Title
PLN24-0639 - Master Plan and Development Agreement - 1521 Buena Vista Avenue - Applicant: North Waterfront Cove LLC. Public hearing to consider an application pursuant to Alameda Municipal Code (AMC) section 30-4 and sections 30-91 through 30-95 to amend the Encinal Terminals Master Plan and Development Agreement (entered into by the City Council on February 1, 2022) to modify interim milestones and related / conforming amendments. General Plan: Mixed Use. Zoning: M-X, Mixed Use. CEQA Determination: Exempt - prior environmental review was conducted for the project and none of the circumstances necessitating further CEQA review are present. Amending the implementation timeline has no foreseeable effect on the environment.
Body
To: Honorable Chair and Members of the Planning Board
From: Steven Buckley, Planning Board Secretary
EXECUTIVE SUMMARY
Staff is recommending that the Planning Board conduct a public hearing and adopt a Resolution recommending that the City Council adopt an ordinance approving an amended Master Plan and Development Agreement for the Encinal Terminals site to extend the internal milestones for performing certain actions due to the current economic climate that makes implementation infeasible. The milestone extensions would be granted under two conditions: that steady progress be made on the formation of the project’s assessment district and biannual written reports tracking economic conditions are submitted to the City. Without amendments to certain internal milestones, the Development Agreement will expire, which will trigger expiration of both the Disposition and Development Agreement and the State Exchange Agreement.
The developer’s application is attached as Exhibit 1, the Master Plan is attached as Exhibit 2, the Development Agreement is attached as Exhibit 3, the Tidelands Trust Exchange Diagram is attached as Exhibit 4, and a draft Resolution is attached as Exhibit 5.
BACKGROUND
The Encinal Terminals site is a vacant site located at 1521 Buena Vista Avenue between the Alaska Basin and the Fortman Marina north of Clement Avenue. The site is located within the Bay Area’s regional sustainability plan (Plan Bay Area) Northern Waterfront Priority Development Area (PDA), and the site is designated as a multifamily housing opportunity site in the City of Alameda Housing Element.
The site is comprised of four parcels: three owned by North Waterfront Cove, LLC (applicant) and one 6.4-acre site owned by the City of Alameda in trust for the State of California (Tidelands Property). The Tidelands Property is located in the middle of the site (Exhibit 4).
In 2018, the Developer and City entered into a Development Agreement (DA), Disposition and Development Agreement (DDA), and Tidelands Exchange Agreement to facilitate redevelopment of the property consistent with the General Plan and zoning designations. The Master Plan provides for public waterfront parks and promenades adjacent to the Oakland Estuary where no public access currently exists. Further, the Plan allows for the conversion of the site, which was previously used for shipping container storage, to a transit-oriented, mixed use development with market-rate and affordable deed-restricted housing opportunities, retail and maritime commercial job opportunities and services, and pedestrian, transit and bicycle facilities.
On February 1, 2022, the City Council adopted an amendment to the Master Plan, DA, DDA and Tidelands Exchange to facilitate a viable redevelopment of the property that included certain milestones within the overall 15-year term of the DA/DDA to ensure completion of intermediate steps.
The City Council’s amended approval allows for a mixed use plan for up to 589 multifamily housing units, 80 of which would be deed restricted affordable units, up to 50,000 square feet of commercial and maritime commercial space, a 160-slip marina, and 4.5 acres of public open space; a Density Bonus application; and a Development Agreement vesting the entitlements for 15 years in exchange for additional public benefits that could not be achieved without the Development Agreement.
The DA requires certain milestones, including the adoption of an assessment district or equivalent funding source within 24 months of the effective date (March 2022). On March 7, 2024, the City Manager approved an extension of one (1) year for this interim milestone, extending the deadline for the adopting of an assessment district or equivalent funding source to March 2, 2025.
On November 14, 2024, the applicant, North Waterfront Cove LLC, filed an application to request an amendment to selected internal milestones while retaining the overall 15-year timeline for implementation due to “circumstances beyond our control, specifically an economic environment that has obliterated the present residual land value of the property.”
Without amendments to certain internal milestones, the DA will expire, which will trigger expiration of the DDA.
In recognition of the current economic circumstances and the progress made by the Developer over the past nearly three years, the City and Developer seek to amend select internal milestones in the DA and Master Plan to allow additional time for the project to fulfill its obligations.
