2012 2:00:00 PM

Monday, September 24, 2012 2:00 PM
Sparks Legislative Building, 745 4th Street, Sparks, NV 89431

General Business: 6.3

Title: Review, consideration and possible approval of an Exclusive Negotiating Agreement between the City of Sparks, the Redevelopment Agency of the City of Sparks and AED Investments, LLC for the redevelopment of a 10.2 acre parcel owned by the Redevelopment Agency located on Marina Gateway Drive between East Prater Way and Lincoln Way and having Assessor’s Parcel Number 037-020-50

Petitioner/Presenter: AED Investments, LLC/Community Services Department/Armando Ornelas,City Planner

Recommendation: Staff recommends that the City Council and Redevelopment Agency Board approve the proposed Exclusive Negotiating Agreement

Financial Impact: None at this time

Business Impact (Per NRS 237):
A Business Impact Statement is not required because this is not a rule.

Agenda Item Brief: The Redevelopment Agency acquired the property located on Marina Gateway Drive between East Prater Way and Lincoln Way in 2004 (the “Property”). The Agency acquired the Property with the intention of potentially locating a new city hall facility there and/or for a redevelopment purpose. AED Investments, LLC, a real estate development firm led by Bill Erwin and Robert Aitchison, has requested an exclusive opportunity to prepare a proposal to redevelop the Property for facilities which provide specialized services to the elderly and other complementary uses and, if the proposal is approved by the Agency, to acquire and redevelop the Property. The proposed Exclusive Negotiating Agreement (ENA) would grant AED Investments, LLC six months to prepare and submit for City and Agency consideration a development proposal for the Property. The ENA’s proposed terms obligate the City and Agency to negotiate exclusively with the AED Investments regarding the possible transfer, disposition or use of the Property for the term of the ENA. The ENA does not, however, grant AED Investments the right to acquire the Property.

Background: In 2004, the Redevelopment Agency acquired a 10.2 acre parcel situated along the east side of Marina Gateway Drive between East Prater Way and Lincoln Way (the “Property”). The Assessor’s Parcel Number is 037-020-50. The Agency acquired the Property with the intention of potentially locating a new city hall facility there and/or disposition for a redevelopment purpose. In July of 2012, AED Investments, LLC formally requested (the letter request is attached) an exclusive opportunity to prepare a proposal to redevelop the Property for facilities which provide specialized services to the elderly (e.g., respiratory, memory, behavioral, orthopedic, transitory, and other skilled care). AED requested that if the Agency and City approve the subsequent proposal, AED be granted, through a development agreement, the right to acquire and redevelop the property in accordance with the project proposal. In their letter requesting an Exclusive Negotiating Agreement, AED describes their preliminary project concept as focused on development and operation of a series of facilities to provided specialized facilities to the elderly including, potentially: • Respiratory care facility. AED would determine the number of beds (36, 60 or 120) during the ENA period. • At least 2 and probably 3 other specialty senior living facilities: some combination of memory care, behavioral care, orthopedic care, or transitional rehabilitation. Currently and at a minimum, AED expects to develop a 40 bed behavioral facility, a 36 bed memory-impaired facility, and a 36 bed transitional facility. • These four facilities would all be connected to a centralized building providing dietary, administrative and marketing services for the four services. • Campus setting. Until plans are complete, estimating the square footage is very much an "estimate" but AED is assuming they would build at least 10,000 - 12,000 square feet per acre, or between 100,000 and 120,000 square feet. AED preliminarily estimates that their development costs, which include some start-up, operational costs, will total $51-62 million. In addition to the construction jobs that would be created by the project, AED expects a minimum of one employee per bed created by the project. AED anticipates 150- 300 jobs being created and, of these, 90-95% would be permanent, full-time jobs. The positions will include professional medical and ancillary staff whose salaries range from $9.00 an hour up to $100,000 a year. After receipt of AED’s request for an Exclusive Negotiating Agreement, Agency staff conferred with the Agency’s Chair and Vice-Chair, who asked that Agency staff provide an opportunity for other parties to indicate their interest in the Property. Towards this end, legal notices were published in the Reno Gazette Journal and Sparks Tribune, posted on the City’s web site and sent to numerous developers and other parties via email. The notice solicited letters from parties with an interest in developing the Property, and with the ability to initiate a development project within two years that would produce high quality, high assessed value uses and a substantial number of new jobs. The Agency did not receive any letters of interest other than from AED Investments.

