HomeMy WebLinkAboutContract 1782SITZER
LAW GROUP
September
28, 2018
VIA EMAIL & OVERNIGHT COURIER
C -/82 -
City of Cathedral City
Attn: City Manager
68-700 Avenida Lalo Guerrero
Cathedral City, California 92234
Email: CMcClendon(a,cathedralcity.gov
City Urban Revitalization Corporation
Attn: Counsel for CURC
68-700 Avenida Lalo Guerrero
Cathedral City, California 92234
Re: Delivery of Fully -Executed Tri -Party Agreement and
NOTICE OF UNAVOIDABLE DELAY
Dear Sirs,
As you know, we are counsel to Cathedral Canyon Development, LLC ("CCD") with
respect to:
1. That certain Purchase and Sale and Escrow Instructions Agreement dated April 26,
2017 between CCD, as Buyer, and the City of Cathedral City ("City"), as Seller, for the purchase of
certain unimproved real property described therein located in the City of Cathedral City ("City
Property"), as amended by that certain First Amendment dated September 27, 2017 (as so amended,
the "City PSA");
2. That certain Purchase and Sale and Escrow Instructions Agreement dated April 26,
2017 between CCD, as Buyer, and the City Urban RevitalIi7ation Corporation ("CURC"), as Seller,
for the purchase of certain unimproved real property described therein located in the City of
Cathedral City ("CURC Property," and, together with the City Property, the "Properties"), as
amended by that certain First Amendment dated September 27, 2017 (as so amended, the "CURC
PSA," and, together with the City PSA, the "PSA's"); and
3. That certain Cathedral Canyon Performance Agreement dated September 27, 2017
between CCD, as Developer, and City and CURC (collectively, "Sellers"), as Sellers (the "PA," and,
together with the PSA's, the "Agreements"), pertaining to CCD's purchase of the Properties
pursuant to the PSA's and subsequent development of the Properties.
Although our review of the Agreements indicated that Sellers' refusals to grant previous
requests by CCD for extensions of time, and/or placing conditions on extensions were contrary to
301 SHIPYARD WAY, SUITE B, NEWPORT BEACH, CA 92663 • TEL. (949) 723-5320 • FAX (949) 723-5324
the terms of the Agreements,' our client has, at the specific request of City and CURC, instructed us
to forbear from issuing any formal notice of default at this time.
Instead, and in specific reliance on the terms of the Tri -Party Agreement, including the non -
waiver and reservation of rights provisions of section 5 thereof, and the assurances of City's and
CEJ$C Jegal_representatives_that_CCD_'s_ ights_andremedies_as_they_existed_immediately_prior_to_the
Tri -Party Agreement shall be unaffected by the Tri -Party Agreement, we are delivering herewith the
fully -executed Tri -Party Agreement.
In addition to delivering the signed Tri -Party Agreement, and in an excess of caution to
preserve its rights under the Unavoidable Delay provisions of the PA (and only in the event it were
ever determined that Sellers were not otherwise obligated to extend the Closing Date and were not
otherwise in default:
CCD hereby provides Sellers with its NOTICE OF UNAVOIDABLE DELAYS pursuant
to section 7.10 of the PA, effective as of no later than September 21, 2018 and continuing until the
end of the condition or conditions causing each such Unavoidable Delay.
The Unavoidable Delays of which Sellers is hereby noticed are set forth in Exhibit A hereto
and incorporated herein by reference.
All of CCD's rights and remedies, whether at law or in equity, are hereby expressly
reserved and shall not be impaired or limited in any manner by the foregoing Notice.
Sincerely,
Mic ael rdinand Sitzer, Esq.
1 E.g., Section 3.6 of PA (parties acknowledge that changes to the Scope of Development and/or
Schedule of Performance "may become necessary or desirable" in the course of the entitlement and
development process, including the Close of Escrow "Milestone" date of October 1, 2018; Sellers to
notify CCD within 10 business days "of either their approval or disapproval"; disapproval if there is a
"reasonable basis"; only extensions for less than 365 days in the aggregate are defined as
"unreasonable"; City Manager may grant extensions without Council's approval. Section 14.10 of
the PSA's: "The City Manager is authorized to sign on his or her own authority amendments to this
Agreement which are of routine or technical nature, including extensions of time deadlines ...
requested by Buyer ... not [to] exceed one (1) year." Section 14.19 of PSA's: "Time of the Essence"
as a term considered but consciously omitted. Section 2.5 of the City PSA, vacation of Interior
Streets, will not be completed as required before the scheduled Closing Date. Encroachment,
revisions to property lines, and changes to driveway easement behind the Napa Auto Parts affect
title, see condition to Closing under section 5.2.1 of City PSA. See also sec. 8.1(c) of City PSA (City rep
re no further grants of rights) & City covenant at sec. 8.2 (no further easements or encumbrances).
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cc: Gresham Savage Nolan & Tilden
Attn: Kevin Randolph
550 E. Hospitality Lane
San Bernardino, CA 92408
(Counsel for CURC)
l;mail: Kevin.Randolph c�i GreshamSavage.com
Eric S. Vail, Esq.
