DISPOSITION ANALYSIS IN SUPPORT OF DISPOSITION OF REAL PROPERTY

Transcription

1 DISPOSITION ANALYSIS IN SUPPORT OF DISPOSITION OF REAL PROPERTY Project Name: St. Elizabeths East Phase One Property Description: Assessment and Taxation Lot Nos. 809, 811, 812, 813 and 823 on Lot 2, Square S-5868; located between 1300 and 1100 Alabama Ave., SE in Washington, D.C. (the Property ) Size of Property: acres Zoning of Property: St-E 10, 11, 14(a/b) and 17 Ward: Ward 8 Proposed Purchaser: Redbrick LMD, or its permitted successors/assigns ( Developer ) Description of Development Program: The St. Elizabeths East Phase One will create a truly unique destination where retail, office, and mixed-income residences combine with history and spaces for innovation and the arts. These diverse uses will come together to form a vibrant neighborhood that is integrated into the Congress Heights community. The proposed redevelopment program will consist of four phases (each a Phase and collectively, the Phase One ), as described below and depicted in the Phase One plan included as Attachment 1. Since the St. Elizabeths East campus is a National Historic Landmark District, the Development Program described below is noted in some instances as approximate because the proposed project will be subject to review by the District s Historic Preservation Review Board and the State Historic Preservation Officer, through which certain revisions to the proposed design and layout of the project are subject to change. Plans for Phase One were informed by the St. Elizabeths East Master Plan & Design Guidelines (the Master Plan ), which calls for over 5 million square feet of mixed-use development on St. Elizabeths East. The vision outlined in the Master Plan is further described in the surplus analysis included as Attachment 2. The Phase One plan includes the following: Phase Phase/Property Description Redevelopment Description Phase A Parcel StE- 11 includes seven historic structures (Buildings ) located on 10.9 acres. The Master Plan notes that quality residential development is an essential ingredient of the District s vision for creating a live-work-play community at St. Elizabeths East. The Developer s Phase One plan envisions that the seven historic buildings on Parcel StE- 11 will be redeveloped as multi-family buildings, with approximately 250 apartments. The Phase One plan commits to exceeding the District s requirement for affordability with 80% Page 1 of 23

2 Phase B Phase C Phase D Parcel StE- 14(b), which is currently vacant, except for the temporary walkway and temporary installation of public art. Parcel StE- 14(b) sits along the southwestern edge of the campus, and a portion of it lies directly between Dogwood Street and Alabama Avenue. It marks entrances to the campus along Malcolm X Avenue and 11th and 12th Streets Phase C contains Parcels StE- 14(a) and 10, situated along the southwestern edge of the campus, between Dogwood Street and Congress Heights. The Parcels marks the entrances to the campus along both Malcolm X Avenue and 8th Street/Oak Street, and are currently vacant except for the temporary walkway. Parcel StE- 17 is a vacant site that occupies the southern edge of the St. Elizabeths East Campus. The Parcel will provide its primary face along Alabama Avenue and have a continuous frontal façade along Dogwood Street. Finally, Parcel StE- 17 will frame entrances to the campus and public spaces along both affordable housing targeted to families earning 60% of AMI or less. The Phase One plan also includes approximately 14,000 square feet reserved in the basement levels for innovation, technology, arts and culture spaces that will be provided at low-cost to local community groups and organizations. The Phase One plan provides that Parcel StE- 14(b) is targeted to provide for sale townhomes/duplexes, of which 30% will be set aside for families earning from 30% - 80% AMI. In addition, approximately 15 of the townhomes will be designed as live-work units which will provide both housing and workspace opportunities for small business owners and entrepreneurs. The Developer s Phase One plans anticipates that the livework units will be concentrated within Parcel StE- 14(b), facing Alabama Ave., SE, to begin to provide a transition into the commercial development on Parcel StE-17 adjacent to the Congress Heights Metro Station. The Phase One plan anticipates that Parcels StE- 14(a) and 10 will feature for-sale townhomes/duplexes, of which 30% will be set aside for families earning from 30% - 80% AMI. As described in the current form of the Land Disposition Agreement ( LDA ), the Developer will have the option to purchase the Parcels StE- 14(a) and 10 upon execution of the ground lease for Parcel StE-11 and the commencement of construction of the multi-family residential building on Parcel StE- 11. The Phase One plan anticipates that Parcel StE- 17 will be developed into a mixed-use building that will serve as a gateway to the mixed-use and innovation-focused redevelopment. Parcel StE- 17 sits adjacent to the Congress Heights Metro Station and will be redeveloped as a 217,800 square feet Page 2 of 23

