Item B: Selection of Development for 10th and Charnelton

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In the initial memo from Johnson Gardner, “Assessment of Development Risks” (included in the Council packet of July 14, 2008), the projected office lease rate in the WG proposal was considered to be on the high end of lease rates for class “A” office space in downtown Eugene. Staff requested follow-up information to address concerns regarding revenue assumptions for the office space, which represents 32% of the total gross revenues of the project. The follow-up memo, “Supplemental Review of WG Development Proposal,” is included as Attachment C. The memo indicates that lease rates assumed in the WG pro forma exceed the expected office market in 2011 by a significant amount. Johnson Gardner and staff reviewed a set of comparable construction projects, and determined that the estimate of construction costs included in the WG proposal are at the middle of the range for comparable projects in the area, and appear to be within acceptable market expectations. WG provided a letter in support of the construction estimates as part of their response to the request for supplemental information. The equity in the WG project appears strong. The supplemental information provided new detail on possible equity participants. The Jean Tate group is considering an investment that could represent as much as 25% of the total equity needed for the project. In addition, Pacific University, the identified anchor tenant, is apparently considering an equity position in the project. The supplemental information submitted by Opus addresses the anticipated design refinements and provides more detail on the student residents and the financial participation requested from the City. No supplemental information was requested on the market and financial feasibility of the Opus proposal; the proposal appears very strong in terms of these development objectives. Both the assumptions of construction costs and projected revenues are within market expectations, in addition to other project feasibility and financing indicators. Both the WG and Opus proposals satisfactorily address the development objectives in the RFP. Both proposals represent multi-story dense downtown developments. The Opus proposal appears stronger in terms of project feasibility specifically with respect to projected revenues. Both proposals appear to be well designed development projects, with a desirable mix of activities and architectural forms that would contribute to the vitality of downtown. In each case, the design addresses the goal of an active pedestrian realm, with high quality materials, elements of scale and architectural interest, and embedded parking. The development of either project would compliment other public and private investments in the area. Staff is committed to working with the development team and proposal selected by the URA; staff will also continue to work with the development team and proposal not selected to provide assistance with possible alternate sites downtown. RELATED CITY POLICIES th Future development of the 10 and Charnelton site is consistent with the policies in the Eugene Downtown Plan, including: Downtown development shall support the urban qualities of density, vitality, livability and ? diversity to create a downtown, urban environment. Z:\CMO\2008 Council Agendas\M080730\S080730B.doc