Title
Recommendation to Select the Brookfield Properties/Catellus Team to Develop the West Midway Project at Alameda Point and Authorize the City Manager to Negotiate an Exclusive Negotiation Agreement (ENA) with the Team Consistent with the Form of the ENA included in the Request for Qualifications (RFQ). (Base Reuse 819099)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
On March 3, 2020, the City Council directed staff to conduct a three-week Request for Qualifications (RFQ) solicitation for the development of the West Midway project by reaching out to the three development teams who responded to the previous RFQ and continued to express interest in developing the project. An updated RFQ was prepared and two development teams submitted Statements of Qualifications (SOQs) - (i) a partnership of Brookfield Properties and Catellus, and (ii) Cypress Equity Investments (CEI). Upon review and evaluation of the submittals and interviews with both teams, staff recommends that the City Council approve the Brookfield/Catellus team for development of West Midway and authorize the City Manager to negotiate an Exclusive Negotiation Agreement (ENA) consistent with the form of the ENA included in the RFQ. The RFQ and SOQs are attached as Exhibits 1-3.
BACKGROUND
The West Midway Project is a 32.5 acre mixed use development site that consists of a 22.8 acre market rate y site (Market Rate Site), and a 9.7acre affordable housing site (Rebuilding the Supportive Housing at Alameda Point or RESHAP Site). The Market Rate Site is a mixed-use project that includes 291 residential units and commercial uses, construction of all required backbone and in-tract infrastructure improvements for the property and all of the required backbone infrastructure for the adjacent RESHAP site. The RESHAP project is a 267-unit, 100% affordable housing development being built by Alameda Point Collaborative, Operation Dignity, and Building Futures with Women and Children (collectively, the Collaborating Partners) and MidPen, a non-profit affordable housing developer.
On July 10, 2018, the City Council authorized staff to issue an RFQ for development of the Market Rate Site, within the Main Street Neighborhood sub-district, located south of West Midway and bounded by Main Street to the east, Pan Am Way on the west and West Tower to the south.
On February 2, 2019, four finalists made presentations to City Council. The finalists were Alameda Point Partners (APP), Brookfield, Catellus, and Jamestown/Cypress Equity Investments. The City Council selected APP and Jamestown/CEI to move on in the selection process.
From March 2019 to September 2019, the following events occurred: 1) APP and Jamestown explored a partnership; 2) Jamestown dropped out due to the uncertainty regarding the viability of commercial development, given the project phasing and the increased cost of infrastructure; and 3) APP dropped out to focus on Site A.
On March 3, 2020, the City Council directed staff to conduct a three-week (RFQ) process for the development of the West Midway Project with the three development teams from the previous RFQ process who continued to express interest in developing West Midway - Brookfield, Catellus, and CEI. Council also directed staff to include a $350,000 appropriation for the RESHAP project backbone infrastructure design in the City’s Mid-Year Budget as a way of jump-starting the RESHAP project.
DISCUSSION
As directed by the City Council, staff issued an updated RFQ on March 9, 2020, which included additional questions about the developer’s capabilities to finance and construct the required infrastructure for its West Midway project and the RESHAP project. These additional questions were developed based on issues and concerns identified by a City Council ad hoc subcommittee, as well as from City Council members at the meeting.
A week after the RFQ was released, the Shelter-in-Place Order was issued due to the COVID 19 virus. Staff checked in with each developer team to see if the March 30 due date was still realistic or if more time was needed. Each developer team confirmed that it would still be able to submit its SOQ by the due date.
On March 30, staff received two developer SOQs, one from a partnership of Brookfield Properties and Catellus, and another from CEI. A selection panel consisting of Gerry Beaudin, Assistant City Manager, Debbie Potter, Community Development Director, Lois Butler, Economic Development Director, and Michelle Giles, Base Reuse Manager, was convened to review and rank the two SOQs.
The Collaborating Partners and MidPen also reviewed the SOQs and provided feedback and proposed interview questions for each development team for the selection panel’s consideration. Both SOQs included financial information which was reviewed by Willdan, a third-party financial consultant. Willdan concluded that both teams had sufficient assets and financial capacity to fund the development of the project. A more detailed financial review will be completed during negotiations with the selected developer.
On April 9, 2020, the selection panel held interviews via WebEx with both developer teams. Below is a summary of the each team’s SOQ and the panel’s observations and considerations.
