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HomeMy WebLinkAboutItem C: West Broadway Project EURA UGENE RBAN ENEWAL GENCY AIS GENDA TEM UMMARY Work Session: West Broadway Project Meeting Date: December 10, 2007 Agenda Item Number: C Department: Planning and Development Staff Contact: Denny Braud www.eugene-or.gov Contact Telephone Number: 682-5536 ISSUE STATEMENT At the November 27 Urban Renewal Agency (URA) workshop, the URA board discussed potential next steps for the West Broadway redevelopment area. The URA board is asked to take action on a preferred next step for West Broadway. BACKGROUND On November 27, staff presented seven options for West Broadway that captured a variety of possibilities. The following motion was presented by Councilor Bettman for consideration and was ultimately tabled: I move to direct the city manager/agency director to bring back to the Council/URA for consideration at the 12/10/07 work session a proposal(s) that is consistent with provisions of Option 2 offered by staff/ERAC at the April 25, 2007 council work session as follows; Option 2 engages Beam to proceed with "renovation of the Centre Court building and the Washburne building and a yet-to-be-defined level of new construction on the adjacent vacant land." (The adjacent vacant land being the Aster Pit.) And; includes that the council/URA "would also continue to move forward with the TK Partners project as previously selected on the 10th and Charnelton Request for Proposals process." (Consisting of 106 "homes" on the Sears pit site.) This motion assumes a proposal(s) coming back to council will define the use and intensity for the Aster Pit development; and maintain Beam and Kemper as separate entities. At the workshop, the URA board and representatives from Beam Development (Brad Malsin and Pete Eggspueler) and KWG Development Partners (Tom Kemper) discussed various strategies for moving forward with the redevelopment of West Broadway. The following is a brief summary of some of the highlights from the discussion: Developer Feedback: ? Beam indicated that they are still interested in their proposed project for the Centre Court building and hole and the Washburne Building. ? Tom Kemper expressed concerns about the feasibility of the previously accepted TK Partners th housing proposal for the 10 and Charnelton site, but indicated a willingness to discuss the possibility of moving forward on a delayed timeline. F:\CMO\2007 Council Agendas\M071210\S071210C.doc ? Both developers expressed concerns about downward trends in the market, particularly in the housing market and in their ability to access financing. URA Feedback : (as summarized by Susan Muir at the end of the workshop) ? The URA supports the idea of moving forward with some level of new development within the West Broadway redevelopment area in a timely manner. ? There appears to be some agreement that moving forward with the Beam proposal and the TK Partners project would be a desirable first step. ? The URA is willing to offer some flexibility in working with the configuration of the Beam and TK Partners projects. ? There were various levels of interest expressed in acquiring property currently under purchase option agreement, potentially including Centre Court building and hole, Washburne building, Diamond property, DIVA to Shawmed property, Roberts - Taco Time building, and the Scan Design building. ? If new open space is to be considered, it should not be a stand-alone project. Rather, open space should only be considered as part of a redevelopment project. On December 5, 2007, the City Manager received notification from Tom Kemper that KWG is terminating the Memorandum of Understanding with the URA. Kemper also indicated that TK Partners th has decided not to move forward with the previously proposed project on the 10 and Charnelton site (see Attachment A - letter from Tom Kemper). Using only the Beam Development proposal as the basis, staff prepared a hypothetical financial model for example purposes (see Attachment B). It is intended to be an outline of only one potential financial approach and does not represent a final financing structure. RELATED CITY POLICIES Future development of West Broadway is consistent with the policies and implementation strategies included in the Downtown Plan, including: • Downtown development shall support the urban qualities of density, vitality, livability and diversity to create a downtown, urban environment. • Stimulate multi-unit housing in the downtown core and on the edges of downtown for a variety of income levels and ownership opportunities. • Actively pursue public/private development opportunities to achieve the vision for an active, vital, growing downtown. • Use downtown development tools and incentives to encourage development that provides character and density downtown. • Promote multi-story, mixed-use structures downtown through financial incentives or code amendments. In addition, the redevelopment of West Broadway is responsive to the following Growth Management Policies: F:\CMO\2007 Council Agendas\M071210\S071210C.doc Policy 1: Support the existing Eugene Urban Growth Boundary by taking actions to increase density and use existing vacant and under-used land within the boundary more efficiently. Policy 2: Encourage in-fill, mixed-use, redevelopment, and higher density development. Policy 3: Encourage a mix of business and residential uses downtown using incentives and zoning. Policy 10: Encourage the creation of transportation-efficient land use patterns and implementation of nodal development concepts. Policy 14: Development shall be required to pay the full cost of extending infrastructure and services, except that the City will examine ways to subsidize the costs of providing infrastructure or offer other incentives that support higher-density infill, mixed use, and redevelopment. Downtown Initiative – This item is also related to two of the 2007-2008 Council Goals:Facilitate Arts & Outdoors significant revitalization of downtown core and – Strengthen our commitment to community arts and outdoor assets. AGENCY OPTIONS 1. Move forward with negotiating the Beam project, including renovation of the Centre Court building and new construction in the adjacent hole, and renovation of the Washburne building. The final proposal would be brought back to the URA board for approval. 