Agenda Item AGENDA STAFF REPORT ASR Control 25-000448
MEETING DATE:	12/02/25
legal entity taking action:	Board of Supervisors
board of supervisors district(s):	5
SUBMITTING Agency/Department:	County Executive Office (Approved)
Department contact person(s):	Thomas A. Miller (714) 834-6019
	Brian Bauer (714) 834-5663

Subject: Revised Option and Ground Lease for Laguna Niguel City Center

ceo CONCUR

County Counsel Review

Clerk of the Board

Concur

Approved Agreement to Form

Discussion

3 Votes Board Majority

Budgeted: Yes

Current Year Cost: N/A

Annual Cost: N/A

Staffing Impact:

# of Positions:

Sole Source: N/A

Current Fiscal Year Revenue: $37,500

Funding Source: N/A	County Audit in last 3 years: N/A
Levine Act Review Completed: Yes

Prior Board Action: 8/26/2025 S35G, 5/20/2025 S87A, 6/4/2019 S41B

RECOMMENDED ACTION(S):

Approve Amended and Restated Option Agreement with Laguna Niguel Town Center Partners, LLC to extend the Option Term 12 months, effective from December 2, 2025, to December 2, 2026, to continue due diligence and permitting regarding the lease and development of County-owned property located at the former South County Justice Center in Laguna Niguel, and authorize the Chief Real Estate Officer or designee to execute the Amended and Restated Option Agreement in substantially the form attached with minor modifications that do not increase the risk or the financial obligations to the County with approval by County Counsel.

Approve revised Ground Lease Agreement with Laguna Niguel Town Center Partners, LLC for an 89-year term to oversee the planning, design, financing, construction, renovation, marketing, operation, management, and maintenance of the property, and authorize the Chief Real Estate Officer or designee to execute the Ground Lease Agreement in substantially the form attached with minor modifications that do not increase the risk or the financial obligations to the County with approval by County Counsel, upon fulfillment of the conditions set forth in the Amended and Restated Option Agreement.

Authorize the Chief Real Estate Officer or designee to execute any and all necessary documents related to the Laguna Niguel City Center project, including documents related to entitlements, land dedications, easements, conditions, covenants, and restrictions, tract maps, and construction permitting, as well as documents related to the planning, relocation, construction and sublease of the temporary and new County library building, as set forth in the Amended and Restated Option Agreement and Ground Lease Agreement, and minor modifications and amendments to the Amended and Restated Option Agreement and Ground Lease Agreement, provided they do not materially impact the terms or financial obligations of the County, and authorize the Chief Real Estate Officer or designee to perform all activities specified under the terms of the Amended and Restated Option Agreement and Ground Lease Agreement.

SUMMARY:

Approval of an Amended and Restated Option Agreement and revised Ground Lease Agreement with Laguna Niguel Town Center Partners, LLC will facilitate continued due diligence, planning, management, and development of the Laguna Niguel City Center project.

BACKGROUND INFORMATION:

On June 4, 2019, the Board of Supervisors (Board) selected Laguna Niguel Town Center Partners, LLC (LNTCP) as the developer for a mixed-use development project known as the Laguna Niguel City Center (Project), located on an approximately 23-acre County of Orange (County) owned parcel in the City of Laguna Niguel (City) at the intersection of Alicia Parkway and Crown Valley Parkway (Property). The Board also approved an Option Agreement (Option) and Ground Lease Agreement (Ground Lease) with LNTCP to develop, entitle, fund, operate and manage the Project. On May 20, 2025, the Board approved a First Amendment to Option Agreement with LNTCP to extend the Option Term three months, effective from June 2, 2025, to September 2, 2025, to provide additional time to negotiate modifications to the Project, Option, and the Ground Lease that would allow the Project to move forward. On August 26, 2025, the Board approved a Second Amendment to Option Agreement with LNTCP to extend the Option Term another three months, effective from September 2, 2025, to December 2, 2025, to provide additional time to complete negotiations with LNTCP on the revised Option and Ground Lease.

LNTCP received entitlements in July 2022 for the Project, including 275 multi-family residential units, commercial space, and a new County library. The City, as lead agency under CEQA for the Project, certified Final Environmental Impact Report No. 22-01 (State Clearinghouse No 2019110083) on June 21, 2022. A Notice of Determination (NOD) was filed on June 23, 2022. Due to changes in financial markets, LNTCP has coordinated with the County and is working with the City on proposed revisions to the Project, which should allow the Project to move forward and break ground on construction by the end of 2026. The proposed revised Project includes significantly downsizing the office component and replacing the parking structure intended to support it with surface parking meeting parking code. Office space is being downsized due to the collapse of financing available for new office space, declining office rents, and the rise of remote office work. Eliminating the parking structure brings down costs materially and improves the financial viability of the Project, while also enhancing the Project’s site circulation and parking layout by providing more convenient parking for the new library. The proposed revised site plan would also accommodate optional future construction of additional office space, if supported by market conditions.

