San Francisco Redevelopment Agency


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108-032.09-002                                                                                       Meeting of March 17, 2009

 

 

INFORMATIONAL MEMORANDUM

 

TO:                  Agency Commissioners

 

FROM:            Fred Blackwell, Executive Director

 

SUBJECT:    Notice of selection of a short-list of development teams to be invited to participate in Phase II of the Request for Proposals from development teams to propose, design, and develop a high-density residential project on Block 8, located on Folsom Street between First and Fremont Streets; Transbay Redevelopment Project Area

 

 

PURPOSE OF INFORMATION

 

The purpose of this Informational Memorandum is to inform the Commission of the results of Phase I of the Request for Proposals (“RFP”) from development teams to propose, design, and develop a high-density market-rate and affordable residential project on Block 8 in the Transbay Redevelopment Project Area (the “Project Area”), and staff’s intent to issue instructions for Phase II of the RFP to a short-list of development teams.

 

Unless the Commission objects, the Phase II instructions will be released to the short-listed development teams on March 18, 2009.  Staff anticipates returning to the Commission with a recommended developer in July 2009.

 

BACKGROUND

 

Block 8 is a 42,625-square-foot parcel situated on Folsom Street between First and Fremont Streets in the Project Area.  It will be assembled from Lots 005, 012, and 027 of Assessor’s Block 3737, currently owned by the State ofCalifornia (the “State”), and a portion of the State’s operating right of way.  The State is currently using Block 8 as a construction staging area for work on the west approach to the San Francisco-Oakland Bay Bridge, which is scheduled for completion in 2009 and is currently on-schedule.  Pursuant to the Redevelopment Plan for the Transbay Redevelopment Project Area (the “Redevelopment Plan”) and related agreements, all of the land sale proceeds from Block 8 have been pledged to the Transbay Joint Powers Authority to help pay the cost of constructing the new Transbay Transit Center on the site of the existing Transbay Terminal.

 

In conformity with the controls and guidelines adopted by the Agency in the Redevelopment Plan, the Development Controls and Design Guidelines for the Transbay Redevelopment Project (the “Development Controls”), and the Transbay Redevelopment Project Area Streetscape and Open Space Concept Plan (the “Streetscape Plan”), Block 8 will be developed as approximately 600 residential units, including 150 affordable units, and ground-floor retail, in a variety of building types.  The development program for the site consists of: 1) a 550-foot residential tower and an adjacent 50-foot residential townhouse development (the “Market-Rate Project”); and 2) an adjacent 65-foot to 85-foot stand-alone, 100% affordable housing development (the “Affordable Project”).  This development program was analyzed in the Environmental Impact Statement/Environmental Impact Report for the Transbay Terminal/Caltrain Downtown Extension/Redevelopment Project, which was certified in 2004.

 

The development will also include:

 

  • an open space parcel in the center of the block, which will be shared by all four buildings on the block;
  • a shared underground parking facility, to be used by all four buildings on the block;
  • a child care facility, to be located on Fremont Street within the Affordable Project, that will serve a mixed-income population, as well as a mix of children from the Block 8 development and from the rest of the city;
  • the reconfiguration of the existing Folsom Street Off-Ramp, which transverses the block diagonally, to the north edge of the site to create more space for development;
  • streetscape improvements, including the extension of Clementina Alley between First and Fremont Streets;
  • ground-floor retail spaces along the Folsom Boulevard frontage and along a portion of the First Street and Fremont Street frontages; and
  • a minimum LEED Silver level of certification.

 

A minimum of 15% of the units in the Market-Rate Project must be inclusionary housing units.  For inclusionary rental units, incomes of qualifying persons and families may not exceed 60% of the unadjusted Area Media Income (“AMI”).  For inclusionary ownership units, incomes of qualifying persons and families may not exceed 100% of the unadjusted AMI.  The Affordable Project will be family rental housing with a mix of one-, two-, and three-bedroom apartments affordable to families whose incomes do not exceed 50% of the unadjusted AMI. The total unit mix in the Affordable Project will be roughly 25% 1-bedroom units, 50% 2-bedroom units, and 25% 3-bedroom units. 

