R850-140. Development Property, R850. School and Institutional Trust Lands, Administration, Utah Administrative Code

Utah Administrative Code (Current through November 1, 2019)

R850. School and Institutional Trust Lands, Administration

R850-140-100. Authorities

Latest version.

This rule implements Sections 6, 8, 10 and 12 of the Utah Enabling Act, Articles X and XX of the Utah Constitution and Subsection 53C-1-302(1)(a) and Section 53C-4-101, which authorize the director of the School and Institutional Trust Lands Administration to establish rules and criteria for the disposition of trust lands.

R850-140-200. Purpose of Development Property Rules

Latest version.

This rule permits the agency to designate trust land as development property and thereby

1. subject agency activities in connection with such properties to this rule; and

2. exempt agency activities in connection with such properties from the rules listed in R850-140-1000.

R850-140-250. Definitions

Latest version.

For the purposes of this rule:

1. Development Property: a parcel of trust land that has been designated a development property pursuant to the director's determination that the parcel meets the criteria established in R850-140-300(1).

2. Development Transaction: a transaction entered into by the agency for the purpose of generating financial returns to the trust from real estate development of a particular development property. Development transactions include sales, exchanges, ground leases, development leases, build-to-suit leases, joint ventures, and Other Business Arrangements with respect to development properties.

3. Joint Venture: a transaction in which the agency contributes trust assets to a joint undertaking in which such assets may be subject to risk of loss, including without limitation a transaction in which the agency becomes a member of a limited liability company in exchange for the commitment of trust assets.

4. Other Business Arrangement: a transaction other than a joint venture which involves similar risk of loss of trust assets as a joint venture and which involves material reliance on the economic performance of a third party or other contingent events to generate expected returns. The non-subordinated lease of trust property for development purposes, with the trust's returns based upon a percentage of final property sales, is not an Other Business Arrangement.

5. Supporting Transaction: a transaction entered into by the agency for the purpose of preparing for or supporting real estate development on trust lands, but not directly conveying trust lands for real estate development purposes. Supporting transactions include without limitation: exchange, acquisition or conveyance of lands for assemblage or configuration of development projects; agreements with local government entities with respect to development entitlements and provision of infrastructure; rights-of-entry, dedications and easements for development improvements and amenities on trust lands; and leasing or conveyance of trust lands for necessary development infrastructure and amenities.

R850-140-300. Designation of Development Property

Latest version.

1. The director may designate a property as a development property upon the director's determination that the following criteria are met:

(a) The property is located in or near an urban area of the State or, in more rural locations, the property is of a character suitable for current or future commercial, industrial, resort, residential or other real estate development activities; or

(b) The agency has received inquiry from private parties concerning the potential for development of the property or the agency, after preliminary analysis, has determined that the probable highest and best use for the property is for development purposes.

2. The director shall maintain a database of each property designated as a development property. The director may remove property from development designation in his discretion as deemed appropriate for the best interests of the trust beneficiaries.

R850-140-350. Planning

Latest version.

1. Prior to designating a property as a development property, the agency shall submit the proposed designation to the Resource Development Coordinating Committee (RDCC), and evaluate and respond to comments received through the RDCC process. Participation in the RDCC process shall constitute compliance with Subsection 53C-2-201(1).

2. If the agency chooses to participate in local government planning and entitlement processes, such participation constitutes an additional degree of planning supplemental to the RDCC process, but is not required under Subsection 53C-2-201(1).

R850-140-400. Development Transactions - General Provisions

Latest version.

1. Subject to the board notice and approval provisions contained in R850-140-500 and R850-140-600, the agency may solicit and reject proposals, make offers, counter offers and otherwise negotiate freely with interested parties in its efforts to arrange development transactions that are in the best interests of the trust. Development transactions will be structured according to the circumstances of the market and the attributes of the particular development property.

2. Prior to entering a development transaction, the agency shall initiate an appropriate advertising program designed to effectively solicit interested parties. Advertising may be implemented through print media, internet, signage, direct mail or other appropriate marketing methods.

3. In negotiating development transactions, the agency shall undertake appropriate due diligence with respect to the proposed transaction, including consideration of the following criteria:

(a) The ownership, character, reputation, financial status, credit and litigation history and prior real estate development experience of the party with whom the development transaction is proposed.

(b) The financial attributes of the proposed development transaction.

(d) The potential effects of the proposed development transaction upon nearby trust lands; and

(e) Whether the proposed transaction will bring the highest long-term return to the trust compared to other reasonably foreseeable alternatives.

4. Development transactions shall result in the trust receiving not less than fair market value for the sale, use or exchange of the development property in question.

5. The purchase, sale or exchange of land in connection with a development transaction shall be supported by either an appraisal or a detailed internal analysis of value.

