Title
Subject: Forest City Residential West, Inc.
From: Community and Economic Development Agency
Recommendation: Adopt an Agency Resolution authorizing the Agency Administrator to negotiate and execute a second amendment to the Exclusive Negotiating Agreement between the Redevelopment Agency and Forest City Residential West, Inc. regarding development of the Uptown Project in downtown Oakland extending the Exclusive Negotiating Agreement for an additional term of one-hundred and eighty (180) days
Body
RE: RESOLUTION AUTHORIZING THE AGENCY ADMINSTRATOR
TO NEGOTIATE AND EXECUTE A SECOND AMENDMENT TO
THE EXCLUSIVE NEGOTIATING AGREEMENT BETWEEN
THE REDEVELOPMENT AGENCY AND FOREST CITY
RESIDENTIAL WEST, INC. REGARDING DEVELOPMENT OF
THE UPTOWN PROJECT IN DOWNTOWN OAKLAND
EXTENDING THE EXCLUSIVE NEGOTIATING AGREEMENT
FOR AN ADDITIONAL TERM OF ONE HUNDRED AND EIGHTY
(180) DAYS
SUMMARY
This report recommends authorization of a second amendment to an Exclusive
Negotiating Agreement (ENA) between the Oakland Redevelopment Agency (Agency)
and Forest City Residential West, Inc. (Forest City). The proposed amendment will
extend the ENA for an additional term of one hundred and eighty (180) days to allow
completion and certification of documentation required pursuant to the California
Environmental Quality Act (CEQA), and to provide sufficient time to schedule a public
hearing by the Agency Board to consider whether to approve a disposition and
development agreement (DDA) between the Agency and Uptown Partners, LLC,
(Uptown Partners) for the development of a mixed-use project (the "Uptown Projecf') in
the Uptown Area.
In addition, this report provides an updated overview of the proposed business terms
between the Agency and Uptown Partners, which will be incorporated into the DDA for
the Uptown Project and brought to the Agency Board following action on the Final
Environmental Impact Report (EIR). This report also provides an update on various
project-related activities and issues.
This report does not ask for Agency approval of the DDA or the proposed business terms.
Rather, it is intended as an opportunity for the Council to make general comments on any
of the business terms or the project, without binding the Council to any of the proposed
business terms or the project.
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All required steps under the California Environmental Quality Act (CEQA) project
approval process must be completed before the Agency can consider whether to approve
a DDA or any business terms. It is anticipated that final approval of the DDA will be
presented for Agency consideration in January of 2004.
In order to bring in an equity investor for the development of the Uptown Project, Forest
City will form Uptown Partners, a limited liability company, with California Urban
Investment Partners (CUIP). Forest City has committed to develop at least 770 rental
housing units in the area generally bounded by Thomas L. Berkley Way (20'h Street) on
the north, Telegraph Avenue on the east, I g1h Street on the south and San Pablo Avenue
on the west. (collectively referred to as the "Project Area", as identified on Exhibit A).
The Fox Theater, which is located to the cast of Parcel 6, is not part of the Project Area.
Twenty percent of the units will be affordable to households earning up to 50 percent of
area median income (AMI).
Furthermore, Forest City will attempt to recruit an associate developer to construct a
high-rise condominium tower with approximately 270 units of market rate housing in the
Project Area. Lastly, Forest City is pursuing development of a student housing project
including 1,000 beds (which equated to approximately 365 residential units), and up to 50
units of faculty housing along the western side of Telegraph Avenue between Thomas L.
Berkley Way (20'h Street) and 21" Street. This project is not covered under the ENA
between the Agency and Forest City. However, the student housing is being analyzed in
the EIR and Forest City's architectural team is preparing preliminary designs for the
building.
FISCAL IMPACT
This proposed legislation does not commit the Redevelopment Agency to any
expenditure of funds.
BACKGROUND
On July 23, 2002, the Agency approved Resolution 02-57 C.M.S., authorizing the
Agency Administrator to enter into an ENA with Forest City, which was executed on
August 7, 2002. During the FINA period, which is running for a term of one year and
three months, the Agency and Forest City are evaluating the design and iinancial
feasibility of a mixed-use project in the Project Area and negotiating the business temis
for the project, which will be incorporated into a DDA between the Agency and Uptown
Partners. On December 17, 2002, the Agency authorized the use of the preliminary
design plan for the Uptown Project only for the purpose of public outreach under the
CEQA process. A Notice of Preparation of Environmental Impact Report (EIR) for the
Uptown Project was issued on February 26, 2003. On March 12, 2003, Forest City
conducted a community workshop to present the preliminary project design and to solicit
comments from the public. On March 19, 2003, the Oakland Planning Commission held
a scoping session public hearing to receive comments about the content of the EIR. On
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May 6, 2003, the Council reviewed and accepted a non-binding informational report on
the proposed business terms between the Agency and Uptown Partners (the new limited
liability company that will be established by Forest City for the development of the
Uptown Project), and the Agency's preliminary financing plan for the project. On June
30, 2003, the Agency and Forest City, pursuant to Section 1.5 (a)(i) of the ENA, executed
a first amendment to the ENA providing for a 90-day extension of the ENA term because
there have been unavoidable delays in completing and certifying documentation required
pursuant to CEQA. The ENA will expire on November 4, 2003.
