AGENDA #4n
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Downtown Economic Development Initiative: Exclusive Right to Negotiate
DATE: June 27, 2005
The attached Resolution would authorize the Town Manager to sign an Exclusive Right to Negotiate (please see Attachment 1) as an initial step in negotiations between the Town and Ram Development Company on a development agreement to develop Town Parking Lot Number 5 and the Wallace Parking Deck sites.
BACKGROUND
Since November 2003, the Council and the Council Committee on the Downtown Economic Development Initiative have been working on a process to potentially develop several key Town-owned sites including Town Parking Lot Number 5 at Franklin, Church and Rosemary Streets and the Wallace Parking Deck and the adjacent property at Henderson and Rosemary Streets.
From December 2004 to May 2005, the Town conducted a developer selection process that included the issuance of a Request for Qualifications followed by a Request for Proposals.
Five firms that responded to the Request for Qualifications were invited to respond to the Request for Proposals. Two developers, Ram Development Company of Palm Beach Gardens, Florida, and the team of Grubb Properties of Charlotte and LeylandAlliance of Tuxedo, New York, responded by the May 2, 2005 deadline.
On May 23, 2005, the Council interviewed representatives from Grubb Properties/LeylandAlliance and Ram Development Company.
On June 15, 2005, the Council approved a resolution selecting Ram Development Company as the Council’s preferred developer to develop Town Parking Lot #5 and the Wallace Parking Deck sites. The Resolution also authorized the Manager to proceed with the negotiation of an Exclusive Right to Negotiate with Ram Development Company for the Council’s consideration on June 27, 2005. Council Members Bill Strom, Sally Greene and Cam Hill were appointed to the Town negotiating committee.
On June 20, 2005, the Council held a work session to discuss design and building program issues with Ram Development Company.
DISCUSSION
The attached draft Exclusive Right to Negotiate would establish terms for the Town and Ram Development Company during the negotiations period. The document was drafted by Stainback Public/Private Real Estate, the Town’s consultant on the project. Proposed terms include the following:
§ The Town would agree to negotiate exclusively with Ram Development Company on a development agreement to develop the two sites.
§ The Town and Developer would agree to negotiate for a period up to October 24, 2005 in order to negotiate a Development Agreement. It provides the option to extend the negotiating period by up to 90 days if needed to draft the final Development Agreement and Ground Lease.
§ Either the Town or Developer may terminate this Agreement at any time “if the other party adopts a negotiating position which substantially deviates from the proposals and scope referred to in this Agreement.”
§ The Developer would complete refinements to the conceptual site plans by mid-August 2005.
§ The Developer would work with Stainback Public-Private Real Estate to prepare a financing plan and would provide evidence of ability to secure adequate financing from at least one source.
§ The Developer and Town would negotiate a Memorandum of Understanding outlining the major “deal points” to include in a more detailed draft Development Agreement.
Proposed Terms of Development Agreement
The Exclusive Right to Negotiate also describes proposed terms of the Development Agreement, noting that the terms are “not binding and may be changed at any time to the execution of the Development Agreement.”
Proposed terms include the following:
§ The Town would lease to the Developer the land and air rights within the sites to be developed for a term of 99 years.
§ The Developer would provide the Town with approval rights during pre-development, development and operation phases.
§ The Developer would provide Town with financial and development safeguards to reduce Town risks during pre-development, development and operation phases.
NEXT STEPS
The Council has scheduled a June 29, 2005 work session, 3 to 5 p.m. in the Council Chamber, with Ram Development Company to continue discussions on design and the proposed building program.
The negotiating team will initiate discussions with the developer in the latter part of July, with work continuing on an initial draft agreement through most of August. Prior to the July meetings, the developer will have the opportunity to review and refine the proposed building program, including exploring the potential participation of RBC Centura in the project and making changes to the proposal for the Wallace Deck sites.
Council Committee meetings are anticipated to take place in late August and September to review the draft agreement as developed by the negotiating team. Council consideration of the proposed development agreement could take place on October 10, 2005.
RECOMMENDATION
That the Council adopt the attached Resolution authorizing the Town Manager to sign an Exclusive Right to Negotiate with Ram Development Company based substantially on the terms described in Attachment 1.
ATTACHMENT
A RESOLUTION AUTHORIZING THE TOWN MANAGER TO SIGN AN EXCLUSIVE RIGHT TO NEGOTIATE WITH RAM DEVELOPMENT COMPANY (2005-06-27/R-12)
WHEREAS, on December 6, 2004 the Council authorized commencement of a Request for Qualifications developer solicitation process to develop Town Parking Lot #5 and the Wallace Parking Deck sites; and
WHEREAS, on March 7, 2005 the Council authorized issuing a Request for Proposals to five developers which responded to the Request for Qualifications; and
WHEREAS, Ram Development Company and the team of Grubb Properties and LeylandAlliance submitted proposals to the Town to develop Parking Lot 5 and the Wallace Deck sites; and
WHEREAS, on June 15, 2005 the Council selected Ram Development Company of Palm Beach Gardens, Florida, as the Council’s preferred developer to develop the two sites; and
WHEREAS, on June 15 the Council also authorized the Town Manager to enter into development negotiations with Ram Development Company and to draft an Exclusive Right to Negotiate agreement with the developer for the Council’s consideration on June 27;
NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council authorizes the Town Manager to sign an Exclusive Right to Negotiate with Ram Development Company based substantially on the terms described in the Manager’s June 27, 2005 memorandum to the Council.
