AGENDA #7
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Downtown Economic Development Initiative: Selection of Developer and Authorization to Negotiate Development Agreement
DATE: June 15, 2005
The attached Resolution A would:
The attached Resolution B would schedule a Council work session for 3 p.m. June 20, 2005 to discuss design and building program issues with the developer.
BACKGROUND
The Downtown Small Area Plan adopted in 2000 identifies key “opportunity areas” for development downtown, including Town Parking Lot #2 at East Rosemary and South Columbia Streets, and Town Parking Lot #5, bounded by West Franklin, Church and West Rosemary Streets.
Since November 2003, the Council and the Council Committee on Lots 2 and 5 have been working on a process to potentially develop the two Town-owned sites as well as the Wallace Parking Deck and the adjacent property at Henderson and Rosemary Streets, and the RBC Centura bank property at South Columbia and East Franklin Streets.
The Town’s consultant, Stainback Public/Private Real Estate of Houston, Texas, developed a financial feasibility analysis with input from the Council, the Council Committee and the public.
On December 6, 2004, the Council authorized the distribution of a Request for Qualifications document to solicit statements of qualifications from development teams interested in submitting proposals for development of Town Parking Lot #5 and the Wallace Parking Deck and adjacent property. Six developers responded to the Request for Qualifications.
On February 28, 2005, the Council approved issuance of a Request for Proposals to five of the six developers. On March 7, 2005, the Council authorized issuance of the Request for Proposals document.
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 in the Council Chamber.
DISCUSSION
At the June 2, 2005 meeting of the Council Committee on Lots 2 and 5, Stainback Public/Private Real Estate presented its evaluation of the proposals and recommended selection of a developer (please see Attachment 1). The consultant evaluated each development proposal based on criteria including the building program, urban design concepts, the public/private finance plan, and preliminary approval rights for the Town.
Stainback Public/Private Real Estate recommended entering into negotiations with Ram Development Company on a development agreement. The evaluation gave Ram 85 points out of a possible 100; Grubb Properties/Leyland Alliance’s proposal scored a 62 out of 100.
Ram Development proposes building 27,000 square feet of retail, 124 condominiums, 16,000 square feet of open space and 422 underground parking spaces at Lot 5. The developer’s plans for the Wallace deck sites include 107 condominiums and 6,000 square feet of open space, mostly atop the deck. In addition, 3,500 square feet of retail and 50 parking deck spaces would be built on the corner of Henderson and Rosemary Streets. The development budget for the two sites totals about $75 million.
Grubb Properties and Leyland Alliance proposes building about 37,000 square feet of retail, 120 condominiums and 20,000 square feet of open space at Lot 5. The plan’s 384 parking spaces would be in an underground garage and an above-ground garage wrapped by mixed-use buildings. At the Wallace Deck, the development team proposes building a total of 60 condominiums and townhouses and a half level of parking on the deck; 7,500 square feet of retail space would be built at the corner of Rosemary and Henderson Streets. The total development budget is projected at about $63 million.
Mr. Stainback told the Committee that one of the factors distinguishing the two proposals related to Ram’s proposed public-private finance plan, which would potentially provide the Town a net return of $1.4 million, not including other revenues such as property and sales tax revenues. The Grubb/LeylandAlliance proposal would require an investment by the Town of approximately $17 million, according to the consultant’s analysis.
The consultant’s report listed several issues related to the Ram proposal that will need to be addressed, including the projected returns on investment on the Wallace Deck condominiums which the consultant considers too low to meet the requirements of capital markets, and the projected net loss of 126 public parking spaces due to the development of the deck site. (Grubb’s proposal would result in a net loss of 199 public spaces, according to the consultant’s analysis.)
The Committee also reviewed a Town analysis comparing the two proposals with the Council’s Principles and Priorities for the Use of Parking Lots 2 and 5, adopted February 24, 2003 (see Attachment 2).
NEGOTIATIONS PROCESS AND SCHEDULE
Adoption of the attached Resolution A would establish a Town negotiating team consisting of the Town Manager, the Town Attorney and associated legal counsel, Mr. Stainback, Town staff and Council Members designated by the Council.
As an initial step, the Council Committee has proposed that the Council hold a work session at 3 p.m. June 20, 2005, in the Council Chamber to discuss design and building program issues with the development team (see the draft negotiations schedule, Attachment 3). The attached Resolution B would schedule this work session.
We propose that the Council consider authorizing an Exclusive Right to Negotiate agreement between Ram Development Company and the Town at its June 27, 2005 meeting.
We anticipate that the negotiating team would 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 would have the opportunity to review and refine the proposed building program, including exploring the potential participation of RBC Centura in the project. The schedule contemplates Council Committee meetings 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.
Legal Counsel
The Town Attorney is in discussions with an attorney who is experienced in negotiating public-private development agreements. The Town will enter into a contract for legal services if the Council authorizes proceeding with development agreement negotiations and execution of an Exclusive Right to Negotiate with the selected developer. Funds for legal assistance are included in the proposed Town Budget to be considered on June 27, 2005.