6. Formal contract documentation of any development transaction shall be subject to approval by a representative of the attorney general's office. No party to a proposed development transaction shall have any vested rights in the transaction until the formal contract documents have been approved by the agency representative of the attorney general's office, approved by the board if required by rule or statute, approved and executed by the director, and delivered.

R850-140-500. Development Transactions -- Approval of Minor Development Transactions

Latest version.

1. For purposes of this rule, a minor development transaction is a proposed development transaction that:

(a) involves a projected commitment of trust lands or assets of less than $5 million; or

(b) if the proposed development transaction is a joint venture or Other Business Arrangement, involves a projected commitment of trust lands or assets of less than $2 million.

2. The agency shall provide the board with the following information with respect to a proposed minor development transaction:

(a) a description of the parties to and terms of the proposed transaction;

(b) an economic analysis of the proposed transaction;

(d) a declaration of staff conflicts of interest, if any;

(e) if the transaction will involve the subordination of trust assets in connection with a joint venture or Other Business Arrangement, a description of the assets and an analysis of relevant risks to those assets; and

(f) other relevant information derived from the agency's due diligence activities.

3. The board must approve any proposed minor development transaction that is a joint venture or Other Business Arrangement in accordance with Subsection 53C-1-303(4)(e).

4. The director may approve any proposed minor development transaction that is not a joint venture or Other Business Arrangement after compliance with R850-140-500(2).

5. The board or director, as appropriate, may approve, conditionally approve, or reject any proposed minor development transaction consistent with their fiduciary obligations.

R850-140-600. Development Transactions -- Approval of Major Development Transactions

Latest version.

1. For purposes of this rule, a major development transaction is a proposed development transaction that:

(a) involves a projected commitment of trust lands or assets of $5 million or more; or

(b) involves a projected commitment of trust lands or assets of $2 million or more if the proposed development transaction is a joint venture or Other Business Arrangement.

2. Prior to entering negotiations for a major development transaction, the agency shall provide the board with the following information:

(a) relevant information concerning the property and the financial aspects of a possible transaction, including:

(i) property value;

(ii) financial goals for a proposed transaction;

(iii) timeliness of a proposed transaction; and

(iv) type of transaction contemplated;

(b) a summary of the anticipated competitive process and advertising program to be utilized in soliciting proposals; and

3. Prior to seeking final board approval of a major development transaction, the agency shall provide the board with the following information:

(a) a statement of the key terms of the transaction;

(b) the results of the agency's due diligence activities under R850-140-400(3)(a);

(d) the results of the competitive process and advertising process utilized to select the proposed transaction; and

(e) a declaration of staff conflicts of interest, if any;

(f) a description of legal risks assumed by the trust;

(g) an analysis of the financial strength and commitment of the parties to the transaction; and

(h) if the transactions will involve the subordination of trust assets in connection with a joint venture or Other Business Arrangement, a description of the assets and an analysis of relevant risks to those assets.

4. The board must approve any proposed major development transaction prior to the director's execution of the transaction.

5. The board or director, as appropriate, may approve, conditionally approve, or reject proposed major development transactions consistent with their fiduciary obligations.

R850-140-700. Amendments to Development Transactions

Latest version.

1. The agency may amend development transactions subject to the conditions contained in Subsections R850-140-700(2) through(4).

2. No amendment to a development transaction shall result in the trust receiving less than fair market value for the sale, use or exchange of the property in question.

3. The director shall deliver a summary description of the terms of proposed material amendments to minor or major development transactions to the board with sufficient detail to permit the board to review the proposed amendment consistent with its statutory duties.

4. All amendments that will materially modify the financial terms of a joint venture, Other Business Arrangement, or major development transaction must be approved by the board.

R850-140-800. Supporting Transactions

Latest version.

1. The agency may enter into supporting transactions as necessary to promote prudent and profitable development of trust lands designated as development properties.

2. The purchase, sale or exchange of land in connection with a supporting transaction shall be supported by either an appraisal or a detailed internal analysis of value.

3. The board must approve any proposed supporting transaction that involves the purchase, sale or exchange of land having a value in excess of $500,000.00.

R850-140-900. Deviation from Rules

Latest version.

In situations where the board determines that an economic opportunity favorable to the trust beneficiaries may otherwise be lost, or other good cause exists that is in furtherance of the statutory obligations of the board, the board may authorize the agency to deviate from the transactional approval processes set forth in this rule, so long as the board and agency's actions are otherwise in compliance with law.

R850-140-1000. Exemption From Rules

Latest version.

The agency, in connection with its activities in managing and conveying development property, shall be subject to all rules applicable to the agency, except the following, which shall not be applicable:

(a) R850-3-300. Application Forms.

(b) R850-3-400. Application Processing.

(d) R850-30. Special Use Leases.

(e) R850-40. Easements.

(f) R850-41. Rights-of-Entry.

(g) R850-80. Sale of Trust Lands. (Except R850-80-250.)

(h) R850-90. Land Exchanges.