PROJECT DESCRIPTION
Forest City's development proposal for the Project Area includes the following
highlights:
a A transit-oriented development of at least 770 rental apartments;
0 20 percent (154 units) of the 770 units will be affordable to households earning
50% or less of the AMI for a period of 55 years;
0 Five percent (38 units) of the 770 units will be affordable to households earning
incomes not exceeding 120 percent of AM[ for a period of 55 years;
0 Five percent (39 units) of the 770 units will have 3 bedrooms, proportionately
distributed between affordable and market rents;
6 At least 14,500 square feet of neighborhood-serving retail along Telegraph
Avenue, which will be integrated Mth the Uptown Retail and Entertainment
District;
0 A 25,000 square foot public park, to be owned by the City of Oakland, that
borders on Thomas L. Berkley Way, which will be paid for by the Agency and
maintained by the developer at their expense;
0 Uptown Partners will be granted an option, to run for three (3) years from the date
of execution of the DDA, to purchase from the Agency at fair market value a
portion of the property behind the Fox Theater and start construction on a 270-
unit market-rate condominium lower along San Pablo Avenue. Uptown Partners
will attempt to recruit an associate developer for this project component.
KEYIMPACTS
ENA Extension
The ENA between the Agency and Forest City will expire on November 4, 2003. The
City of Oakland, as Lead Agency for the project, will not complete the Environmental
Impact Report (EIR) for the Uptown Project until December of 2003. The City issued the
Notice of Preparation of an EIR for the Uptown Project on February 26, 2003. It is
anticipated that the draft EIR will be available for public review in September of 2003.
The Final EIR will not be ready for certification by the Planning Commission until
December 2003, with Agency Board consideration whether to approve a DDA with
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Uptown Partners following in late January of 2004. As a result, the current ENA term is
insufficient and must be extended to conform to the EIR and DDA approval schedule.
Staff's recommendation for a 180-day extension of the ENA term should provide
adequate time to obtain all necessary approvals required under CEQA and redevelopment
law, to complete DDA negotiations and to schedule a public hearing by the Agency's
governing board to consider approval of the DDA. The proposed amendment does not
allow any additional 90 day extensions that could be granted under the authority of the
Agency Administrator in the event of additional unavoidable delays. Any such extension
will be subject to Agency Board approval.
The East Bay Housing Organization (EBHO) Proposal
In April of 2003, EBHO and the Coalition for Workforce Housing submitted a concept
proposal for a 100 percent affordable housing project which would be built on a portion
of Parcel 2 and all of Parcel 6 (see site map on Exhibit A) in the Project Area. These
parcels are currently part of Forest City's project. EBHO prepared this project variant to
demonstrate how Forest City could provide more affordable units, achieve a wider range
of housing affordability, develop a larger number of family-sized units (3 and 4 bedroom
units) and replace the 34 Single Resident Occupancy (SRO) units of the Westerner Hotel.
Specifically, EBHO's proposal called for the construction of 225 housing units affordable
to households eaming between 20 and 60 percent of AMI that included 77 units with 3
and 4 bedrooms. The proposal also aimed to provide replacement units for the 34 SRO
units in the Westerner Hotel located at 1920 and 1954 San Pablo Avenue, which will be
demolished during the implementation of the Uptown Project. EBHO put forward a
financing plan that relies on a variety of funding sources and which is only achievable by
separating the affordable housing units from the market rate units in the Project Area. As
part of the financing plan, EBHO would require approximately $26,350 per unit in direct
gap financing from the Agency. EBHO would also rely on the Agency to provide the
necessary land, hazardous materials remediation, off-site and street improvements, as
well as a proportional share toward the costs of the public park, area master planning
effort, and EIR. EBHO further suggested that Forest City could modify the design and
financing structure of its Uptown Project to achieve some or all of the objectives
proposed by EBHO.
In response to direction from the City Council regarding EBHO's proposal, Agency staff
carefully reviewed EBHO's proposal and discussed its implications with Forest City.
Staff and Forest City agree that the Uptown Area represents a pioneering location for a
dense urban in-fill multifamily housing project. The Agency's redevelopment strategy
for the Uptown Area is to invest significant Agency funding into one large and focused
mixed-income development to stimulate further private investment in the surrounding
area. The public and private investment required to make this first large project in the
area economically viable is considerable and bears significant risks. Therefore, it is
critical to launch a project that is substantial enough to transform the existing physical
conditions in, as well as the public perception of the Project Area. Forest City's proposed
project, if successful, would achieve the desired impact on the area. Forest City has
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successfully developed similar large mixed-income projects in other cities and does not
feet confident that a different financing structure and tenant base, as well as a significant
reduction in the project size as proposed by EBHO would replicate their other
accomplishments with this type of development. As a result, Forest City would not agree
to changing the design or financing structure for their project, nor would they consent to
relinquishing a substantial portion of land in the Project Area for a separate affordable
housing development. Forest City contends that such steps would significantly reduce
the critical mass of their proposed mixed-income project and pose unacceptable
marketing and financial risks to the developer.
Nevertheless, in an effort to address the concerns of the City Council, Forest City was
prepared to accept a recommendation to the Council by Agency staff to set aside a
portion of the land (approximately .67 acres) behind the Fox Theater (Parcel 6) for the
development of a 100 percent affordable family housing project with up to 70 units (the
"Affordable Housing Project"), if EBHO and the Coalition for Workforce Housing were
to agree to such a compromise. As part of the proposal, Forest City would act as the
Master Developer of Parcel 6 and, together with the Agencv, issue a Request for
Proposals for the development of the site. Selection of the developer of the Affordable
Housing Project would be subject to approval by Forest City and the Agency. Forest City
would also establish guidelines to ensure that the Affordable Housing Project design is
compatible with, and of the same finish quality as Forest City's adjacent multi-farnily
housing development and that appropriate social services are provided. The project
design and program elements would require approval by Forest City and the
Redevelopment Agency. Forest City was also prepared to forego the gap financing
associated with the development of Parcel 6, which is a part of the Agency's total direct
funding assistance to Forest City's project ($1.4 million). In addition, the Agency would
be responsible for the costs of land, off-site improvements, hazardous materials
abatement, a proportional share of the public park to be developed along Thomas L.
