Loading...
HomeMy WebLinkAboutItem B: Selection of Proposal for 10th and Charnelton EURA UGENE RBAN ENEWAL GENCY AIS GENDA TEM UMMARY Work Session: Selection of Development Proposal for 10th and Charnelton Site Meeting Date: July 14, 2008 Agenda Item Number: B Department: Planning and Development Staff Contact: Nan Laurence www.eugene-or.gov Contact Telephone Number: 682-5340 ISSUE STATEMENT th A Request for Proposals (RFP) was issued in March 2008 for the sale and development of the 10 and Charnelton development site. The Urban Renewal Agency board (URA) is asked to review the responses to the RFP and to direct the Agency Director to enter into exclusive negotiations with the preferred RFP respondent. BACKGROUND The RFP identified the development objectives to be used in the evaluation of proposals. The objectives include development team experience, urban design, active uses, sustainable development, timeliness, financial feasibility, and net financial cost/benefit. Five proposals for the purchase and development of the site were submitted by the following: WG Development, Opus NWR Development, The Canterbury Group, Energy Village, and Trannovation Station. Summaries of the proposals are included in Attachments A-E. Copies of the RFP and the responses were included in the council packet under separate cover. To assess the financial feasibility and development risks of the projects, Johnson Gardner, a development and economics consulting firm, completed an analysis of the RFP responses. The resulting memo is included as Attachment G. Summary information from the memo is included in the discussion of each proposal in Attachments A-E. Staff held a public information and input session on June 17, 2008. Information was available on all of the proposals, and representatives were present from each development team to answer questions. More than 50 individuals attended and 18 submitted comments. These comments are included as Attachment F. On June 19, 2008, nine members of the Eugene Redevelopment Advisory Committee (ERAC) and the West Broadway Advisory Committee (WBAC) came together in a joint meeting to review the RFP responses. The combined advisory committees indicated strong support for two of the proposals, Opus NWR Development and WG Development, with a voted preference for the WG Development proposal. The two main issues that emerged were 1) mix of uses and urban form, and 2) feasibility. The committee members indicated that the WG proposal addressed many of the WBAC recommendations from last summer, and they expressed support for the WG mix of uses, including strong support for the open space. (The WBAC recommendations were approved with minor modifications by the URA last fall and a copy was included in the RFP). The advisory committees expressed concerns about the financial feasibility of the WG proposal. Z:\CMO\2008 Council Agendas\M080714\S080714B.doc The advisory committees also expressed support for Opus’s housing use and acknowledged a significant need for student housing and its potential to bring a critical mass of activity to the area. They indicated that the feasibility of the Opus proposal was very positive given market demand and Opus’ readiness to proceed. The major concerns expressed by the committees were related to design and the single use character of the proposal. Specifically, the building design presented in the proposal lacked detail, particularly on the ground floor and in its relationship to the street. The three other RFP responses were not recommended for further consideration at this time. Although a new hotel use downtown is desired, the Canterbury hotel proposal was considered to be too preliminary in its development, and the suburban design character of the building was not viewed as a desired outcome. The community-oriented proposals submitted by Energy Village and Trannovation Station were considered to be desirable projects, but lacked many important details necessary to be considered for selection. Based on the advisory committees’ discussion and staff analysis of the responses, staff requested supplemental information from Opus and WG. Several key issues were addressed in the supplemental information. WG submitted a revised pro forma which included upward adjustments to the lease rate and construction cost assumptions. WG also clarified that the open space would be privately owned and controlled with the potential for public access. They indicated that traditional “public” space would negatively impact the viability of the project. WG indicated that their desire is to complete the entire project in a single phase, but also expressed concerns about absorption rates for new space and indicated that project phasing may need to occur. For example, the first phase could be limited to a quarter block with office and housing, or possibly only two floors of office. The supplemental information provided by Opus indicated that they are working with Pivot Architecture to provide design revisions and additional design details, although the overall scale of the th project would not change. Opus noted that their analysis of the retail potential along 10 Avenue did not support retail uses at this time, but the ground floor would be built to allow for future retail uses. Opus also clarified that they are adhering to a specific timeline and that project delays would jeopardize their desire to have the project construction completed by July 2010. The requests for supplemental information and the responses received by WG and Opus are incorporated in Attachments A and B. Staff has reviewed the information and input received to-date, including the Johnson Gardner memo, the insights from the ERAC/WBAC discussion, and the supplemental information provided by WG and Opus. Staff has determined that both the Opus and WG development teams have significant development experience. WG has successfully completed office development projects in the local area, and Opus has a wide range of completed mixed use and residential projects. Both developers appear to have the financial capacity to deliver their project, and both proposals have the potential to add vitality and activity to the west end of downtown. A matrix evaluating the two proposals based on the development objectives in the RFP is included as Attachment H. The evaluation of the two proposals illustrates significant differences between the proposals with regard to the predominant use envisioned, the public assistance requested, and the overall feasibility of the projects. Opus is proposing a dense residential project with units for 472 students. The proposed housing use is very responsive to the residential preference expressed in the RFP and the housing density supports the policies in the Downtown Plan. This project has a strong potential to stimulate other investments through activity generation and discretionary spending of the students, and could Z:\CMO\2008 Council Agendas\M080714\S080714B.doc also enhance the desired connection between downtown and the University. The project appears to be the most feasible, and its readiness to proceed is very favorable. A market analysis has been completed, which was shown to staff, which strongly supports the financial feasibility of Opus’ proposed investment. Although Opus’ proposed purchase price of $482,360 is well below market value, it is the highest price offered amongst the proposals. It is also important to recognize that their proposed $40 million investment