ORIGINAL DEVELOPER PROPOSAL COMPARED TO PROPOSED MEMORANDUM OF UNDERSTANDING
Developer Proposal 410 parking spaces in underground parking garage
MOU 400 parking spaces of which 375 are underground
Reduction in underground cost savings in order to permit fixed investment by the Town.
Developer Proposal 27,320 square feet of retail at Lot 5
MOU 24,000 square feet
MOU is net leasable square feet versus gross square footage in proposal.
Developer Proposal Wallace Deck Project, 3,500 square feet of retail
MOU 6,000 square feet of retail
Wallace Deck Project completely revamped after submission of Developer proposal in order to create greater efficiency and an improved architectural design.
Developer Proposal Suggest ownership of parking garage, other than the 173 public spaces, would be owned by Developer. Additionally, public space to be owned by Developer and leased to the Town.
MOU Parking garage entirely owned by the Town but with certain spaces leased to Developer. All public space owned by the Town.
Ownership of the Parking Garage and public facilities was felt important in order to ensure long-term control and maintenance of these facilities. Further, public money paying for a substantial portion of these improvements and accordingly should be Town-owned.
Developer Proposal Contemplated constructing 50 new parking spaces at the Wallace Deck and utilizing more than 100 of the existing Wallace Deck spaces for condominium owners at the Wallace Deck Project.
MOU A maximum of 55 existing parking spaces at the Wallace Deck will be made available to residents of condominiums at a monthly fee of $85. No new parking spaces will be constructed at the Wallace Deck site.
The cost of constructing additional parking spaces at Wallace Deck was felt prohibitive. Of the 309 parking spaces available at the Wallace Deck it was the Town’s view that only a maximum of 55 could be committed to condominium residents so as to continue to maintain parking for customers of nearby establishments. The economics drive utilizing the Lot 5 Parking Garage to provide necessary parking needed for condominiums (including affordable housing units) constructed at the Wallace Deck. Parking for all affordable housing will be provided at the Lot 5 Parking Garage.
Developer Proposal The Developer proposed two types of lease payments: $4,000,000 and $3,000,000, respectively, for the Lot 5 and Wallace Deck leases and annual payments on the retail components of the project at $2.50 per net leasable square foot.
MOU A lease payment of $4,750,000 with respect to Lot 5 and $3,150,000 with respect to the Wallace Deck Site.
Rather than receive annual rent of $2.50 per net leasable square feet for the retail space, the same was calculated over the life of the lease, with an appropriate escalator and then discounted to present value. This computation was then used to adjust the rent from the original $4,000,000 and $3,000,000 to the present $4,750,000 and $3,150,000. The objective was to create more present rent that could be used to fund the Town’s investment and with minimum use of other Town funds. The overall objective was an arrangement where the total Town investment was not only fixed (with all construction risk, price increases, etc. being that of the Developer) but with the total amounts being paid by the Developer to the Town being close to the total investment required of the Town in the Project. This revised arrangement cuts the immediate out-of-pocket expense of the Town to approximately $500,000, which is attributable to special parking needs for the affordable housing and was triggered in part by the unwillingness of the Town to commit more than 55 parking spaces at the Wallace Deck to the condominium purchasers.
Developer Proposal The Developer proposed to pay to the Town $150,000 to discharge the existing debt on the Wallace Deck Site.
MOU The $150,000 originally proposed to be paid by the Developer has now been included in the Rent on the Wallace Deck Site. The indebtedness on the Wallace Deck was in fact substantially more than $150,000 (approximately $6,500,000). Rather than discharging the debt on the Wallace Deck Site the Town is securing a release of the air rights and the .29 acre lot on the corner of Rosemary and Henderson Street from the Deed of Trust securing the Wallace Deck indebtedness.
Developer Proposal The Developer proposed a Town investment of approximately $8,515,000 representing 50 percent of the cost of all public space, 100 percent of the increased cost to install the parking underground, 100 percent of the cost to build 173 replacement parking spaces in the new garage at Lot 5, plus the cost to retire the outstanding bonds on the Wallace Deck. The estimated additional funds required by the Town over and above payments from the Developer was $1,086,000. This was an estimate and could increase or decrease based upon actual construction costs.
MOU The Town’s Investment is fixed at $8,400,000 unless the Town specifically requires the Developer to add additional improvements. All risks of cost overruns including increased construction costs are borne by the Developer.
The Town negotiated for a fixed investment that would place all construction risks, price increases, etc. on the Developer. The Rent paid by the Developer for the Lot 5 Lease and the Wallace Deck Lease aggregates $7,900,000. The only additional funding required by the Town from Town sources is $500,000 which is to go toward providing parking for the affordable housing units.
Developer Proposal The Developer’s proposal contemplated a non-subordinated ground lease of Lot 5 and the air rights over the Wallace Deck plus the lot at the corner of Henderson and Rosemary Streets. The leases would be structured with a term of 40 years as to retail/commercial improvements, and 99 years for the residential component.
MOU The lease term is 99 years for both retail/commercial and residential, plus the right to extend the leases an additional 25 years beginning in the 70th year of the lease term.
The Developer was concerned over issues of marketability and accordingly the Town agreed to the increased term of the retail/commercial component plus the extension right. The Town will receive a payment upon exercise of the option to extend. This trade-off was a key element in allowing the Town to secure the agreement of the Developer to fix the Town’s Investment at $8.4 million with the Developer assuming all cost overrun risk.
Developer Proposal The Developer’s proposal provided for 17.5 percent of the units being affordable housing.
MOU The MOU provides that 15 percent of the total number of units will be affordable housing, provided however, if the Developer constructs more than 233 residential units, 20 percent of the excess must be affordable housing.
The Developer computed the 17.5 percent in its response as being 17.5 percent of the market rate units (not all of the residential units). This equates to 15 percent of the total units. The Developer estimates that each affordable housing unit will result in a loss to the Developer in excess of $50,000 per unit. The Town was unable to negotiate an increase in the affordable housing beyond the 15 percent as contained in the MOU. However, the 15 percent complies with the Town’s current guideline.