Community Redevelopment Agency of the CITY OF LOS ANGELES. 354 South Spring Street I Suite 800 Los Angeles 1 California

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1 Community Redevelopment Agency of the CITY OF LOS ANGELES DATE I JUL FILE CODE I 354 South Spring Street I Suite 800 Los Angeles 1 California T IF CRA File No. Council District: Contact Person: (213) tiofo 3 Leslie Lambert Honorable Council of the City of Los Angeles John Ferraro Council Chamber 200 N. Spring Street Room 340, City Hall Los Angeles, CA Attention: John White, Office of the City Clerk COUNCIL TRANSMITTAL: Transmitted herewith, is a Board Memorandum adopted by the Agency Board on July 21, 2005, for City Council review and approval in accordance with the "Community Redevelopment Agency Oversight Ordinance" entitled: VARIOUS ACTIONS RELATED TO: APPROVAL OF EXCLUSIVE NEGOTIATION AGREEMENT (ENA) WITH CIM GROUP, INC. AND THE CIM URBAN REAL ESTATE FUND, L.P. FOR THE RESEDA THEATER ADAPTIVE REUSE PROJECT, LOCATED AT SHERMAN WAY, RESEDA, IN THE EARTHQUAKE DISASTER ASSISTANCE PROJECT FOR PORTIONS OF COUNCIL DISTRICT 3 RECOMMENDATION That City Council approve the recommendation on the attached Board Memorandum. ENVIRONMENTAL REVIEW The proposed action does not constitute a "project" according to the California Environmental Quality Act ("CEQA"). Is a Disposition and Development Agreement results from the proposed ENA, the appropriate environmental documents will be prepared and presented for Agency and City Council actions prior to entering into any agreements. FISCAL IMPACT STATEMENT There is no fiscal impact to the City's General Fund, as a result of this action. ~xecutiveofficer

2 cc: John White, Office of the City Clerk (9 copies-three hole punched) Lisa Johnson Smith, Scott Eritano, Office of the CAO Paul Smith, lvania Sobalvarro, Office of the CLA Robert R. Ovrom, Office of the Mayor Neil Blumenkopf, Office of the City Attorney 2

3 Bee: R. Benbow Ras Mallari Alma Acosta Nenita Tan, Office of the City Controller Records (2 copies) L. Lambert 3

4 .. THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CALIFORNIA 6 MEMORANDUM DATE: JULY 21, 2005 TO: AGENCY COMMISSIONERS RP2060 FROM: RESPONSIBLE PARTY: RICHARD L. BENBOW, ACTING CHIEF EXECUTIVE OFFICER LESLIE LAMBERT, REGIONAL ADMINISTRATOR SUBJECT: COMMITTEE REVIEW: APPROVAL OF EXCLUSIVE NEGOTIATION AGREEMENT (ENA) WITH CIM GROUP, INC. AND THE CIM URBAN REAL ESTATE FUND, L.P. FOR THE RESEDA THEATER ADAPTIVE REUSE PROJECT, LOCATED AT SHERMAN WAY, RESEDA, IN THE EARTHQUAKE DISASTER ASSISTANCE PROJECT FOR PORTIONS OF COUNCIL DISTRICT 3 (CD3) WEST VALLEY REGION PROJECT REVIEW COMMITTEE-JULY 14, 2005 (RECOMMENDED 2:0) RECOMMENDATIONS That the Agency, subject to City Council review and approval, authorize the Chief Executive Officer or designee to execute an Exclusive Negotiation Agreement (Attachment "A") with CIM Group, Inc. and CIM Urban Real Estate Fund, L.P. for the Reseda Theater Adaptive Reuse Project, located at Sherman Way, Reseda, as shown on the Location Map attached as (Attachment "B") SUMMARY The recommended action will begin the negotiation process with CIM Group Inc. and CIM Urban Real Estate Fund, L.P. for disposition and redevelopment of the Reseda Theater property, which is located in the center of the Reseda commercial district. In January 2005, the Agency released two Requests for Proposals ("RFP") for purchase and redevelopment of the Reseda Theater in the Reseda-Canoga Park Redevelopment.Project Area. One RFP No called for proposals to purchase and rehabilitate the property as a live performance space and/or movie theater. The second RFP No called for proposals to purchase the property for adaptive reuse as commercial and/or restaurant space. Both RFP's emphasized the Agency's intent to make redevelopment of the Reseda Theater the major catalytic project in the commercial district.