Analysis: AED Investments, LLC desires to prepare a proposal for the Property and, if their analysis indicates the project is feasible and is approved by the Agency and City, to enter into an agreement to acquire the Property from the Agency and redevelop the Property in accordance with the approved development proposal. AED is unwilling, however, to expend time and funds to prepare plans and budgets and solicit financing and prospective tenants unless they have an exclusive negotiating agreement with the Agency and City. The proposed Exclusive Negotiating Agreement (ENA) would grant AED Investments, LLC (the “Developer”) six months to prepare and submit for City and Agency consideration a development proposal for the Property and negotiate a Disposition and Development Agreement (DDA) with the Agency and City. The ENA’s proposed terms obligate the City and Agency to negotiate exclusively with the Developer regarding the possible transfer, disposition or use of the Property for the term of the ENA. Specifically, the City and Agency would agree to negotiate exclusively regarding the following matters (see Article 3.1, page 2 of the ENA): (i) the transfer or other disposition of the Property during the term of this Agreement; (ii) the submittal, review and approval of any plans, drawings, budgets and supporting documents for the Project; (iii) the terms and provisions of a Disposition and Development Agreement (DDA) for the Property; (iv) the use, lease or occupancy of the Property without the prior consent of Developer except (a) regulatory, police or legislative actions relating to public safety, public welfare or land use (including zoning and zoning enforcement); however, Developer’s consent is required to rezone the Property during the term of this Agreement. (b) uses in connection with special events; and (c) temporary uses. The ENA does not, however, grant the Developer the right to acquire the Property and any terms for conveyance of the Property to the Developer must be approved in a subsequent agreement, the prospective DDA. In order for the Developer to proceed to the DDA stage, they must submit a development proposal to the Agency and City within four months of approval of the ENA. The requirements for the submittal are specified in Attachment A to the ENA, as follows: 1. Market Study. A market analysis that tests the proposed concept for the Project, including an assessment of the likelihood of long-term success relative to competition (existing, planned and proposed) and income projections for the project. 2. Plan. A schematic plan showing the location, size and use of all improvements to be constructed on the Property, including: a. The proposed building height, dimensions and square footage of all structures. b. The type of tenant proposed in the Project. c. Preliminary renderings showing the architectural style of the Project. 3. Budget. A proposed budget for the Project (reflecting any phasing), including the following elements: a. Projected costs for the construction and development of the concept for the Project, including all anticipated hard and soft costs. b. Projected operating revenues and expenses for the Project for three years following issuance of the first certificate of occupancy for the Project, together with information on operating revenues and expenses for various components (e.g. retail, housing, etc.) of the Project. 4. Land Value Analysis. A written analysis of land value Developer is willing to pay or written statement, with economic justification, asking for land contribution from the Agency and City. 5. Financing. A summary of likely financing sources for the Project. 6. Completion of Project. A schedule showing the expected timeline for the possible financing, development and leasing of the Project. As required by Nevada law, the Agency will have to, prior to entering into any agreement to convey the Property, establish the fair market value of the Property. The Agency may, however, convey it to a developer at a below-market value. To do so the Agency must comply with NRS 379.630 and be able to make the findings required by NRS 279.486. Also, the Property is located within the City of Sparks’ Special Assessment District No. 2, created to finance certain infrastructure improvements for the area. An assessment lien in the amount of $951,870 was imposed against the property, which staff propose the Agency require any Developer of the Property to assume. The current “pay-off” amount is $615,411 with semi-annual payments of $46,462 due in June and December of each year until 2023. Staff believes the Developer’s interest represents a genuine opportunity to redevelop the Property in furtherance of the Agency’s and the community’s interests. The Developer’s project team, which is described in their letter requesting an ENA, appears to possess the appropriate experience and expertise to develop the type of project they are proposing for the Property. Redevelopment of the Property in the manner envisioned by the Developer would create high quality, high assessed value development and a substantial number of new jobs. For these reasons, Sparks staff believes granting the Developer an exclusive negotiating period is warranted and recommends approval of the ENA.

Alternatives: Alternatives include modifying the terms of the proposed ENA, subject to the Developer’s agreement, or denying its approval.

Recommended Motion: I move to approve the Exclusive Negotiating Agreement between the City of Sparks, the Redevelopment Agency of the City of Sparks and AED Investments, LLC for the redevelopment of the Agency’s 10.2 acre Marina Gateway Drive property.

Attached Files:

AED ENA 10.2 acres 9-9-12.pdf

AED ENA request 8-24-12.pdf

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