 

DISCUSSION

 

Pursuant to an Informational Memorandum to the Commission dated October 7, 2008, staff issued the Block 8 RFP on October 22, 2008.  The RFP was publicized to developers, architects, and real estate professionals, including SBEs, through direct mailing to more than 1,200 firms and individuals, newspapers of general circulation, community newspapers, and the Agency’s and City of San Francisco’s websites.

 

The selection process for the RFP is divided into two phases.  In Phase I, development teams were asked to submit qualifications, a basic development concept and an initial financial proposal, including a purchase offer for the Market-Rate Project and a requested subsidy for the Affordable Project. 

 

Phase I proposals were received from the following three development teams (listed in order of receipt):

 

Team 1

Lead/Market-Rate Developer:

AvalonBay Communities Inc.

Affordable Project Developer:

Bridge Housing Corporation

Lead Architect:

Arquitectonica

Other Architect(s):

Leddy Maytum Stacy Architects

Saida & Sullivan Design Partners

 


Team 2

Lead/Market-Rate Developer:

Golub Real Estate Corporation

Affordable Project Developer:

Mercy Housing California

Lead Architect:

Solomon Cordwell Buenz

Other Architect(s):

Gelfand Partners Architects

 

Team 3

Lead/Market-Rate Developer:

Avant Housing

Affordable Project Developer:

Citizens Housing Corporation

Lead Architect:

Richard Meier & Partners Architects

Other Architect(s):

Michael Willis Architects

 

Each of the development teams proposed projects that are in substantial conformance with the controls and guidelines adopted by the Agency in the Redevelopment Plan, the Development Controls, and the Streetscape Plan, as well as the parameters outlined above.  Because the selection process is still underway and the development teams will be submitting revised proposals in Phase II, as described below, the details of the proposals, including the concept designs and the financial proposals, will remain confidential until a recommendation of a development team is forwarded to the Commission for exclusive negotiations.

 

Using the selection criteria specified in the RFP, the proposals were reviewed by a selection panel comprised of Agency staff, one representative from the Transbay Citizen’s Advisory Committee, and one representative from the Planning Department (the “Selection Panel”).   Per the RFP, the three development teams that receive the highest scores in Phase I, based on the criteria in the RFP, are to be recommended to the Commission for a short-list to be invited to participate in Phase II.   Because only three proposals were received, the Selection Panel agreed that all of the development teams will be invited to participate in Phase II.

 

The submittal requirements and selection process for Phase II are outlined in the RFP.  Per the RFP, the three short-listed teams will be required to submit a detailed schematic design, including perspective sketches, and a revised financial proposal.  Staff also intends to issue additional instructions, included in Attachment 1 to this memorandum, to set the schedule for Phase II, clarify portions of the RFP, and request supplemental information, including a structured purchase offer for the Market-Rate Project.  Phase II will also include a presentation and interview with the Selection Panel.  The team with the highest score in Phase II, based on the selection criteria in the RFP, will be recommended to the Commission for exclusive negotiations.

 

The additional instructions for Phase II will be issued to the short-listed development teams on March 18, 2009, unless the Commission objects.  Phase II submittals will be due in May, interviews will be held in June, and staff anticipates returning to the Commission in July 2009 with a recommended development team for exclusive negotiations.

 

(Originated by Christine Maher, Development Specialist)

 

 

 

Fred Blackwell

Executive Director

 

 

Attachment:

 

1.      Phase II Additional Instructions, Transbay Block 8 Request for Proposals

 

 


 

 

Transbay Block 8 Request for Proposals

Addendum #1: Phase II Additional Instructions

 

Following are additional instructions for Phase II of the Transbay Block 8 Request for Proposals (the “RFP”).    These instructions are an addendum to the RFP released on October 22, 2008.  Unless otherwise stated below, respondents to Phase II of the RFP must comply with all provisions of the RFP and this addendum.

