Memo from City Manager to City Council Regarding Status Report on Site A Development at Alameda Point, including Presentation of Updated Development Plan, Approach to Transportation, and Disposition and Development Agreement (DDA), March 17, 2015
Summary of the Site A Disposition and Development Agreement
The ENA grants the potential developer of Site A (APP) the exclusive right to negotiate terms of disposition and development of Site A with the City for six months. The ENA includes the potential for two three-month extensions, which can be granted by the City Manager. If successful, once the ENA period is finished both parties will have agreed to a DDA (i.e., price and terms of payment for the land and development obligations), in addition to the Development Plan discussed above. Exhibit C (Term Sheet) of the ENA outlines the agreed upon key terms of a DDA (Exhibit 7). Building upon the Term Sheet, City staff has been negotiating the DDA with APP over the past several months. While the details of the DDA are still under negotiation, the following provides an overview of the organization and content of the DDA for Site A so that the City Council knows what to expect when City staff comes to the City Council in the next couple of months recommending approval of an agreed upon DDA:
1. Term of the Agreement. The DDA is expected to have a 20 year term. The DDA will also include a Milestone Schedule that sets out the schedule for development of the Property during that Term of the DDA.
2. Financial Terms. This section of the DDA consists of the following provisions, many of which were included in the Term Sheet:
a. Non-refundable deposits provided by the developer, including $200,000 that was provided at time of execution of the ENA and an additional $100,000 to be provided at execution of the DDA ;
b. A total land value of $108 million. Developer will pay the land value by installing backbone infrastructure valued at $88 million, including park improvements; $5 million for the planned sports complex at Alameda Point; a $5 million credit for accelerating the Seaplane Lagoon Plaza improvements (contemplated in the $88 million infrastructure); and $10 million for a ferry terminal;
c. Profit participation payments (or a contingent purchase price) consistent with the details provided in the Term Sheet. The profit participation provisions are included in the DDA to ensure that the City participates in any windfall profit from the development of Site A after the developer achieves a market rate of return on their investment. The DDA contemplates increasing percentages of profit participation by the City (in addition to the land payment described above) as the developer achieves increasing rates of return on their investment, referred to as an Internal Rate of Return (IRR). This section of the DDA also defines eligible development costs, gross proceeds, and IRR, among other terms necessary for calculating the potential profit participation payments. This section also describes the City's right to audit the developer's financials to determine whether profit participation payments were warranted.
3. Financing Plan. This section requires the developer to provide a project financing plan for the entire Site A project. Additionally, prior to the conveyance of each phase of the property to the developer, the developer will be required to submit a detailed phase financing plan that includes evidence of commitment of both debt and equity sources of funding so that the City can have confidence that the developer has sufficient resources to complete the development. The project financing plan will include: a detailed development budget and cash flow analysis, including all sources and uses of funds; a description of any partnerships for equity funding; and a plan and budget for creation of any public financing districts.
4. Disposition of Property and Escrow. This section outlines the process for transferring each phase of land within Site A from the City to the developer, including the conditions that must be met by the developer and City before this can occur. The City will not transfer the property to the developer prior to the Developer obtaining all required approvals necessary for the construction of the infrastructure in the phase to be transferred. Additional conditions, include that the City has title to the property, the developer has evidence of insurance and that a final map has been approved for the phase creating the parcel to be transferred. This section also establishes the outside closing dates for the transfer of each phase of property. Consistent with the Term Sheet, the Developer has the option to extend the outside closing date for transfer of a phase by paying the City an extension fee.
5. Infrastructure Construction. The backbone infrastructure to be constructed by the developer consistent with the Master Infrastructure Plan for Alameda Point was clearly delineated in the Request for Qualifications from developers for Site A and the ENA (Infrastructure Package). The DDA will have a detailed plan for the phasing of the Infrastructure Package consistent with the Term Sheet that highlighted a number of key improvements that the developer agreed to provide in Phase 1, including the complete extension of RAMP between Main Street and Ferry Point Road at the Seaplane Lagoon, $5 million worth of permanent waterfront park improvements, the sewer line between Site A and the sewer pump station at the northern edge of the property, and the Main Street intersection improvements. This section of the DDA also includes the requirements of the developer to enter into a Subdivision Improvement Agreement, including issuance of payment and performance bonds or other equivalent security to ensure completion of the infrastructure improvements; to negotiate in good faith a project labor agreement with the Building and Construction Trades Council for Alameda County; to pay prevailing wages consistent with State and local laws; and to comply with an agreement the City has with the Alameda Point Collaborative (APC), one of the three supportive housing providers located at Alameda Point, to establish a goal that residents of APC perform 15 percent of all apprentice hours.
