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HomeMy WebLinkAboutItem A: Terms for WG Development at 10th/CharneltonEURA UGENE RBAN ENEWAL GENCY AIS GENDA TEM UMMARY Work Session: Review of Outline of Terms of Sale and Development of 10th and Charnelton Site Meeting Date: October 22, 2008 Agenda Item Number: A Department: Planning & Development Staff Contact: Nan Laurence www.eugene-or.gov Contact Telephone Number: 682-5340 ISSUE STATEMENT On July 30, 2008, the Urban Renewal Agency (URA) Board selected WG Development as the th preferred proposal and development team for the 10 and Charnelton Development site. The URA directed the Agency Director to enter into exclusive negotiations with WG Development and to return within 90 days with the proposed sale and development terms. The URA also directed the Agency Director to work with Opus NWR Development to explore alternative sites in the downtown area and report back to the URA on the results. BACKGROUND A Request for Proposals (RFP) was issued in March 2008 for the sale and development of the th 10 & Charnelton development site. Five proposals were received by the May 30, 2008, deadline. At a work session on July 14, 2008, staff presented information about the proposals, focusing the presentation on the WG Development and Opus NWR Development proposals. Staff analyzed both proposals in terms of the Development Objectives approved by the URA as part of the RFP. Staff also considered the analysis from financial consultant Johnson Gardner on development risks as well as comments from the Eugene Redevelopment and West Broadway advisory committees. Since the July 30 URA meeting, City staff has worked with WG Development to outline the terms of the sale and development of the site. Staff has also provided assistance to Opus NWR Development in exploring alternative downtown sites for the proposed student housing development. The following sections provide more detail on both of these efforts. WG Development Following URA direction, staff worked closely with Wally Graff and Nathan Philips of WG Development on an outline of the sale and development terms. Both staff and WG Development were in agreement regarding the resulting outline of terms as of Friday, October 10, 2008. Included in these terms were WG Development’s three requested modifications: 1) an extension to the Due Diligence period by 30 days to address project-related issues, such as tenanting and financing; 2) the ability to postpone expenditures for project design and development until after the property has been purchased, and 3) a definition of the commencement of the project as the submission of building permits. Z:\CMO\2008 Council Agendas\M081022\S081022A.doc On Monday, October 13, staff received notification from WG Development that Pacific University, intended as the primary commercial tenant, needed additional time to determine their th needs relative to the 10 and Charnelton project. Subsequently, WG Development requested that the Due Diligence Period be extended; staff agreed to this change. Staff requested that the purchase date of March 31, 2009, be held firm; WG Development agreed to this request. The revised outline of terms is provided as Attachment A; a summary of the key terms is provided below. The letter from Pacific University is included as Attachment B. A memo discussing the changes in the project timeline is provided as Attachment C. Following approval of the outline of terms by the URA, the Agency and WG Development will enter into a formal Purchase and Sale Agreement (PSA). Key Terms (as of October 13, 2008) Purchase Price ? $500,000 cash. Note: WG Development proposed paying $1,000,000 in project-related costs; a portion of this money has been allocated towards the purchase price and the remainder towards System Development Charges (SDCs). Deposit ? WG Development will provide a $50,000 deposit as earnest money. The earnest money becomes non-refundable at the end of the Due Diligence Period. Due Diligence Period ? The Due Diligence Period runs from the time the PSA is signed through March 30, 2009, a period of approximately 120 days. During this time, WG Development has the opportunity to review property information and address project-related issues. Note: The PSA needs to be signed within 30 days of URA approval of terms. Alley vacation ? Prior to the sale closing, the City will process an alley vacation application to vacate the mid- block, north-south alley. Note: the portion of the alley to be vacated is shown on Attachment D. Multi-unit Property Tax Exemption (MUPTE) ? If requested, the City will process an application for a MUPTE. Bureau of Labor and Industry (BOLI) Determination ? The City will submit a request to BOLI to determine if the proposed project is subject to the Prevailing Wage