Phase 2
The development of Town Parking Lot #5 and the Wallace Deck sites are Phase 1 of the Downtown Economic Development Initiative. The Town’s Request for Proposals did not seek proposals for Phase 2 of the project – development of Town Parking Lot #2 and, potentially, the RBC Centura property at East Rosemary and North Columbia Streets.
However, the Request for Proposals states that the Council may award Phase Two to the developer selected for Phase One “dependent on the performance of the development team in structuring and implementing Phase One, but the Council reserves the right not to award Phase Two to the developer selected for Phase One for any or no reason.”
The Resolution states that the Council reserves the right to award Phase Two to Ram Development Company.
RECOMMENDATIONS
Council Committee on Lots 2 and 5: On June 2, the Council Committee unanimously recommended that the Council authorize the Manager to enter into development agreement negotiations with Ram. The Committee further recommended that the Manager, as an initial step, be authorized to draft an Exclusive Right to Negotiate with Ram Development Company for the Council’s consideration on June 27.
Manager’s Recommendation: We recommend that the Council adopt the attached Resolution A selecting Ram Development Company as the Council’s preferred developer to develop Town Parking Lot #5 and the Wallace Parking Deck sites. The Resolution authorizes the Manager to enter into development negotiations with Ram Development Company and to draft an Exclusive Right to Negotiate with the developer for the Council’s consideration on June 27. In addition, the Resolution includes a provision for appointment of Council Members to the negotiating team.
The Resolution also includes a provision that the Council may later consider initiation of negotiations with Grubb Properties and LeylandAlliance if negotiations with Ram Development Company not result in a Development Agreement.
In addition, the Resolution reserves for the Council the right to award or not to award Ram Development Company Phase Two of the project – the development of Town Parking Lot #2 and, potentially, the RBC Centura property at East Rosemary and North Columbia Streets.
We also recommend the Council adopt Resolution B scheduling a Council work session for 3 p.m. June 20, 2005 in the Council Chamber to meet with Ram Development Company to discuss design and building program issues.
ATTACHMENTS
RESOLUTION A
A RESOLUTION SELECTING RAM DEVELOPMENT COMPANY AS PREFERRED DEVELOPER TO DEVELOP TOWN PARKING LOt 5 AND THE WALLACE PARKING DECK SITES (2005-06-15/R-16a)
WHEREAS, on December 6, 2004, the Council authorized commencement of a Request for Qualifications developer solicitation process; and
WHEREAS, on February 28, 2005, the Council authorized issuance of a Request for Proposals to five development teams which responded to the Request for Qualifications; and
WHEREAS, on March 7, 2005, the Council authorized issuing a Request for Proposals to the five selected developers which included a provision for the Council to consider awarding Phase 2 to the developer selected for Phase 1; and
WHEREAS, two development teams, Ram Development Company and the team of Grubb Properties and Leyland Alliance, submitted proposals to the Town to develop Parking Lot 5 and the Wallace Deck sites; and
WHEREAS, on May 23, 2005, the Council interviewed representatives from the two development teams; and
WHEREAS, on June 2, 2005, the Council Committee on Lots 2 and 5 reviewed an analysis of the development proposals by the Town’s consultant and recommended the selection of Ram Development Company to proceed with negotiation of a development agreement;
NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council selects Ram Development Company of Palm Beach Gardens, Florida, as the Council’s preferred developer to develop Town Parking Lot #5 and the Wallace Parking Deck sites, as recommended by the Council Committee on Lots 2 and 5 on June 2, 2005;
BE IT FURTHER RESOLVED that the Council authorizes 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.
BE IT FURTHER RESOLVED that the Council appoints ____________________________, _______________________ and ____________________________ to the negotiating team.
BE IT FURTHER RESOLVED that if negotiations with the Ram Development Company do not conclude in a Development Agreement, the Town Council may consider initiation of negotiations with Grubb Properties and Leyland Alliance.
BE IT FURTHER RESOLVED that, dependent on the performance of the development team in structuring and implementing the development of Wallace Deck and Town Parking Lot #5, the Council reserves the right to award or not to award at a later date Phase Two of the Downtown Economic Development Initiative – development of Town Parking Lot #2 and, potentially, the RBC Centura property at East Rosemary and North Columbia Streets – to Ram Development Company.
This the 15th day of June, 2005.
RESOLUTION B
A RESOLUTION SETTING A COUNCIL WORK SESSION ON DOWNTOWN ECONOMIC DEVELOPMENT INITIATIVE (2005-06-15/R-16b)
WHEREAS, the Town Council has selected Ram Development Company and decided to initiate negotiations potentially leading to a Development Agreement; and
WHEREAS, the Council desires to give direction to the negotiating team on design and building program prior to the initiation of negotiations;
NOW THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council schedules a work session for 3 p.m. June 20, 2005 in the Council Chamber to meet with Ram Development Company to discuss design and building program issues.
This the 15th day of June, 2005.