HomeMy WebLinkAboutDoc 462 - Amend Improv Agrmt - TetherowDeschutes County Board of Commissioners
1300 NW Wall St., Suite 200, Bend, OR 97701-1960
(541) 388-6570 - Fax (541) 385-3202 - www.deschutes.org
AGENDA REQUEST & STAFF REPORT
For Board Business Meeting of 8/25/14
DATE: 8/19/14
FROM: Will Groves
CDD 388-6518
TITLE OF AGENDA ITEM:
Consideration and Signature of Document No. 2014-462, Amending an Improvement Agreement
bewteen Deschutes County and Weston Investment CO., LLC. for the overnight lodging units at the
Tetherow Destination Resort
PUBLIC HEARING ON THIS DATE? No
BACKGROUND AND POLICY IMPLICATIONS:
On August 4, 2014, Weston Investment Co. LLC submitted a request to Deschutes County to amend
their improvement agreement that financially secures the building of the required overnight lodging
units ("OLUs"). An amendment to the Tetherow Destination Resort ("Resort") Improvement
Agreement must be completed by August 28, 2014, or the current Improvement Agreement will expire.
This would result in there being no financially assured overnight units and the Resort falling out of
compliance with existing land use approvals.
This will be the 8th amendment to the original improvement agreement that was first entered into on
July 23, 2007. That agreement was for a financial security of $16m and recorded at Vol. 2007, Page
380. The County and Developer subsequently amended the Agreement seven times.
Since the last amendment, the Developer received an approved revised site plan for hotel units rather
than lodge cabin units and modified the resort's CMP and FMP to recduce the required number of units
to 2.5:1 under the current code. Staff and the applicant have had conversations regarding the fmancial
security for the new type of units but insufficient time exists to completely discuss the matter before the
expiration of the improvement agreement.
Therefore, the current proposed amendment agreed to by staff and the applicant extends the agreement
for 60 days. Staff and the Applicant agreed that a 60 -day extension will provide sufficient time to
resolve issues involving the amount of the fmancial assurance and the possibility of future extensions
through a new or amended Improvement Agreement.
FISCAL IMPLICATIONS:
None.
RECOMMENDATION & ACTION REQUESTED:
Motion: Approve signature of Document 2014-462.
ATTENDANCE: Will Groves
DISTRIBUTION OF DOCUMENTS:
CDD Staff.
Community Development Department
Planning Division Building Safety Division Environmental Soils Division
P.O. Box 6005 117 NW Lafayette Avenue Bend, Oregon 97708-6005
(541)388-6575 FAX (541)385-1764
http://www.co.deschutes.or.us/cdd/
MEMORANDUM
DATE: August 15, 2014
TO: Board of County Commissioners
FROM: Will Groves, Senior Planner
RE: Doc No. 2014-462 - Tetherow Destination Resort, Improvement Agreement No. 8
Issue
Weston Investment Co. LLC submitted a request to Deschutes County to amend their
improvement agreement on August 4, 2014. An amendment to the Tetherow Destination Resort
("Resort") Improvement Agreement must be completed by August 28, 2014, or the current
Improvement Agreement will expire. This would result in there being no financially assured
overnight units and the Resort falling out of compliance with existing land use approvals.
Background
On July 23, 2007, the Deschutes County Board of County Commissioners ("Board") approved
an Improvement Agreement (valued at $16m and recorded at Vol. 2007, Page 380) for the
financial assurance of the required 150 units of Overnight Lodging for the Resort on Tract AB of
their property. The County and Developer subsequently amended the Agreement seven times.
Amendment Nos. 1 through 7 referenced above:
Original IA
Arrowood bonds for 150 Overnight Units at Tetherow under a Site Plan
(SP -07-6).
Amount $16m — for 48 "lodge homes".
Completion Date — Recorded Phase I Plat (9/24/2007) plus two years.
Three one year extensions allowed. (to 9/24/12)
Units to be located on Tract AB
Amendment #1 Changes Bonding Company
Amendment #2
Arrowood bonds for 198 (150+48) Overnight Units at Tetherow under a
Site Plan (SP-07-6/MC-08-6).
Amount $8.7m
Amendment #3 One Year Extension
Quality Services Performed with Pride
Amendment #4 One Year Extension
Amendment #5 One Year Extension
Amendment #6 Weston bonds for 198 (150+48) Overnight Units at Tetherow under a Site
Plan (SP -12-11). Changes overnight to two hotel buildings with 94 and 74
overnight units and four "cottages" containing 30 units between the four
"cottages".
Amount $8.7m
Units to be located on Tract AA
Completion Date — Recorded Agreement (8/28/2012) plus two years.
Three one year extensions allowed. (8/28/17)
Amendment #7 Site Plan updated to SP -12-22.
Amendment #8
(Proposed)
Extend the expiration 60 days.