2. In addition to option 1, consider acquisition of the Diamond property, DIVA to Shawmed property, Roberts - Taco Time property, and/or Scan Design property. 3. Consider assigning the purchase option agreements on the properties that are not included in the Beam project. 4. Take no action at this time. AGENCY DIRECTOR’S RECOMMENDATION The Agency Director’s recommendation is to: 1. Move forward with negotiations on the Beam Development project as selected in the West Broadway Request for Qualifications process to renovate the Centre Court building and Washburne building, and provide a yet-to-be defined level of new construction in the adjacent hole. Work with Beam to assemble the property through URA acquisition or assignment of purchase option agreements. Present the Beam proposal for URA consideration in February 2008 including details on the City’s financial participation, transfer of property, mix of uses, density, design, and timeline for the project. th 2. Come back to the URA with options for moving forward with the redevelopment of the 10 and Charnelton site. F:\CMO\2007 Council Agendas\M071210\S071210C.doc SUGGESTED MOTION Move to direct the City Manager to: 1. Proceed with negotiations for the Beam Development project as selected in the West Broadway Request for Qualifications process to renovate the Centre Court building and Washburne building, and provide a yet-to-be defined level of new construction in the adjacent hole. Work with Beam to assemble the property through URA acquisition or assignment of purchase option agreements. 2. Present the Beam proposal for URA consideration in February 2008 including details on the City’s financial participation, transfer of property, mix of uses, density, design, and timeline for the project. th 3. Come back to the URA with options for moving forward with the redevelopment of the 10 and Charnelton site. ATTACHMENTS A. Letter from KWG Development Partners B. Hypothetical Financial Model FOR MORE INFORMATION Staff Contact: Denny Braud Telephone: 682-5536 Staff E-Mail: denny.braud@ci.eugene.or.us F:\CMO\2007 Council Agendas\M071210\S071210C.doc ATTACHMENT B Hypothetical Financial Model: Move forward with Beam Development Considerations ? The financial model presented below is only intended to outline a potential financing approach and does not represent the final numbers or final financing structure. ? The URA has limited financial capacity. Given Beam’s potential office use, and no th current redevelopment proposal for the 10 and Charnelton site, retaining some meaningful level of financial capacity for future housing development and redevelopment th of the 10 and Charnelton site may be desirable. ? Spending all of the available urban renewal funds to purchase property would leave no urban renewal funds to assist in the redevelopment of the properties, including actual project costs, relocation assistance, RFP work, public process, and project management. ? Spending all of the available urban renewal funds to purchase property would leave no funds for other projects in the Downtown District. ? Buying property without a known developer/development agreement is speculative. City-owned properties have historically taken long periods of time to develop and/or resell. ? To loan the HUD Section 108 funds to Beam (see assumptions below), the City would be required to submit a new project specific application to HUD. HUD will determine whether the proposed repayment source and back-up security is sufficient to approve the loan to the City. ? In the event that a use, other than property acquisition, is proposed for HUD Section 108 funds, the City would need to complete another individual project application. The process includes a written public comment period, a public hearing, Council approval, and HUD approval. ? Under the financial model scenario listed below, not all of the purchase options would be executed. Approximately $242,000 in option money has been spent on properties not included in the Beam footprint. Assumptions (for example purposes only) ? URA purchases the Centre Court building and adjacent hole for $2.8 million and resells it to Beam for $2 million. ? URA assigns the purchase option on the Washburne building to Beam at face value ($1.9 million). Beam purchases the building. ? City loans HUD Section 108 proceeds to Beam ($7.8 million) to provide subordinate, permanent financing for the purchase of the property and completion of the project. ? Based on developer comments made at the 11/27/07 workshop regarding a potential office use for Centre Court building, adjacent hole, and Washburne building, and comments regarding difficulty attracting financing in the current market, the model suggests that the HUD Section 108 loan be used to provide financing for Beam’s project. The proposed office use is eligible for HUD Section 108 funds. ? HUD Section 108 loan is repaid through Beam’s principal and interest payments to the City. The BEDI grant and the property that Beam purchased with the loan is used as collateral for the HUD Section 108 loan. The City’s CDBG annual allocation may be withheld by HUD as a final remedy for any default. No other City or URA funds are used or at risk to repay this loan. Potential Financing Approach Potential Funding Approach – Rough Estimates Funding Sources URA - Tax URA – Increment HUD Section DT Loan Funds BEDI Grant Program Totals 108 Loan Amount Available $ 4,000,000 $ 7,895,000 $ 2,000,000 $2,000,000 $ 15,895,000 Use of Funds Purchase Centre Ct & Hole – Sell to Beam with Note ($2,800,000) ($2,800,000) Loan to Beam at Completion of Construction ($5,000,000) ($5,000,000) Additional Costs for Beam Project Unknown Loan Loss Reserve for HUD 108 Borrowing ($2,000,000) ($2,000,000) 1 Other City Project Costs & Contingency ($2,000,000) ($95,000) ($2,095,000) Subtotal for Beam Project ($2,000,000) ($7,895,000) ($2,000,000) $0 $11,895,000 Potential Balance - Other Possible Projects$ 2,000,000 $0 $0 $2,000,000 $4,000,000 Other Potential Uses Additional Costs for Beam unknown Diamond $ 300,000 DIVA to Shawmed $ 3,150,000 Roberts - Taco Time $ 1,200,000 Scan Design $ 1,900,000 1 Includes discounted Beam purchase price for Centre Court & Hole, construction period interest for HUD Section 108 borrowing and other loan fees, project management, and contingency.