5 RESEDA THEATER ENA \ I 2 Three proposals were submitted for adaptive reuse as a commercial facility, and one proposal was submitted for reuse as a performing arts space. This latter proposal was deemed incomplete based on the submission requirements set forth in the RFP. The three commercial reuse proposals were as follows: The proposal submitted by Baily Properties (Parker-Brown, General Contractors) calls for major rehabilitation resulting in 5,000 square feet of "flexible" retail or business space on the second floor, to be constructed from the existing mezzanine, 3,000 square feet of "flexible" retail space on the ground floor in an arcade configuration, and conversion of approximately fifty percent (50%) of the ground floor into a parking garage to be entered from the rear alley. The theater's fa<,;:ade would be refurbished but not restored to its original appearance. The proposal did not include a development budget but did call for a twenty-year land lease from the Agency for $1 million and a $300,000 cash payment from the developer for the balance of the land value. (The Agency paid $1.35 million for the property, which was stated in the RFP.) Also proposed is a $1.5 million "grant" from the Agency to cover rehabilitation costs, which presumably are estimated at $2 million. Based on the Agency's own cost estimate for rehabilitation, plus the increased cost associated with putting parking on the ground floor, staff believes this rehabilitation cost estimate to be low. The Agency performed an interior inspection of the building seven years ago, prepared a scope of work, and estimated a rehabilitation cost of $1.5 million. This estimate did not include tenant improvements; it only estimated the cost of replacing systems and bringing the building shell up to code. Based on the increases in construction costs since then, staff estimates this work to cost at least $3 million in today's dollars. Tenant improvement costs would be in addition to this as.would be restoration of the theater's fa<,;:ade. The proposal submitted by A&A Holdings calls for purchase and rehabilitation of the property as a commercial retairtacility. The developer's goal is to convert the building into one store to be occupied by a "national credit retailer''. If this approach fails, the structure will be divided into three or four smaller retail spaces for "mom and pop" businesses similar to those now on Sherman Way. When asked to describe existing relationships with national retailers or a plan for attracting such a business to the space, the developer indicated that their approach had not been decided upon at this stage. Staff therefore believes that smaller retail businesses will actually end up being the tenants in the building. A&A Holdings also proposes installation of a second billboard on the roof as a means to increase income for the project. The developer did not inspect the interior of the building although the Agency arranged several walk-throughs during the RFP response period. The proposal does not contain a detailed development budget. It projects a total preconstruction and construction budget of $1.597 million, which will be financed by the developer. The proposal cites a $1 million line of credit for this purpose but does not explain where the balance will be obtained. Again, staff believes this cost projection is low based on the Agency's estimate. The proposal makes no mention of the acquisition price to be paid b"y the developer or the source of these funds. The CIM Group and CIM Urban Real Estate Fund, L.P. (the CIM Group) propose to transform the theater into a major, state of the art, live performance and lounge destination for the Central San Fernando Valley. CIM Group intends to use its pipeline of larger venues, such as the Kodak Theater, to attract smaller scale performers and bands that are not yet ready for bigger theater venues. In support of these shows, the theater will serve food and beverages to attract a larger crowd and will encourage patrons to come early and stay later than the performances.

