Agenda Item   

AGENDA STAFF REPORT

 

                                                                                                                        ASR Control  19-001038

 

MEETING DATE:

10/08/19

legal entity taking action:

Board of Supervisors

board of supervisors district(s):

2

SUBMITTING Agency/Department:

County Executive Office   (Approved)

Department contact person(s):

Thomas (Mat) Miller (714) 834-6019 

 

 

Brian Bauer (714) 834-5663

 

 

Subject:  Coyote Canyon Option and Lease Agreement for Golf Course

 

      ceo CONCUR

County Counsel Review

Clerk of the Board

Concur

Approved Agreement to Form

Discussion

 

 

3 Votes Board Majority

 

 

 

    Budgeted: N/A

Current Year Cost: N/A

Annual Cost: N/A

 

 

 

    Staffing Impact:

No

# of Positions:

Sole Source: N/A

    Current Fiscal Year Revenue: $50,000

  Funding Source: N/A

County Audit in last 3 years: No

 

 

    Prior Board Action: 09/26/2017 #42

 

RECOMMENDED ACTION(S):

 

 

1.

Approve the Option Agreement with Tait Development, LLC to conduct the due diligence regarding ground leasing and development of the property and authorize the Chief Real Estate Officer or designee to execute the Option Agreement substantially in the form attached, with approval of County Counsel.

 

2.

Approve the Ground Lease Agreement with Tait Development, LLC for a 75-year term to plan, design, fund, construct, renovate, market, operate, manage and maintain the property and authorize the Chief Real Estate Officer or designee to execute the Ground Lease Agreement in substantially the form attached, with approval of County Counsel, upon fulfillment of the conditions set forth in the Option Agreement.

 

3.

Authorize the Chief Real Estate Officer or designee to sign any and all necessary documents related to the process of entitling the property located in Newport Beach, as set out in the Ground Lease Agreement, including minor modifications and amendments to the Option and Ground Lease Agreement that does not materially alter the terms or financial obligations to the County, and perform all activities specified under the terms of the Option and Ground Lease Agreement.

 

 

 

 

 

SUMMARY:

 

Selection of Tait Development, LLC and approval of the Option and Ground Lease Agreements will allow Tait Development, LLC to conduct the due diligence tasks necessary for the long-term lease, and will create a long-term revenue generating ground lease for the County.

 

 

 

BACKGROUND INFORMATION:

 

The County of Orange (County) owns a 375-acre parcel in the City of Newport Beach (City) that was the site of the Coyote Canyon Landfill (Coyote Canyon).  Coyote Canyon was a Class III municipal solid waste landfill that operated between 1963 and 1990.  Between 1990 and 1995, OC Waste & Recycling (OCWR) implemented site closure activities and since 1995, the site has been undergoing post-closure maintenance in accordance with applicable regulatory requirements.  Coyote Canyon is currently zoned open space with approximately 123.5 acres set aside as coastal scrub habitat for the California gnatcatcher. 

 

OCWR manages Coyote Canyon  and conducts monitoring and maintenance in accordance with South Coast Air Quality Management District, Santa Ana Regional Water Quality Control Board and Solid Waste Local Enforcement Agency rules and regulations. Coyote Canyon is equipped with several environmental control systems, including a gas collection and control system of approximately 370 landfill gas recovery wells, a gas/condensate collection and conveyance network  and a flare station. The area around the landfill is monitored through a network of approximately 155 multiple-depth gas-monitoring probes.  A groundwater-monitoring network and a groundwater extraction system have also been installed at Coyote Canyon. Following the completion of waste disposal operations in 1990, a final landfill cover was installed in compliance with landfill closure requirements. Although the County values the potential for revenue, the County’s primary commitment is to comply with all applicable regulatory requirements for closed landfills.  

 

Request for Proposals

On September 1, 2016, CEO Real Estate, on behalf of OCWR, released a Request for Proposals (RFP) seeking a qualified respondent to enter into a long-term ground lease for Coyote Canyon as a golf facility.  On December 9, 2016, CEO Real Estate received two proposals in response to this RFP, including a proposal from Chapman Investment Company LP and Guardian Investment Capital, LLC (Chapman) and a proposal from Tait & Associates, Inc. (Tait). A four-member evaluation committee comprised of public and private sector subject matter experts reviewed the proposals.  The panel recommended Chapman as the primary developer for the potential golf course. On September 26, 2017, the Board directed CEO Real Estate to negotiate a lease with Chapman as the primary developer and Tait as the alternate developer.