 

A.      New Instructions

 

Section 6.B.2, Page 6.2 – Final Financial Proposal

 

1.       Replace paragraph 1 through subsection a.i. (Purchase Offer) with the language in the attached “Structured Land Payment Financial Proposal.”

 

Section 6.C.2, Page 6.5 – Final Financial Proposal (30 Points)

 

2.       A maximum of 20 points will be awarded for the Initial Purchase Offer (Part A).  A combined maximum of 10 points will be awarded for future structured payment proposals (Parts B and C). 

 

Section 3.D.3, Page 3.8 – Reconfiguration of Folsom Street Off-Ramp

 

3.       For the Phase II proposal, the development teams should assume that the Agency will pay for all costs associated with the reconfiguration of the Folsom Street Off-Ramp.  The removal of the off-ramp reconfiguration as a Market-Rate Project developer obligation should be reflected in the revised financial proposal.  The revised financial proposal should document how this change has affected the purchase offer.

 

Section 6.B.2.b.i, Page 6.3 – Affordable Project Sources & Uses Pro-Forma

 

4.       For the Phase II proposal, the development teams should not assume MHP funding from the state.  The RFP previously stated that the proposals could assume MHP funding.

 

Section 3.G.1.c.i, Page 3.13 – Financing Assumptions

 

5.       For the Affordable Project, underwriting should be at 50% of Area Median Income for all units.  The RFP previously stated that rents could be tiered, and be less than 50% AMI.

 

B.      General Clarifications

 

1.       Block 8 will be conveyed to the selected development team in an “as is” condition.  The Agency will not be providing any credits or price adjustments for site remediation costs. (Block 8 RFP, Section 8.A., Page 8.1)

 

2.       The townhouse development must be part of the Market-Rate Project.  (Block 8 RFP, Section 3.B.1, Page 3.3)

 

3.       The affordable project’s funding sources should assume 4% tax credits (not 9% credits) and tax exempt bonds.  (Block 8 RFP, Section 6.B.2.b.i, Page 6.3) 

 

4.       Page 16 of the Development Controls and Design Guidelines states that the Folsom Street setback area cannot be included in the private open space calculations.

 

5.       The Bulk Controls for the market-rate tower are specified on page 20 of the Development Controls and Design Guidelines.  In addition, page 46 of the Development Controls and Design Guidelines states, as a guideline, that the “towers should be sculpted in such a way that the floor plates of the upper portions of the building are perceptibly smaller than the rest of the tower when viewed from a distance.”

 

6.       For the Affordable Project, the annual ground lease payment should be $15,000. (Block 8 RFP, Section 3.G.1.c.iii, Page 3.13)

 

7.       The market-rate tower is already entitled with a height of up to 550 feet.  Development teams are encouraged to maximize the height, and thereby the value, of the tower.

 

 

C.       Additional Submittal Requirements

 

Section 6.B.1, Page 6.2 – Schematic Design

 

1.       Elaborate on the proposed contracting process.  Will there be one general contractor for the project, or separate general contracts for the Market-Rate and Affordable Projects?  If there is one general contractor, how will the contract be negotiated between the general contractor and the developers?

 

2.       Describe how the tower design enhances the visual interest of the neighborhood and the City skyline.

 

3.       All drawings should be at a scale of 1”=32’, and included in the bound proposal in an 11x17 format.  Larger formats can be submitted in addition to the 11x17 format, if desired.

 

4.       The Ground Floor Plan should include building supports and services (i.e. maintenance, mechanical, electrical, garbage, loading, etc). 

 

5.       Perspectives should include the following:  1) the design in the context of the new Folsom Street neighborhood; 2) the design as seen from the Bridge exit; and 3) the design from Fremont/Clementina Streets, showing the low-rise/mid-rise buildings and tower beyond.