6 RESEDA THEATER ENA 3 Patrons who do not wish to incur the cost of food and beverages may attend performances in an area near the stage designated as the "standing area" in the plans. This configuration has proved successful at the Wiltern Theater. The proposed development will also include 900 square feet of retail space with entrances on Sherman Way. These retail spaces were built as part of the original theater and are located on either side of the theater entrance. The CIM Group proposal contains a detailed development budget and pro forma. The total acquisition and development cost is estimated to be $5.195 million. Substantial Agency financial participation is proposed. The proposal calls for a complete restoration of the theater fa<;ade, including restoration of the marquee and neon and the terrazzo entry to the building. The details of the Agency's financial involvement will be worked out during the negotiation period, resulting from close scrutiny of the development costs and the pro forma. The five.:.member community evaluation panel and the Agency evaluators unanimously selected the CIM Group and recommended that the Agency enter into an ENA with this developer. This recommendation is based on the following conclusions, based on the evaluation criteria used: 1. A major objective is to develop a catalytic project, which will attract people to the Reseda business district and further its economic recovery. It is believed that the CIM proposal will accomplish this. It was felt that the other two proposals would result in the same type of retail and commercial use already present in the area and would therefore not give the needed boost to the Agency's revitalization efforts. 2. The track record of the CIM Group in successfully developing and owning similar projects is outstanding, and their financial capacity is strong. 3. The excellence of the proposed design of the project and the intent to fully restore the fa<;ade were major considerations for the evaluators. 4. The proposal was the most complete and responsive to the intent of the RFP, and their presentation to the evaluation panel was excellent. It was clear that the developer has every intent of working closely with the Reseda community through the design, construction and operation of the facility. 5. The public benefits that will accrue from the project are significant. CIM Urban Real Estate Fund L.P. is a $676 million discretionary investment fund whose principal equity investor is the California Public Employees Retirement System. The CIM Group provides a portion of the capital for each fund investment. The CIM Group and the CIM Urban Real Estate Fund are the owners and developers of a significant portfolio of real estate that includes ownership of Hollywood and Highland, development of Pico Plaza with CRAILA assistance in the Mid-City project area, and the Gas Company and 9 1 h and Flower projects in City Centre. Similar projects include Club Sugar in Santa Monica. The Brig in Venice, Falcon Restaurant in Hollywood, adaptive reuse of the Bijou Theater in Hermosa beach, and adaptive reuse of the United Artists Theater in Pasadena.

7 RESEDA THEATER ENA 4 Key Provisions of the Exclusive Negotiation Agreement are: o o o Term of the Agreement is 180 days from date of execution by the Agency. The developer understands that the Agency may refuse to extend the Agreement and may terminate the Agreement before its term if negotiations are not proceeding satisfactorily. Developers will provide a $10,000 'Good Faith" Deposit. Developers to comply with all Agency policies including without limitation: Prevailing Wages; Living Wage, Contractor Responsibility, Service Worker Retention and Equal Benefits; Equal Opportunity/Affirmative Action; Public Art Program. June 3, Agency Board approval of the Reseda Theater Project including acquisition of the property by the Agency. June 18, City Council approval of Agency action. SOURCE OF FUNDS Developer Contributions, Reseda-Canoga Park Tax Increment. PROGRAM AND BUDGET IMPACT The recommended actions are consistent with the adopted FY'06 Budget and Work Program. ENVIRONMENTAL REVIEW The actions do not constitute a "Project" according to the California Environmental Quality Act (CEQA). If a Disposition and Development.Agreement results from the proposed ENA, the appropriate environmental documents will be prepared and presented for Agency and City Council actions prior to entering into any agreements. BACKGROUND A major economic revitalization program is underway in the Reseda commercial district. This program includes a $1.4 million power line undergrounding project being undertaken by the Department of Water and Power, storefront improvements on thirty-five (35) businesses along two blocks of Reseda Boulevard, which is being implemented by the Agency, and a $900,000 streetscape improvement project being administered by the Agency. The major portion of the streetscape project ($700,000) is being funded by Federal transportation funds. The Agency's Business Attraction and Retention Program is also underway in Reseda. The Reseda Theater was constructed in 1948, on an 8,400 square feet parcel. The interior is approximately 9,500 square feet in size and is relatively typical for a smaller local theater with a ticket booth, concessionaire area, restrooms (fixtures removed), two theater entries and exits,

