City Council

6. DISPOSITION AND DEVELOPMENT AGREEMENT WITH TUSTIN LEGACY\nACQUISITION LLC (IRVINE COMPANY) FOR PORTIONS OF DISPOSITION\nAREAS 2B, 2C AND 8 AT TUSTIN LEGACY Request for authorization to\napprove the Disposition and Development Agreement (DDA) between Tustin\nLegacy Acquisition LLC (Irvine Company) and the City for the development of a\nresidential apartment community consisting of 1,336 rental units on\napproximately 19.4 acres with a total of 25% of the residential units affordable\nto lower income households. The DDA specifies the terms and conditions under\nwhich the City owned property, known as portions of Disposition Areas 2B, 2C\nand 8, and bounded by Warner Avenue, Legacy Road, Tustin Ranch Road and\nCompass Avenue in Planning Areas 13 and 14 of Tustin Legacy, will be\nconveyed to and developed by Tustin Legacy Acquisition LLC. The purpose of\nthe DDA is to implement the Reuse Plan for Marine Corps Air Station Tustin\n(MCAS Tustin) and the Specific Plan for Tustin Legacy through the\ndevelopment and maintenance of the property.\nRecommendation: 1. Authorize the City Manager to execute the DDA between\nTustin Legacy Acquisition LLC and the City in the form attached hereto subject\nto any non-substantive modifications as may be recommended by the City's\nspecial real estate counsel or the City Attorney; and 2. Authorize the City\nManager to take all actions and execute all other agreements necessary or\nappropriate to implement the DDA. Fiscal Impact: The property will be disposed\nof in a single takedown for a purchase price of $42,100,000.00. In addition to\nthe purchase price, Tustin Legacy Acquisition LLC will also pay to the City a\nProject Fair Share Contribution of $9,584,714.53 to fund backbone\ninfrastructure improvements at Tustin Legacy. A brokerage commission of 1% of\nthe purchase price will be paid by Tustin Legacy Acquisition LLC to the City's\nbroker, CBRE, at the close of escrow. Upon execution of the DDA, Tustin\nLegacy Acquisition LLC will submit a $5,000,000.00 good faith deposit into\nescrow, which will be applicable towards the purchase price at the close of\nescrow. The Tustin Unified School District (TUSD) created Community Facilities\nDistrict (CFD) 15-2 for portions of Tustin Legacy to fund new facilities such as\nthe new middle school and high school (Legacy Magnet Academy). The source\nof funds for constructing facilities are: 1) statutory and development fees\ncollected when building permits are issued and 2) Community Facilities District\nfees collected on a project-by-project basis either at the time of conveyance to a\ndeveloper or assessed to the property owners in the form of bonds. The\ntransaction has been structured to allow the developer/owner to assume the\nobligation of paying special taxes associated with bonding under CFD 15-2;\nhowever, the City maintains the option, in its sole discretion, to make a\nprepayment of an agreed upon sum at the close of escrow to release the lien of\nCFD 15-2 on the subject property. Negotiation costs, such as legal, third-party\nconsultants and staff costs incurred by the City are reimbursed by Tustin\nLegacy Acquisition LLC in accordance with the Exclusive Negotiation\nAgreement (ENA). Upon execution of the DDA, Tustin Legacy Acquisition LLC\nshall submit an additional City Costs Deposit to bring the deposit account\nbalance up to $50,000.00 to pay for the City's staff costs and third-party out-of-\npocket expenses incurred by the City in implementing the DDA through\nissuance of a final Certificate of Compliance or in the event the DDA is\nterminated prior to conveyance. Tustin Legacy Acquisition LLC shall replenish\nthe City Costs Deposit as needed to cover all of the City's Transaction\nExpenses. This project will be annexed into a future Zone 3 of the City\nCommunity Facilities District 18-01 prior to close of escrow, which has been\nestablished to cover service costs at Tustin Legacy (police and fire; recreation\nprogram services; maintenance of parks, streets, sidewalks and drainage\nfacilities) due to the discrepancy in property tax revenue (3% of the basic levy\n(1.0%) at Tustin Legacy versus approximately 10.5% City-wide). The Rate and\nMethod of Apportionment specific to this project will require City Council\nconsideration and approval at a later date. The negotiated rate attributable to\nmarket rate apartments will be $1,364.28 per dwelling unit with affordable\ndwelling units exempted. The rate will escalate annually based on a specific\nConsumer Price Index with a minimum annual escalation of 2% and a\nmaximum of 3%.