Berkley Way and the street improvements to be made in the Project Area.
After a presentation of the above scenario to EBHO and its coalition partners. its
representatives raised issues concerning the possibility of expanding the number of three-
bedroom affordable units in the Forest City Project and reserving some of the market rate
units for Section 8 tenants in the Forest City project. Moreover, EBHO was concerned
that Parcel 6 might be inadequate to accommodate 70 units and that a higher subsidy may
be needed as the economies of scale achievable with their original 225-unit proposal
would be diminished. EBHO has not provided a project feasibility analysis to validate
this position. At a second meeting and in subsequent conversations, EBHO clarified that
they wish to have added to the Forest City project the following two features in addition
to the Affordable Housing Project:
1. An additional seven three-bedroom units within the 20% affordable housing
portion of the Forest City Project.
2. Increase the affordability level of 60 units within the 20% affordable housing
portion of the Forest City project by using the project-based Section 8 program.
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Forest City will not agree to these requests because they do not want to use the project-
based Section 8 program as part of their financing structure for the project. Moreover,
Forest City is required by law to accept Section 8 certificate holders. Since EBHO and
its coalition partners do not support the Affordable Housing Project without further
consideration of the two issues outlined above, Forest City is not willing to proceed with
the Affordable Housing Project alternative at this time.
The Ground Lease
As part of the proposed business terms for the Uptown Project, the Agency will enter into
a ground lease with Uptown Partners for a terin of 66 years, with one 33-year extension
option. The Agency's land will be [eased in phases. The first phase will be leased upon
Uptown Partner's receipt of tax-exempt multi-family housing revenue bond financing.
The developer will acquire the land in subsequent phases upon 50% occupancy of the
previous phase, or three years from lease of the previous phase, whichever occurs first,
and other conditions to be negotiated as part of the DDA. Uptown Partners also has the
option to acquire the Agency-owned properties during the lease term. The Agency and
Uptown Partners are still negotiating the terms for the option to purchase the Agency-
owned properties.
Hazardous Materials
Since 1991, the Agency has conducted groundwater monitoring investigations in the
Project Area. Elevated concentrations of chlorinated solvents have been detected in
certain samples of shallow groundwater, especially along the northwestern portion of the
Project Area. The source of the contamination in these locations is unknown, but appears
to be inactive and located outside of the Project Area. The most recent groundwater
analysis in the area, dated October of 2002, indicates that while contaminants are still at
detectable levels, concentrations may be slowly decreasing due to natural attenuation
processes and the absence of an on-going, primary source. Uptown Partners have
requested indemnification from the Agency against all claims arising out of the
groundwater contamination. Agency staff, with the assistance of the City Attorney's
Office, is still evaluating the limitations and conditions on any indemnity for the
groundwater contamination, if such indemnity is recommended for approval by the
Agency's governing board at the time of DDA authorization. The following facts are
being considered in these deliberations:
• Depth of groundwater levels in the Project Area ranges from 15 to 25 feet.
Uptown Partners proposes to construct underground parking that will likely not
disturb the groundwater and therefore obviate the need for remediation. although
certain precautions to protect workers, the community and the environment will
be in place in the event of excavation or dewatering in the Project Area;
• Forest City will employ all necessary construction techniques, such as the
installation of a vapor barrier underneath the garage foundation, to avoid
disturbance of any contamination; P7
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• The Agency will continue to monitor groundwater contamination;
• A 2001 risk assessment for the Project Area indicates that residual concentrations
of contaminants are below residential standards for vapor inhalation scenarios;
and
• Forest City is exploring insurance policies that would limit any liability exposure.
Proeect Desian
Forest City and its team are making great progress in arriving at a project design that
combines architectural variety for the buildings, while creating a pedestrian-oriented
streetscape that establishes the Project Area and its surroundings as a unique district in
the downtown. Generally, Forest City and its design team would like to construct several
five-story structures atop parking podiums which would be approximately 65 feet in
height on each block. Buildings will include different unit types, such as townhouses,
live-work units and studios, one, two and three bedroom apartments. The buildings on
each block will have a different design and fagade, while common streetscape elements
such as paving materials, lighting and landscaping unify the character and identity of the
Uptown Project. Buildings will be linked to their surroundings with narrow streets, small
front yards and front porches so that a residential block feels like a small and unique
neighborhood within a larger district. The design approach of Forest City's team is
motivated by the "New Urbanist" understanding that it is important to create sustainable
urban communities that are diverse, mixed-use, and pedestrian friendly. Hence. the
project design emphasizes the development of a neighborhood that provides a range of
housing types near jobs, recreation, and transit. The Planning Commission will review
and comment on the proposed design in November. Agency staff would like to
incorporate mutually agreed-upon design requirements into the DDA.
On May 6, 2003, the Council reviewed an inforniational report on the proposed business
terms between the Agency and Uptown Partners, which included a discussion of the
financing plan for the project. The following section will provide an update on the
Agency's financing plan for the project.
As illustrated in Table I below, the Agency will provide funding assistance to Uptown
Partners in two major categories: (1) site assembly and infrastructure development costs;
and (2) development gap financing. Agency costs in the first category total $31.2
million. The second category represents the monies required to fill the financial gap
attributable to the $170.0 million project development cost. These monies total
approximately $28.3 million, and are referred to as development gap financing. Gap
financing will be provided in two ways, property tax increment abatement for the
remaining term of the Central District Redevelopment Project Area, if necessary, and a
lump sum cash payment that will be made in at least two disbursements as the properties
are leased by Uptown Partners.
The Agency's total project contribution is limited to $59.5 million. After Uptown
Partners completes its due diligence and decides to proceed with the project, Uptown
Partners will be responsible for any cost overruns in excess of the Agency's contribution.