3 12th and 13th Streets. mixed-use building. Consistent with the Master Plan, a minimum of 30,000 square feet on the first floor of Parcel StE- 17 will offer much needed retail to service the campus and surrounding community. In addition, the building will serve as part of a signature entrance to this mixed-use and innovation-focused community and an immediate sense of place adjacent to the Metro. Given the low density permitted for the site, the current form of the LDA allows the Developer to seek a modification to the zoning code to provide additional density on the Parcel. The undeveloped areas on the site will be activated as Innovation Greenspace on an interim basis. 1. Proposed Method of Disposition. DC Official Code (b)(8). A negotiated sale to the Developer for specifically designated purposes or a ground lease for a period of greater than 20 years. DC Official Code (b)(8)(B),(C). 2. Description of efforts to dispose of Property for direct public benefit as described on specific government plan adopted by the Mayor or Council (e.g. Community Development Plan, the Comprehensive Plan, the Strategic Neighborhood Plan, or the Comprehensive Housing Strategy Plan). DC Official Code (a-2). The Office of the Deputy Mayor for Planning and Economic Development ( DMPED ) carefully evaluated the Property and the proposed development program to ensure that it reflects and maximizes the District s economic development and land use goals and provides substantial public benefit as set forth by specific government plans and policies. DMPED s evaluation was heavily informed by the St. Elizabeths East Master Plan, which provides guidelines for the redevelopment of the entire East campus. The Master Plan was completed in June 2012 with significant community input and, because of the historic nature of the campus, was developed in coordination with the historic preservation community. The Master Plan allows for newly constructed offices with larger footprints alongside the existing historic buildings promoting interaction among all components of the development from large and small companies to retailers and new residents to the campus. For Phase One, the Master Plan envisions a transit-oriented town center consisting of housing, retail, and other amenities serving the public. These uses are critical to providing the density and 24/7 activity needed to support the office, entertainment, and retail activities and are currently located in the area of the portion of the East campus closest to the Congress Heights Metro station. Page 3 of 23

4 Consistent with these goals, the parcels of Phase One were identified because of their ability to most practically achieve a sense of place, leverage the activities of the proposed Innovation Hub, and establish a critical mass of tenants and activity at St. Elizabeths East to spur future development phases. Specifically, the proposed Phase One parcels offer: Proximity to the Congress Heights Metro Station, allowing for the creation of a Transit- Oriented Development; Relatively condensed area allowing for proximity of diverse uses and pedestrian oriented scale; Re-use of historic buildings that allows for a possible distinctive residential component of Phase One that is within walking distance of the Congress Heights Metro Station; Ground-up development pads for potential office and retail uses adjacent to the Congress Heights Metro Station; and Opportunity to take full advantage of existing surface parking areas to serve Phase One until commencement of future development phases. a. Public Benefits Requested in Solicitation. In accordance with the St. Elizabeths East Master Plan, as discussed above, as well as other District economic and land use goals and objectives, DMPED issued a Request for Proposals ( RFP ) that solicited development proposals that met or exceeded those goals. Specifically, the DMPED solicitation called for: Create an Innovation Community: Develop a technology-focused Innovation Hub that includes a collection of academic, office, and research spaces, with potential coworking and incubator facilities. Provide a Mix of Uses: Create a plan that accommodates a mix of uses, including residential, office, retail, and the Innovation Hub. If needed, the District will work with the Master Developer to refine the District s Master Plan for St. Elizabeths East. Creatively Reuse Historic Structures: Establish a reuse and preservation strategy for a unique and sustainable redevelopment. Create Opportunities for DC-Based Businesses: Develop business incubation and capacity-building opportunities for DC-based businesses. Preference was given to respondents who assembled development teams that include Ward 8 and Certified Business Enterprise ( CBE ) developers, contractors, and/or equity partners. Generate New Job and Educational Opportunities for DC Residents: Create new employment and education opportunities for DC residents, particularly those of Ward 8. Page 4 of 23

