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HomeMy WebLinkAboutItem A: URA - Review of Responses to the 10th & Charnelton Request for Proposals EURA UGENE RBAN ENEWAL GENCY AIS GENDA TEM UMMARY th Work Session: Review of Responses to the 10 & Charnelton Request for Proposals Meeting Date: October 16, 2006 Agenda Item Number: A Department: Planning and Development Staff Contact: Denny Braud www.eugene-or.gov Contact Telephone Number: 682-5536 ISSUE STATEMENT This item was presented to the City Council/Eugene Urban Renewal Agency at a work session on Wednesday, October 11, 2006. During that meeting, the motion contained herein was made and seconded. Then, a motion to postpone until October16, 2006, was approved. That motion now is on the floor. There is no need to repeat the motion; however, it is provided here for informational purposes. th A Request for Proposals (RFP) was issued in June 2006 for the sale and development of the 10 & Charnelton development site. The Urban Renewal Agency (URA) is being asked to review the responses to the RFP and 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. Three proposals for the purchase and development of the site were submitted by Beam Development, TK Partners, and Sockeye Development. Summaries of the proposals are included in attachments A-C. Copies of the RFP and the responses were included in the council packet under separate cover. On September 28, 2006, the Eugene Redevelopment Advisory Committee (ERAC) reviewed the RFP responses. Because of the complexity and specificity of the development objectives under which the proposals were to be evaluated, staff expanded the ERAC group to include expertise in the areas of sustainability (Josh Proudfoot, Good Company), financing (Erik Riechers, Pacific Continental Bank), and housing development (Jim McCoy, Housing and Community Services Agency). ERAC has recommended that staff move forward with the selection of the TK Partners proposal. Overall responsiveness to the RFP, feasibility, timeliness, development team experience, incorporation of ownership housing, urban design, and subsidy level were all cited as factors in its recommendation. Although the Beam Development and Sockeye Development proposals were also considered to be very positive, ERAC had concerns regarding feasibility and the significant level of subsidy that would likely be required for their proposed projects to move forward. An exclusive negotiation period of 90 days is being recommended for the preferred proposal. During this time, staff would further investigate and negotiate project details. Negotiations would include L:\CMO\2006 Council Agendas\M061016\S0610161-URASpecMeet.doc selling price, further design and use details, financing due diligence, project timing, and other terms that will be brought back to the URA for approval prior to the signing of a purchase and sale agreement. th The 10 & 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 other half of the th surface parking on 10 and Olive is owned by an adjacent private party. The URA purchased the property in 1993. The acquisition cost of $900,000 (approx. $12/sq ft) included the Sears building, and the half-block on which the new library was constructed. 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. th A new appraisal of the 10 & Charnelton development site, completed on May 10, 2006, indicated a market vale of $970,000 ($25/sqft.). 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 & Charnelton site was issued in 1999. Responses were limited, and the URA deferred review of the responses given pending discussion regarding sites for the Federal Courthouse and new City Hall options. 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. State statutes, the Downtown Urban Renewal Plan, and adopted URA procedures govern the disposition of real property held by the URA. URA procedures provide for the City Manager, as the business agent for the URA, to publicly or privately solicit proposals and negotiate with any party for the disposal of real property consistent with the Urban Renewal Plan. Any proposal which is acceptable to the City Manager must then be presented to the council (acting as the URA) for its approval. RELATED CITY POLICIES th Future development of the 10 & Charnelton development site is consistent with the policies and implementation strategies included 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. • Promote multi-story, mixed-use structures downtown through financial incentives or code amendments. th In addition, the proposed future development of the 10 & 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. L:\CMO\2006 Council Agendas\M061016\S0610161-URASpecMeet.doc 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. COUNCIL OPTIONS 1. Direct the Agency Director to enter into a 90-day exclusive negotiation period with TK Partners for th the sale and development of the 10 & Charnelton development site, with the terms of the sale and development to be approved by the URA following the negotiation period. 2. Direct the Agency Director to enter into a 90-day exclusive negotiation period with either Beam th Development or Sockeye Development for the sale and development of the 10 & Charnelton development site, with the terms of the sale and development to be approved by the URA following the negotiation period. 