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In addition, any cost savings during project construction will accrue to the Agency in the
form of a reduction in the Agency's development gap financing.
The table below shows that financing occurs in three phases. Phase I is funded by: (1)
the estimated value of currently owned property; (2) funds in the FY 01-03 ORA Capital
Budget; and (3) Series 2003 bond proceeds. Phase 11 funding is proposed to be generated
from a combination of land sale proceeds, bond-swap proceeds, and parking revenue
bonds. Phase III financing utilizes rebates of property tax increment.
Table I
Agency/City Fundi g Sources (in million)
Phase I Phase 11 Phase III
Financing Financing Financing
NPV of Projected
Agency Estimated Tax See Generated Tax
Agency/City Budget Land Increment Discussion Increment/Gross Total
Funding Uses FY 03-05 Value Bonds Below Receipts Tax Uses
Completed Site
Assembly --- 5.3 --- 5.3
Future Site Assembly 3.1 --- 13.1 --- 16.2
Hazardous Materials
Abatement --- --- 3.0 --- 3.0
Off-sites: Streets,
Curbs, Gutters, etc. --- --- 5.0 .7 $5.7
Public Park --- --- --- 1.0 --- $1.0
Development Gap
Financing - Property
Tax Increment
Abatement 13.1 $13.1
Development Ga
Financing 15.2 --- $15.2
Total Sources $3.1 S5.3 $21.1 $16.9 $13.1
Phase I Financiny, - Land Assembl
Land in the Project Area currently owned by the Agency totals S5.3) million in estimated
value. The Fiscal Year 03-05 capital budget includes $3.1 million for land assemblage in
the Project Area. The Series 2003 bond issuance provides an additional $21.1 million to
the Agency's Fiscal Year 2003-05 budget for the Uptown Project. These funds are
needed for land assembly, site clearance, remediation, residential and business relocation,
and construction of off-site improvements, such as utilities, sidewalks, etc. However, the
Agency has temporarily used $7.0 million of these funds to pay to the City of Oakland
for the City Center T-10 site, which is designated for purchase by Camden USA, Inc. for
thedevelopmentofaresidentialproject. IfthesaleoftheT-]OpropertytoCamdenUSA
is delayed. funds needed for the Uptown project may not be available in Fiscal Year
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2004-05. Furthermore, the Agency has received authorization from the City Council to
repurchase the vacant Key Systems building and the adjacent vacant parcel from Arnin-
Broadway LLC for an as yet undetermined amount. The funding required for the
purchase will also be taken from the Uptown Project's Fiscal Year 2003-05 budget and
returned to this project once the resale of the properties to a developer has been
completed. If a sale to a developer is delayed, funds needed for the Uptown project may
not be available in Fiscal Year 2004-05.
Phase 11 Financing - Development Gap Financing Lumn Sum PaVinent
Most of Phase 11 financing is needed for development gap financing as shown in Table 1.
This would consist of at least two lump-suin payments, with payments being made at the
commencement of each of the project construction phases. The anticipated financing
sources are shown in Table 2. Both the sale of Preservation Park and the issuance of a
Parking Revenue bond will require separate Council actions.
Table 2
Source: Amount
Sale of Preservation Park $6.5 million
Bond Swap Proceeds $3.9 million
Parking Revenue Bond $6.5 million
Total S16.9 million
The finance Committee has reviewed various options for increasing revenues from City
and Agency-owned parking facilities. Under the above scenario, debt service from
parking revenues would require approximately $500,000 (A parking revenue bond for a
term of 30 years with a rate of 6.5%) in annual payments. With planned rate increases,
and parking meter staff cost reassignments to meter revenue, there will be sufficient
funding remaining for transportation engineering salaries and overhead. The City
Council has made a series of decisions to implement Phase 11 Financing including: 1)
utilization of the "bond swap" proceeds, as authorized by the City Council on February
25, 2003; and 2) re-activation of the Parking Authority as authorized by the Council on
June 24, 2003. In addition, the City Council will have to authorize 1) the sale of
Preservation Park, and 2) the issuance of parking revenue bonds.
The Agency issued a RFP for the sale of Preservation Park in July. It is anticipated that
staff will request authorization for the sale of the Preservation Park in January of 2004.
Any authorization for the sale of Preservation Park or issuance of parking revenue bonds
could be made contingent upon entering into a DDA with Uptown Partners.
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Phase III Financing-1 @Develo @ment Fina@ncinGa @Pament @Stream
The proposed business terms establish that the Agency will return property tax increment
generated by the project to the developer to provide Uptown Partners with extra revenues
for covering debt service on up to $13.1 million in additional permanent financing.
Without this property tax increment abatement, which will be in effect until 2019, the
additional debt service could not be supported by project revenues and the project would
be financially infeasible. Hence, the net present value of the property tax abatement over
time would total approximately $I 3.1 million, although this amount is subject to the final
assessed value of the project by Alameda County's tax assessor's office, which
determines the amount of property taxes to be paid by the developer.
A copy of the proposed business deal is attached to this report as Exhibit B.
SUSTAINABLE OPPORTUNITIES
Economic
This redevelopment infill project will take blighted, underutilized and contaminated sites
and turn them into economically productive use by building a large-scale housing and
retail project. The development of over 1,000 housing units in the Uptown Area should
attract over 2,000 new residents to downtown Oakland with corresponding disposable
income to help revitalize underutilized retail sites and stimulate job creation through
increased demand for local services and shopping opportunities. A local real estate and
urban economics consultant estimated that these new residents will generate up to $19
million in potential direct spending, which will support up to 48,000 square feet of new
commercial and retail space and create more than I IO new jobs, if Oakland captures all
of this spending. Even if Oakland only captures 50 percent of the estimated direct
spending or $9.5 million, it would still result in 24,000 square feet of new retail space and
55 newjobs.
