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File #: 2014-826   
Type: Regular Agenda Item
Body: City Council
On agenda: 9/16/2014
Title: Recommendation to Approve Finalists for an Exclusive Negotiating Agreement (ENA) to Develop Site B at Alameda Point. (Base Reuse 819099)
Attachments: 1. Exhibit 1 - Map of Site A and Site B Boundaries, 2. Exhibit 2 - Request for Qualifications from Developers for Site A, 3. Exhibit 3 - Request for Qualifications from Developers for Site B, 4. Exhibit 4 - Statement of Qualifications (SOQs) from Developers for Site B - Part 1, 5. Exhibit 4 - SOQs from Developers for Site B - Part 2, 6. Exhibit 4 - SOQs from Developers for Site B - Part 3, 7. Exhibit 4 - SOQs from Developers for Site B - Part 4, 8. Exhibit 5 - Schedule for Pre-ENA Period for Site B
Recommendation to Approve Finalists for an Exclusive Negotiating Agreement (ENA) to Develop Site B at Alameda Point.  (Base Reuse 819099)
To: Honorable Mayor and Members of the City Council
From: John A. Russo, City Manager
Re: Recommendation to Approve Finalists for an Exclusive Negotiating Agreement (ENA) to Develop Site B at Alameda Point
In April 2014, the City Council provided direction to staff to issue two Requests for Qualifications (RFQ) from developers for two development sites at Alameda Point, as well as approved a form of Exclusive Negotiation Agreement (ENA).  Attachment 1 depicts a map of Sites A and B.  The RFQs were issued on May 1, 2014 (Attachments 2 and 3).  An offering sheet summarizing the development opportunity and inviting developers to review and submit a response to the two RFQs was sent to an extensive list of developers; an ad was placed on the Urban Land Institute website (a national land development association); and prominent articles announcing the RFQs were run in the San Francisco Chronicle and the San Francisco Business Times.
Site A consists of 68 acres within the Waterfront Town Center (WTC) zoning sub-district and Site B consists of a total of 82 acres, of which 14 acres are within the WTC sub-district, 38 acres within the Enterprise 1 (E-1) zoning sub-district, 23 acres within the Enterprise 2 (E-2) zoning sub-district, and seven acres within Enterprise 3 (E-3) zoning sub-district.  
The RFQ for Site A solicited interest from developers interested in developing a residential/commercial mixed-use project consistent with the recently approved Town Center Waterfront Plan and Master Infrastructure Plan (MIP); and the RFQ for Site B solicited interest from developers/users interested in developing commercial projects with a focus on a major sales tax generator, such as a premium retail outlet (not a "big box" store) and/or a corporate "build-to-suit" user(s) that generates significant jobs, business-to-business sales tax or other catalytic economic benefits (consistent with the Town Center Waterfront Plan, the rezoning and MIP).  
The RFQs required developers to submit a Statement of Qualifications (SOQ) that included a project understanding and approach; description of project team; project description; a summary of previous experience; financial qualifications; and an acceptance of conditions, including any requested modifications to any aspect of the form of ENA approved by the City Council on April 15th.  The SOQs were due to the City by June 16, 2014.
The City received 10 responses to the Site A RFQ and seven responses to the Site B RFQ. One of the Site A responses and three of the Site B responses were not submitted in a timely fashion and/or did not meet the minimum requirements of the RFQ.  These responses were disqualified and not reviewed.  As a result, there were nine complete qualified responses to the Site A RFQ and four to the Site B RFQ.  On September 2, 2014, the City Council approved two developer finalists for Site A:  Alameda Point Partners and Brookfield Homes.  This evening's staff report focuses on the selection of two finalists for Site B: Catellus Development Corporation and Mission Bay Development Group.  The following summarizes the names of the four developers who submitted qualified responses for Site B:
1.      Catellus Development Corporation (Catellus)
2.      CIM Group
3.      Mission Bay Development Group (MBDG)
4.      Trumark Homes
All qualified SOQs submitted in response to the Site B RFQ are attached (Attachment 4).  