8 RESEDA THEATER ENA 5 theater seating area with a downslope floor and seating for approximately 350 patrons. There is a mezzanine area over the lobby that generally includes a projection area with restroom and storage areas. The interior is in very poor condition with exposed ceiling framing, plumbing and electrical conduit. There is a 1 0' x 48' roof mounted single sided billboard, which includes individually metered illumination, a dual vertical steel post, lateral supports and sign frame all of which is owned by the property owner. The lease on the billboard expires in five and a half years and has an annual rental rate of $15,000. The Agency purchased the Reseda Theater in October 2004 at a price of $1.35 million. A community evaluation panel (the "panel") was selected with representatives from the Third District Council Office, the Reseda Neighborhood Council. The CD3 Community Advisory Committee, and the Reseda Chamber of Commerce. The panel focused on the following evaluation criteria: (i) degree to which the proposed project would have a catalytic effect on the economic recovery of the commercial district; (ii) design of the proposed project and design quality of other projects developed by the proposer; (iii) degree to which the proposed project would upgrade the commercial mix in the area; (iv) demonstrated capacity of the developer to construct, own and operate the project; and public benefits vis-a-vis anticipated Agency financial involvement. The panel met on May 18, 2005 and heard presentations from all three development teams. Questions and answers followed the presentations for all three teams. The panel recommended selection of CIM Group based on the above criteria. Of particular merit were the completeness of their proposal, the excellent design of their proposed project, which called for restoring the theater fagade to its original appearance with rehabilitation of the marquee, the neon and all exterior lighting. The panel also expressed their feeling that the CIM Group proposal would introduce a unique destination business into the area and upgrade the existing commercial mix. Finally, the CIM Group has a demonstrated track record in the development, ownership and management of similar businesses, as well as experience with the rehabilitation of older movie theaters. The three proposals were also evaluated by Agency staff, who reached the same conclusions as the community evaluation panel and recommend selection of the CIM Group. Prior to selecting CIM Group, Agency staff went through an extensive outreach and selection process. The RFPs were published on the Agency's website for interested firms/developers to download and respond to its requirements. Prior to posting the RFPs on the CRA website, Agency staff advertised a pre-solicitation notice regarding the Agency's intent to issue the two RFPs in three (3) newspapers including the Daily News, La Opinion and Los Angeles Sentinel during the week of January 10, A pre-solicitation notice was also posted on the City of Los Angeles website prior ~o the RFPs being posted on the CRA website. Agency staff on January 6, 2005 mailed 155 solicitation letters to firms/developers on the Agency's directory, which included fifty-one (51) non-profit and minority/professional organizations.

9 RESEDA THEATER ENA 6 AGENCY REQUIREMENTS CIM Group and its subcontractors will be bound to the Agency's Equal Opportunity and Affirmative Action policies, Prevailing Wages policies, Worker Retention, Living Wages, Equal Benefits, and Contractor Responsibility. CIM Group's Profile is shown on Attachment C. ~ Richard L. Benbow Acting Chief Executive Officer There is no conflict of interest known to me to exist with regard to any Agency officer or employee concerning this action. Attachments: Attachment A ENA Attachment B Location Map Attachment C CIM Group's Profile

10 ATTACHMENT A CIM filigroup SAMPLE OFFER TO NEGOTIATE EXCLUSIVELY Mr. Robert R. Ovrom, Chief Executive Officer The Community Redevelopment Agency of The City of Los Angeles, California 354 South Spring Street, Suite 800 Los Angeles, CA SUBJECT: RESEDA THEATER PROJECT OFFER TO NEGOTIATE EXCLUSIVELY Dear Mr. Ovrom: The undersigned Developer hereby submits to the Community Redevelopment Agency of the City of Los Angeles, California, an Offer to Negotiate Exclusively for a period not to exceed one hundred and eighty (180) days for the purchase and development of the project known as the Reseda Theater Project. Our proposed development shown on the attached Site Map generally consists of (please describe). We request that the Agency negotiate exclusively with us for the 180 day period, during which time we will seek to negotiate a Development Agreement with the Agency for development of the Site. This Offer is made upon the following terms and conditions: We hereby stand ready to tender to the Agency a Good Faith Deposit in the sum often Thousand Dollars ($1 0,000) to ensure that we will proceed diligently and in good faith to meet our obligations under this offer. The Good Faith Deposit shall be submitted in conformance with Agency guidelines for Good Faith Deposits prior to consideration by the Agency Board. If the negotiations do not result in an Agreement, and if we have negotiated diligently and in good faith, the Agency shall return the deposit. We understand that the negotiations may be extended beyond the established negotiation period at the option of the Agency. We also understand that the Agency may refuse to extend the Exclusive Right to Negotiate beyond the established negotiation period and reissue the Request For Proposals or begin negotiations with other Development entities without further solicitation. We also understand that if negotiations are not proceeding in a diligent manner during the Exclusive Right to Negotiate period, the Agency may at its option terminate the negotiations and reissue the Request For Proposals or begin negotiations with other development entities without further solicitation Hollywood Blvd. Ninth Floor Hollywood, CA 9002S 1 of3 323/ main 323/ I fax

