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2024-08-02 City - CMG - Term Sheet & Ltr of Intent re: TALUS - SRR Interim Agr for Transfer of Dev Obligationsta, athitai August 2, 2024 VIA E-MAIL Christopher M. George 3160 Crow Canyon Road, Suite 400 San Ramon, California 94583 Email: cgeorge@cmgfi.com Re: Term Sheet and Letter of Intent Interim Agreement for Transfer of Developer Rights and Obligations CALIFORNIA Dear Mr. George: As public records reflect, the City of La Quinta ("City") and SilverRock Development Company, LLC ("SDC"), entered into a Purchase, Sale, and Development Agreement on or about November 19, 2014 ("Original PSDA"), as amended by that certain Amendment No. 1 dated on or about October 29, 2015 ("Amendment No. 1"), that certain Amendment No. 2 dated on or about April 18, 2017 ("Amendment No. 2"), that certain Amendment No. 3 dated on or about November 28, 2018 ("Amendment No. 3"), that certain Amendment No. 4 dated on or about October 12, 2021 ("Amendment No. 4"), and that certain Amendment No. 5 dated on or about November 16, 2023 ("Amendment No. 5" and collectively referred to as the"PSDA") for the SilverRock Resort Project, renamed Talus project (the "Project"). Under Amendments Nos. 4 and 5, SDC and the City memorialized the then City -approved Revised Capitalization that was presented to the City by SDC. Pursuant to letters from the City to SDC, dated July 1 and August 1, 2024, respectively, the City declared that SDC is in full breach of the PSDA and that SDC no longer has any rights as "Developer" under the PSDA for failure to timely cure, and inability to ever cure, the Defaults identified in those letters (copies of which are attached for reference). Furthermore, as explained in the City's August 1, 2024 letter, the City identified a material misstatement made by SDC by promulgating SDC has the authority to determine whether CMG, one of multiple parties to the MOU (as defined therein) "has no further rights, liabilities, or obligations under the MOU or the PSDA or in connection with the Developer - Held Properties." To the contrary, as explained by the City, SDC failed to perform under the MOU, willfully took actions to frustrate the ability for CMG and other parties to perform under the MOU, and no longer has any rights as the "Developer" under the PSDA. T8495 Calie Tampico 1 La Ruinta, California 922531760.171.I{IBC 1 www.laquintaca.goy CALIFORNIA In this regard, the City sends this Term Sheet and Letter of Intent tooutl he efforts by the City to continue with effectuating the transactions that were set forth in the MOU, given the frustration of purpose and bad faith actions taken by SDC. Please be reminded that this letter is an outline, albeit delivered to be as informative as possible, and any and all actions described below are and will be subject to final review and approval by the City Council and memorialized in a binding, written agreement (for reference, described as the "Interim Agreement"). Term Sheet/Statement of Terms With those provisions, the City sets forth the following terms and conditions ("Term Sheet"), with details and implementing provisions to be more fully developed and agreed upon in the Interim Agreement, to proceed with having CMG assume and become the "Developer" for the Project under the PSDA: 1. Parties to the Interim Agreement are proposed to be same parties as in the MOU, except SDC and the SDC -affiliated entities. Upon mutual agreement of the City and CMG, other parties may be added to the Interim Agreement. 2. If CMG acquires by foreclosure sale the real property covering the secured interest described in the Second Deed of Trust with Cypress Point Holdings ("Cypress") as named beneficiary, County Recorder Doc. No. 2022-0486431 ("Cypress Deed of Trust"), which real property is referred to in this Term Sheet as the "Core Project Components Property," and as a result of the foreclosure sale the fee interest in the Core Project Components Property vests with CMG, then the City will approve CMG as the "Developer" for the Project and will accept CMG's assumption of the rights and obligations under the PSDA for the Core Project Components Property. The City and CMG will then negotiate and amend the PSDA (or enter into another agreement as mutually agreeable