DISCUSSION
Pursuant to Alameda Municipal Code (AMC) requirements, the Planning Board must make a recommendation to the City Council on whether to proceed with an amended Master Plan (AMC Section 30-4.20.g) and Development Agreement (AMC Section 30-92.5).
Recognition of Project Progress
Since receiving amended approvals from City Council in March 2022, the Developer has completed the unique, complicated and costly tidelands exchange process that is most critical to the future viability of the Encinal Terminals project, despite unfavorable real estate market conditions. Despite these economic headwinds, the Developer has completed all of the vital steps in this project with the State of California including:
• Negotiating the State Exchange Agreement: signed and recorded in February 2023;
• Securing legislation to allow the State to convey to the City all of the parcels it receives in the exchange of tidelands properties: completed in July 2023; and,
• Completing a title validation action that confirmed the validity of the State Exchange Agreement and ensures clear title for future conveyances: completed in February 2024
(See also concurrent staff report regarding Encinal Terminals Development Agreement Annual Review.)
March 2024 Extension
Section 3(b) of the DA states in part: “This Development Agreement shall terminate and be of no further force and effect (subject to Section 3.e) on the earliest of … (6) failure to adopt an assessment district or equivalent funding source acceptable to both parties within 24 months of the Effective Date for the maintenance of the Public Trust Lands in perpetuity.”
After determining that the Developer had made a good faith effort to meet the initial 24-month deadline in Section 3(b)(6) but that additional time was necessary to accommodate delays that were not the result of actions by the Developer, on March 7, 2024, the City Manager approved an extension of one (1) year for the Section 3(b)(6) deadline.
This extension was granted on condition that the Developer completed certain interim milestones with the intent to effectuate the formation of the funding source(s) for the maintenance of the public lands in perpetuity. However, due to the environment, the Developer has not been able to complete the interim milestones and will not be able complete formation of the CFD with the City by March 2, 2025.
Current Economic Environment
Current real estate conditions remain unfavorable for new residential development. In comparison to the 2022, the present economic environment does not provide necessary conditions for the Developer or a successor to develop the project. While not a complete picture of the economic conditions, the following metrics are key to understanding how conditions have worsened since the project was approved by City Council in 2022. These metrics and 2022 benchmarks are:
In recognition of the current economic circumstances and the progress made by the Developer over the past nearly three years, the City and Developer seek to amend select internal milestones in the DA and Master Plan to allow additional time for the project to fulfill its obligations.
Furthermore, to encourage the Developer to actively market the project to potential successors and remain committed to completing the project, staff recommends an extension of certain interim milestones (detailed below) with the following conditions:
Assessment District Formation
o By the 11th month of the proposed three (3) year extension of select DA and Master Plan interim milestones, OR prior to the property transacting, whichever comes sooner, Developer will enter into a reimbursement agreement with the City of Alameda. The reimbursement agreement will require a $75,000 deposit (“Deposit”) to reimburse City for staff and consultant services incurred as part of the effort to formulate an assessment district or equivalent funding source.
o Developer and City shall hold kickoff meeting no later than August 2026
o Draft RMA shall be completed no later than December 2026
o First Formation Document Hearings no later than June 2027
Documentation of Progress and Economic Viability
o Twice per year, Developer shall submit a written report to City staff documenting project progress, including all marketing efforts and any other pertinent disposition efforts and demonstrating whether the project is commercially viable using the following market condition metrics and 2022 benchmarks described above:
• Apartment rents
• Townhome sales prices
• Condominium sales prices
• Absorption rates
• Capitalization rates
• Mortgage rates
• Construction costs
The Developer will monitor data for these key metrics in comparison to the 2022 benchmarks, seeking to substantiate a sustained positive trend towards the benchmark levels of 2022 for capitalization rates, mortgage rates, apartment rents, townhome and condominium pricing and sales paces, without material construction cost increases. Once these market benchmarks have been achieved, the project will become viable.
Biannual reports will be evaluated by an economic consultant of the City’s choosing. Consultant costs will be borne by the Developer.
Staff recommends amending the Development Agreement and Master Plan to extend the following interim milestones as detailed below (a redline of the DA and Master Plan are provided in Exhibits 2 and 3, respectively):
Interim Milestone Modifications
The amendments to the DA and Master Plan:
• Do not change the overall term of the Development Agreement (15 years).
• Do not modify the approved Disposition and Development Agreement.