11 CIM ~GROUP We understand that the Agency reserves the right at any time during the negotiation period to request additional information and data from the Developer, and that the Agency particularly reserves the right to obtain further information, data and commitments to ascertain the depth ofthe Developer's capability and desire to develop the Site expeditiously. Adequate time to obtain and submit such additional matters will be provided by the Agency. We understand that any and all information provided to the Agency including plans, market studies and financial analysis is the property of the Agency. If necessary, we are fully prepared and capable of providing all funding necessary for the acquisition at fair market value of all properties necessary for our development which we do not own. We understand that we will be required to make full disclosure to the Agency of the methods of financing to be used in developing the Site. We understand that the nature and type of development is subject to the approval of the Agency Board of Commissioners and the Los Angeles City Council. We further understand that we will be required to make full disclosure to the Agency of our principals, officers, stockholders, partners, etc., and all other pertinent information concerning the Developer and its associates. We understand that the design and development objectives shall be specified in the Disposition and Development Agreement, entered into with the Agency. The development shall conform to those objectives. The Agency shall cooperate fully with our professional associates in providing them with information and reasonable assistance in connection with the preparation of such drawings, plans and specifications. We understand that we must be in compliance with all City and Agency rules, policies and regulations, and must be in conformance with all the terms and conditions specified in the Request For Proposals. We have read and reviewed the summary of the Agency's Equal Opportunity Policies and goals and are aware of the Agency's Policy on Prevailing Wages and understand that we, and our contractor(s), must comply with,these and other Agency and City policies throughout the development and construction process. 2 of3

12 CIM :.;: G R 0 U P The Agency shall not be liable for any real estate commissioners or brokerage fees, which may arise herefrom. The Agency and Developer each represent that it has engaged no broker, agency or finder in connection with this transaction. Please indicate your acceptance of this Offer by signing and returning the attached copy to us. Sincerely, This Offer is hereby accepted of the day below, subject to the terms and conditions stated above. APPROVED AS TO FORM: Rockard Delgadillo City Attorney By: Agency General Counsel Date: THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CALIFORNIA By: Robert R. Ovrom Chief Executive Officer Date: 3 of3

13 ATTACHMENT B Reseda/ Canoga Park Recovery Redevelopment Project Area CRA/LA fl Sherman Way LJ Reseda APN: J WYANDOTIE ST.

14 ATTACHMENT 11 C~ 1 A. Contract Team: Name CONTRACTOR AWARD PROFILE Ethnicity Prime /Vendor Contract Amount CIM GROUP, INC. AND THE CIM URBAN REAL ESTATE FUND NM p $* Total (P):Prime Consultant/Contractor (S):SubconsultantjContractor (*) To be determined $* B. Contract Team Minority and Women-Owned Business Participation: Note: A minority- or woman-owned business is defined as a business that is at least 51% owned and controlled by minorities or women. A business owned by a minority/female(s) may be certified as either minority or woman-owned, but not both. Agency Goals Contract Team Actual * To be determined MBE 20.0% % WBE 5.0% % c. Contract Team Workforce Profile: Paraprofessional and Above: Agency Goals Contract Team Actual Minority 28.3% 34.9% Female 28.3% 16.8% Overall Workforce Profile Minority 28.3% 44.9% Female 28.3% 20.9% Note: This data is provided for information purposes only, and is not intended as the basis for final selection. I