5 Maximize Value to the District: Through land-proceeds and long-term financial returns through increased tax revenues, maximize the value of the Phase One area. Activate the Campus: Activate the campus through activation of interim use sites. In addition to the goals specifically stated in the RFP, the Council of the District of Columbia passed the Disposition of District Land for Affordable Housing Amendment Act of 2013 (D.C. Act (November 27, 2014)) requiring 30% of all multi-family units that are part of a District disposition and development project be offered as affordable housing units at specified AMI levels. As a result, DMPED carefully reviewed these requirements as applicable to the development of the Property and ensured that Phase One proposal complies with these requirements. In the case of the development of the multi-family building on Parcel StE- 11, these requirements are exceeded thereby offering significant public benefit in the form of longterm affordable housing units. b. Describe any Public Benefits in proposed Developer s Development Plan. The Developer s proposal for redeveloping the Property, as negotiated between the Developer and DMPED, meets and exceeds the public benefits requested as part of the RFP, which include: Create an Innovation Community: Develop a technology-focused Innovation Hub that includes a collection of academic, office, and research spaces, with potential co-working and incubator facilities. The Phase One plan reserves 14,000 square feet in Parcel StE- 11 (the CT Campus) in the basement levels for innovation, technology, arts and culture spaces that will be provided at low-cost to local community groups and organizations. In addition, the Phase One plan reserves the greenspace adjacent to the mixed-use building on Parcel StE- 17 for use as interim-use programmed greenspace on Parcel StE- 17 fronting Alabama Ave. This space will be reserved for programs including, but not limited to, arts and cultural temporiums, creative art installations, technology displays, pop-up retail, rain barrel installation (or low-impact development), urban agriculture (including hydroponics and aquaponics), performance areas, athletics or recreational play space, temporary parklets, food incubators, and/or STEM education programs. Provide a Mix of Uses: This proposed mixed-use program furthers the land-use planning and real estate development goals stated in the St. Elizabeths East Master Plan by maximizing transit-oriented development and enhancing this corridor s ground floor retail presence and continuity. Specifically: Phase A of the project features plans to restore seven historic buildings into an estimated 250 unit multifamily apartment building that includes 80% affordable rental units targeted to families earning 60% of AMI or less. Of those affordable housing units, the Developer plans to set aside 30% of the units for individuals/ families at or below 30 and 50% AMI, with the remaining units being reserved for individuals/ families at or below 60% AMI. In addition, the Developer has agreed to set-aside space in Phase A for innovation/arts/culture uses as described above. Page 5 of 23

6 In addition, Phases B and C of the project are targeted to provide for-sale housing, of which 30% will be set aside for families earning from 30% - 80% AMI. In addition, approximately 15 of the townhomes will be designed as live-work units which will provide both housing and workspace opportunities for small business owners and entrepreneurs. Phase D is planned to feature much needed retail space, along with a commercial office building. The District is working with the Developer to identify innovation, business and tech-related tenants for the building. The proximity of Parcel StE- 17 to the Metro Station and prominence within the historic campus all provide opportunities for new buildings that exhibit design excellence and creativity. The Developer s conceptual designs encourage pedestrian traffic and activity, particularly with ground floor retail, and take maximum advantage of its proximity to the Metro Station. Given the low density permitted for the site, the current form of the LDA allows the Developer to seek a modification to the zoning code to provide additional density on the Parcel. The undeveloped areas on the site will be activated as Innovation Greenspace on an interim basis. Creatively Reuse Historic Structures: The centerpiece for St. Elizabeths East s Phase One is the preservation and reuse of the former Continuing Treatment buildings (called the CT Campus ) as an affordable housing multifamily project. The CT Campus redevelopment will feature the adaptive reuse of the seven historic structures, creating an immediate unique sense of place that is innovative, creative and respectful of the campus history. The CT Campus forms the core of the southern section of St. Elizabeths East. The CT Campus buildings (106, 107, 108, 109, 110, 111, and 112) were all constructed between 1933 and 1940 and are each two-story masonry buildings with basements that have a floor-to-floor height of The structures range from 35,200 to 51,000 square feet. Each of the buildings has a prominent central entrance and lobby area and is symmetrical in elevation and plan. The buildings also possess contributing historic features that include enclosed porches, hipped roofs with red ceramic roof tiles, stone and brick detailing and ornamentation, and ornamental window grills. The buildings are situated in an oval pattern with Building 109 in the center. While St. Elizabeths East s flexible zoning allows for commercial uses on Parcel StE- 11, the District s early analysis determined that residential uses for these buildings demonstrate an optimal redevelopment option. With their graceful layout around the Dogwood/Oak Street oval, floor-to-ceiling heights and floor plans designed to maximize daylight, the buildings lend themselves well to repurposing for residential use. As such, the Phase One plan leverages the CT Campus as an essential component of the District s vision for a 24-hour live-work community at St. Elizabeths East. Create Opportunities for DC-Based Businesses: Redevelopment plans feature opportunities to develop business incubation and capacity-building opportunities for DC-based and Ward 8 businesses and partners. First and foremost, the Page 6 of 23