Environmental
By developing in already built-up areas, this project reduces the pressure to build on
agricultural and other undeveloped land, and contribute to the prevention of urban sprawl.
The location of the Project Area in proximity to major public transportation nodes,
together with fight-sized parking, will likely encourage use of BART and AC Transit by
project residents and retail customers. The business term sheet stipulates that
environmental sustainability measures will be incorporated into the Uptown Project to the
extent that such features are equivalent or lower in cost than comparable non-sustainable
alternatives, when measured over their respective life-cycles.
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Lquity
The Uptown Project will expand the supply of affordable housing in Oakland by
including 140 rental units that will be affordable to households earning 50 percent or less
of the area's median income. The Affordable Houing Project will provide additional
housing with family-sized units and a wider range of affordability. Uptown Partners will
comply with the City's contracting programs, including Small/Local Business
Construction Program, the Small/Local Business Professional Services Program
(USLBE) and the Local Employment Program. All of the workers performing
construction work for Agency funded projects must be paid prevailing wage rates.
Uptown Partners will also be subject to the Living Wage Ordinance.
DISABILITY AND SENIOR CITIZEN ACCESS
Any project to be developed by Uptown Partners in the Project Area will comply with the
requirements of the Americans with Disabilities Act.
RECOMMENDATIONS AND RATIONALE
It is recommended that the Agency Board authorize a second amendment to the ENA
between the Agency and Forest City to extend the ENA for an additional term of one
hundred and eighty (180) days to allow completion and certification of documentation
required pursuant to CEQA and to provide sufficient time for Agency Board
consideration whether to approve a DDA between the Agency and Uptown Partners,
LLC, for the development of a mixed-use project in the Uptown Area.
ALTERNATIVE RECOMMENDATION
The City Council could, in addition to the above recommended action, direct staff to
work with Forest City to incorporate the "Affordable Housing Project" behind the Fox
Theater.
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ACTION REQUESTED OF THE AGENCY
It is recommended that the Agency Board authorize a second amendment to the ENA
between the Agency and Forest City to extend the ENA for an additional term of one
hundred and eighty (I 80) days.
Respect y submitted,
Dan Vanderpriern
Director of Redevelopment, Economic
Development and Housing
Prepared by:
Jens Hillmer
Urban Economic Analyst IV
Redevelopment Division
APPROVED AND FORWARDED TO
THE COMMUNITY AND ECONOMIC
DEVELOPMENT COMMITTEE
kU4-@-k wA@
Deborah Edgerly I
Interim Agency Administrattl
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September 23, 2003
EXHIBIT B
Uptown Partners, LLC.
Business Term Sheet
1. Scope
1. 1. Uptown Partners LLC. a partnership between Forest City Development and
California Urban Investment Partners (the "Developer"), shall design and
construct the following improvements:
1.1.1 770 apartments on parcels 1, 2, 3 and 4
1.1.2 Twenty percent @20% or 154 units) shall be affordable to families
earning 50 percent of area's median income (AMI) for a period of 55
years, and 5 percent (3 )5 units) shall be affordable to households earning
incomes not exceeding 120 percent of AMI for a period of 55 [The
period of affordability has to be 55 years per AB 6371 years
1.1.3 Five percent (5% or 39 units) of all 770 units shall have 3 ) bedrooms,
proportionately distributed between the affordable and market rate units
1.1.4 14,500 sq.ft. of neighborhood-serving retail on parcels 3 and 4
1.1.5 815 Parking Spaces
1.1.6 A 25,000 sq. ft. public park, subject to the provision in 1.4.2 and 1.5.
Collectively, these improvements will be referred to as the Uptown Project.
1.2. Working with the Agency, the Developer will use its best efforts to recruit
immediately an associate developer, with sufficient experience, good
reputation, and financial capacity, to construct a market-rate residential
condominium tower with approximately 269 units (the "Condo Project") on a
portion of parcel 6 (the "Condo Lot"). Either party may recruit a developer for
the Condo Project. Approval of the selected developer of the Condo Project
shall not be unreasonably withheld by either party. Ownership of the Condo
Lot will not be transferred to Developer as part of the Disposition and
Development Agreement (the "DDA"). However, Developer or the associate
developer shall be granted an option for a term of three (3) years from the date
of execution of the DDA (the "Option"), to purchase the Condo Lot from the
Agency at its fair market rate, and start construction on the Condo Project.
Failure by Developer or an associated developer to begin construction on the
Condo Project within the Option term shall result in a default and immediate
termination of the Option, or if mutually agreed to by the Agency and
Developer, the Developer or the associate developer may extend the term of
the Option for an additional three (3) year term by paying to the Agency an
amount for project expense and staff administration ("PEP"), and the annual
tax increment anticipated from the Condo Project, which is currently estimated
to be in the amount of $877,500, until such time as the Condo Project is placed
on the tax roll. The parties may negotiate a phase-in of the in-lieu tax
increment payment during the option period.
1.3. Agency will, subject to provisions conditioning the DDA on the Agency's
discretion to adopt appropriate resolutions of necessity, acquire and deliver 10
Developer parcels 1, 2, 3, 4, 5, and 6, not currently owned by Developer,
subject to the provision in Section 1.4 and 1.5 below. In addition, Agency will
pay for the following:
1.3.1. The cost of relocation of the existing Sears Auto Center and the
Telegraph Plaza Garage exchange with Sears, Roebuck & Co
"(Sears").
1.3.2. The cost of design and construction of a neighborhood park and all
off-site improvements required for the project.
1.4 The Agency has acquired properties with an estimated value of $5.3
million.
