaults, then FAL will take back the leasehold from SDCCC; The FAL Option for the 250 room hotel will terminate by its own terms; and, Release of FAL and its guarantors, Raymond Carpenter and Arthur Engel, from the Lease.

Memorandum of Understanding Between District, FAL and SDCCC

To activate the purchase and sale agreement, SDCCC and FAL requested the District's consent in November 2008, to the transaction. The District did not agree to approve the proposed purchase and sale agreement without an agreement between SDCCC

San Diego Unified Port District Board Meeting - March 2, 2010

MOU Amendment 2 extend MOU to April 9, 2010.

AGENDA ITEM 34 Page 3 of4

and the District for redevelopment of the property. On December 2, 2008, the Board authorized the District to enter into the MOU with FAL and SDCCC to provide SDCCC with the time to conduct their due diligence and allow District and SDCCC staff time to negotiate a new option to lease agreement for the proposed hotel and phase Ill expansion of the convention center. Amendments to Memorandum of Understanding The most recent amendment, Amendment No. 1 to the MOU extended the term from December 1, 2009 to March 5, 2010. Amendment No. 2 to the MOU proposes to extend the term from March 5, 201 O to April 9, 2010. All other terms and conditions will remain in full force and effect. Conclusion The next steps for SDCCC and FAL are to cooperate with the District under the terms of the MOU and finalize negotiations of the necessary agreements. Staff will then leases to return to the Board for its consent to the proposed assignment and grant of r FAL and SDCCC. Port Attorney's Comments: The Port Attorney has reviewed and approved the requested document for form and legality. Environmental Review: This proposed Board action is not subjee
San Diego Unified Port District Board Meeting - March 2, 2010

Attachment to Agenda Sheet No. 34

MOU Information Summary

MOU (as amended)

Amendment No. 2

San Diego Unified Port District Parties:

San Diego Convention Center Corporation

SAME

Fifth Avenue Landing, LLC Project: Term:

Proposed Hotel and Phase Ill Expansion of the San Diego Convention Center

SAME

December 2, 2008 - March 5, 2010

Expires April 9, 2010

I

San Diego Unified Port District Board Meeting - March 2, 201 O

Attachment to Aoenda Sheet No. 34

SOUTH EMBARCADERO/ 10th AVENUE MARINE TERMINAL

3'...............

Attachment to Agenda Sheet No. _.

SAN DIEGO UNIFIED PORT DISTRICT San Diego, Ca

San Diego Unified Port District Board Meeting - March 2, 201 O