to the City and CMG), to memorialize the mutually agreed-upon modifications to the PSDA with CMG proceeding as the "Developer" of the Project, and in connection therewith, the City will want to address the following: a. The daily reduction in rebates based on TOT receipts for the Luxury and Lifestyle Hotels, as described in Section 6 of Amendment No. 5, will need to have revised the completion dates of the two hotels. New dates will be mutually agreed upon by City and CMG, and these will become the new dates for calculating any reductions. In explanation of this, if the hotels are completed on schedule per a new amendment to the PSDA (for reference, "Amendment No. 6"), then there will be no reductions to the TOT rebate. Currently, the TOT rebate has 90% T8495 Calie Tampico 1 La Ruinta, California 922531 160.171 TM 1 www.laquintaca.goy CALIFORNIA available for first 10 years, and 70% for the remaining 5 years, of a tob al— 5= - year rebate term. b. The Schedule of Performance will need to be adjusted based on new schedules provided by the general contractor, with an added contingency for minor delays, and will include force majeure provisions to be approved by City Manager and CMG. This new Schedule of Performance will be incorporated into Amendment No. 6. c. The Purchase Price for the Future Resort Property (as defined in the PSDA) will be Two Million Five Hundred Thousand Dollars ($2,500,000) as identified in Amendment No. 4, and will not be subject to the "Financial Incentive Reductions" incurred by SDC, as the previous "Developer." 3. If CMG acquires the Core Project Components Property, then the City will exercise its rights under the PSDA and respective repurchase Option Agreements (County Recorder Doc. Nos. 2018-0464676 and 2018-0464677, and referred to as the "Repurchase Option Agreements"), as applicable for the repurchase of the property constituting the Luxury Branded Residential Project Component (formerly Parcel 1 of Parcel Map No. 37207 and subdivided as Tract Map No. 37730 [Lots 1-29 & Lots A -L], and referred to as the "Luxury Branded Residences Property") and the undeveloped land consisting of Planning Areas 7, 8, and 9 (Parcels 10, 11, and 12 of Parcel Map 37207, and referred to as the "PA7,8,9 Property") (collectively, the Luxury Branded Residences Property and the PA7,8,9 Property is referred to as the "Repurchase Options Properties"). The City will assign all of its rights and obligations under the Repurchase Option Agreements to CMG, and CMG will assume all rights and obligations under the Repurchase Option Agreements. The City will also exercise its right under the PSDA to acquire from SDC all "Plans" related to the Project (such as blueprints, drawings, studies, and other work product relating to the construction of the Project). The City will assign to CMG all of its rights acquire the Plans, and CMG will assume all rights and obligations to acquire the Plans. 4. If CMG acquires the Core Project Components Property, then CMG must acquire the fee interest in the Luxury Branded Residences Property either by foreclosure sale or grant deed executed by SDC to CMG through the Repurchase Option Agreement process, and CMG must acquire the fee interest in the PA7,8,9 Property either by foreclosure sale or grant deed executed by SDC to CMG through the Repurchase Option Agreement process. 5. If CMG acquires the Core Project Components Property, then CMG must: (a) pay-off (or assume on restructured terms) all debts owed by SDC to Poppy Bank ("Poppy"), which debt is secured by that certain Deed of Trust with Poppy as named beneficiary (County T8495 Calie Tampico 1 La Ruinta, California 922531 160.171 TM 1 www.laquintaca.goy eiCa adgrai (.A I.IFOR\IA Recorder Doc. No. 2021-0628130, and referred to as the "Poppy Deed of Trust"), so that the recorded documents relating to the Poppy foreclosure sale are removed from title; and (b) pay-off all debts owed by SDC to RD Olson Construction, Inc. ("Olson") and its respective subcontractors, and Granite Construction Company ("Granite"), in the respective amount stipulated or agreed between SDC and such contractor/subcontractor, including all stipulated or agreed interest accrued through payment date, in satisfaction of SDC's contractual obligations and all mechanic's liens that have been recorded against the SDC -held properties relating to Olson's (and Olson's subcontractors') and Granite's completed work and said claims filed in Riverside County Superior Court. 