The Willowick Golf Course is an 18-hole commercial golf course owned by the City since 1964.  The golf course and its amenities, which include a clubhouse and restaurant have historically produced a net positive income stream to the City’s General Fund. Over the past few years, the Willowick operations has experienced a gradual decline in income that is likely commensurate with golf popularity waning. Concurrently, an expiring management agreement for Willowick has made continuing the golf operations uncertain.  Given these factors, initial efforts to explore long-term economic sustainability of Willowick commenced.  From an approved 2017 Memorandum of Understanding, early discussions associated with potential reuse of the Willowick property initiated between the Cities of Garden Grove and Santa Ana. Through a progression of Joint Study Session meetings between Garden Grove and Santa Ana (December 2018 and April 2018), the Envision Willowick community engagement efforts (September through October 2018), and release of the Request for Proposals (April through June 2019), a comprehensive effort to explore the future of Willowick was proceeding.

Willowick Request for Proposal (RFP)

The response to the Willowick RFP resulted in twelve respondents of which nine (9) contingent proposals and three (3) non-contingent cash offers were received.  In July 2019, eight (8) contingent proposers were invited to a presentation and interview process by the City of Garden Grove in collaboration with the City of Santa Ana. Evaluations of the non-contingent cash offers proceeded under a separate process by the City of Garden Grove.  

Willowick Alternative Proposals

Unexpectedly, various entities have offered alternative proposals to acquire Willowick on the condition that the transaction is completed prior to December 31, 2019. This was an unanticipated development.  Given the economic magnitude, a comprehensive review and negotiations of the alternative proposals was conducted to determine potential long-term economic sustainability for Garden Grove and Santa Ana. The alternative proposals were offered by the following entities:

1.  InSite Property Group

2.  Landspire - Lyon Living - Integral Development, LLC

3.  Majestic Realty Co.

4.  McWHINNEY Real Estate Services, Inc. ("McWHINNEY")

5.  West Coast GC Group, LLC

At the November 26, 2019 meeting, staff received City Council direction to negotiate a Master Ground Lease with the McWHINNEY for consideration at the December 10^th City Council meeting.  As additional time was needed to finalize the Master Ground Lease, staff requested a continuance of this item to the December 17, 2019, City Council meeting.

Pending Litigation

The City of Garden Grove has disclosed to McWHINNEY that there is currently pending litigation affecting the Willowick Property brought by Orange County Communities Organized for Responsible Development. While a Temporary Restraining Order has been issued on November 26, 2019, the City is permitted to continue to negotiate an agreement for the disposition of Willowick and the City Council can approve a final agreement provided the agreement doesn’t become effective or the disposition consummated until after the court’s decision on the scheduled hearing on a preliminary injunction, provided the court’s decision does not enjoin the City from consummating the transaction. A preliminary injunction hearing is scheduled for December 17, 2019 and it is anticipated the results of the preliminary injunction hearing will be presented at the December 17^th City Council meeting.

Founded in 1991, McWHINNEY is a comprehensive real estate development, investment and management firm that has demonstrated experience with community engagement and outreach, planning, entitlements and development execution. McWHINNEY brings a dynamic approach and philosophy that puts “Place-Making First”. With over 30 years of experience in developing large-scale, mixed-use developments, it is recommended that McWHINNEY be selected as the development partner to help guide the future of Willowick to achieve future long-term economic sustainability and deliver community benefits to both Garden Grove and Santa Ana.  These benefits could include the following:

• The creation of new jobs benefitting Garden Grove and Santa Ana residents;The development of new or improved park and recreation facilities and other infrastructure;
• A sustainable funding source for programs that support the development of additional affordable housing in Garden Grove; and
• Additional funding to support public safety, economic development initiatives, small business assistance programs, community health and welfare programs, and similar initiatives and activities in Garden Grove.

Proposed Master Ground Lease

The City Council is requested to approve a Master Ground Lease with a McWHINNEY affilliated entity, MWillowick Land LLC that would provide for MWillowick Land LLC to act on behalf of the City for all purposes in management and control of the Property subject to the Master Ground Lease.

A copy of the final Master Ground Lease is attached and a general overview of the lease structure is summarized below:

Master Ground Lease Term:

•  55 years

Initial Base Rent Payment:

•  $2 million

Ongoing Lease Payment(s):

•  The City will receive ground lease payment of 85% of the value and MWillowick Land LLC shall receive 15% of the value.

Pre-development Costs:

•  MWillowick Land LLC shall be responsible for all pre-development costs including: outreach and community engagement, planning, entitlements, finance, and infrastructure development.

Sale Parcel(s): 

• Following approval of entitlements, MWillowick Land LLC may exercise an option to purchase up to 30 acres of Willowick Property in which the City will be entitled to receive 85% of the sale proceeds.

Ground Lease Development:

• MWillowick Land LLC may convert up to +70 acres of the Property under a Developer Ground Lease and/or Third Party Ground Lease structures in which the City shall receive 85% of the value and Developer shall receive 15% of the value.

Golf Course Operations:

• MWillowick land LLC will responsible for leasing and contracting a qualified operator for interim operations.

Subject to entitlements and performance of the Property, it is anticipated the City may realize increased income streams comprised of the Option Parcels and a combination of eight-five percent (85%) share of the Base Rent and Percentage Rent over the term of the Ground Lease, thereby achieving a long-term economic sustainability for Garden Grove.

It is recommended that the City Council:

• Adopt the Resolution authorizing approval and execution of a Master Ground Lease between the City of Garden Grove and MWillowick Land LLC in substantially the form attached to this report; and, authorize the City Manager to execute the agreement and approve minor modifications deemed necessary.

Lisa L. Kim

Assistant City Manager/Community and Economic Development Director