1.5 In addition to the Agency-owned properties under Section 1.4 above, the
Agency has allocated a maximum total of $25.9 million for the following
activities to be completed prior to and during the term of the DDA:
Site Acquisition - $16.2 million
Hazardous Materials Abatement - $3.0 million
Off-Site Improvements - $5.7 million
Public Park Construction - $1.0 million
The Agency's total contribution for these activities shall not exceed $25.9
million. The Agency shall have reasonable discretion to reallocate unexpended
funds from one category to another category. The parties will agree to a fixed
amount and scope for the development of all off-site improvements required by
the Uptown Project, with Developer agreeing to fund cost overruns over the
initial estimated cost of $5.7 million. The scope of off-site improvements has
been estimated, but will be confirmed prior to execution of the DDA; the $5.7
million off-site improvement estimates only cover improvements that extend to
the middle of the streets. Developer shall not be responsible for the costs of
additional off-site improvements required by City or Agency subsequent to the
latter of obtaining all project approvals (including, without limitation,
certification of the EIR) and obtaining its building permit for any particular
phase, unless such requirements (i) are imposed as a result of City ordinances,
resolutions, codes, plans, policies, rules, regulations, conditions or other
2
requirements effective at the time the building permit is issued for a particular
phase; (ii) are necessary to satisfy adopted mitigation measures or conditions of
approval; (iii) are necessary to satisfy state or federal laws, regulations or other
requirements (including, without limitation, CEQA).- or (iv) City or Agency
determines, in its discretion, that such requirements are necessary and feasible
and there are no other reasonably feasible alternatives to imposing such
requirements.
1.6 The neighborhood park shall be constructed in phase I by Developer at the
Agency's expense, and maintained by Developer at Developer's expense for
the lease term (including extensions). The neighborhood park shall be owned
by the City of Oakland. The construction and maintenance of the
neighborhood park shall be subject to certain construction and maintenance
standards to be included in the DDA. The City of Oakland will provide, at no
cost, insurance or public indemnity for the park equal to that which is provided
on other typical City-owned parks.
1.7 All public streets within the project area will remain public. In the event that
Developer proposes non-standard off-site improvements, Developer shall be
responsible for the maintenance thereof.
2. Financial
2.1. Agency will ground lease the land to Developer in phases (the "Ground
Lease").
2.1.1. The first phase will be transferred at the initial multi-family tax-
exempt housing bond closing for said phase, and subsequent phases
will be transferred as provided herein. The Agency will convey the
land in subsequent phases. The land will be leased in subsequent
phases upon 50% occupancy of the previous phase, or three years from
the exercise of the previous option, whichever occurs first, and other
conditions to be negotiated. The parties shall agree on DDA provisions
allocating the Agency's gap financing or other assistance among the
phases.
2.1.2. The Ground Lease will be for a term of 66 years, with one 33-year
extension option. The Developer will have the option to acquire the
Agency-owned properties during the initial and extension term of the
ground lease on terms to be negotiated. Developer will contribute its
land in the project area at no cost to the Agency, and will be
responsible for any billboard relocation and hazardous materials
remediation required on its site. Developer will receive an equity
credit for the acquisition, remediation and relocation costs.
3
2.13. The Agency will not subordinate its fee interest in the land or, unless
agreed to by the Agency because of financing or regulatory
requirements, the affordable housing covenants. The Ground Lease
payments will be based on residual receipts as described in 2.3. 1,
2.2. Developer will receive up to 100% of the available monthly TI for a total
amount not to exceed $13.1 million in net present value calculated on the basis
of a 5.5 percent discount rate (net of mandatory payments to the City, the
school district, reallocations to the Educational Revenue Augmentation Fund
("ER-Al"'), and other eligible entities) generated by the project. excluding the
TI created by the condominium development, until expiration of the Central
District Redevelopment Area in 2019, if necessary. Any potential shortfall in
the available TI, which is created by property tax shifts to the FRAY and which
is less than the TI amounts projected for the project in the last pro forma
preceding the date of this term sheet will be mitigated by the Agency. The
Gross Receipts Tax generated by the project will serve as a meaSUTernent
standard to determine the amount of the additional funds, if any, to be provided
by the Agency, and will not in any event exceed the actual Gross Receipts
Taxes generated by the project.
2.3. Ground Lease residual receipts payments:
2.3.1. The Agency will receive a 25% participation in the excess cash flow
("Excess Cash Flow") generated by the property. The Excess Cash
Flow is defined as any cash flow generated by the project that is
greater than that required to provide a 12% cumulative return on
Developer's equity including any outstanding balance of cumulative
preferred return. The Agency's participation shall continue until it has
been repaid the outstanding NPV balance of the TI (and any other
revenues provided by the Agency such as amounts measured by the
gross receipts tax), and any outstanding nominal balance of the GAP.
NPV shall be calculated based on a 5.5 percent discount rate.
2.3.2. The Agency shall also receive a Windfall Profit Participation
("Windfall") upon the first sale of the project if, in the year of sale, the
sales price is in excess of the pro forma sales prices listed on the
proforma. dated January 10, 2003, prepared by Developer. In this case,
Agency shall share in 50% of the differential between the net sales
proceeds and that year's pro fomia sales price as shown in the pro
forma dated January 10, 2003, prepared by Developer, provided that in
no case shall the Agency's Windfall exceed that amount necessary to
pay any outstanding balance of the combined NPV of its TI (and any
other revenues provided by the Agency such as any amounts measured
by the gross receipts tax used as contributions) and its development
gap contribution ("GAP"). Net Present Value will be calculated based
on a 5.5 percent discount rate. No sale will occur prior to 2020
4
without the express consent of Agency, and shall be based on an arms-
length transaction to a bona fide third-party purchaser.