1770 Iowa Avenue, Suite 240
Riverside, CA 92507-2479
Email: evail@bwslaw.com
Tami Scott
Administrative Services Director
68-700 Avenida Lalo Guerrero
Cathedral City, California 92234
Email: tscott@cathedralcity.gov
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EXHIBIT A
[Summary of Unavoidable Delays Under. Section 7.10
of Cathedral Canyon Performance Agreement]
1. Napa Edge: CCR's original design called for an entry to the site on a old street lying directly
behind a third party owned NAPA Auto Parts building; it included a to -be -vacated street easement
the City holds. The City contacted CCD approximately late November 2017 to inform CCD that the
NAPA owner had been using the land behind his building for quite some time for deliveries and
parking, and in order to avoid a potential "hassle" with NAPA the City wanted CCD to give up a
greater portion of the street vacation. CCD was informed that City and Napa would present a
reasonable solution but never heard back until approximately February 15th, 2018, when CCD was
told that it should move forward regardless of where the property line might end up. CCD reminded
City that changes to the boundary lines would cause great expense to CCD in the preparation of its
plans. The ultimate understanding on this issue — CCD would give up a 10' wide by 85' length of
what would customarily have been vacated to it — has still not been formalized and thus still an
unresolved issue affecting title and the physical site.
2. Replacement of Key City Official: In October of 2017, CCD was notified of the retirement
of Curt Watts (Economic Development Director of the City). Curt was for all purposes CCD's
contact with the City to that time. The successor to that role is Stone James, new to the position.
3. SCE Substation: The SCE substation located on the southern edge of the project (CURC
owned land) was assumed not to be an impediment to the project, however, as project design and
pro -forma moved forward it became clear that the cooperation of SCE would be needed. SCE is
scheduled to decommission that substation, with no guarantee from them on timing. There are
transmission lines going in and out of that substation, along with many 20-25 active and inactive
electrical poles scattered throughout the site and which surround the substation. SCE requires their
own contractors & bids, and all at CCD's expense. The timing of SCE's decommissioning of that
station plays an integral role in the costs associated with developing the site. SCE stated that they
would consider selling that substation to CCD, but that it could take years. Numerous follow-up
calls to SCE between July and December 2017 were to no avail and the substation remains an
uncertainty and delaying factor to CCD in finalizing its plans and pro -formas.
4. Change in Concept: Starting in the 4th Quarter of 2017 CCD began discussions with the
City regarding changing development concept for this site from apartments and retail to mixed use
hotel and commercial building. The City was receptive to these discussions and encouraged this
change in direction by offering financial contributions towards costs, removal or certain rights of
way to increase the developable envelope, and various other concessions and forms of assistance.
However, when it came time to formalize the offers made in oral conversations, and restated in
emails, the City was unwilling to do so and substantial additional delay resulted from CCD's
attempts to arrive at an agreeable form of amendment to the agreements. Throughout this time, the
City actively encouraged CCD's change of course; CCD relied on City's shared enthusiasm for the
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change, which all parties understood starting over in many respects. CCD relied on the fact that City
would continue to support this change and accommodate CCD with appropriate amounts of
additional time to allow this to occur, which is one of the things that was going to be confirmed in
the June 2018 amendments, but after spending the entire first part of 2018 working with the City
amicably toward this change in concept, CCD learned on August 30, 2018 — 8 months down the
road, that City and CURC were pullingthe_plug on the amendments,_and_placing CCD in_a position
of hardship and desperation (they hoped) with respect to the project and the time and monies they
had invested to date.
5. Uncertainty regarding parcels: CCD's engineer discovered various discrepancies regarding
the size and square footage of many of the parcels and APN's. There was confusion with the City
surrounding the determination of the size and dimensions of all of the parcels. The City was not
certain of exactly what they were selling, it took them a great amount of time to formally identify
those boundaries (approx. 1-2 months) and later describe in their June 2018 proposed amendments,
which have not been signed. To our knowledge, a revised City property map has not been updated.
6. Protracted Attempts to amend agreements with City: After a long delay, the City finally
delivered proposed amendments to the agreements in June of 2018, efforts by CCD to reach an
acceptable form of amendment to each agreement were ongoing when City abruptly and
precipitously revoked the proposed amendments on August 30, 2018, resulting in approximately 3
months wasted in attempting to document the concessions and contributions CCD believed the City
had committed to.
6. City's and CURC's conditions: City's and CURC's inability to satisfy various conditions for
Closing, resulting in addition delay and expense to CCD.
7. Other: Recurring delays in obtaining responses from City officials; new personnel at City
unfamiliar with the project and with the City processes; City budgetary constraints and limited
working hours, including 4 -day work week; lack of agreement between City and CURC on crucial
issues under the PA affecting their ability to speak with one voice as "Seller" under the PA and to
communicate effectively with CCD and properly administer the PA as "Seller."
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