SCV Newsmaker of the Week
Paul Brotzman, Santa Clarita Community Development Director
Topic: Whittaker-Bermite Real Estate Partnership
January 24, 2011
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UPDATE 2/11/2011 — Shapell pulls out of Whittaker Bermite Partnership
Shapell Homes a Beverly Hills-based home builder company, has decided not to continue its partnership with the Lewis Companies and the City of Santa Clarita, citing multiple issues for pulling out of the partnership. Shapell, Lewis, and the City enjoyed their relationships and continue to have the highest respect for each other. First and foremost, Shapell made its business decision based upon the fact that the project is expensive and complex — more than originally anticipated by Shapell.
At its January 25, 2011 City Council meeting, the Santa Clarita City Council approved a partnership with Lewis Companies and Shapell Homes to spend the next year working on a plan with the community to acquire the Whittaker Bermite property out of bankruptcy for the purposes of re-planning the site.
The City learned this week that Shapell Homes will not be partnering with Lewis Companies to work with the City of Santa Clarita over the next year to collaborate to acquire the 996-acre Whittaker Bermite property.
"We've known that this is a complex property with many issues, and will be complicated and expensive to move forward. The City is pleased that Lewis Companies will continue working with us over the next year," commented Ken Pulskamp, City Manager.
In initial discussions with the City and the community, emphasis has been placed on bringing more jobs and fewer homes to the site; something that concerned Shapell Homes who are primarily home builders.
Lewis Companies have indicated that they will continue to partner with the City and the community over the next several months, working diligently to help acquire and re-plan the property in preparation for future development.
Over the last several years, the City of Santa Clarita has been closely involved with the remediation, bankruptcy, and reuse of the 996-acre Whittaker Bermite property by actively engaging with existing and various owners of the site, the U.S. Federal Bankruptcy Court, various lien holders, and insurers of the property, the State of California Department of Toxic Substances Control (DTSC), and the Whittaker Corporation.
In December 2010, the City successfully reached a settlement agreement in the U.S Federal Bankruptcy Court with the property owner, Remediation Financial Incorporated, and lien holders of the property on our Golden Valley Road and Metrolink Parking litigations. Under the terms of the agreement, the City was able to negotiate a reduction in Court awarded legal fees (from $7+ million to approximately $5.3 million), permanent rights for public parking and access at the Santa Clarita Metrolink Station on Soledad Canyon Road, right-of-way needed for Golden Valley Road, and a reduced financial exposure from the City's Golden Valley Road and Metrolink Parking litigation (from $30+ million to approximately $25.3 million).
According to the settlement, of the total $25.3 million, $20 million will be credited toward the Whittaker Bermite note, reducing it to $13 million. The settlement agreement also resulted in the City of Santa Clarita obtaining an exclusive one year option for the City to acquire the remaining $13 million lien against the Whittaker Bermite property. It is also important to note that should the City ultimately take ownership of the property through the lien purchase, pursuant to Federal Law, DTSC ruling and existing insurance for the property, clean up liability and responsibilities would continue to rest with parties other than the City.
This exclusive option places the City, for the first time in the property's history, in a primary leadership role and as a controlling partner in the property. This one year window for the City of Santa Clarita would require the leadership skills of the entire community to come together to capture and take advantage of this unique and timely opportunity to expedite the remediation of the site and to achieve the community's infrastructure and employment goals and objectives for this critical area of the City of Santa Clarita. During this critical one year window, the City would need to move quickly to work with a financial/development partner that will assist in securing a controlling interest in the property, coordinate meetings with all of the stakeholders and community members to begin discussions about the goals for the property, and to continue working with DTSC and various public agencies in expediting and integrating the clean up and potential reuse of the property.
As a result of this very limited one year timeline that was approved by the U.S. Federal Bankruptcy Court, it would be necessary for the City to immediately and expeditiously start the due diligence in securing a financial/development partner. As mentioned previously, this would most importantly not only secure a primary leadership role in this property but a controlling interest in the ownership of the property, which the City believes would be the key combination to controlling our own destiny on this 996-acre site that is in the heart of the City.
Bringing on a financial/development partner is necessary, as the exclusive option requires significant money to be paid to the lien holders of the property at the end of the one year window. Thus, our financial/development partner would need to commit several million dollars which would significantly reduce the financial risk for the City, and at the same time, would continue to preserve our controlling interest in the property.
Due to the short time period, in connection with the settlement process, the City identified specific characteristics needed in a potential development partner that included expertise in non-residential development and adequate financial capabilities which narrowed the field considerably in these challenging economic times.