Current Amendment Request
The present amendment extends the agreement for 60 days. Staff and the Applicant have
agreed that a 60 -day extension will provide sufficient time to resolve issues involving the
amount of the financial assurance and the possibility of future extensions, as discussed below,
through a new or amended Improvement Agreement. Please note that the present amendment
is a simple 60 -day extension and does not resolve any of the issues discussed below.
Issues to be Resolved in a Future Amendment
During the process for Amendment No. 7, Staff requested that the applicant update the
construction estimate and associated bonding for the overnight units in association with the
present Amendment (No. 8). This is because the construction estimate is a 2008 estimate for
the construction of 198 overnight units configured as 48 "lodge homes". Since then, the
applicant has modified the Site Plan to configure the units as hotel style structures, received
approval to reduce the number of units to meet the 2.5:1 (residential:overnight) unit ratio, and
constructed a 26 -unit lodge building. At present, the applicant must complete 133 overnight
units, approved as a 94- and 39 -unit hotel structure.
The current ILOC is for $8.7m. However using a number of hotel industry construction
estimation tools, Staff estimates that completion of 133 overnight units as a 3 -star, midscale
hotel would cost $13.8m1, $10.3m2, or $14-$18m3. Deschutes County should have a financial
assurance in place for the required overnight units at all times that is sufficient to complete the
approved overnight units. Regardless if any of these estimates are correct or if the existing
$8.7m would cover the construction costs, the Board, as part of a future amendment, should
discuss whether it is appropriate to have the applicant:
1 Based on extrapolation of the completed 26 -unit lodge building's County building permit estimate.
2 HVS Hotel Development Cost Survey — WWW.HVS.COM
3 Rider Levett Bucknall construction cost calculator - www.rlbintelligence.com/
File No.: A-14-2 (A-13-4 and SP -13-7) Page 2 of 3
1) Provide a new construction estimate that is based on 2014 construction costs and
covers the type of unit actually approved for construction; and,
2) Include a financial assurance that matches the current cost estimates.
In a letter dated August 15, 2014, Joe Weston, on behalf of Weston Investment Co. LLC,
indicated that an increase in the overnight financial assurance amount would be acceptable,
provided the County extended the Completion Date for the overnight units by 5 years, and
provided a process to annually reduce the financial assurance as construction of these units are
completed.
Again, these are issues that may be addressed in a future amendment within 60 days.
Attachments
1. Amendment No. 8.
2. Verification of the continued validity of the ILOC from Wells Fargo
3. Site Plan figure from SP -14-2.
File No.: A-14-2 (A-13-4 and SP -13-7) Page 3 of 3
REVI Wc7
LEG L COUNSEL
For Recording Stamp Only
DOCUMENT NO. 2014-462
AMENDMENT NO.8 TO CONTRACT NO. 2007-380
That certain Improvement Agreement, Deschutes County Document No. 2007-380, recorded in the Deschutes
County Official records at 2007-53411, ("Agreement") by and between DESCHUTES COUNTY OREGON, a
political subdivision of the State of Oregon ("County") and ARROWOOD DEVELOPMENT, LLC, an Oregon
limited liability company ("Developer"), dated August 29, 2007, together with:
Amendment No. 1, Deschutes County Document No. 2007-493, recorded in the Deschutes County Official
Records at 2007-53412;
Amendment No. 2, Deschutes County Document No. 2008-576, recorded in the Deschutes County Official
Records at 2008-43806;
Amendment No. 3, Deschutes County Document No. 2009-510, recorded in the Deschutes County Official
Records at 2009-42805;
Amendment No. 4, Deschutes County Document No. 2010-289, recorded in the Deschutes County Official
Records at 2010-37552; and
Amendment No. 5, Deschutes County Document No. 2011-509, recorded in the Deschutes County Official
Records at 2011-29853;
Amendment No. 6, Deschutes County Document No. 2012-485, recorded in the Deschutes County Official
Records at 2012-33642
Amendment No. 7, Deschutes County Document No. 2014-127, recorded in the Deschutes County Official
Records at 2014-07620
is amended as set forth below, effective upon signature of all parties hereto ("Amendment No. 78"). All other
provisions of the Agreement remain the same and in full force.
The above listed contract is amended as follows, effective upon signature of all parties:
1. Section 3 Exhibits
3.6. Exhibit H —Verification by Wells Fargo of amendments to and extension of expiration date of
Irrevocable Letter of Credit No. NZS648008 consistent with this Amendment No. 78.
2. Identification of Overnight Lodging Required Improvements.
4.1 Developer shall install and complete, or cause to be installed and completed, the improvements
required by the land use approval in SP -12-22 set forth in Exhibit C, to the extent the same
remain to be completed ("Overnight Lodging Required Improvements").