 

 

 

Section 6.B.2.a.ii, Page 6.3 – Market-Rate Project Sources and Uses Pro-Forma

 

6.       Itemize the off-site improvements, which include the streetscape improvements, Clementina Alley, Clementina Plaza/Common Area, and the Public Art/Gateway Monument.

 

7.       Show the assumptions used in calculating the permits and fees.

 

8.       Show the assumptions used for site remediation.

 

9.       Show the calculations used in calculating the annual Community Benefit District and Community Facilities District payments.

 

10.   Show project hard costs per unit and per square foot.

 

11.   Show residential and commercial gross square footages.

 

12.   Indicate if the market rate project would require or benefit from tax exempt bond financing.

 

Section 6.B.2.b.i, Page 6.3 – Affordable Project Sources and Uses Pro-Forma

 

13.   Provide affordable project hard costs per unit and per square foot. Are these comparable costs to projects the nonprofits have recently developed?  Provide examples and explain why costs are or are not comparable. 

 

Section 6.B.2.b.ii, Page 6.4 – Affordable Project Operating Budget

 

14.   Show the CAM charge allocation for the Affordable Project, and include all assumptions.

 

D.      Phase II Schedule

 

March 18                     Issue Addendum #1: Phase II Additional Instructions

March 24                     Pre-Submittal Meeting, 1:00 p.m., 1 South Van Ness, Second Floor

May 22                         Deadline for Questions and Requests for Additional Information, 4:00 p.m.

June 4                           Submission Deadline, 4:00 p.m.

June 24-26                  Interviews

July 9                             Transbay Citizen’s Advisory Committee

July 21                           Redevelopment Commission selection of development team

Fall 2009                       ENA to Redevelopment Commission

 

 

Attachment:

 

Structured Land Payment Financial Proposal


 

 

STRUCTURED LAND PAYMENT FINANCIAL PROPOSAL

 

The following should replace paragraph 1 through subsection a.i (Purchase Offer) of Section 6.B.2 of the RFP.

 

2.  Final Financial Proposal

 

The final financial proposal should be based on the schematic design and replaces the initial financial proposal submitted as part of Phase I. The score for the final financial proposal will be calculated independently of the score received for the initial financial proposal in Phase I. The final score for Phase II will use the score for the final financial proposal in place of the score received for the initial financial proposal in Phase I.  The maximum number of points for the final financial proposal, to be awarded as discussed below, will be 30 points. 

  1.  Market-Rate Project

 

Submit a financing plan that is consistent with the Market-Rate Project requirements, including the cost of constructing the shared underground parking garage, the streetscape improvements and any other developer obligations attributable to the Project,  as described in Section 3 of this RFP.  This financing plan should include the following:

 

i.                    Purchase Offer: The Agency is now seeking a three-part structured land payment as the Final Financial Proposal for the Market-Rate Project (the “Project”): A) an initial purchase offer; B) an additional amount calculated at time of Project financing, and prior to conveyance of the property; and C) a second additional amount based upon the performance of the Project after completion.  This three-part structured land payment, as further described below, replaces Section 2.a.i. of the Final Financial Proposal section in the Phase II submission requirements. 

 

The intention is to have a structure, based on verifiable and measurable calculations, in which the Agency will receive additional payments for Block 8.  Accordingly, in addition to the purchase offer described in the original RFP submission requirements and submitted as part of the Phase I proposals, the Agency is seeking a proposal for incremental land payments in the future.  The initial purchase offer (A) will be worth a maximum of 20 points.  The future payment structures (B and C) will be worth a combined maximum of 10 points.  The details of the structured land payment will be included in the DDA negotiations.

 

As described below, the initial purchase offer must be an unconditional payment.  For the structured payment proposals, the Agency is providing recommendations as to how each payment should be structured.  However, the Agency will consider alternative future payment structures.  Such alternatives must include calculations that are easily verifiable and measurable, and must be based on actual project costs.  The Agency will not consider structured payment proposals based on operating costs or net operating income because of the difficulty in verifying such measures.

