Title
Adoption of Resolution Authorizing the City Manager to Execute a Third Amendment to the Disposition and Development Agreement (DDA) and All Other Necessary Documents between the City of Alameda and Alameda Point Partners, LLC for the Site A Development at Alameda Point. (Base Reuse 819099)
Body
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Adoption of Resolution Authorizing the City Manager to Execute a Third Amendment to the Disposition and Development Agreement and All Other Necessary Documents between the City of Alameda and Alameda Point Partners, LLC for the Site A Development at Alameda Point
BACKGROUND
In June 2015, the City Council approved the Site A Development Plan and a Disposition and Development Agreement (DDA) with the private developer, Alameda Point Partners (APP), for a 68-acre area within Alameda Point that extends generally from the Main Street entrance of Alameda Point to the eastern edge of the Seaplane Lagoon. Site A includes 800 housing units (200 affordable), 600,000 square feet of commercial development, and extensive parks and utility infrastructure (Site A Project).
The Site A Project represents the first major public/private development at Alameda Point since the base closed and lost 18,000 jobs over two decades ago. As part of the first phase of the Site A Project, 130 low and very low affordable housing units will be constructed by Eden Housing, a highly qualified nonprofit affordable housing developer in two buildings on Block 8: 1) a family building with 70 units (Family Project), and 2) a senior building with 60 units (Senior Project) (collectively, Affordable Housing Projects). The DDA contemplates that the rest of the Site A Project will be constructed in three phases over the next 15 years. The executed DDA and amendments can be found at the following link: <https://alamedaca.gov/alameda-point/final-planning-documents>
Since the approval of the Site A Development Plan and DDA, APP and its team of architects, engineers, and design professionals, in coordination with City staff, have expended significant staff and financial resources making extensive progress on implementing the Site A Project over an 30-month period. APP has expended $15 million to date in equity funds on all of these predevelopment efforts. Despite that progress, due to the rising cost and complexity of the project, APP requested a first DDA amendment in January 2017 to provide them with more time to complete property due diligence items and to finalize financial commitments by extending the outside closing date on the Phase 1 property (Phase 1 Property) by four additional months from December 12, 2016 to April 11, 2017, which the City Council approved on January 17, 2017. Although significant efforts were made by APP to finalize these commitments, APP did not meet the conditions of the DDA necessary to accept conveyance of the Phase 1 Property by April 11, 2017, and was therefore in default under the DDA. As part of APP’s effort to cure its default, APP submitted proposed changes to the Site A Development Plan, which were approved by the Planning Board on May 22, 2017, and a second DDA amendment, which was approved by the City Council on July 5, 2017, that enhanced the financial underwriting of the Site A Project and allowed APP to make a $1.4 million option payment and extend the Phase 1 closing date to April 9, 2018.
APP is requesting a third amendment to the DDA, which it believes is necessary to finalize its financing commitments and close on the Phase 1 property by April 9, 2018. This evening’s staff report discusses APP’s proposed request and staff’s recommendation to approve the third DDA amendment.
DISCUSSION
APP is requesting a third DDA amendment (DDA Amendment) in order to remove the provision in Section 4.2 of Exhibit M (Affordable Housing Implementation Plan) of the DDA that allows the City to withhold building permits for any market rate units in excess of 395 units (Metering Provision), if Eden Housing has not received and executed a Low Income Housing Tax Credit Reservation for the Affordable Housing Projects. While Eden Housing has been very successful at obtaining much of its required financing for the Affordable Housing Projects, there are outstanding funding applications, whose results will be known in May/June 2018, after the April 9, 2018 Phase 1 closing date. As a result, at the time of the Phase 1 closing, there will be uncertainty for APP and their third-party developers as to whether the City will have the right to halt their building permits pursuant to the Metering Provision in the DDA.
APP asserts that the Metering Provision inhibits their ability to sell the market rate development blocks at sufficient value to cover the costs of the Phase 1 project, as the provision restricts one property owner based on the timing of another property owner out of their control. Further, APP believes that these reduced proceeds from the sale of these blocks would then be insufficient to cover the costs associated with the required backbone infrastructure and other amenities. In other words, the third-party vertical developers will not purchase the market rate blocks at all or will pay significantly less for them, if the City has the ability to stop them from developing their project due to the Metering Provision. APP contends that if the Metering Provision is removed, they will be able to close by April 9, 2018, deliver the $10 million Seaplane Lagoon Ferry Terminal contribution, and start construction on backbone infrastructure within 30 days. Without this third amendment, the Developer will not be able to continue with the Site A Project.