3. Defer selection of a proposal at this time, and recommend next steps to the Agency Director. CITY MANAGER’S RECOMMENDATION The City Manager recommends that the URA direct the Agency Director to enter into a 90-day th exclusive negotiation period with TK Partners for the sale and development of the 10 & Charnelton development site, with the terms of the sale and development to be approved by the URA following the negotiation period. SUGGESTED MOTION Move to direct the Agency Director to enter into a 90-day exclusive negotiation period with TK Partners th for the sale and development of the 10 & Charnelton development site based upon the proposal submitted, and to return to the City Council, acting as the Urban Renewal Agency, with the proposed terms of the sale and development following the negotiation period. (Text in italics in the above paragraph was added at the meeting on October 11, 2006) ATTACHMENTS A. Summary of Beam Development Proposal (previously provided for the October 11, 2006 meeting) B. Summary of TK Partners Proposal (previously provided for the October 11, 2006 meeting) C. Summary of Sockeye Development Proposal (previously provided for the October 11, 2006 meeting) FOR MORE INFORMATION Staff Contact: Denny Braud Telephone: 682-5536 Staff E-Mail: denny.braud@ci.eugene.or.us L:\CMO\2006 Council Agendas\M061016\S0610161-URASpecMeet.doc ATTACHMENT A BEAM DEVELOPMENT Summary of Proposal Development Team Developer: Beam Development Architect: Ankrom Moisan Associated Architects Project Manager: Pinnell Bush Contractor: SD Deacon Development Proposal Development Footprint: Full block Residential: Undisclosed number of ownership condominium units on two quarter blocks Retail: 110,000 sq.ft. Office: 40,000 sq.ft. Hotel: 75-125 rooms Parking: 293 underground spaces Development Team Experience Beam’s most recent developments have been focused on historic building rehabilitation and warehouse and industrial adaptive reuse. Beam’s principal, Brad Malsin, has prior experience developing condominiums in New York. Although there is evidence of relevant project experience, Beam does not have extensive experience with mixed-use new construction of the scale being proposed. Project examples include Eastbank Commerce Center and Olympic Mills Commerce Center. The design architects for the proposed project, Ankrom Moison, have extensive experience designing urban mixed- use projects. Urban Design No architectural design concept was included in the proposal, other than a diagram indicating four quadrants of the full block development over underground parking. Based on this diagram, each quarter block would include a multistory structure, with a pedestrian plaza in the middle, linked by pedestrian access through the alleys. The text states that the design will be sensitive to the context of the surrounding buildings, and reinforce the walkable character of downtown Eugene. Active Uses Beam is proposing a diverse mix of active uses which include ground floor retail, ownership housing, hotel, office, and public space. Significant ground floor retail extends throughout the block. The proposal also anticipates retail activity along the alleys. The proposed hotel use has the potential to bring visitors downtown to activate the streets. Sustainable Development Beam is proposing a high level of LEED certification for the project. Storm water management technologies, renewable energy sources, and wind turbines are cited as potential sustainable building features. L:\CMO\2006 Council Agendas\M061016\S0610161-URASpecMeet.doc Timeliness Beam is anticipating a project completion date of 2009. Tenant commitments, adjacent property acquisition, and financing commitments are all considered to be speculative at this time. Financial Feasibility Market feasibility, cost estimates, and financing commitments appear to be speculative at this time. Beam’s experience completing projects of this scale is limited. Net Financial Cost/Benefit Income: Beam has estimated that the proposed project would result in annual urban renewal tax increment revenue in the amount of $354,000. Further project details would be required to accurately project future tax increment revenue. Cost: Beam is proposing that the URA contribute the $970,000 land value to the project. The proposal also requests City urban renewal financing in the range of $2 - $2.75 million. Repayment of the financing would be based on the financial performance of the development. Beam has also indicated that they would be seeking property tax exemptions under the Multi-Unit Property Tax Exemption (MUPTE) or Vertical Housing Development Zone. Proposal Strengths • Full-block development, density • Desirable hotel use • Maximizes active ground-floor retail uses • Destination quality of the project • Taxable value • Potential to stimulate other investment • Sustainable building features • Includes ownership housing • Reputable design team Proposal Weaknesses • No clear evidence of similar mixed-use project experience • Market feasibility for significant retail uses • Financial feasibility not evident • Financial capacity unclear • Level of subsidy required • Timeliness is questionable L:\CMO\2006 Council