This the 27th day of June, 2005.
EXCLUSIVE RIGHT TO NEGOTIATE (ERN)
This Exclusive Right to Negotiate (ERN) agreement (“Agreement”) is entered into this _____ day of ____________ 2005, between the Town of Chapel Hill (“Town) and Ram Development Company (“Developer”).
Recitals
Primary Public and Private Partner:
Primary Public Partner: Town of Chapel Hill, NC
Primary Private Partner: Ram Development Company, Palm Beach Gardens, FL
Town-Owned Land (“Sites”):
Parking Lot 5: The northeast corner of Franklin and Church Streets.
Wallace Deck: The southwest corner of Rosemary and Henderson Streets
Proposed Development:
Parking Lot 5: A $50 million mixed-use development which includes retail space, housing, open space and an underground garage.
Wallace Deck: A $25 million expansion of the existing parking garage, which includes retail space, housing, open space and additional parking.
II.
NEGOTIATIONS
§ On June 15, 2005, the Town Council approved a resolution authorizing the Manager to enter into development negotiations with Ram Development Company.
§
§ Town and Developer agree (for the period stated below) to negotiate in good faith pursuant to the terms of this Agreement to prepare a Development Agreement which shall include a Land Lease of certain real property (“Site”) generally delineated in the Master Plans for Lot 5 and Wallace Deck submitted by the Developer on May 2, 2005. Lot 5 constitutes approximately 75,000 square feet (1.72-acres). The land parcels included in the Wallace Deck development constitute 52,272 square feet (1.20-acres).
§ Town agrees (for the period stated below) not to negotiate with any other person or entity regarding development of the Sites without consent of Developer, provided, however, nothing contained herein shall prevent Town from discussing terms and conditions of the Agreement and project concepts with tenants and other parties who may be affected by the proposed development of the Sites.
§ During negotiations the parties shall cooperate in providing information and documentation as may be reasonably requested, shall discuss their views and positions concerning the negotiations and shall make diligent response to inquiries and requests for information. All matters discussed in the negotiations shall be considered confidential, and shall not be discussed by either party with others without prior consent of the other party.
§ Town shall be represented in negotiations by the Town Manager, the Town Attorney and three members of the Town Council. Developer shall be represented by designees of the developer’s choice. The Town’s consultants shall be represented by Kennedy Covington Lobdell & Hickman, LLP and Stainback Public/Private Real Estate, LLC.
III. NEGOTIATION PERIOD
Town and Developer agree to negotiate for a period up to October 24, 2005 (131 days from Town Council action of June 15, 2005) in order to negotiate a Development Agreement. Both parties agree that it would be desirable to complete the Development Agreement at the earliest possible date. Town may extend the negotiation period for up to an additional 90 days if a Business Memorandum is agreed to by both parties by October 24, 2005. Such extension would be provided to draft the final Development Agreement and Ground Lease. Upon execution of the Development Agreement by Town and Developer, this Agreement shall have no further force and effect.
Further, either the Town or Developer may terminate this Agreement at any time if the other party adopts a negotiating position which substantially deviates from the proposals and scope referred to in this Agreement.
IV. OBLIGATIONS OF DEVELOPER
A. Development Concept
Developer, in cooperation with Town, shall refine a concept for development
of the Sites which shall produce mixed-use developments, which are responsive
to the Town of Chapel Hill. The concept shall be consistent with the Town’s
Development Objectives as set forth in the developer RFQ and RFP, be in
compliance with the regulations and requirements of the Town, and be compatible
with and supportive of the Downtown Economic Development Initiative.
In the creation of the concept for development, Developer shall engage in a
joint process with Town which shall include at least the following activities:
1) Participate in Design Review on June 20, 2005 and June 29, 2005
It is anticipated that this work session will provide an initial opportunity to
receive input from members of the Town Council.
2) Undertake critical review of similar projects (Optional)
Developer and Town shall cooperatively, but each at its own expense, examine
similar projects of the last generation to determine what makes them successful
and where they have fallen short of their potential.
B. Conceptual Site Plan
Developer, in cooperation with Town, shall refine a conceptual site plan based upon the development concept and upon discussion with potential tenants and investors. The conceptual site plans shall be completed and submitted to Town for its review by mid-August, 2005.
The conceptual site plan shall include identification of floor area devoted to specific uses, pedestrian and vehicular circulation and access, parking, and architectural design studies.