Rate law. Note: If the project is subject to this law, labor costs for the project could increase significantly. As a result, either the Agency or WG Development may terminate or renegotiate the terms of the PSA. Timing ? The sale closing will occur no later than March 31, 2009. Building permits for the project must be submitted by November 30, 2009. The URA maintains the right to extend these timelines. Opus NWR Development Following URA direction regarding Opus NWR Development, staff identified alternative downtown sites for the proposed student housing development. The sites included the north half Z:\CMO\2008 Council Agendas\M081022\S081022A.doc th of the 10 and Charnelton block, in addition to publicly and privately-owned properties downtown. Staff met with John Bartel, Vice President, Opus NWR Development, and Scott Duckett, Campus Advantage, to go over the costs and possible development scenarios for the identified sites. Mr. Bartel and Mr. Duckett also investigated a number of sites independently. th Mr. Bartel indicated in a letter dated October 3, 2008, that the 10 and Charnelton site is the only suitable site for the proposed student housing development, based on design considerations, site location, availability and cost. The letter from Mr. Bartel is included as Attachment E. RELATED CITY POLICIES th Future development of the 10 & 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. 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 & 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. 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. Z:\CMO\2008 Council Agendas\M081022\S081022A.doc AGENCY OPTIONS 1. Approve the Outline of Terms and direct the Agency Director to enter into a Purchase and th Sale Agreement for the sale and development of the 10 & Charnelton development site. 2. Modify the Outline of Terms and direct the Agency Director to enter into a Purchase and th Sale Agreement for the sale and development of the 10 & Charnelton development site. th 3. Provide other direction to the Agency Director regarding the sale and development of the 10 and Charnelton development site. AGENCY DIRECTOR’S RECOMMENDATION The Agency Director recommends approving the Outline of Terms and directing the Agency th Director to enter into a Purchase and Sale Agreement for the sale and development of the 10 & Charnelton development site. SUGGESTED MOTION Move to direct the Agency Director to enter into a Purchase and Sale Agreement for the sale and th development of the 10 & Charnelton development site consistent with the outline of terms included as Attachment A. ATTACHMENTS A.Outline of Terms of Development dated October 13, 2008 B.Unsigned Draft Letter from Darlene P. Morgan, Pacific University dated October 10, 2008 C.Memo from staff regarding timeline for WG project dated October 13, 2008 D.Alley Vacation Map E.Letter from John Bartel, Vice President, Opus NWR Development dated October 3, 2008 FOR MORE INFORMATION Staff Contact: Nan Laurence Telephone: 682-5340 Staff E-Mail: nan.laurence@ci.eugene.or.us Z:\CMO\2008 Council Agendas\M081022\S081022A.doc ATTACHMENT A Outline of Terms of Purchase and Sale Agreement th 10 and Charnelton Development Site October 13, 2008 The Purchase and Sale Agreement is between the Urban Renewal Agency (“Seller”) and WG Development (“Buyer”) for the purposes of the redevelopment of the 10th and Charnelton Site. The Purchase and Sale Agreement shall be in substantial conformity with the following terms: th 1. Property : Approximately 1.2 acres of land located at the northeast corner of the intersection of West 10 Avenue and Charnelton Street in Eugene, Oregon (Map 17 03 31 13 tax lots 6600, 5100, 5200 and 5300). 2. Development Purpose : The purpose of the sale of the Property is for Buyer to develop a five story mixed-use project (“Project”) on the entire Property in substantial conformity with the overall concept design submitted by Buyer to City staff in response to the Request for Proposals and requests for supplemental information. WG Development commits to working with City staff on the final design. The overall design concept is summarized as follows: The development consists of a mix of commercial and residential uses, with the ground floor and 2nd floor for office or other commercial use and the remaining three floors for residential use. The structure does not exceed 80 feet in height, excluding any mechanical equipment, which will be appropriately screened. Approximately 80 residential units are included. The configuration of the development proposal creates a plaza of approximately 6,000 square feet facing the Eugene Public Library Main entries into the development are located facing the Plaza and along Olive Street. Access to parking is along the east west alley. The plaza is