Agendas\M061016\S0610161-URASpecMeet.doc ATTACHMENT B TK PARTNERS Summary of Proposal Development Team Developer: TK Partners, LLC (KemperCo, LLC and Innovative Construction Solutions, Inc.) Design Architect: Main Street Architects + Planners, Inc. Project Architect: MCM Architects PC Development Proposal Development Footprint: URA-owned parcels Residential: 106 units of ownership condominiums Retail: 3,575 sq.ft. Parking: 57 underground spaces, 28 embedded spaces Development Team Experience TK Partners (Thomas Kemper and Ronald Skov) have extensive experience in complex multi-unit housing development, including mixed-use, mixed-income rental and condominium ownership housing. They are currently developing a mixed-use, mixed-income housing project (North Main Village) on the former Safeway grocery store site in downtown Milwaukie, Oregon. The $17 million project includes retail, ownership housing, and affordable rental housing. TK Partners also developed Esther Short Commons, a $20 million national award winning mixed-use, mixed-income 106 unit housing project in Vancouver, WA; The Hawthorne, a mixed-use 16-unit condominium project in Portland; and Center Commons, a national award winning $30 million, 288-unit mixed-income housing project in Portland. TK Partners is also in pre-development for a 44-unit mixed-use housing development in downtown Bend, Oregon, and is in the process of developing The Pointe at Bridgeport, a $23 million, 50,000 square foot retail/office development in Tualatin, Oregon. Mainstreet Architects, design architect for the proposed project, specialize in urban planning and design. Doug Nelson, principal in charge of design of the proposed project, graduated from the University of Oregon School of Architecture. Ron Skov, TK Partner principal, also graduated from the University of Oregon School of Architecture. Project architects, MCM Architects, have experience in various forms of multi-family housing and resort development. Urban Design TK Partners has submitted a conceptual design for the proposed project. The design incorporates desirable urban design features including multi-story buildings close to the sidewalks, prominent entries facing public streets, ornamentation such as multiple windows, openings, entries, and overhangs, public space, and structured and embedded parking. Ground floor materials such as glass, stone and brick are proposed. Incorporation of public art is proposed. Use of high quality materials throughout the project will be critical to the overall success of the project design. Active Uses TK Partners is proposing dense ownership housing (120 units per acre). Ground floor housing units are th designed to activate the street. A 3,575 square foot retail use is proposed along 10 Avenue across from L:\CMO\2006 Council Agendas\M061016\S0610161-URASpecMeet.doc th the Library. Additional retail/commercial space, particularly on the corner of 10 Avenue and Olive Street may be possible given initial discussions with TK Partners. A limited amount of public space is proposed. Sustainable Development TK Partners is proposing to incorporate LEED standards. Sun shading with roof overhangs, green roof components, low E windows, insulation exceeding code requirements, central hot water facility, and energy efficient appliances are cited as potential sustainable building features. Timeliness TK Partners is anticipating a project completion date of 2009. Given the developers experience in more complex projects, and their relatively simple financing strategy for this project, it appears that it may be possible for the project to move forward in accordance with the proposed timeline. Financial Feasibility TK Partners is proposing a financing structure which includes 20% equity and conventional construction financing through Bank of America. Equity would be provided by KemperCo -10% and ScanlanKemperBard Company (SKB)-90%. SKB is a major real estate investment banking firm located in Portland and originally co-founded by Thomas Kemper. Although Kemper is no longer a principal, SKB has been a primary source of equity for several of Kemper’s projects. SKB has significant real estate holdings throughout the West Coast. Net Financial Cost/Benefit Income: TK Partners has proposed a purchase price of $192,000. Assuming 10-years of property tax exemption would be available for a majority of the project, urban renewal tax increment revenue from the project would likely be limited to the 3,575 square feet of retail use. Cost: TK Partners is proposing that URA contribute land value of approximately $778,000 to the project. TK Partners has also indicated that they would seek property tax exemptions under the Multi- Unit Property Tax Exemption (MUPTE) or Vertical Housing Development Zone. Proposal Strengths • Developer experience with similar projects • Dense housing use which incorporates ownership and mix of unit types • Desirable urban design features • Timeliness • Financial capacity and feasibility • Potential to stimulate other investment • Subsidy limited to land write-down and tax exemption • Sustainable building features proposed • Overall responsiveness to the RFP objectives Proposal Weaknesses • Demand/marketability of proposed ownership housing is unknown • Quality of design is not fully known at this time L:\CMO\2006 Council Agendas\M061016\S0610161-URASpecMeet.doc ATTACHMENT C SOCKEYE DEVELOPMENT Summary of Proposal Development Team Developer: Sockeye Development, LLC Project Manager: Shiels Obletz Johnsen, Inc. Architect: Fletcher Farr Ayotte, Inc. General Contractor: Howard S. Wright Construction Development Proposal Development Footprint: URA-owned parcels Residential: 144 units of rental housing . 