Brookfield/Catellus
Previous Experience
• Alameda Landing/Bayport (Catellus) - Bayport is 100% complete; Alameda Landing recently received entitlements for its last phase, the Waterfront, including a 4.5 acre park
• Pier 70 (Brookfield) - Entitlements approved in 2017; renovated historic buildings with office tenants; residential to begin construction
• Playa Vista (Brookfield) - Acquisition and construction of urban infill mixed-use development with 3,000 homes and in its final phase
Market Rate Site Description/Land Use
• Emphasis on jobs, neighborhood-serving uses, varied housing types, community service, pedestrian and bike friendly streets and open spaces
• Inclusion of RESHAP as an integral part of the vibrant new community
• Up to half-million square feet of commercial space, with majority of it concentrated in a “blue” and “green” technology campus
• With the City of Alameda (City), create a flexible master plan, which will allow the team to adaptively scale commercial and retail space based on market demand
• A new gathering place at the intersection of Pan Am Way and Tower Avenue to act as the heart of the commercial area, with a food hall conceived as a collection of small restaurants
• A commercial/retail mix that will provide “makers” and smaller scale employers the opportunity to work in proximity to larger tenants
• A range of housing choices, including:
o For-sale accessible flats (approx. 800-1000 sf)
o Apartments above commercial
o Walk-up apartments
o For-sale townhouses
o Accessory Dwelling Units (approx. 500 sf)
o Thirty-four (34) workforce units, 20% more than the requirement
Conceptual Plan for Infrastructure/Financing
• Brookfield/Catellus will fund the infrastructure improvements through their internal capital resources, which will allow them to avoid the unpredictability and compromise inherent in securing third-party capital and render them better able to adapt to market changes.
• Brookfield/Catellus will use their own internal contracting division to manage the development of infrastructure eliminating the need to negotiate with a third-party general contractor and adding flexibility to schedule critical path soils improvement and deep utility installation earlier than under a typical general contractor approach.
• Developer team identified multiple challenges such as timing with Site A roadway improvements and responsibility for utility and surface improvements abutting site A; timing of East Bay Municipal Utility District design; 115kv power line integration and coordination with Alameda Municipal Power; and geotechnical improvements of the site.
• Developer team has had preliminary phasing discussions with the Collaborating Partner and MidPen about temporary replacement facilities for Operation Dignity.
Selection Panel Comments/Considerations
• Two strong land developers/homebuilder with many years of experience including experience in Alameda and with military bases; team consists of firms with deep knowledge of Alameda Point - BKF, CBG, ENGEO
• Will fund the infrastructure improvements through internal capital resources
• Has discussed phasing strategy with Collaborating Partners and has ideas how to integrate RESHAP into the larger development with shared amenities
• Has a good grasp of the challenges and mitigations/strategies required to address them, especially the geotechnical and infrastructure phasing challenges
CEI
Previous Experience
• Site A - Helped finance the closing of Phase 1; owns and is constructing Block 9, a four- story, 200-unit, mixed-use project with 8.500 square feet of retail; 50% partner of Block 11, a five-story, 220-unit apartment with 15,000 square feet. Not yet under construction.
• Master Plan Development, Somerville MA - 450-unit mixed-use, high rise building under construction in conjunction with the extension of the Green Line train from north Boston to Union Square with scheduled delivery for June 2021.
• Lincoln Collection, Santa Monica, CA - three separate apartment buildings totaling 346 units plus 27,543 sf of retail and amenities. The first project is in lease-up and the second one under construction.
Market Rate Site Description/Land Use
• Mix of commercial and residential uses to create an integrated mixed-use district
• Preliminary program includes:
o Creative office space, life science/lab space, incubators and supportive retail totaling 700,000 GSF to provide job opportunities allow entrepreneurship to thrive
o Up to 291 residential units, including 31 moderate-income units with at least 26 (10%) workforce units distributed among multiple buildings
o Additional community facilities as appropriate to support the district and compliment other community facilities in the neighborhood
o At the heart of the district will be a neighborhood center where residents, employees and visitors overlap in their daily activities
o Pocket parks, plazas, community gardens and outdoor dining areas
• Uses organized around a network of streets and open spaces that create a distinct neighborhood within the larger Alameda fabric, with linkages to the Town Center, Adaptive Reuse area and the rest of Main Street Neighborhood
• Coordination with the Collaborating Partners to ensure the district evolves as an integrated neighborhood with a shared sense of identity
Conceptual Plan for Infrastructure Financing
CEI determined that it could not respond in good faith to this section due to the global pandemic and the uncertainty of the capital markets, debt and equity financing, construction costs, asset values, rents, and supply and demand.