 

A.      Initial Purchase Offer

 

The Initial Purchase Offer, as described in the original RFP, is an unconditional payment to be paid in full at close of escrow and conveyance of Block 8.  It should include appropriate documentation to support the offer.  There will be no credits or offsets against this payment.

 

B.      Price Adjustment at Time of Financing (and prior to conveyance)

 

An additional land payment will be paid to the Agency at the time when financing is secured and before conveyance of Block 8, if the return on total Project cost exceeds a stipulated target return to the Buyer.  The determination of the additional land payment will be made after the Buyer has secured a guaranteed maximum price contract from a qualified contractor and at the time commercially reasonable financing commitments (including both debt and equity) for no less than 90% of the Project cost are secured.  The formula will be calculated using capitalized value, revenue, cost, and return projections in the documents used to secure financing commitments.  

 

Agency’s Proposed Structure.  Following is the Agency’s proposed structure, with the percentage to be filled in by the development team.  The Agency will consider alternative structures, as discussed above.

 

The return is defined as the difference between the capitalized value of the Project  and  total Project cost (including the Initial Purchase Offer) divided by the total Project cost (the “Return”).    If the Return is in excess of 12% (the “Stipulated Target Return”), then ___% of the amount above the Stipulated Target Return will be paid to the Agency at the close of escrow and conveyance of Block 8.  This will be in addition to the Initial Purchase Offer, which is included in the Project cost.   

 

C.      Price Adjustment at Stabilization of Rental Units or Sale of Ownership Units

 

Based on the performance of the Project after completion, an additional land payment, in addition to A and B above, may be paid to the Agency.  With this adjustment, the Agency will be seeking assurances from the Buyer that its lenders and investors will agree to the proposed performance-based payment offered by the Buyer. 

 

Agency’s Proposed Structure.  Following is the Agency’s proposed structure, with the percentage to be filled in by the development team.  The Agency will consider alternative structures, as discussed above.

 

§  Rental Projects

 

An additional land payment will be determined based on the appraised value of the Project no sooner than two (2) years and no later than three (3) years after a Temporary Certificate of Occupancy is issued for the Project.  However, if all or a portion of the Project is sold to an independent third party any time before the end of the third year, then the sale price for the portion of the Project that is sold in combination with the appraised value for the unsold portion of the Project will be used. 

 

An additional payment will be paid to the Agency if the return on cost exceeds a stipulated target return to the Buyer.  The return is defined as the difference between the appraised value of the Project and total Project cost (including the Initial Purchase Offer and any additional land payment from the formula described in B above) divided by the total Project cost (the “Return”).  The total Project cost is the cost, including the Initial Purchase Offer and any additional payment from the price adjustment formula in B above, as stated in a financial report prepared by an independent accounting firm using GAAP and used with lenders and investors of the Project.  If the Return is in excess of 12% (the “Stipulated Target Return”), then ___% of the amount above the Stipulated Target Return will be paid to the Agency.  This amount will be in addition to the Initial Purchase Offer and any additional payment from the price adjustment formula in B above, as these amounts are included in the total Project cost.   The payment will be made to the Agency within 90 days of the date of the appraisal.

 

§  Ownership Projects

 

Additional payments will be made to the Agency if the return on cost exceeds a stipulated target return to the Buyer on a per unit basis.  The return is defined to be the difference between the sale price of a unit and the total cost of a unit divided by the total cost (the “Per-Unit Return”).   The total cost of a unit will be calculated using an agreed upon per square foot cost of development, including the Initial Purchase Offer and any additional payment from the price adjustment formula in B above, as verified by an independent accounting firm using GAAP.  If the Per-Unit Return is in excess of 12% (the “Stipulated Target Return”), then ___% of the amount above the Stipulated Target Return will be paid to the Agency at the close of escrow for each unit.  This amount will be in addition to the Initial Purchase Offer and any additional payment from the price adjustment formula in B above, as these amounts are included in the total Project cost.