Exhibits:

1. Map of Site B

2. Summary of Site B Development Strategy

File #: 2015-2169
Type: Regular Agenda Item
Body: City Council
On agenda: 10/20/2015
Title: Recommendation to Proceed with a New Development Strategy for the Enterprise District (Formerly Site B) at Alameda Point. (Base Reuse 819099)
Attachments: 1. Exhibit 1 - Site B Map - final, 2. Exhibit 2 - Final Summary of Site B Development Strategy

Recommendation to Proceed with a New Development Strategy for the Enterprise District (Formerly Site B) at Alameda Point. (Base Reuse 819099)

To: Honorable Mayor and Members of the City Council
From: Elizabeth D. Warmerdam, Interim City Manager
Re: Recommendation to Proceed with a New Development Strategy for the Enterprise District (Formerly Site B) at Alameda Point

BACKGROUND

In April 2014, at the same time that the City Council directed staff to issue a Request for Qualifications (RFQ) from developers for the 68-acre mixed-use Site A project, it also authorized the issuance of an RFQ from developers for an 82-acre commercial development site within the Enterprise District at Alameda Point, previously referred to as Site B (Exhibit 1). The City received four complete qualified responses from developers to the Site B RFQ and on September 16, 2014, the City Council directed staff to negotiate key business and financial terms with two developer finalists. During these negotiations, the developers were not willing to commit to upfront infrastructure, land payments or a milestone schedule for implementing development due to the uncertainty of the commercial market in Alameda and the high cost of infrastructure. As a result, in December 2014, the City Council approved postponing any decision on Site B until 2015 when there would be more certainty about the Site A development and the timing of its infrastructure development, which has the potential to significantly benefit commercial development sites.

In July 2015 the City Council approved the 68-acre mixed-use Site A project at Alameda Point consisting of 800 housing units and 600,000 square feet of commercial space. The first phase of the Site A project is in the design phase and is comprised of major infrastructure investment, including a new upgraded sewer line from the pump station at the northern boundary of Alameda Point, the “gateway” extension of Ralph Appezzato Memorial Parkway, waterfront park and retail amenities, and a significant contribution towards a new ferry terminal in the Seaplane Lagoon. A key issue raised as part of the Site A planning process was the strong desire by the City Council and community to attract new jobs to Alameda Point to balance the housing units being proposed at the former base and elsewhere in the City. Now that there is more certainty about Site A, including its schedule and commitment towards key infrastructure improvements, staff is recommending proceeding with a new development strategy for the Enterprise District at Alameda Point.

DISCUSSION

Upon approval of Site A, an inter-departmental team of City staff, in concert with its leasing and technical advisors, discussed and evaluated potential options for a renewed effort to attract commercial development to the Enterprise District. These options include: (1) re-issuance of an RFQ from developers for the Enterprise District (formerly Site B); (2) re-initiation of negotiations with one or both of the two Site B developer finalists; and (3) a new development strategy that focuses on attracting a major commercial business or “end user,” instead of commercial developers, by leveraging its existing leasing agent relationship with Cushman & Wakefield, an international full-service real estate brokerage house. Staff recommends proceeding with the new development strategy focused on end users that would consist of three phases tied to the progress being made during Site A development over the next 24 to 36 months (Exhibit 2). Staff recommends this approach for the following reasons:

• New Approach. Re-issuing the RFQ has the potential to stigmatize the Enterprise District more than renew interest in the site since developers and users less familiar with the reasons to postpone the first Site B process may perceive the Enterprise District as inherently “flawed” or less desirable. Also, a new approach less focused on developers and more focused on “end users” has the potential to cast a wider net without foreclosing any opportunities. If an interested commercial user needs help identifying a qualified developer, the City could re-engage one or both of the Site B developer finalists or other developers, and help facilitate a development relationship. This new approach does not preclude re-engaging the developer finalists in the future, if appropriate.

• Cost-efficiency. The new strategy would leverage the City’s existing listing agreement and commission structure with Cushman & Wakefield at Alameda Point and require very little upfront costs from the City. While Cushman & Wakefield would use their resources to prepare much of the marketing material, there may be instances, however, that the City would decide to strategically invest additional funds in enhanced marketing materials as the development strategy evolves. Cushman & Wakefield is highly qualified, maintains relationships throughout the Bay Area and country with numerous commercial brokers, developers, and users, and specializes in marketing and brokering large-scale commercial land and development transactions, such as the VF Outdoor Campus in Harbor Bay in Alameda.

• Flexibility. This approach does not require that the City enter into an exclusive negotiation agreement or disposition and development agreement with long-term rights to a developer for the Enterprise District land; therefore, it would not foreclose potential interest from end users that already have relationships with a preferred developer or contractor or any other interested developer. The City would maintain flexibility in marketing and use of the site until an interested commercial user or developer suitable to the City was obtained.

The following provides a summary of the three phases of the proposed new strategy described in greater detail in Exhibit 2:

• Awareness Phase. This phase would occur immediately and focus on raising awareness of the Enterprise District opportunity, including developing a marketing brochure, refreshing and re-launching a marketing and outreach campaign with a focus on the commercial brokerage community, and identifying initial corporate or institutional users that may be an appropriate fit for the Enterprise District. This phase would correspond to the Pre-Infrastructure Phase of the Site A development.

• Connection Phase. Once the City transfers ownership of the first phase of the Site A project to the Site A developer and the developer commences construction on infrastructure, the second phase of the Enterprise District development strategy would commence: the Connection Phase. This phase would take advantage of “the buzz” and any media coverage of the Site A ground-breaking to intensify its marketing efforts by creating an Enterprise District Newsletter, providing streaming video of the Site A construction process, hosting a targeted broker event, creating a social media campaign, expanding its contact list to include more end users and developers, and enhancing the connections made with potential leads through personal visits, direct mail, phone canvassing and email.

• Delivery Phase. Once key Site A infrastructure improvements are near completion and there is much greater certainty about the timing of delivering land that can be developed for a commercial use, outreach will intensify, highlighting the expedited delivery of this development opportunity and focusing on executing a transaction with a corporate user. Again, this phase will kick-off with an on-site celebration of infrastructure completion, including possibly a BBQ for tenants and prospective users and developers. Other marketing efforts will include expanding the target list to smaller developers and owner/users, intensifying the social media and public relations campaign, and continuing the personal visits, direct mail, phone canvassing and emails with potential users, developers, and brokers.

In sum, City staff recommends that the City Council provide direction this evening to proceed with a new development strategy for the Enterprise District (formerly Site B), as described above.

FINANCIAL IMPACT

There is no financial impact to the City’s General Fund or Base Reuse Department budgets (Fund 858) related to proceeding with a new development strategy for Site B at Alameda Point.

ENVIRONMENTAL REVIEW

No environmental review is required as proceeding with a new development strategy for Site B is not a project as defined under CEQA. CEQA Guidelines, section 15378(a).

RECOMMENDATION

Proceed with a new development strategy for the Enterprise District (formerly Site B) at Alameda Point.

Respectfully submitted,

Jennifer Ott, Chief Operating Officer - Alameda Point

Financial Impact section reviewed,

Elena Adair, Finance Director

Exhibits:

1. Map of Site B

2. Summary of Site B Development Strategy