An inter-departmental team of City staff reviewed the submittals based on the evaluation criteria in the RFQ: (1) responsiveness to the RFQ; (2) evidence of relevant experience and proven track record; (3) technical capability and relevant experience of the project management staff; (4) evidence of financial capacity, resources, and relationships, and clear corporate/organizational structure; and (5) in depth understanding of, and reasonable approach to the project.  Based on this evaluation process, City staff invited three developers for Site B to an interview.  The interviews were held in July with a panel that included an inter-departmental team of City staff and members of the community, including representatives of the Planning Board, Alameda Point Collaborative, Association of Realtors, Alameda Point tenants, Chamber of Commerce, and West Alameda Business Association.  
The Site B interview panel recommended two developers as finalists for Site B: CIM Group and MBDG.  However, CIM Group withdrew their interest in Site B due to the uncertainty of the market for commercial uses at Alameda Point.  As a result, staff selected Catellus as the other proposed finalist for Site B.  Despite not being selected initially by the panel, staff has significant confidence in recommending Catellus as a highly qualified development firm for Site B.  Both finalists include very qualified urban design and planning firms, architecture, and landscape architecture firms, presented in greater detail in their SOQs.  
Both of the finalists for Site B are proposing significant commercial development with a focus on build-to-suit corporate users, including office/R&D and light industrial uses, and also potentially retail, hospitality and other commercial uses.  The details of an exact project description was not the primary focus of the RFQ process, but will be explored in much greater detail and more clearly defined during the ENA period.
The following provides a summary of each of the development teams and staff's rationale for selecting them as finalists:
Catellus Development Corporation
Catellus is a national leader in mixed-use development with nearly 30 years of experience as a master developer on complex land developments, including redevelopment of former airports, military bases and urban industrial sites.  Catellus has teamed with Hudson Pacific Properties (Hudson), a real estate investment trust that specializes in best-in-class office properties in San Francisco, Los Angeles, and Seattle.  Hudson's specialty experience in the office market locally and nationally adds an important element and a depth of expertise to the Catellus team.
Catellus' most relevant projects include the local Bayport and Alameda Landing projects, the redevelopment of the former Mueller Airport in Austin, Texas, and Mission Bay in San Francisco.  The commercial components of these projects have been successful in large part because Catellus was able to secure key anchors early on in the development process:  Target for Alameda Landing, the Dell Children's Hospital in Austin, and the University of California San Francisco at Mission Bay.  Their extensive local experience at Bayport and Alameda Landing demonstrates their ability to successfully implement complex base reuse projects and their in depth knowledge of the local community, regulatory, geotechnical, and infrastructure environment in Alameda that can be leveraged for Site B development.  
The 700-acre Mueller project, a public/private partnership with the City of Austin, transformed a former airport into one of the most notable new urbanist communities located in the heart of Austin, Texas.  Upon completion, Mueller will feature at least 5,900 housing units; a mixed-use town center district; 4.4 million square feet of prime commercial space, including 650,000 square feet of retail; and 140 acres of parks and open space.  The commercial component of the Muller project has exceeded expectations.
Catellus is a real estate owner, investor and developer that is privately held and owned by TPG Capital.  TPG Capital is a leading global private investment firm founded in 1992 with $58 billion of assets under management.  Catellus has indicated that it intends to use internal equity to fund the Site B development.
Catellus intends to use ROMA Design Group as its urban planning and landscape architecture firm for the site planning efforts during the ENA period.
Mission Bay Development Group
MBDG is a privately owned development company comprised of former employees of Catellus and Farallon Capital Management that have been working together for over a decade, primarily on developing Mission Bay in San Francisco.  The Mission Bay redevelopment project is a highly relevant Bay Area waterfront project with a proven track record of success that consists of a 303-acre public/private partnership with the City of San Francisco, including 6,400 residential units; 3.7 million square feet of office and biotech space; a new Golden State Warriors arena; a 2.65 million square-foot University of California San Francisco Research Campus; retail and hotels; public facilities; and 49 acres of public parks.  Some of their greatest success has centered around creating a major biotech employment center, which provides them with local in depth knowledge of the commercial market in the Bay Area and what uses and companies may offer the greatest potential for Site B.