privately owned, but generally open for use by the public during regular business hours. The structure includes a combination of brick, cementitious materials, and glass, with a high percentage of glass on the first floor. A pedestrian walkway provides a privately-owned connection between 10th Avenue and the north south alley to the north of the property. The overall development site includes sidewalks with a minimum width of 15’ with enhanced paving and street trees. The structures are set back from the east west alley to allow improvements to the development site including street trees and a paved pedestrian path. Approximately 65 parking spaces are provided, including 44 underground spaces and 21 structured spaces. 3. Purchase Price : $500,000 cash. 4. Project Related Fees: The City commits to payments for building and related permit fees. Buyer commits to payments for System Development Charges. 5. Purchase and Sale Agreement : Within 30 days following approval of terms by Seller, Buyer and Seller shall enter into a formal Purchase and Sale Agreement (PSA). 6. Deposit : Upon the execution of the PSA, Buyer shall deposit into escrow Earnest Money in the amount of $50,000. The Earnest Money shall be cash or a promissory note secured by agreed-upon collateral. Once the Due Diligence Period has expired, the Earnest Money shall become nonrefundable. Earnest Money will be credited toward the Purchase Price. 7. Due Diligence Period : Upon execution of the PSA for a period of time up to and including March 30, 2008, Buyer shall have a Due Diligence Period in which to review Property Information provided by the Seller, perform additional environmental investigation, and address Project-related issues. 6. Environmental Condition : Upon execution of the PSA, Seller shall deliver to Buyer all information in Seller’s possession relating to the condition of the Property. Such Property Information shall include, but not be limited to, environmental reports, soils reports, and topographical and boundary surveys. The Seller has available Phase II Environmental Assessments which do not indicate environmental trespass onto the site. The history of the site indicates that it was used as the Sears Building; a Masonic Temple; and a used office furniture and equipment store until demolition of the former Sears building in 2005. No other occupancy of concern has taken place of which the Seller is aware. During the Due Diligence Period, Buyer will be able to perform additional environmental investigation to satisfy itself of the environmental condition of the property, including any desired on-site testing. The additional investigations must be scheduled with the Seller and the results provided to the Seller for review. Based on the information provided in the environmental assessment, Buyer may either move forward with the purchase of the site or rescind the offer to purchase the site prior to the expiration of the Due Diligence Period. Buyer will also have the option to negotiate with the City regarding a remedy for specific site clean-up costs if contamination is identified. 7. Alley vacation : Prior to the sale closing, the City shall process an alley vacation application to vacate the mid-block, north-south alley in a manner sufficient to allow development of the Property. 8. Multi-unit Property Tax Exemption (MUPTE) : Prior to the sale closing, if requested by Buyer, the City shall process an application for a MUPTE to Buyer for the Development Purpose, or provide assistance with the application for the Vertical Housing Development Zone tax exemption with Oregon Housing and Community Services. 9. Condition of Title : Seller shall deliver the Property to Buyer with clear title free of any and all encumbrances and exceptions except those as may have been approved by Buyer at its sole discretion. Seller, at Seller’s cost, shall provide Buyer with ALTA form of owner’s policy of title insurance in the face amount of the Purchase Price insuring clear title in Buyer’s name subject only to the approved exceptions. 10. Bureau of Labor and Industry (BOLI) Determination : Within 30 days of the signing of the PSA, Seller shall submit a request to determine if the Project is subject to the Prevailing Wage Rate law. If the Project is determined to be subject to the Prevailing Wage Rate law, either Seller or Buyer may terminate or renegotiate the terms of the Purchase and Sale Agreement. 11. Prevailing Wage Liability : If Buyer secures financing or undertakes other actions relative to the Project, and these actions are determined to trigger federal or state prevailing wage standards or in any way cause the Project to be considered a public work, Buyer is liable for any increase in costs of wages or any liquidated damages. 