City Council Agenda Item
January 25, 2011
RECOMMENDED ACTION
City Council approve Lewis and Shapell Operating Corporations as the prospective business partners for the Whittaker Bermite property.
BACKGROUND
Over the last several years, the City of Santa Clarita has been closely involved with the remediation, bankruptcy, and reuse of the 996-acre Whittaker Bermite property by actively engaging with existing and various owners of the site, the U.S. Federal Bankruptcy Court, various lien holders and insurers of the property, the State of California Department of Toxic Substances Control (DTSC), and the Whittaker Corporation.
In December 2010, the City successfully reached a settlement agreement in the U.S Federal Bankruptcy Court with the property owner, Remediation Financial Incorporated, and lien holders of the property on our Golden Valley Road and Metrolink Parking litigations. Under the terms of the agreement, the City was able to negotiate a reduction in Court awarded legal fees (from $7+ million to approximately $5.3 million), permanent rights for public parking and access at the Santa Clarita Metrolink Station on Soledad Canyon Road, right-of-way needed for Golden Valley Road, and a reduced financial exposure from the City's Golden Valley Road and Metrolink Parking litigation (from $30+ million to approximately $25.3 million). According to the settlement, of the total $25.3 million, $20 million will be credited toward the Whittaker Bermite note, reducing it to $13 million. The settlement agreement also resulted in the City of Santa Clarita obtaining an exclusive one year option for the City to aquire the remaining $13 million lien against the Whittaker Bermite property. It is also important to note that should the City ultimately take ownership of the property through the lien purchase, pursuant to Federal Law, DTSC ruling and existing insurance for the property, clean up liability and responsibilities would continue to rest with parties other than the City.
This exclusive option places the City, for the first time in the property's history, in a primary leadership role and as a controlling partner in the property. This one year window for the City of Santa Clarita would require the leadership skills of the entire community to come together to capture and take advantage of this unique and timely opportunity to expedite the remediation of the site and to achieve the community's infrastructure and employment goals and objectives for this critical area of the City of Santa Clarita. During this critical one year window, the City would need to move quickly to work with a financial/development partner that will assist in securing a controlling interest in the property, coordinate meetings with all of the stakeholders and community members to begin discussions about the goals for the property, and to continue working with DTSC and various public agencies in expediting and integrating the clean up and potential reuse of the property.
As a result of this very limited one year timeline that was approved by the U.S. Federal Bankruptcy Court, it would be necessary for the City to immediately and expeditiously start the due diligence in securing a financial/development partner. As mentioned previously, this would most importantly not only secure a primary leadership role in this property but a controlling interest in the ownership of the property, which the City believes would be the key combination to controlling our own destiny on this 996-acre site that is in the heart of the City. Bringing on a financial/development partner is necessary, as the exclusive option requires significant money to be paid to the lien holders of the property at the end of the one year window. Thus, our financial/development partner would need to commit several million dollars which would significantly reduce the financial risk for the City, and at the same time, would continue to preserve our controlling interest in the property.
Due to the short time period, in connection with the settlement process, the City identified specific characteristics needed in a potential development partner that included expertise in non-residential development and adequate financial capabilities which narrowed the field considerably in these challenging economic times. Based upon that criteria, the City interviewed several development companies and in the end selected the Lewis Operating Corporation and Shapell Industries as prospective business partners; both with technical and financial expertise in environmentally friendly master planned communities in Southern California.
Lewis Operating Corporation has been in business for 55 years and has developed master planned communities in California, Nevada, Arizona and Utah totaling in excess of 25,000 acres. Lewis Operating Corporation's focus is on developing mixed-use planned communities consisting of residential subdivisions, building and owning rental communities, shopping centers, office parks, and industrial buildings. Lewis Operating Corporation also has significant experience with environmental remediation and the coordination of that remediation with redevelopment. Thus, combined experience of both Companies includes remediation experience and the development of planned communities with thousands of residential units and millions of square feet of retail, office and industrial space that is still owned and operated by these companies.
Our first steps in this exciting new opportunity and process will be to conduct a public Open House here at City Hall in the Century Room at 5:00 p.m. on February 23, 2011. The City of Santa Clarita will be hosting the Open House for the community to meet our prospective new business partners in this venture. In addition, the City is in the process of developing an extensive outreach program that will provide opportunities for residents, community members and stakeholders to get involved and provide leadership on achieving the goals and objectives that will be laid out for the Whittaker Bermite property throughout the outreach program.