6. Vertical Construction. This section of the DDA sets forth the developer's obligations for construction of the vertical improvements of the Site A project (i.e., buildings) consistent with the City's approvals (i.e., Development Plan, design review, and building permits). Prior to commencement of vertical construction, the developer will be required to provide the City with a completion assurance either in the form of payment and performance bonds or completion guarantee.
7. Affordable Housing Requirements. As described above, 25% of the 800 housing units planned for Site A are required to be permanently restricted to very-low, low, and moderate income households. The 128 very-low and low-income housing units will be constructed by the nonprofit developer, Eden housing in a stand-alone project to maximize the potential for obtaining financing, while the remaining moderate income units will be integrated with the market rate housing projects. A detailed affordable housing agreement will be attached to the DDA that outlines the developer's and Eden Housing's obligations regarding constructing the affordable housing.
8. Additional Developer Obligations. This section of the DDA is a catch-all section that highlights other developer obligations related to the development of Site A, such as Project Covenants, Conditions & Restrictions (CC&Rs), which require private property owners to maintain private improvements adjacent to and visible from the public right-of-way in a first class condition, compliance with the mitigation, monitoring and reporting program (MMRP) contained in the EIR, payment of taxes, non-discrimination, among other terms.
9. Phase 0 Activities Plan. As discussed above, the developer must prepare and implement a Phase 0 Activities Plan consistent with Exhibit C of the Term Sheet (Exhibit 3). This section of the DDA outlines the developer's obligations to implement the Phase 0 Activities Plan.
10. Master Lease and Master Tidelands Lease. This section of the DDA outlines the conditions under which the City will lease of certain buildings and property to the developer under two circumstances: (1) the reuse and lease of specifically identified existing buildings and their premises outside of the tidelands areas before conveyance of ownership of the related land occurs (Master Lease); and (2) any interim or long-term reuse and lease of buildings and land within the tidelands areas by the developer for up to 66 years (Master Tidelands Lease), as no fee title transfer of property can occur in the tidelands areas.
11. City Obligations. This section of the DDA outlines the City's obligations related to Site A, including processing permits and approvals, facilitating conveyance of land from the Navy, effectuating a tidelands trust exchange for each phase of land from the Navy, considering in good faith the formation of one or more community facilities districts to provide funds for construction and maintenance of infrastructure.
12. Assignment and Transfer. This section of the DDA limits the developer's rights to transfer its interest in the DDA and requires the City approval of any such assignment or transfer prior to the completion of construction. Certain transfers are allowed including for financing purposes, the sale and rental of residential and commercial space and transfers to affiliates of the developer.
13. Security Financing and Rights of Holders. Mortgages, deeds of trust, and other real property security instruments are permitted to be placed on the property for purposes of financing the development as authorized in this section of the DDA.
14. Hazardous Materials. This section outlines the developer's obligations regarding hazardous materials, requirements to notify the City of any discovery of hazardous materials and/or claim related to hazardous materials, and cross-references developer's hazardous materials indemnification, as contained in the following section.
15. Indemnification. This section describes the developer's obligations to indemnify the City for: the developer's or contractor's performance or non-performance under the DDA, hazardous materials, Phase 0 activities, the Master Lease, and Master Tidelands Lease.
16. Insurance Requirements. This section of the DDA sets out the insurance requirements that are imposed on the developer once property is conveyed to the developer, including comprehensive general liability, vehicle liability, worker's compensation, construction contractor's, and pollution liability insurance.
17. Default and Remedies. This section of the DDA governs the developer's and City's rights to terminate the DDA and the developer's and City's remedies for breach or failure under the DDA.
18. General Provisions. This section of the DDA includes numerous miscellaneous provisions, such as notices and communications, non-liability of officials, employees and agents, force majeure (i.e., extensions of the term for certain circumstances outside the either party's control), severability, legal actions, covenants to run with land, authority of developer, amendments, counterparts, among others.
19. Definitions and Exhibits. This section provides explanations of all of the "defined terms" in the DDA and lists the exhibits that are part of the DDA.
It is expected that the organization and content of the final DDA will change from what is described above over the next couple of months, as the document is still under negotiation. It is also important to note the City's obligations under the ENA are only to negotiate exclusively with APP and to consider approval of the DDA. The City is under no obligation to approve any document produced during the ENA period. The developer has also requested a Development Agreement (DA) that would vest the Site A's current and future project approvals for the term of the DDA. Generally speaking a DA would allow greater latitude and flexibility in imposing conditions and requirements on the project in the form of public benefits, and affords the developers greater assurance that once approved, the City's regulatory structure, e.g. its zoning code, will remain the same. The City is negotiating the terms of the DA with the developer as well.