12. Timing : The sale closing shall occur no later than March 31, 2009. Building permits for the Project shall be submitted by November 30, 2009. Construction of the entire half-block Project shall begin within 30 days of approval for building permits. The City shall retain the right to repurchase the Property based on failure to adhere to these timelines or to extend the timelines. 13. Parking : The City of Eugene has an existing bulk purchase parking permit program for advanced volume permit sales. There is capacity available for WG Development to purchase permits for approximately 120 structured parking spaces. Bulk purchase permits are offered at eighty percent of face value or seventy percent of face value if tenants maintain an approved employee alternative transportation mode program. ATTACHMENT B October 10, 2008 Mr. Wally Graff W&G Companies 541 Willamette St., Ste. 106 Eugene, OR 97401 Dear Wally, In response to our discussion this morning, this letter is to confirm our continued th interest in the 10 and Charnelton project in Eugene and our relocation to the proposed site. It is evident due to the economic situation that it would be difficult for Pacific University to make a commitment until we see some recovery and confidence in the market. As you know, we are a tuition-dependent organization and, while we look forward to our continued growth in education and new healthcare programs in Eugene, it will take some time for us to feel confident that our students and their families are not at risk for their commitments and have the availability to continue their financial planning and access to student loans. We appreciate our continued work together on this project and ask that Pacific be allowed up to six months to make the final decision. As we discussed, it is a very difficult time to look at financing until we see improvement in the global economics and confidence in the future of our financial security. Again, we appreciate the work that has been done and ask that you continue working with us as we all work through this very volatile time. Sincerely, Darlene P. Morgan VP for Finance & Administration ATTACHMENT C Planning & Development Community Development City of Eugene th 99 W. 10 Avenue M Eugene, Oregon 97401 EMORANDUM (541) 682-5443 (541) 682-5572 FAX www.eugene-or.gov Date: October 13, 2007 To: Mayor Piercy and City Council From: Nan Laurence, 682-5340 Community Development Planner,Community Development Division th Subject: TIMING FOR WG PROJECT AT 10 AND CHARNELTON SITE Since the proposal submittal by WG Development (WG) was selected by the Urban Renewal Agency Board (URA) in July 2008, the timeline for the project has been extended. The purpose of this memo is to highlight and explain the changes in the project timeline. The original timeline indicated project selection at the end of July and occupancy 13 months later, in September 2010. The revised timeline has been extended by approximately 10 months, for occupancy in July 2011. The primary factors are time needed to negotiate and sign the Purchase and Sale Agreement (PSA), the addition of a Due Diligence Period, and more time to complete design and construction documents. WG had originally assumed that a PSA would be signed within 30 days. However, direction from the URA provided 90 days for staff to return with the outline of terms of the PSA. In the draft outline of terms, staff included a Due Diligence Period of 60 days for WG to inspect the property and resolve any environmental issues, with the understanding that the earnest money would be refundable during this period. At the request of WG, staff extended the Due Diligence Period to 90 days and broadened the issues to include financing, tenanting, and other project related issues. Staff also agreed to new assumptions from WG regarding the time required for design and construction documents and expanded the time for this component of the project by 60 days. As of the date of this memo, additional factors have come to light which further affect the project timeline, although not the purchase deadline of March 31, 2009. Based on a letter to WG and a follow-up conversation with City staff, Pacific University maintains their commitment as the primary commercial tenant in the project. However, the University requires additional time to determine short term as well as long term square footage requirements in the project, and to resolve financing issues due to the current economic situation. The Due Diligence Period has, therefore, been extended to March 30, 2009, approximately 120 days from the date the PSA is signed; the end of this period now corresponds with the March 31, 2009 deadline to purchase the property. Please contact me at 682-5340 or via e-mail (nan.laurence@ci.eugene.or.us) if you have questions or need additional information. ATTACHMENT D