The Redevelopment Agency of the City of Sparks (Agency) and the City of Sparks (City) approved a “Disposition and Development Agreement” (DDA) with SWD-Quarry FVS, LLC (Developer) on July 27, 2015 for development of the Fountainhouse at Victorian Square project.  The DDA granted the Developer the ability to acquire and develop 8 parcels from the Agency, 6 of which are referred to in the DDA as the Agency Residential Parcels and 2 of which are referred to as the Agency Mixed-Use Parcels (see Exhibit 1 to the DDA).  The Agency Residential Parcels and the Agency Mixed-Use Parcels are jointly referred to as the Project Property.

Per the terms of the DDA, on the Agency Residential Parcels the Developer will build a total of ten (10) residential buildings containing approximately 220 residential units plus a clubhouse and a swimming pool.  On each of the two Agency Mixed-Use Parcels, the Developer is to build a mixed-use building with approximately 4,615 square feet of restaurant/retail space on the ground floor and 8 residential units on the second floor.

The DDA provides for two escrows for sale of the Project Property.  The First Escrow was for the sale of the Agency Residential Parcels.  The First Escrow was completed and the Developer has or is constructing all of the improvements specified in the DDA.  The Second Escrow is for closing the sale of the Agency Mixed-Use Parcels, which have Washoe County Assessor Parcel Numbers (APNs) of 032-341-22 and 032-341-23.

Per Article 3.3 (Project Schedule) and Article 4.3.1 (Time Frames and Deadlines) of the DDA, the Closing Deadline for the Second Escrow for the Agency Mixed-Use Parcels is December 31, 2016.  Per Article 3.3 (Project Schedule) of the DDA, the deadline for the Developer to start construction on the Agency Mixed-Use Parcels is also December 31, 2016.

The Victorian Square Development Plan (i.e., the Agency’s adopted redevelopment plan for Victorian Square) calls for, as a key feature, the development of ground floor retail uses (including restaurants) on the 6 parcels, including the Agency Mixed-Use Parcels, that border the Victorian Square plaza between the movie theater building and Victorian Avenue.

Amendment No. 1 would change the terms of the DDA to provide the Developer additional time to close the Second Escrow for, and commence construction on, the Agency Mixed-Use Parcels.  Specifically, Amendment No. 1 would extend the deadline for closing escrow on these parcels from December 31, 2016 to June 30, 2017.  The deadline for the developer to begin construction would be extended from December 31, 2016 to July 14, 2017.  No other terms of the DDA would be modified, including the sales price for the Agency Mixed Use Parcels, which would remain at $271,000.

The Agency Mixed-Use Parcels are located directly in front of the Victorian Square movie theater building owned by Syufy Enterprises that, until September 29^th of this year, was operated by Cinemark Theaters.  City staff do not know whether, and if so when, a movie theater operator will resume operations in the building owned by Syufy Enterprises.  The restaurant/retail uses proposed on the Agency Mixed-Use Parcels are anticipated to rely in part on a complementary use on the site of the movie theater building to be successful.  Understandably, the Developer does not want to proceed with constructing the mixed-use buildings until the future use of the movie theater property is better understood.  The proposed extensions of the DDA deadlines for closing the Second Escrow and start of construction on the Mixed-Use Parcels would provide the Developer additional time to decide if they want to proceed with development of those parcels as prescribed in the DDA.

If the City and Agency choose to not extend these deadlines, the Developer must either perform per the original Project Schedule or their right to acquire and develop the Agency Mixed-Use Parcels will terminate on January 1, 2017.  Failure to do so would not, however, constitute a default under the DDA or affect the Developer’s ownership of, or right to develop, the portion of the Fountainhouse project currently under construction.

The Council could reject or modify the Amendment No. 1 subject to the consent of the Developer.

I move to approve Amendment No. 1 to the Disposition and Development Agreement with SWD-Quarry FVS, LLC.