3. Construction of Overnight Lodging Required Improvements
5.3 Developer shall cause the Overnight Lodging Required Improvements to be inspected by and
receive final written construction approval from County and/or the State of Oregon not later than
twe60 (260) yeaisdays from the date of this Amendment No. 68 to the Agreement is recorded in
the Deschutes County Official Records ("Completion Date").
PAGE 1 OF 2 —DOCUMENT NO. 2014-462, AMENDMENT NO. 8 TO CONTRACT NO. 2007-380
DC -2014-462
1
4. Liens.
29.4. The Agreement as amended by Amendments 1 through 78 shall have priority on the subject
property over all other interest holders other than the owner.
Dated this of , 2014
WESTON INVESTMENT COMPANY, LLC, an
Oregon limited liability company
By:
Name:
Title:
STATE OF OREGON
) ss.
County of Deschutes
Before me, a Notary Public, personally appeared , the for
Weston Investment Company, LLC and acknowledged the foregoing instrument on behalf of Weston Investment
Company, LLC.
DATED this day of
, 2014.
Notary Public for Oregon
My Commission Expires:
DESCHUTES COUNTY SIGNATURES ON FOLLOWING PAGE
PAGE 2 OF 2 — DOCUMENT NO. 2014-462, AMENDMENT NO. 8 TO CONTRACT NO. 2007-380
Dated this of , 2014 BOARD OF COUNTY COMMISSIONERS
OF DESCHUTES COUNTY, OREGON
ATTEST:
Recording Secretary
STATE OF OREGON )
) ss.
County of Deschutes )
TAMMY BANEY, Chair
ANTHONY DeBONE, Vice Chair
ALAN UNGER, Commissioner
Before me, a Notary Public, personally appeared ALAN UNGER, TAMMY BANEY, and ANTHONY DEBONE, the
above-named Board of County Commissioners of Deschutes County, Oregon and acknowledged the foregoing
instrument on behalf of Deschutes County, Oregon.
DATED this day of , 2014.
Notary Public for Oregon
My Commission Expires:
PAGE 1 OF 2 — DOCUMENT NO. 2014-462, AMENDMENT NO. 8 TO CONTRACT NO. 2007-380
EXHIBIT H
Deschutes County, Oregon
117 NW Lafayette
Bend, Oregon 97701
Attention Deschutes County Planning Director
Re: Wells Fargo Bank, NA
Letter of Credit No. NZS648008
Commercial Real Estate
MAC P6101-121
1300 SW 5th Avenue, 12th Floor
Portland, OR 97201
Reference is made to that certain Letter of Credit No. NZS648008. This Letter of Credit
remains as valid security for the Improvement Agreement and all terms expressed in
Amendment No. 7.
Very truly yours,
WELLS FARGO BANK, N.A.
a,
Cc: Keith Vernon
2154 NE Broadway
Portland, Oregon 97232
1
{00237994;1 )PAGE 1 OF 1 - DOCUMENT NO. , AMENDMENT NO. 7
Wells Fargo Bank N.A.
Together we'll go far
Weston Investment Co. LLC
A Real Estate Holding Company
Administrative Office
2154 9V. E. Broadway, Suite 200 ' Portland, Oregon 97232-1590
Waiting Address: ea Box 12127 ' <Dortfand, Oregon 97212-0127
PIiione 503-284-9005 Fax503-284-5458 •
E-91-1ai�
joe@westoninv.com
Sent Via E -Mail: shultberg@.radlerwhite.com and
First Class US Mail
August 15, 2014 •
Steven P. Hultberg
Attorney at Law
PO Box 2007
Bend, Oregon 97709
RE: Tetherow
Bend, Oregon
Line of Credit
Dear Mr. Hultberg,
I have been advised by Keith Vernon, Senior Vice President of Weston Investment Co. LLC (WIC)
that Deschutes County desire to increase the Letter of Credit dollar amount on deposit with the
County to assure that there will be compliance with the overnight room rental obligation under the
Development Agreement for Tetherow.
It is true that WIC did originally supply the bonding requirement for Don Bauhofer and at that
time WIC did not have any actual ownership interest in any land parcels at Tetherow.
When the great recession hit in 2007-2008 Mr. Bauhofer lost control or sold his interest in
Tetherow to Spring Capital of Eugene, Oregon, who in turn sold the golf course portion to Willem
Willemstein, who resides in Holland and through his managing partner Chris van der Velde
operates the golf course and various tracts of land in Tetherow.
Other parcels at Tetherow went into foreclosure and WIC, to protect their letter of credit interest,
acquired two parcels through being the successful bidder at the foreclosure sale on the courthouse
steps.
Mr. Bauhofer, principal lender for the project, was Virtual Realty Enterprises, LLC (VRE) out of
St. Louis, Missouri, thus the ownership of the various tracts of land were held by VRE, WIC,
Willem Willemstein, and Spring Capital, who later disposed of their holding to IStar Financial,
who is now the declarant for Tetherow.