40% (58 units) affordable to persons earning less than 60% median income . 60% (86 units) market rate – including 10 live/work units Retail: 25,500 sq.ft. Parking: 62 underground spaces Development Team Experience Sockeye Development has significant experience developing urban mixed-use projects. Relevant project experience includes: Museum Place Lofts & Townhouses, a $42 million, 140 unit mixed-use, mixed-income rental housing project in downtown Portland which features a Safeway grocery store on the ground level; Hollywood Library/Bookmark Apartments, a $10.2 million, 47-unit mixed-income rental housing project in Portland which features a ground floor branch library and received a Governor’s Livability Award in 2002; St. Francis Apartments, a $15.7 million, 132-unit mixed-use, mixed-income housing project in Portland; The Belmont Dairy and Belmont Dairy Rowhouses, a $16 million, 115-unit mixed-use housing project which features rental and ownership housing and received a Governor’s Livability Award and BEST Innovation Award. Project manager Shiels Obletz Johnsen is a Portland- and Seattle-based firm that specializes in the management of complex urban planning and development projects for public and private clients. They have significant experience managing projects similar to and more complex than the Sockeye proposal. Project architects Fletcher Farr Ayotte has extensive experience working with urban mixed-use projects. Urban Design Sockeye Development has submitted a massing diagram for the proposed project. The design concept incorporates desirable urban design features including multi-story buildings with tall first floors close to the sidewalks, a prominent entry facing 10th Avenue, public space accessed from a pedestrian friendly alley, and structured and embedded parking. The design anticipates the use of brick, large windows, and balconies to articulate the façade. Incorporation of public art is proposed. Active Uses Sockeye Development is proposing dense rental housing (163 units per acre). Ground floor live/work units are expected to activate the street. Significant retail uses (25,500 square feet) are proposed along th 10 Avenue across from the Library. A limited amount of public space is proposed. L:\CMO\2006 Council Agendas\M061016\S0610161-URASpecMeet.doc Sustainable Development Sockeye Development indicates that they will follow LEED principals to establish a program for sustainability. Elements such as recaptured rainwater, permeable paving, Energy Star roof, high efficiency appliances, drought tolerant/native landscaping, low VOC paints and adhesives, recycled content materials, and locally manufactured materials are cited as potential sustainable building features. Timeliness Sockeye Development anticipates a project completion date of 2009. The developers have experience with complex, multi-layered financing strategies. The largest impediment for the project timing is likely to be an identified financing gap estimated at $3.36 million. Financial Feasibility Sockeye Development is proposing a financing structure which includes multi-family housing revenue bonds, 4% low income housing tax credits ($3.9 million in tax credit equity), a $2 million URA loan, and private equity in the amount of $1,575,000. Sockeye has preliminarily projected a $3.36 million project financing gap. Options identified by Sockeye for closing the gap include elimination of the underground parking, reduction in the scale of the project, phasing the project, and other financing sources. Sockeye has had preliminary discussions with FannieMae regarding higher loan-to-value ratios and other strategies to narrow a portion of the projected gap. Net Financial Cost/Benefit Income: Sockeye has proposed a purchase price of $100,000. Assuming that a 10-years of property tax exemption would be available for a majority of the project, urban renewal tax increment revenue from the project would likely be limited to the 25,500 square feet of retail uses (estimated at $70,000 per year.) Cost: Sockeye is proposing that URA contribute approximately $870,000 in land value to the project. Sockeye has also indicated that they would seek a $2 million urban renewal loan from the City, and a property tax exemption under the Multi-Unit Property Tax Exemption (MUPTE) program. Sockeye has also requested a waiver of SDCs. Proposal Strengths • Developer experience with similar projects • Strong project team • Dense housing use which incorporates affordable rents • Desirable urban design features • Financial capacity of developer evidenced by completed projects • Potential to stimulate other investment • Sustainable building features proposed • Overall responsiveness to the RFP objectives Proposal Weaknesses • Financial feasibility (financing gap) • Level of subsidy requested L:\CMO\2006 Council Agendas\M061016\S0610161-URASpecMeet.doc