I. Proposed DDA Amendment
The proposed DDA Amendment removes the Metering Provision from the DDA based on the following conditions:
1. APP meets all of the financing requirements for the Phase 1 closing in the DDA and closes on the Phase 1 Property by April 9, 2018;
2. The Progress Milestone in the DDA requiring construction start on backbone infrastructure within 30 days becomes a Major Milestone, which means that a failure to meet is an event of default;
3. APP and Eden Housing demonstrate to the City’s reasonable satisfaction that they have sufficient public subsidies to achieve a competitive score in the March round of Low Income Housing Tax Credits (LIHTC) financing for the Senior Project, including ensuring that Eden Housing has access to up to $500,000 of the $4 million in East Bay Municipal Utility District fee credits already provided by the City to the Site A Project;
4. APP deposits the $3 million developer contribution required by the DDA for the Affordable Housing Projects into escrow at the Phase 1 closing for eligible use by Eden Housing; and
5. APP agrees to use commercially reasonable efforts to support Eden Housing to obtain all of its required financing and to meet Eden Housing’s readiness deadlines, which may include necessary assurances satisfactory to Eden Housing’s equity investor related to the timing of start and completion of infrastructure construction necessary for occupancy of the Affordable Housing Projects.
Staff recommends that the City Council approve the DDA Amendment for the following reasons:
1. Readiness and Momentum. APP has indicated that there is significant momentum from Trammell Crow Residential and their third-party vertical developers who are poised to purchase the market rate development blocks to close by the April 9, 2018 deadline and that any further delay from another paid extension or default (other potential options available to APP within the current DDA) would jeopardize that momentum and inhibit the Site A Project from moving forward.
2. Catalytic Benefits. There are significant catalytic transportation, housing, and economic development benefits to other areas within Alameda Point, as described below in greater detail; and
3. Eden Housing Success and Support. Eden Housing has secured significant financing commitments to date, as summarized below; is optimistic about its ability to secure all of the necessary financing by December 2018, the deadline in the DDA and the Ground Leases entered into with Eden Housing; and is supportive of the Developer moving forward with the Phase 1 closing and infrastructure construction as soon as possible so that the backbone infrastructure necessary for Eden to close on its financing, and build and occupy their building is not jeopardized.
If the Metering Provision is removed and Eden Housing is not able to obtain all of the required financing for the affordable housing by December 2018, the City would not be able to halt building permits for any of market rate development blocks within Phase 1. Nevertheless, APP would still remain obligated to fulfill its affordable housing obligations, pursuant to the DDA. There are also other options APP could take in the DDA without the DDA Amendment, although APP has indicated that these options will be detrimental to the Site A Project and jeopardize their ability to move forward with the project. Those options include: (1) paying the City to extend the Phase 1 closing date again to allow more time to determine if Eden Housing received all of its financing within the timelines contemplated in the DDA; and (2) default under the DDA and cure that default, if time allows, once more information is received about Eden Housing’s ability to complete all of its financing.
In sum, staff recommends that the City Council approve the DDA Amendment and remove the Metering Provision pursuant to the conditions highlighted above and for the reasons presented above.
II. Financing Status of Affordable Housing Projects
The following provides the latest status of Eden Housing’s financing commitments for the Affordable Housing Projects:
Site A/Eden Affordable Housing - Family Project
|
Source of Funds |
Amount |
Status |
|
Land Donation |
$5.1 million |
Committed |
|
County of Alameda Measure A1 |
$2.0 million |
Committed |
|
Bank Loan |
$4.2 million |
Committed |
|
VASH Voucher Loan |
$3.0 million |
Committed |
|
AHSC State Grant |
$9.0 million |
Applied in January 2018* |
|
LIHTC 4% Investor Capital |
$14.5 million |
Apply June 2018 |
|
Section 811 Loan |
$3.1 million |
Committed |
|
HCD Infill Infrastructure Grant |
$3.0 million |
Applied in January 2018* |
|
GP Equity |
$3.4 million |
Committed |
|
TOTAL SOURCES |
$47.3 million |
|
*Results of application to be publicized in May/June 2018.
Site A/Eden Affordable Housing - Senior Project
|
Source of Funds |
Amount |
Status |
|
Land Donation |
$4.4 million |
Committed |
|
County of Alameda Measure A1 |
$3.0 million |
City Committed/County Approval Pending |
|
Bank Loan |
$1.8 million |
Committed |
|
VASH Voucher Loan |
$5.0 million |
Committed |
|
Affordable Housing Program (AHP) |
$0.6 million |
Committed |
|
Master Developer Contribution |
$3.0 million |
Committed if APP Closes |
|
Veteran Housing Homelessness Program Loan |
$1.4 million |
Committed |
|
LIHTC 9% Investor Capital |
$16.1 million |
Apply February 2018* |
|
HCD Infill Infrastructure Grant |
$1.3 million |
Applied in January 2018* |
|
TOTAL SOURCES |
$37.2 million |
|
*Results of application to be publicized in May/June 2018.