would historically represent the largest single private investment downtown. The most significant concern expressed during the review process was related to the building design presented in the proposal. In response to such comments, Opus and Pivot are working on refining the design. The WG proposal would also add activity to downtown, with a desired mix of uses that addresses the RFP development objectives and the policies in the Downtown Plan. Pacific University is currently located downtown, but an expanded facility, along with other potential offices users, would make a positive contribution to the area. WG’s incorporation of housing above office uses is also responsive to the strong residential preference expressed in the RFP. Although WG has identified a major office tenant and there appears to be adequate demand for rental housing downtown, they have indicated a need for a market analysis to support their investment and that demand may be insufficient to support the entire scope of the project at this time. Additionally, the supplemental information clarified that the open space would be private. The $1 purchase price and the request for additional grant or loan funds would require significant public participation. Again, the WG and Opus proposals both strongly respond to the objectives included in the RFP, although the proposed uses are materially different. There appears to be significant advantages in the feasibility and timeliness of the Opus proposal. The Opus project includes market feasibility, financial feasibility, developer capacity to deliver the project, and a desire and willingness to complete the project in a timely manner. It is anticipated that the selected proposal would enter into an exclusive negotiation period not to exceed 90 days. During this time, project details would be further investigated and negotiated. Negotiations would include the selling price, refinement of design and use details, financing due diligence, project timing, and other terms. The project details would then be brought back to the URA for approval, prior to the signing of a purchase and sale agreement. Additional Background Information th The 10 and Charnelton development site includes the 1/4-block former Sears building property, along th with the 1/8-block surface parking lot on the northwest corner of 10 and Olive. The property was purchased in 1993 for $900,000 (approximately $12/sqft), which included the Sears building and the half-block where the new library now stands. The URA contributed the half-block to the library project in 2004, which represented a land contribution in excess of $1 million at that time. The other th 1/8-block of the surface parking on 10 and Olive is owned by Diamond Parking. In accordance with URA action, the Agency will purchase the property for $290,360 plus exchange of the City-owned th surface lot on 12 and Oak. The Diamond purchase option must be renewed or exercised by July 31, 2008. The renewal cost is $6,000 applicable to the purchase price and would extend the option until January 31, 2009. An appraisal of the 10th and Charnelton development site (not including the Diamond 1/8-block) completed May 10, 2006 indicated a market value of $25 per square foot. An appraisal completed August 1, 2007 on the Diamond property indicated a market value for the 1/8-block lot of $33 per square foot. Using the more recent $33 per square foot valuation, the value estimate for the full half- Z:\CMO\2008 Council Agendas\M080714\S080714B.doc block 10th and Charnelton site is approximately $1,650,000. In 2005, the former Sears building structure was demolished for a total cost of approximately $202,000. th The first RFP for sale and development of the 10 and Charnelton site was issued in 1999. Responses were limited, and the URA deferred review of the responses due to discussions regarding sites for the Federal Courthouse and City Hall. In December 2002, a second RFP was issued. In May 2003, the URA reviewed four responses and selected the Oregon Research Institute (ORI) project. Following ORI’s decision to forgo the purchase and development of the site, the URA provided direction to issue an updated RFP. A RFP was issued in June 2006, with three respondents: Beam Development, TK Partners, and Sockeye Development. In October 2006, the URA selected TK Partners. The TK Partners proposal was put on hold while KWG incorporated that site into their proposal for revitalizing a larger section of West Broadway. In December 2007, the failure of the ballot measure to increase the urban renewal plan spending limit, along with changing market conditions, made the KWG project no longer feasible. In addition, TK Partners decided not to move forward with the previously th proposed project on the 10 and Charnelton site due to concerns about the feasibility of housing. RELATED CITY POLICIES th Future development of the 10 and Charnelton site is consistent with the policies and 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. 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. Relevant Downtown Plan Implementation Strategies include the following: Promote multi-story, mixed-use structures downtown through financial incentives or ? code amendments. Encourage education-related development downtown, such as student housing and ? support services. th In addition, the proposed future development of the 10 and Charnelton site is responsive to the following Growth Management policies: 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. Z:\CMO\2008 Council Agendas\M080714\S080714B.doc 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. AGENCY OPTIONS 1. Direct the Agency Director to a) enter into an exclusive negotiation period not to exceed 90 days with th Opus NWR Development L.L.C. for the sale and development of the 10 and Charnelton development site and b) return to the URA with the terms of the sale and development for approval. 2. Direct the Agency Director to a) enter into an exclusive negotiation period not to exceed 90 days with th one of the other development teams for the sale and development of the 10 and Charnelton development site, and b) return to the URA with terms of the sale and development for approval. 3. Defer selection of a proposal at this time and recommend next steps to the Agency Director. AGENCY DIRECTOR’S RECOMMENDATION Direct the Agency Director to a) enter into an exclusive negotiation period not to exceed 90 days with th Opus NWR Development L.L.C. for the sale and development of the 10 and Charnelton development site and b) return to the URA with the terms of the sale and development for approval. SUGGESTED MOTION Move to direct the Agency Director to 1) enter into an exclusive negotiation period not to exceed 90 th days with Opus NWR Development L.L.C. for the sale and development of the 10 and Charnelton development site, and 2) return to the City Council, acting as the Urban Renewal Agency, with the proposed terms of the sale and development following the negotiation period. ATTACHMENTS A.Opus Northwest Summary B.WG Development Summary C.The Canterbury Group Summary D.Energy Village Summary E.Trannovation Station Summary F.Comments from June 17, 2008, Public Workshop G.Assessment of Development Risks by Johnson Gardner H.Evaluation Matrix of Development Objectives for Opus & WG FOR MORE INFORMATION Staff Contact: Nan Laurence Telephone: 682-5340 Staff E-Mail: nan.laurence@ci.eugene.or.us Z:\CMO\2008 Council Agendas\M080714\S080714B.doc