Other projects that the MBDG principals have worked on include Bayport in Alameda, the pursuit of the Lawrence Berkeley National Lab process as a private partner to the City of Alameda; the re-entitlement of the former 22-acre Potrero Power Plant site in San Francisco; and the entitlement of a multi-family mixed-use residential/retail project in downtown Oakland.  While MBDG has not yet identified a capital partner, MBDG employs a typical developer model of customizing capital investment to the unique needs and demands of the proposed asset.   MBDG is actively seeking the appropriate capital investment for this project.  Additionally, the Managing Principal has 13 years of real estate private equity investing and lending experience, most recently as Managing Director with Farallon Capital Management, which provides him with extensive relationships and experience working with capital investors.  As described below, staff will not be recommending any preferred developer to the City Council in November that cannot demonstrate that they have access to sufficient capital to fund the ENA period and ultimately, the project.
MBDG proposes using VITAL as their urban designer and planner for preparing the detailed site plans during the ENA period.  
Next Steps for Pre-ENA Selection Process
If the City Council approves staff's recommendation this evening, staff has developed a schedule and process for selecting a preferred developer for Site B by December 2014 (Attachment 5).  A summary of the process is outlined below:
1.      August - Developer continues due diligence on sites.
2.      September - City Council approval; City/developers start term sheet negotiations; and City hosts open house so that the community can meet prospective developers and learn about their past project experience.
3.      October - Subsequent term sheet negotiations; City Council closed session; staff selection of preferred developer; and final term sheet negotiations.
4.      November - Staff report recommending preferred developer for Site B and ENA (with final term sheets attached) released to public.
5.      December - City Council public hearing.
Negotiating a term sheet with two finalists for Site B instead of recommending a preferred developer at this stage of the process creates a competitive situation between developer finalists, which will result in a better deal for the City as it commences negotiation of a Disposition and Development Agreement (DDA) during the ENA period. All of the development teams will need to provide evidence of having access to sufficient capital to not only fund the ENA period, but the entire development project.  Staff will not recommend any team that is not able to demonstrate the financial capability of funding the project.
ENA/Post-ENA Transaction Process
The ENA period is contemplated as a compact 6-month process, which results in an approved DDA (i.e., price and terms of payment for the land and development obligations), and an approved Development Plan (i.e., detailed site plan, including backbone and in-tract street alignments and sections, building footprints and massing, landscape concepts, and a phasing plan).  The ENA allows for two three-month administrative extensions by the City Manager.  The ENA also prohibits any assignments or transfers of the rights under the ENA to another developer and limits the City's obligations to negotiating exclusively the terms of the DDA with the developer and to considering approval of the Development Plan. There is no obligation by the City to approve the DDA or Development Plan.  The ENA also requires that the developer provide non-refundable funding ($150,000 for Site B) for reimbursement of City expenses for negotiation of the DDA.  Funding for staff time for review and processing of the Development Plan will be handled through the City's standard planning process.  The approval of a DDA and Development Plan at the end of the ENA period are intended to facilitate near-term development of Site B.
There is no financial impact to the City's General Fund or Base Reuse Department budgets (Fund 858) related to the approval of developer finalists for Site B.
No environmental review is required as approving developer finalists is not a project as defined under CEQA.  CEQA Guidelines, section 15378(a).  
Approve Finalists for an Exclusive Negotiating Agreement (ENA) to Develop Site B at Alameda Point.
Respectfully submitted,
Jennifer Ott, Chief Operating Officer - Alameda Point
Financial Impact section reviewed,
Juelle Ann Boyer, Interim Finance Director
1.      Map of Site A and Site B Boundaries
2.      Request for Qualification from Developers for Site A
3.      Request for Qualification from Developers for Site B
4.      Statements of Qualifications from Developers for Site B
5.      Schedule for Pre-ENA Period for Site B