Other proposed Project changes include expanding the retail footprint and modifying the timeline for new library construction to prioritize upfront equity and the cost burden of the overall revenue-generating components. New library construction will begin as soon as possible, but no later than 12 months following substantial completion of either the commercial or multi-family component, whichever is later. The table below provides a comparison of the components of the original approved Project and the proposed revised Project, with the net impact of the changes resulting in the reduction of the commercial component from approximately 158,600 square feet (sf) to approximately 110,708 sf.

Component	Original Plan	Proposed Revised Plan
Office	81,500 sf	15,000 sf
Retail	77,100 sf	95,708 sf
Total Commercial	158,600 sf	110,708 sf
Library	10,000 sf	16,250 sf
Multi-Family	275 units	275 units

Proposed revisions to the Option include:

Topic	Option Revision
Term	Extend term from December 2, 2025, to December 2, 2026, to provide time for completion of construction drawings, permit applications, and recording of a final map.
Library	Start of new library construction will be advanced, if possible, but LNTCP is provided the opportunity to defer the start of the new library construction to later in the schedule. In exchange, the term of the interim/temporary library sublease will be extended accordingly, the size of the temporary library will increase from 3,500 sf to 5,000 sf, the location of the temporary library will be prioritized to be within one mile from the Property, and the tenant improvement allowance for the new library will increase from $100/sf to $150/sf. The size of the new library is also increasing from approximately 10,000 sf to approximately 16,250 sf.
Assignment	Assignment language revised to permit certain transfers without County approval in order to correlate to the financing objectives of LNTCP, including engaging an institutional investor to provide requisite capital and funding for the Project, and excluded transfer language revised to be consistent with Ground Lease.
Remediation	LNTCP is provided the right to enter the Property during the Option Term to complete remediation of pre-existing hazardous materials.
Insurance	Insurance requirements updated to reflect LNTCP’s right to conduct site remediation.

Proposed revisions to the Ground Lease include:

Topic	Ground Lease Revision
Term	Add additional 10 years to lease term from 79 years to 89 years in exchange for a larger new library.
Schedule	Extending the outside construction completion for the entire Project from four to five years to accommodate phasing of the Project and larger new library construction, while imposing liquidated damages if the library is not constructed on time.
Phasing	Allows Project to be developed in phases, including within components.
Subleases	Increases thresholds for County approval of subleases from 7,500 sf to 15,000 sf for retail, 50,000 sf for office, and no limit for medical office. This allows LNTCP to secure anchor tenants without the appearances of political interference, puts the burden on LNTCP to provide construction loan guarantees, and helps maintain the Project’s timing and financing viability. Regardless of whether a sublease requires County consent or not, the use thereunder must conform with the permitted uses allowed by the Ground Lease.
Bifurcation of Lease	Allows bifurcation of Ground Lease into no more than four separate ground leases to separate the financing of the various components. This allows the large mixed-use Project to be divided into smaller component specific ground leases, which will attract more competitive lenders and/or investors, as each component can be financed under terms that are most appropriate and beneficial for that particular use or lender. Bifurcation ensures regulatory compliance and the financial stability of the Project.
Assignment	Assignment language revised to permit certain transfers without County approval in order to correlate to the financing objectives of LNTCP, including engaging an institutional investor to provide requisite capital and funding for the Project.
Library	Start of new library construction will be advanced, if possible, but LNTCP is provided the opportunity to defer the start of the new library construction to later in the schedule to prioritize upfront equity and the cost burden of the overall revenue-generating components.
Library Bond Financing	Allows tax-exempt bond financing for the library and certain public improvements to minimize cost and optionality with loan structure, if available.
Insurance	Itemizes specific requirements for the various phases of the Ground Lease (execution, during construction, after construction) and the various parties involved (tenant, architect-engineer, contractor, etc.).

