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Jl CITY OF RIVERSIDE REDEVELOPMENT AGENCY MEMORANDUM Honorable Mayor & Agency Members Date: Item No.: February 20, 2001 3 Subject: Second Amendment to Memorandum of Understanding and Assignment -FancherlKaser Partners (formerly known as The Fancher Companies) Regarding the Development of a Lifestyle/Entertainment Center in Downtown Riverside Background On May 16, 2000, the Redevelopment Agency authorized the Executive Director to enter into a Memorandum of Understanding with The Fancher Companies regarding the development of a Downtown Riverside lifestyle/ entertainment center. The document allowed the developer to represent the project and solicit tenant interest at the annual International Council of Shopping Centers (ICSe) conference in Las Vegas in May of2000. As proposed, the lifestyle entertainment center would encircle the Main Street Mall, taking advantage of the existing ambiance, and further enhancing the area by refurbishing existing historic buildings, and constructing new buildings to create a variety of retail, dining and entertainment venues. Despite the good faith efforts of the Agency and The Fancher Companies, the parties were unable to complete a Limited Right to Negotiate within the timeframe contemplated by the MOU which expired on August 30, 2000. Subsequently, on September 5, 2000, the Agency authorized the extension of the term through January 31, 2001. Therefore, staff and the developer agree that it would be in the best interest of both parties to amend the MOU by extending the term through May 3 I, 200 I versus entering into a Limited Right to Negotiate. This methodology will allow time to explore alternative development tactics. Additionally, since the MOU was amended last September, Mr. Fancher has partnered with Mr. Craig Kaser, an expert in retail recruitment, for purposes of developing the subject project, thus resulting in the creation of Fancher/Kaser Partners. Consequently, the MOU must be amended to reflect the assignment of The Fancher Companies to Fancher/Kaser Partners. Current Issue and Strategic Questions Despite the fact that encouraging responses were received from potential tenants at lCSC and during ensuing conversations, changes have occurred in the retail and entertainment sectors, resulting in the need to reexamine the development approach for the lifestyle center. If retail development combined with entertainment continues to show doubtful prospects for success, Fancher/Kaser Partners is encouraging the Agency to look to other alternatives, including the incorporation of an urban housing component. In fact, cities across the country have encountered the changing dynamics with the development of lifestyle centers, and have discovered that downtown housing creates the critical mass needed to attract tenants. Examples of downtown housing include a combination of market rate condominiums, apartments, and lofts as well as senior and affordable housing. Further support for examining housing as a strategic alternative comes from Keyser Marston & Associates (KMA). When staff contacted KMA about the development resistance the Agency was experiencing, they readily suggested housing is an alternative to entertainment. In fact, several ofKMA's client cities hav~:urned to this form of development, as housing brings people downtown at night, and creates the necessary cntlcal mass to attract restaurants, service providers, and ultimately specialty retail. 3-1