 

On May 30, 2018, Chapman informed the County that they were terminating negotiations regarding the Option and Ground Lease Agreements for Coyote Canyon.  Because of Chapman’s termination of negotiations, Tait, as the Board-approved alternate developer, was contacted to commence lease negotiations.  Since October 2018, CEO Real Estate staff has worked closely with Tait, OCWR  and the City to finalize the terms of the Option and Ground Lease Agreements.  

 

Tait is proposing to construct, develop, entitle, operate  and maintain an 18-hole golf course facility with related amenities (Project). The Project may include the following program elements based on the entitlement process with the City:

 

  • Driving Range/Practice Facility
  • Public Space with Walking Trails
  • Four-Star Restaurant
  • Boutique Hotel with Spa
  • Banquet/Meeting Facility
  • Outdoor Beer Garden and Recreational Area

7.  Great Room

 

Option and Ground Lease

The proposed Option Agreement has an initial option term of four years and an option price of $100,000.  This term can be extended for up to five additional years, with an initial extension of two years and a fee of $35,000, followed by three subsequent one-year extensions for fees of $45,000, $55,000  and $65,000,  respectively.

 

Pursuant to the terms of the RFP, Tait provided a Good Faith deposit for $50,000. The Good Faith Deposit is not a security deposit; however, it will be credited towards the initial Option payment.  In the event Tait fails to exercise the Option or materially changes the terms of its proposal, the County has the right to deduct the actual cost incurred by County staff (including overhead and burden expenses) in negotiating the Option and Ground Lease from the Good Faith Deposit at the County’s reasonable discretion. 

 

The Option Period will include the following phases: Development Feasibility, General Plan Update  and Project-Specific Entitlement Phase. During the Development Feasibility Phase, Tait will complete engineering and environmental due diligence to define the physical constraints of Coyote Canyon and cost implications to create a “build-ready” condition including infrastructure studies and analysis; biological environmental assessment; and geotechnical investigation and mapping of trash depth. Concurrently, with the Development Feasibility, Tait will work with City staff, elected officials and community members to pass a General Plan Amendment in order to obtain a land use designation that is consistent with the proposed project plans. After completion of the prior two phases, Tait shall diligently pursue Project-specific entitlements, including Preliminary Plans as well as any required review under the California Environmental Quality Act (CEQA).  Once the due diligence tasks have been satisfied, Tait may exercise the Option to lease the Property. 

 

Ground Lease Revenue

The Ground Lease has a term of 75-years with no extensions (Term).  Below is a projected breakout of revenue, based on Tait's pro forma projections, which projects the County receiving approximately $52 million in ground rent.

 

Anticipated County Lease Revenue

 

Years 1-20

Years 21-25

Years 26-30

Years 31-75

Total

$6,281,604

$2,078,835

$2,352,011

$41,268,614

 

Project Development Costs

Tait plans to invest approximately $38 million to plan, design, entitle, permit  and construct the Project. Tait will be obligated to maintain and renovate the improvements during the Term of the Ground Lease to ensure Project revenue and to protect the asset.

 

 

CEQA COMPLIANCE:

This action is not a project within the meaning of CEQA Guidelines Section 15378 and is therefore exempt from CEQA, since it does not have the potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. The approval of this agenda item does not commit the County to a definite course of action in regards to a project since the approval of the Option and Ground Lease agreements would allow Tait to administer and manage the Project. This proposed activity is therefore not subject to CEQA.  Any further action that connected to this approval that constitutes a project will be reviewed for compliance with CEQA, and future development of the site by Tait would be subject to CEQA.

 

 

 

FINANCIAL IMPACT:

 

Approval of Ground Lease is anticipated to provide revenue to the County of approximately $52 million over the 75-year term. Additional revenue to the County of $100,000 for the option payments is also anticipated, or $300,000 should all the option extensions be exercised.

 

Revenue will be split 65 percent to CEO Real Estate Development Program Fund 135 and 35 percent to OC Waste & Recycling Enterprise Fund 299.

 

 

 

 

 

STAFFING IMPACT:

 

N/A

 

REVIEWING AGENCIES:

 

OC Waste and Recycling

 

ATTACHMENT(S):

 

Attachment A - Parcel Map
Attachment B - Option Agreement
Attachment C - Lease Agreement