III. Benefits of Phase 1 Site A Project
The following provides a summary of the benefits to the City of Phase 1 of the Site A Project that if abandoned will not be realized or significantly delayed:
• Parks, Transportation, and Infrastructure. Phase 1 of Site A includes 8 acres of parks and open spaces, the final $10 million gap funding for the Seaplane Lagoon Ferry Terminal, annual funding for bus service to BART, and major gateway and backbone utility improvements, which provide significant benefit to all areas of Alameda Point, not just Site A.
• Workforce Housing. According to APP, based on current underwriting of the project and their market analysis, the developer’s estimated future average rent for all units on Block 9 will be $3,400 and for all studio and one-bedroom units on Block 11 will have average rents of $3,300. These 310 units (or 74% of all units on Blocks 9 and 11) will have rents that are affordable to households earning up to 180% area median income, which is the typical definition of workforce or middle-income housing.
• Catalytic Benefits to Other Areas. The delay of the infrastructure improvements contained in Phase 1 of Site A seriously jeopardizes the attraction of businesses and jobs to the Enterprise District and Adaptive Reuse areas and the reconstruction of the supportive housing units in the Main Street Neighborhood, which are all dependent on the significant infrastructure efficiencies and benefits provided by Phase 1 of the Site A Project.
If the DDA terminates and the Site A Project does not move forward, City staff would most likely recommend seeking interest from new developers. If the City Council decided to move forward with a new developer selection process, it would take 2-4 years to reach the point the City is with APP today assuming no delay related to an economic downturn over that time period. During this time, the existing substandard sewer, storm drainage, and drinking water, and transportation facilities would continue to deteriorate. The delay would also represent a major setback for the funding of the Alameda Point Ferry Terminal, since $10 million of the funds are being supplied by APP upon closing of the first phase. Additionally, staff would expect that a new developer will likely experience similar cost challenges and may require changes to the design, uses, amenities and type of housing currently planned as part of the Site A Project. Staff would anticipate that a new developer may propose more townhomes and/or single family homes, fewer apartments, less rehabilitation and reuse of existing structures, and/or fewer waterfront amenities.
In sum, staff recommends that the City Council approve the DDA Amendment for the reasons presented above.
FINANCIAL IMPACT
There is no financial impact to the General Fund or Base Reuse Fund.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
These actions are consistent with the approved General Plan, Zoning Ordinance, Town Center Plan, and MIP.
ENVIRONMENTAL REVIEW
On February 4, 2014, the City of Alameda certified the Alameda Point Final EIR in compliance with the California Environmental Quality Act (CEQA). The Final EIR evaluated the environmental impacts of redevelopment and reuse of the lands at Alameda Point consistent with the Town Center Plan, which included Site A. Pursuant to CEQA Guidelines Section 15162, no subsequent environmental review shall be required when, as here, an EIR has been certified for a project unless certain events have occurred. As explained below, none of the conditions specified in CEQA Guidelines Section 15162 requiring subsequent or supplemental environmental analysis have occurred; therefore, no new environmental analysis is required to comply with CEQA.
Specifically, the Amendment to the DDA does not include any substantial changes in the Town Center Plan, and there is no evidence in the record that the Amendment to the DDA would result in new significant environmental effects or a substantial increase in the severity of previously identified significant effects necessitating major revisions to the EIR. Similarly, there is no evidence in the record that substantial changes have occurred with respect to the circumstances under which the Site A development is to be undertaken that will require major revisions of the EIR. Finally, there is no new information of substantial importance, which was not known and could not have been known with the exercise of reasonable diligence at the time the EIR was certified, in the record that shows new or considerable different significant effects, mitigation measures, or alternatives than were analyzed in the EIR.
Because no new effects could occur or no new mitigation measures would be required under CEQA Guidelines Section 15162, CEQA Guidelines Section 15168(c)(2) permits the approval of the DDA Amendment as an activity within the scope of the EIR, and no new environmental document is required.
None of the changes proposed by the DDA Amendment change the overall amount of development and therefore, no further review is required for these amendments.
RECOMMENDATION
Adopt a resolution amending the Disposition and Development agreement between Alameda Point Partners, LLC and the City of Alameda for Site A at Alameda Point. .
Respectfully submitted,
Jennifer Ott, Base Reuse Director
Financial Impact section reviewed,
Edwin Gato, Acting Finance Director
Exhibit:
1. Third Amendment to DDA