2.4. The Developer shall be permitted to refinance the project under the
following conditions, which are intended to limit Developer's ability to take
cash out of the project in excess of the amount of the equity contributed:
2.4.1. The total amount of debt on the project shall not exceed I 00% of total
project costs less the GAP (based upon the current pro formas, the
total amount of debt permitted via refinancing would be up to $154
million).
2.4.2. The total debt does not exceed 90% of appraised value.
2.4.3. The interest rate shall not exceed 12%.
2.4.4. The debt coverage ratio shall not exceed 1: 1.
2.5. The Agency will induce the project for up to $154 million dollars and will
issue tax-exempt multi-family revenue bonds for the project. Agency will be
entitled to: (1) an issuance fee; and (2) an annual administrative fee for said
bonds in the amount of one-eighth of one percent of the total bond amount.
2.6. The Developer will provide the Agency with a description of the sources of
financing for the project prior to execution of the DDA. Additional proof of
financing requirements will be incorporated into the DDA.
2.7. If Developer cannot achieve a price for the low income housing tax credits
of $.80 on the dollar provided that the tax credit investor receives (i) no
participation in project cash flow; (ii) no excess depreciation. and (iii) no
repayment of initial principal investment, Developer agrees to have a third
party conduct a tax credit investor solicitation process on the same terms and
conditions as stated above.
General Provisions
3.1. Agency's GAP will be capped at a specific dollar amount in the DDA. The
GAP is currently estimated to be $15,1 88,834 based on the current project pro
forma supplied by Forest City on January 10, 2003.
3.2. If actual construction costs total less than those presented in the final pro
fon-na, then Developer shall return to the Agency the difference between the
costs as estimated in the final pro forma and the actual construction costs, and
said repayment shall reduce the GAP on a per phase basis.
5
3.3. Agency cash assistance shall not be increased for any phases of the project.
Any request by Developer for additional financial contributions following
execution of the DDA will be considered a default and result in the termination
of the DDA, thereby allowing the Agency to negotiate with other developers
and not be in violation of the DDA.
3.4 If parking in any portion of the project is made available to the general
public, any Net Operating Income generated by that parking shall be paid to
the Agency.
3.5 The terms of the DDA are binding on any successors in interest.
3.6 The Developer agrees to comply with all currently existing City
contracting programs, including Small/Local Business Construction Program,
the Small[Local Business Professional Services Program (L/SLBE), the Local
Employment Program and the Living Wage Ordinance. All of the workers
performing construction work for Agency funded projects must be paid
prevailing wage rates.
3.7 Transfer Restrictions. The DDA will include certain restrictions
pertaining to the sale or transfer of the project before and after completion of
construction. Except for permitted transfers to be negotiated, the Developer
shall not be permitted to transfer the project before completion of construction
of all phases of the project. After completion of all phases of the project,
Developer shall be entitled to transfer the project to a third party subject to the
Agency's reasonable discretion. Factors which the Agency can consider
include, but are not limited to, sufficient financial capacity to own and operate
the project, good reputation, and sufficient experience with the operation and
maintenance of projects of the same type and size as the Uptown Project.
3.8 "As-Is" Ground Lease. Developer has the right to perform "due
diligence" investigations, including but not limited to hazardous materials
investigations, on the Agency-owned properties prior to DDA execution
(pursuant to a permit to enter) and during a specified pre-lease conveyance
period under the DDA. Developer will have the option during the pre-lease
period to terminate the DDA if it is detertnined that remediation of any
hazardous materials present on the properties is financially infeasible. If
Developer elects to proceed with the project, Agency shall transfer the land in
its "as-is" condition and Developer shall waive any rights it may have against
the Agency for all claims, including claims related to hazardous materials
contamination. Notwithstanding any of the above, if staff recommends and the
Agency approves that the Agency indemnify Developer against all claims
arising out of or related to the groundwater contamination that is known to
currently exist beneath the property and which is not exacerbated or
contributed to by the Developer, such indemnification shall be subject to the
negotiation of limitations and conditions. Developer, at its expense and to the
6
greatest extent possible consistent with environmental laws, shall design,
construct and maintain the project to avoid disturbing such contamination.
Construction techniques shall include, but not be limited to, the placement of a
vapor barrier for volatile organic compounds underneath all of the foundations
of the improvements contemplated for the Uptown project. Agency will
reimburse or advance any required costs for the remediation of hazardous
materials up to a maximum amount of $3.0 million, as set forth in section 1.5.
3.9 Right to Review and Approve. The Agency has the right to review and
approve all plans and specifications for the project in its reasonable discretion,
except that the Agency will have sole discretion to review plans for the public
park.
3.10. The DDA will include a detailed Scope of Development describing in
detail the project requirements and a Schedule of Performance with detailed
schedule requirements.
3.11. Developer and Agency shall make pay-ins from their respective equity and
development gap financing contributions during project construction on a
50/50 basis.
3.12. Developer shall contribute equity equivalent to 24 percent of total
development costs (excluding the Agency's cost outlined in Section 1.4) to the
project. Developer's equity can consist of cash value, equity or other collateral
subject to the Agency's approval.
3.13. This term sheet includes all of the major basic business terms for the
negotiation of a proposed transaction between the Agency and the Developer.
However, this term sheet is not exclusive and does not bind the City or the
Agency, nor commit the City or Agency to a course of action with respect to
the proposed project. The parties acknowledge that neither the Agency nor the
City can be bound unless and until all CEQA or other necessary environmental
requirements have been satisfied and the Agency votes to approve the DDA.
3.14. A parent or affiliate of Developer with substantial financial assets,
approved by the Agency in its sole discretion. shall provide a Completion of
Construction Guaranty for the entire project.