Selection Panel Comments/Considerations
• Over 20 years of combined and individual experience entitling, capitalizing and developing projects across the county
• Experience with large master-planned developments
• Land use description was consistent with the Main Street Specific Plan
• Did not express a thorough understanding of the site challenges, such as geotechnical, phasing, integration with Site A
• Did not consult with the Collaborating Partners and MidPen prior to its submittal or interview
• A discussion of project timing and how to finance the infrastructure, along with more details on the phasing, was needed
Conclusion
In evaluating the proposals and interviewing the two teams, the selection panel found that each of the developer teams was highly qualified, and financially sound. They both are experienced teams, with consultants who are familiar with Alameda and Alameda’s infrastructure challenges. However, the Brookfield/Catellus team demonstrated, in both the SOQ and the interview process, the depth of research and planning it did as a team, and with the Collaborating Partners and MidPen, to develop land uses and phasing concepts that could meet the needs of both projects. The team also demonstrated a well-informed grasp of challenges and issues it would face and possible mitigations to address them. Finally, the commitment to use each firm’s internal equity to fund the backbone infrastructure showed significant dedication to moving the RESHAP project forward.
CEI’s hesitation to commit to a backbone infrastructure financing plan is understandable with the uncertainty of the economy due to the pandemic. There is no certainty when or how the recovery of markets will occur. However, the experience of the Brookfield/Catellus team over multiple economic cycle in the Bay Area provides it with more perspective and assurance about how it will approach any future challenges over the next two to three years.
ALTERNATIVES
• The selection panel recommends that the City Council select the Brookfield/Catellus team to develop the West Midway project and authorize the City Manager to negotiate an ENA consistent with the form of the ENA included in the RFQ.
• The City Council may instead choose to select the CEI team to develop the West Midway project and authorize the City Manager to negotiate an ENA consistent with the form of the ENA included in the RFQ.
• Give additional time to the Brookfield/Catellus and CEI teams to refine/modify their submittals due to the economic uncertainties stemming from the COVID-19 pandemic. This alternative would delay a decision for another two to three months until more information about the re-opening of the economy is available and better understood.
• Decline to select either Brookfield Properties/Catellus or CEI and re-issue the RFQ - this alternative would take two to three months to complete, including providing a four-week response period for developers who may not be familiar with the project.
• Decide not to proceed with the project at this time.
FINANCIAL IMPACT
There is no financial impact to the City’s General Fund from selecting Brookfield Properties/Catellus as the developer for the West Midway project. The selected team is required to pay non-refundable $25,000 deposit within five days of approval by the City Council.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
The developer selection process for the West Midway project is consistent with the RESHAP DDA with the Collaborating Partners and Milestone Schedule approved by the City Council on May 15, 2018, the initial RFQ approved by the City Council on July 10, 2018, and subsequent RFQ approved on March 3, 2020,
SURPLUS LANDS ACT
The Surplus Lands Act, as amended by AB1486 (2019), does not apply to the West Midway Project because the property is subject to legally binding agreements that were entered into prior to September 30, 2019. See Government Code Section 54234(a).
ENVIRONMENTAL REVIEW
No environmental review is required as selection of a developer is not a project as defined under California Environmental Quality Act Guidelines, section 15378(a)
CLIMATE IMPACTS
This action has no anticipated climate impacts. As part of the ENA and other discussions with the selected development team, the City’s Climate Action and Resiliency Plan goals will be explored.
RECOMMENDATION
Select the Brookfield Properties/Catellus team to develop the West Midway project at Alameda Point and authorize the City Manager to negotiate an Exclusive Negotiation Agreement (ENA) with the team consistent with the form of the ENA Included in the Request for Qualifications.
CITY MANAGER RECOMMENDATION
The City Manager concurs with the recommendation to select Brookfield Properties / Catellus team and I request authorization to negotiate an ENA with the team consistent with the RFQ.
Respectfully submitted,
Debbie Potter, Base Reuse and Community Development Director
By:
Michelle Giles, Base Reuse Manager
Financial Impact section reviewed,
Nancy Bronstein, Interim Finance Director
Exhibits:
1. RFQ
2. Brookfield/Catellus SOQ
3. CEI SOQ