City Council

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