• Would provide the opportunity for the construction of housing units over the course of the City’s 2023-2031 Housing Element cycle.
ENVIRONMENTAL REVIEW
On July 17, 2007, the City Council adopted Resolution Nos. 14134 and 14135 certifying the Final Environmental Impact Report for the Northern Waterfront General Plan Amendment (“Northern Waterfront EIR”) pursuant to the California Environmental Quality Act (“CEQA”), and on December 19, 2017, the City Council adopted Resolution No. 15337 certifying a Focused Supplemental Environmental Impact Report for development of the proposed Master Plan and Exchange Agreement (“Focused Supplemental EIR”, and with the Northern Waterfront EIR, “Previous CEQA Documents”). All project-specific mitigation measures specified in the Focused Supplemental EIR and included in the Project-Specific Mitigation Monitoring and Reporting Program shall be included as conditions of approval for the project development plans required by the Master Plan.
The Master Plan includes the same development program as the preferred project in the 2017 Focused Supplemental EIR. The only significant difference between the 2021 Exchange Master Plan and the 2017 Exchange Master Plan is that the 2021 plan proposes to remove more of the existing wharf than in 2017 plan, which proposed to rehabilitate and rebuild more of the existing wharf. The change results in greater daylighting of the Estuary and less construction activity within the marine environment, which is consistent with BCDC policies to reduce bay fill and state and local policies to minimize impacts in the marine environment. There is no evidence that any changes to the project over the last 36 months since the 2017 Focused Supplemental EIR was certified would result in additional or more severe environmental impacts than the impacts that were disclosed in the 2017 Focused Supplemental EIR.
In the vicinity of the project and regionally, the development that was anticipated to occur in the 2017 Focused Supplemental EIR has occurred as expected (e.g. project such as Del Monte, Site A, Alameda Marina, and Brooklyn Basin in Oakland). There is no evidence that the environmental conditions in the area have changed in manner that was not anticipated in the 2017 Focused Supplemental EIR and therefore would result in additional or more severe environmental impacts than were disclosed in the 2017 Focused Supplemental EIR.
None of the circumstances necessitating further CEQA review are present, as the proposed project would not require major revisions to the Previous CEQA Documents due to new significant impacts or due to a substantial increase in the severity of the significant environmental effects. There have been no substantial changes with respect to the circumstances under which the project would be undertaken that would require major revisions of the Previous CEQA Documents due to new or substantially increased significant environmental effects, and there has been no discovery of new information of substantial importance that would trigger or require major revisions to the Previous CEQA Documents due to new or substantially increased significant environmental effects. For these reasons, no further environmental review is required.
Amending the intermediate timelines for completing certain actions to implement the project does not have any foreseeable effect on the environment.
RECOMMENDATION:
Hold a public hearing and adopt a resolution recommending City Council approval of the requested amendments to the Tidelands Exchange Master Plan and Development Agreement for the redevelopment of the Encinal Terminals Properties and City Tidelands Property, as detailed in the interim milestone modifications table above, subject to the following conditions:
Assessment District Formation
• By the 11th month of the proposed extension of select DA and Master Plan interim milestones, OR prior to the property transacting, whichever comes sooner, Developer will enter into a reimbursement agreement with the City of Alameda. The reimbursement agreement will require a $75,000 deposit (“Deposit”) to reimburse City for staff and consultant services incurred as part of the effort to formulate an assessment district or equivalent funding source.
• Developer and City shall hold kickoff meeting no later than August 2026
• Draft RMA shall be completed no later than December 2026
• First Formation Document Hearings no later than June 2027
Documentation of Progress and Economic Viability
• Twice per year, Developer shall submit a written report to City staff documenting project progress, including all marketing efforts and any other pertinent disposition efforts and demonstrating whether the project is commercially viable using the following market condition metrics and 2022 benchmarks described above:
o Apartment rents
o Townhome sales prices
o Condominium sales prices
o Absorption rates
o Capitalization rates
o Mortgage rates
o Construction costs
• Biannual reports will be evaluated by an economic consultant of the City’s choosing. Consultant costs will be borne by the Developer.
Respectfully submitted,
Steven Buckley, Planning Services Manager
Exhibits:
1. Application for Modification
2. Redlined Encinal Terminals Master Plan
3. Redlined Encinal Terminals Development Agreement
4. Tidelands Trust Exchange Diagram
5. Draft Resolution