Page 1 of 3
At this point the parcel or tracts of land held by WIC were tracts of land that was not designated
for overnight rental.
Mr. Keith Vernon and Dike Dame on behalf of WIC entered into prolonged negotiations with the
various owners of tracts of land and were successful and instrumental in negotiating land trades
wherein WIC did obtain title to tracts of land (Tract AA being the primary overnight rental tract)
and WIC then retained an architect and general contractor to commence construction of overnight
rentals, of which 50 units were built in 2013-14, of which 26 of these units were on Tract AA
which is land owned by WIC.
The Bond/Letter of Credit with Deschutes County provided that the County could call on the Bond
only after the County had completed construction of the overnight rentals, thus in effect placed the
County in the business of being in the construction business of building overnight rentals, a
position the county does not necessarily desire to be in.
WIC agreed as an accommodation to the County to modify the bond requirement, which in effect
allowed the Bond/Letter of Credit to be called for non-compliance if the units were not to be
constructed.
The units that were built in 2013-14 are high end units all with fireplaces, large square footage,
and schedule nightly rentals at the top of the market, as it was felt that this was a needed for these
types of units which would support the existing golf course.
The balance of the unit obligations for the most part will be conventional overnight inn type rooms
with competitive fixture finish, thus the cost per door for these types of units will be considerably
less than the 50 units constructed in 2013-14.
When WIC commenced negotiations to extend the Letter of Credit arrangement with the County,
the County felt that the dollar amount of the Letter of Credit should be increased substantially and
I personally took this as an insult. WIC did not ask for a reduction of the dollar amount even
though WIC have placed 26 units on line as overnight rentals.
WIC is the main contributing cause through their willingness to invest substantial sums of money
and lend its reputation and credit at Tetherow that has allowed the overall development of
Tetherow to move in a positive direction.
We will be amenable to increasing the Letter of Credit dollar amount up to a mutually agreeable
figure but request that the County gives a no less than five year period of compliance and that each
year of the Letter of Credit renewal that the dollar amount be reduced proportionately by the
additional overnight renewal unit count that is available for nightly rental at Tetherow.
WIC was instrumental in working out troubled projects in Deschutes County going back some 30
years.
Page 2 of 3
1. Sunriver Village in Sunriver WIC constructed five buildings to finish the retail village so
the village would be in a profitable position, when it was sold to an out of state investment
group who shortly thereafter went bankrupt and the village went down from there for a
lack of positive direction and management and funds to maintain the investment.
2. Broken Top, it was WIC that took over Broken Top, acquired the interest of the minority
stakeholder, platted and re -platted larger portions of the vacant land, sold out all of the lots,
then donated supporting buildings including the golf course club house and all of the other
common real estate to my public charitable foundation, The OCF Joseph E. Weston Public
Charitable Foundation, who later sold the asset.
What the County has to gain in alienating WIC and my involvement in Tetherow I do not
understand.
Will you please advise Keith Vernon as to the County's position in the matter of the Letter of
Credit and the extension of five years, as I do not want to have unpleasant negotiations each year.
While the U.S. economy is on the upswing, I am not convinced it is on sound economic footing
and we may, through massive Federal government interest subsidies, being putting air in the
inflationary balloon and if it does "pop" it will be a much greater recession than the 2007 to 2012
recession.
Awaiting your replay, and if you wish to share this letter with the County I offer no objections.
Yours truly,
Weston Investment Co. LLC
1
eph E. Weston
t
JW/ts
CC: Keith Vernon, Senior Vice President, Weston Investment Co. LLC
Dike Dame, Land Consultant, Williams & Dame, 1308 NW Everett Street, Portland, OR 97209
William Groves, Via E -Mail: william.groves@deschutes.org
Laurie Craghead, Via E -Mail: laurie.craahead@deschutes.org
Nick Lelack, Via E -Mail: nick.lelack@deschutes.org
Page 3 of 3
WELLS
FARGO
August 4. 2014
Deschutes County, Oregon
117 NW Lafayette
Bend, Oregon 97701
Re: Wells Fargo Bank, National Association ("WFB")
Letter of Credit No. NZS648008
Ladies/Gentlemen,
Reference is made to that certain Letter of Crcdit No. NZS648008 (the "Letter of
Credit"). WFB hereby acknowledges that the current expiration date of the Letter of
Credit is September 30, 2014. This letter shall confirm that effective as of September 30,
2014. the Letter of Credit will automatically be extended pursuant to the terms set forth
therein for a one (1) year period. thereby resulting in a new expiration date of September
30. 2015.
Very truly yours.
WELLS FARGO BANK,
NATIONAL ASSOCIATION
Roger W. Long
Vice President
Relationship Manager
cc: Keith Vernon
2154 NE Broadway
Portland. Oregon 97232
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