Note: The Town and consultants
urge the Developer to begin discussions with RBC Centura as soon as possible in
an effort to better understand their tenant needs in the commercial development
of Lot 5 and their limitations and opportunity to sell the property at the
northeast corner of Columbia and Rosemary Streets.
C. Financial Pro-forma
Developer shall refine their detailed financial pro-formas consistent with
the conceptual site plans.
D. Financing Plan
Developer, in conjunction with SPPRE, shall prepare a public/private finance plan for the complete build-out of the projects as set forth in the conceptual site plans and pro-formas. Evidence of ability to secure adequate financing from at least one source shall be demonstrated.
E. Pre-Development and Construction Schedule
Developer, in conjunction with SPPRE, shall prepare a Development Management Schedule, which describes the major tasks, approvals and milestones to be completed during the balance of the pre-development and development processes.
F. Memorandum of Understanding (MOU)
Developer and Town shall negotiate a Memorandum of Understanding, which
shall form the basis for the Development Agreement. The driving concept behind
preparing an MOU is to negotiate the major “deal points” early in the term of
the ERN to assure input from the Town and allow for the anticipated down-time
during August 2005.
V. Obligations of the Town
A. Town will provide Developer with a detailed description of the applicable taxes, tax rates and the distribution of the tax revenue.
B. SPPRE will provide Developer with projected operation expenses for the Wallace Deck (2003-2004 through 2014-2015). SPPRE will also provide projected Net Revenues for Parking Lots 2 and 5 and the Wallace Deck (2003-2004 through 2014-2015).
C. Town will provide Developer with a detailed description of the Debt Service and Pre-Payment Penalties for the Wallace Deck Certificate of Participation.
D. Town and Consultants will develop and prioritize “deal points” important to the Town.
VI. LIMITATIONS OF THE AGREEMENT
§
If the negotiations culminate in a Development Agreement and
Ground Lease signed by Developer, such Development Agreement and Ground Lease
shall become effective only after it has been considered and approved by the
Town Council.
§ Nothing herein shall constitute a waiver, amendment, promise or agreement by Town (or any of its department, boards or commissions) as to the granting of any approval, permit, consent or other entitlement in the exercise of the Town’s regulatory function.
§ Developer acknowledges and agrees that a proposed Development Agreement which may result from these negotiations must be submitted to the Town Council for its review and approval. Developer further acknowledges and agrees that Town staff and consultants have no authority to bind the Town. The final focus of any proposed Development Agreement to be negotiated may have to contain terms and conditions not contemplated by this Agreement, but which may be necessary to accommodate compliance with the Town’s Design Review and Special Use Permit.
VII. PROPOSED TERMS OF DEVELOPMENT AGREEMENT
Town and Developer have discussed, for possible inclusion in the Development Agreement, the general business terms set forth below. Such terms are not binding and may be changed at any time to the execution of the Development Agreement.
§ Developer proposes the development of the Sites with approximately 281,000 square feet of retail and housing uses, and 299 new parking spaces at a total development cost of approximately $75 million (including the cost of parking).
§
§ Town will provide a capital investment of approximately $8.5 million directly related to the development of the Sites, all, or part of which shall be financed by Developer Land Lease payments to the Town.
§ Town shall lease to Developer that land area within the Sites upon which the retail/housing developments will be constructed for a term of 99 years.
§ The Town and Developer will describe the responsibilities of each party during pre-development, development and operation phases.
§ Developer will provide Town with Approval Rights addressing project aspects during pre-development, development and operation phases.
§ Developer will provide Town with Financial and Development Safeguards making every effort to reduce Town risks during pre-development, development and operation phases.
VIII.
Non-Assignment
The parties acknowledge that the Town is entering into this ERN on the basis of the special skills, capabilities and experience of Developer. This ERN is personal to Developer and is non-assignable without the prior written consent of Town, which may be withheld in Town’s sole discretion. Any attempted assignment of the ERN, or the dissolution, merger, consolidation, or other reorganization of Developer or any cumulative or aggregate sale, transfer, assignment or hypothecation of Developer of more than 50% of the total capital stock of Developer shall, at the Town’s option, be considered an event of default under this ERN and upon Town’s notice to Developer, shall immediately and without opportunity to cure give rise to Town’s remedies in Section VIII hereof.
IX.
DEFAULT
In the event that either party hereto fails to fulfill any obligation
hereunder, the non-defaulting party shall give written notice of such default.
If such default is not cured within thirty (30) days of receipt of such notice,
this Agreement may be terminated by they non-defaulting party.
The Parties have executed this Agreement as of the date first written
above.
Town
Town of Chapel Hill
______________________
W. Calvin Horton
Town Manager
ATTEST BY TOWN CLERK:
______________________
Sabrina Oliver
Town Clerk
Approved as to Form and Authorization
______________________
Ralph D Karpinos
Town Attorney
Developer
Ram Development Company
__________________________________
Ivy Greaner
Managing Partner – Commercial