4. Design and Construction
4.1. Developer commits to a certain design and construction standard that must
be delivered even if project costs increase. Exterior material shall be similar in
appearance to the "Central Station" project in Chicago. Developer shall
prepare schematic drawings, including, but not limited to, elevations and
building footprints for the project, which shall be attached to the DDA, and
approved by the Agency when it approves the DDA.
7
4.2. The current construction cost estimates contain provisions for compliance
with Title 24.
4.3. The parties agree and understand environmental sustainability measures
will be incorporated into the project to the extent that such features are
equivalent or lower in cost than comparable non-sustainable alternatives, when
measured over their respective life-cycles.
4.4. Developer will demolish all buildings still remaining on the property at
transfer provided that the Agency reimburses Developer for any environmental
costs associated with the remediation of asbestos and lead paint related to the
demolition, subject to the $3 million cap on Agency reimbursement for
remediation costs as cited in Section 1.5.
4.5. Agency acknowledges that Developer has assumed $6,000 per unit in City
and other fees. Agency will cooperate with Developer to verify the adequacy
of this estimate prior to execution of the DDA. However, Agency shall not be
responsible to pay or reimburse Developer for this or any other amount
representing such fees.
Notwithstanding any other terms, the Agency shall not under any circumstances provide
financial assistance to the Developer or for the project in excess of the following
amounts:
I ) $25.9 million for site assembly, hazardous materials abatement, the construction
of off-site improvements and a neighborhood park; except for the following (a) the
potential inderrmification obligation under Section 3.8; (b) the obligation to pay the
additional costs for which Agency may become responsible under Section 1.6 for
Agency- requested changes to previously-approved scope@ (c) the estimated value of $5.3
million for the properties already acquired by the Agency under Section 1.4; and
2) $28.3 million in total gap financing per Section 2.2 and Section 3. 1.
Item #7
CED Committee
September 23, 2003
'T
)FF ICE C, Ci ER
Approved as to form and legaIrt
M3 SEP I PH 2: 09 y
REDEVELOPMENT AGENCY
OF THE CITY OF OAKLAND
RESOLUTION No. C. M. S.
RESOLUTION AUTHORIZING THE AGENCY ADMINSTRATOR
TO NEGOTIATE AND EXECUTE A SECOND AMENDMENT TO
THE EXCLUSIVE NEGOTIATING AGREEMENT BETWEEN THE
REDEVELOPMENT AGENCY AND FOREST CITY RESIDENTIAL
WEST, INC. REGARDING DEVELOPMENT OF THE UPTOWN
PROJECT IN DOWNTOWN OAKLAND EXTENDING THE
EXCLUSIVE NEGOTIATING AGREEMENT FOR AN ADDITIONAL
TERM OF ONE HUNDRED AND EIGHTY (180) DAYS
WHEREAS, on July 23, 2002, the Redevelopment Agency (Agency)
approved Resolution 02-57 C.M.S., authorizing the Agency Administrator to enter
into an Exclusive Negotiating Agreement (ENA) with Forest City Residential West,
Inc. (Forest City), for purposes of studying and evaluating the feasibility of, and
negotiating terms and conditions for the development of a mixed-use project
including retail and housing in the Uptown Area; and
WHEREAS, the ENA, which was executed on August 7, 2002, had an initial
term of one (1) year; and
WHEREAS, Forest City is required to complete and certify documentation
required pursuant to the California Environmental Quality Act (CEQA) of 1970
during the ENA term; and
WHEREAS, on June 30, 2003, pursuant to Section 1.5(a)(i), the ENA was
amended to extend the negotiation period by ninety (90) days to November 4,
2003, to allow Forest City to complete and certify the Environmental Impact Report
(EIR) for the project required pursuant to CEQA; and
WHEREAS, Forest City has experienced additional unavoidable delays in
the completion of certification of the EIR required pursuant to CEQA; and
Item #7
CED Committee
September 23, 2003
1)
WHEREAS, the Agency desires to provide Forest City with sufficient time to
complete and certify the EIR required pursuant to CEQA and to complete
negotiations of the terms and conditions for the development of a mixed-use
project; now, therefore, be it
RESOLVED: That the Agency Administrator is authorized to negotiate
and enter into a Second Amendment to the FNA with Forest City to extend the
negotiation period of a term of one hundred and eighty (180) days; and be it
FURTHER RESOLVED: That the Exclusive Negotiating Agreement shall
be reviewed and approved as to form and legality by Agency Counsel prior to
execution, and copies will be placed on file with the Agency Secretary; and be it
FURTHER RESOLVED: That the Agency has independently reviewed and
considered this environmental determination, and the Agency finds and determines
that this action complies with CEQA because this action on the part of the Agency
is exempt from CEQA pursuant to Section 15262 (feasibility and planning studies),
Section 15306 (information collection) and Section 15061(b)(3) (general rule) of the
CEQA Guidelines; and be it
FURTHER RESOLVED: That the Agency Administrator or his designee
shall cause to be filed with the County of Alameda a Notice of Exemption for this
action; and be it
ENA Extension ResoIL111011 Joe
FURTHER RESOLVED: That the Agency Administrator is further
authorized to take whatever action is necessary with respect to the ENA, as
amended, and the project consistent with this Resolution and its basic purposes.
IN AGENCY, OAKLAND, CALIFORNIA, 2003
PASSED BY THE FOLLOWING VOTE:
AYES- BROOKS, BRUNNER. CHANG, NADEL. QUAN. REID, WAN, AND
CHAIRPERSON DE LA FUENTE,
NOES-
ABSENT-
ABSTENTION-
ATTEST-
CEDA FLOYD
Secretary of the Redevelopment Agency
of the City of Oakland
Item # 7
CED Co-mmittee
September 23,2003
ENA Emenston RCSOILMOn.&C