LNTCP’s total development costs for the proposed revised Project will be approximately $260 million, including $15 million for construction of a new County library. Over the 89-year ground lease, it is estimated total lease payments to the County will be approximately $452 million. For comparison, the prior approved Project estimated an approximately $210 million investment and approximately $196 million in total lease payments to the County. Distribution of total ground lease revenue by Project component over the term of the revised Ground Lease is shown in the table below:

Revised Ground Lease Revenue (in millions, rounded)
Component	Years 1-10	Years 11-15	Years 16-20	Years 21-25	Years 26-30	Years 31-89	Total
Commercial	$2.1	$2.2	$2.6	$3.2	$4.5	$170.3	$185.0
Multi-Family	$3.1	$3.2	$3.7	$4.6	$6.4	$245.6	$266.6
Total	$5.2	$5.4	$6.3	$7.8	$10.9	$415.9	$451.6

The Amended and Restated Option is being presented for Board approval less than 30 days before the effective date because of extended negotiations before the Option Term expires on December 2, 2025. The Orange County Preference Policy is not applicable to the Amended and Restated Option or the revised Ground Lease. The Ground Lease Agreement contains nonstandard insurance language approved by Risk Management which allows the County to obtain insurance on behalf of the LNTCP and charge the cost as additional rent, in the event LNTCP fails to procure and maintain the required insurance within 30 days’ notice of default from the County. See Attachment C.

In order for LNTCP to more efficiently move through the process to get a final Project tract map approved and recorded, CEO Real Estate is requesting Board authorization for the Chief Real Estate Officer or designee to execute any and all necessary documents related to the Laguna Niguel City Center project, including the following:

Land Dedications

County of Orange to City of Laguna Niguel:

Lot A (48,352 sf) roadway and drive apron on Pacific Island Drive

Lot B (437 sf) driveway apron on Alica Parkway

Lot C (871 sf) driveway apron on Crown Valley Parkway

County of Orange to OCFA - 1,165 sf of property

OCFA to County of Orange - 825 sf of driveway aisle

OCFA to City of Laguna Niguel - 247 sf driveway apron on Pacific Island Drive

Easements

Moulton Niguel Water District Easements – multiple to be quitclaimed

Southern California Edison Easements – multiple to be quitclaimed

Moulton Niguel Water District Water and Sewer – multiple needed

City of Laguna Niguel – for public storm drain

City of Laguna Niguel – for public sidewalk Crown Valley Parkway

City of Laguna Niguel – for private roadway, utilities, drainage and landscaping over City Hall property, including drive aisles around City Hall

City of Laguna Niguel – for signage at City Hall

Public Access Easement for Private Streets – to library, City Hall, Emergency Services, and OCFA.

Library Parking Stall Easement

Reciprocal Easement between All Parcels – for access, parking, utilities, drainage, etc.

Reciprocal Easement to OCFA – for emergency access purposes

Southern California Edison – utility easement

Southern California Gas – utility easement

Telecom – construction and maintenance easements, as necessary

Conditions, Covenants, and Restrictions (CC&Rs)

Provision(s) for the maintenance of all private street(s) and shared access drives, utilities, drainage, common open space, and slopes

Provision(s) for the maintenance of private drainage facilities within the subdivision

Provision(s) for the requirement and enforcement of individual parking garage spaces to be utilized exclusively for parking of resident vehicles

A statement indicating that proposed amendments to any of the project CC&Rs shall be submitted for review and approval to the Community Development Director

Operations and maintenance document for water quality BMP maintenance

General Plan: Pursuant to City Resolution 2022-1399, the Project is consistent with the General Plan of City of Laguna Niguel pursuant to Government Code Section 65402(b).

Compliance with CEQA: This action is not a project within the meaning of CEQA Guidelines Section 15378 and therefore not subject to 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 regard to a project since it includes approval of an Amended and Restated Option Agreement and revised Ground Lease Agreement that would allow LNTCP to administer and manage the Property. This proposed activity is therefore not subject to CEQA. Any future action connected to this approval that constitutes a project will be reviewed for compliance with CEQA.

FINANCIAL IMPACT:

Approval of the Amended and Restated Option Agreement will provide $37,500 in revenue to CEO Real Estate Fund 135 in FY 2025-26, as a fee for extending the Option Term. Approval of the revised Ground Lease, and if LNTCP exercises the Option, is anticipated to provide approximately $452 million in future revenue to CEO Real Estate Fund 135 over the 89-year term. If LNTCP does not exercise the Option, CEO Real Estate Fund 135 will receive $122,500 in FY 2026-27 as deferred payment for extending the Option Term.

STAFFING IMPACT:

N/A

ATTACHMENT(S):

Attachment A - Amended and Restated Option Agreement
Attachment B - Ground Lease Agreement
Attachment C - Risk Assessment Form