6. If CMG acquires the Core Project Components Property, then CMG must enter into a binding agreement with Montage North America, LLC ("Montage") to serve as the hotel operator and manager of the Project Components comprised of the Luxury and Lifestyle Branded Hotels, and the Luxury and Lifestyle Branded Residences. 7. If CMG acquires the Core Project Components Property, and if the City exercises its rights under the Repurchase Option Agreements, CMG agrees to deposit into escrow funds that City and CMG determine to be sufficient to cover 100% of the costs to repurchase from SDC the Luxury Branded Residences Property and PA7,8,9 Property. 8. If CMG acquires the Core Project Components Property, and if the City exercises its rights under the Repurchase Option Agreements, then the City agrees that it will continue to prosecute its civil claims against SDC in Riverside County Superior Court, and CMG agrees to join in that litigation as a Co -Plaintiff or Plaintiff in Intervention if necessary or proper to effectuate the statement of terms generally outlined herein and terms and conditions in the Interim Agreement, once executed by the parties thereto. 9. CMG must provide to the City, for review and approval by the City, CMG's proposed financing and related agreements, pro -formas, and other documents, for the purpose of confirming CMG's implementation for remediating the partial improvements on the properties held by SDC, and remobilizing and completing the construction of the Core Project Components (as defined in Amendment No. 5, and referred to in the MOU as the "CMG Proposed Plan"), with the first Project Components to be completed being the Permanent Golf Clubhouse and Luxury Hotel (as defined in the PSDA). 10. The City will work to have all necessary recorded documents assigned or replaced, and where necessary, these recorded documents may need to be acknowledged by other secured interests as having priority if they are replaced instead of assigned. 11 In order for the terms of the PSDA (including amendments thereto) to be effective, CMG must have ownership of all property currently owned by SDC (or SDC affiliate). 18495 Calle Tampico I La Ouinta, California 92253 1160.111.1000 I www,laquintaca,gov CALIFORNIA 12. Ultimately, the City Council is required to approve all assignments an amendments to the PSDA or any new agreements as may be required and described above. One last advisory note: The real property and property descriptions that are referenced in this Term Sheet, and that would be included in the Interim Agreement, shall be construed and interpreted to mean the most -current legal descriptions and boundaries of property currently held by SDC (or SDC affiliate). In explanation of the foregoing, the MOU referenced the "Phase 1A Property," "Phase 1B Property," and "City Approved LLAs [Lot Line Adjustments]"), and defined that as the "Developer -Held Properties." For purposes of this Term Sheet and the Interim Agreement, the properties discussed in this Term Sheet are intended to include all of the "Developer -Held Properties" as defined in the MOU even though different defined terms are used in this Term Sheet for purposes of sequencing the acquisition of all properties by CGM. Should you have any questions, please contact me at (760) 777-7100. Jon McMillen, City Manager cc: Bill Ihrke, City Attorney (via email) Michelman & Robinson, LLP 10880 Wilshire Blvd.,19t" Floor Los Angeles, CA 90024 Attn: Edward D. Vaisbort, Esq. Abbey, Weitzenberg, Warren & Emery 100 Stony Point Rd, Ste. 200 Santa Rosa, CA 95401 Attn: Eric Rans, Esq. evaisbort@mrllp.com Attn: Mitchell B. Greenberg, Esq. ERans@mrllp.com mgreenberg@abbeylaw.com Watt, Tieder, et al., LLP Finch, Thornton & Baird, LLP 4 Park Plaza, Suite 1000 4747 Executive Drive Irvine, CA 92614 San Diego, CA 92121 Attn: David McPherson Attn: Andrea L. Petray Email: dmcpherson@watttieder.com Email: apetray@ftblaw.com Rodriguez Wright LLP Attn: Stephen M. Wright, Esq. Email: swright@rodriguezwright.com T8495 Calie Tampico 1 La Ruinta, California 922531 160.171 TM 1 www.laquintaca.goy