7 Developer included Gragg-Cardona Partners as its CBE partner. Gragg-Cardona will serve as the CBE equity-partner and will own no less than a 20% equity stake in the project in the general partnership of the development entity formed for the project. In addition, Redbrick has agreed to partner with Anacostia Economic Development Corporation and Flaherty & Collins on the development of the multifamily affordable housing redevelopment on Parcel StE- 11. These local partnerships will be complimented by to-be-determined Ward 8 businesses, who are also targeted partners. The current form of the LDA contains a goal of 10% Ward 8 business participation in general contracting opportunities for the Project, to ensure further participation by local companies in the redevelopment. Generate New Job and Educational Opportunities for DC Residents: In support of the District s job creation goals, the Developer has entered into a First Source Agreement with the District s Department of Employment Services which provides for compliance with the District s First Source law. In addition, the First Source Agreement contains the Developer s commitment to marketing job openings to Ward 8 residents and the Developer s goal of ensuring that 30% of new hires are Ward 8 residents. Maximize Value to the District: The Phase One plan seeks to provide for long-term financial returns by creating a Project that produces tax revenues for almost the first time in the campus history and maximize the value of the Phase One land by developing substantial affordable housing opportunities. The Developer will be required to pay the purchase price and/or ground lease payments outlined in the current form of the LDA, as well as real estate taxes on each of the Parcels. The Developer anticipates that the District will receive approximately $150M over 20 years inclusive of real property taxes, sales and use taxes and other business-related taxes. Activate the Campus: The Phase One plans will activate the campus and create a unique destination immediately adjacent to the Congress Heights Metro Station. c. Public Uses included in proposed Developer s Development Plan (such as public parks, construction of roads, sidewalks, and other public amenities). The District s Department of General Services, in partnership with the District s Department of Transportation, is working to commence the first two stages of infrastructure construction to occur within St. Elizabeths East. The St. Elizabeths East Campus Stage One Infrastructure and Utility Improvement project will: Provide connectivity within the East Campus and between the campus and adjacent neighborhoods, Upgrade and replace existing utility infrastructure to support the planned development, and Page 7 of 23

8 Provide multi-modal transportation options (public transit, bicycle and pedestrian) to support the redevelopment of the East Campus. The infrastructure improvements will service Phase One by developing Oak, Sycamore, and Dogwood Drives. DGS is in the process of completing 65% designs for the Stage One improvements, and plans to issue a solicitation for a design-build team to complete the designs and start construction in the Summer of The Stage One Infrastructure and Utility Improvement project is an essential first step to advancing the Phase One redevelopment efforts. 3. The chosen method of disposition, and how competition was maximized. DC Official Code (b-1)(1)(A). Parcels St-E 11 and 17 will be conveyed by the District to the Developer by ground lease with a term of 99 years and Parcels StE-14(a) and (b) and StE-10 (provided the Developer exercises its option to develop Parcels StE-14(a) and 10) will be conveyed by the District to the Developer in fee simple by special warranty deed, all in accordance with the terms of the LDA to be entered into between the District and the Developer. DC Official Code (b)(8)(B),(C). Please note, the current form of the LDA provides the Developer with the option to purchase Parcel StE-17 upon the final approval or rejection by the Zoning Commission of the Developer s request to increase in density of Parcel StE- 17 from 2.5 FAR to 4.0 FAR. a. Description of solicitation process (include form of solicitation, how solicitation was advertised). The District completed a thorough solicitation process in order to select a developer to develop the Property. DMPED issued a Request for Expressions of Interest for a Phase One Development Partner in November 2012, that it cancelled the following Winter. The initial solicitation included three parcels primarily consisting of residential uses, but excluded any historic buildings. DMPED decided to retract the solicitation due to the lack of interest from the development community and prospective bidders. The development community also encouraged the District to more clearly articulate the connection with innovation uses and potential private sector partners interested in relocating to the campus. As such, in March 31, 2014, DMPED issued an RFP for a Phase One Master Developer, seeking proposals to create a mixed-use and innovation-focused development, including several historic structures. Information relating to the Phase One solicitation process, including a copy of the RFP was posted on the St. Elizabeths East website at On April 30, 2014, DMPED hosted a pre-offer conference for members of the public interested in the solicitation. One hundred and thirty five (135) individuals attended the conference. DMPED s presentation and the names and contact information for the attendees at the pre-offer conference was also posted on the St. Elizabeths East website at Page 8 of 23

9 b. Please describe the competitive bid process, including number of responses. Please also summarize each qualified bidder for the property. If no competitive process was followed, please explain why not, and how the developer was chosen and all key terms of the arrangement. In an effort to ensure that multiple responses could be anticipated, DMPED requested that interested respondents submit a notice indicating their intent to respond to the RFP by . While this was not a disqualifying requirement, it was strongly encouraged. This was the first instance in which DMPED included this requirement to determine whether there was any interest from the development community in the project. On May 30, 2014, DMPED received five notices and published the names and contact details for the following interested respondents: 1. Redbrick LMD master developer; Perkins Eastman planning and architecture; NVR, Inc. residential development partner 2. The Peebles Corporation 3. Washington Business Group 4. Four Points LLC 5. Friedman Capital The names of the interested respondents were released publicly on the St. Elizabeths East website at On June 27, 2014, the proposal due date, DMPED received five proposals from the following teams: 1. Partnership for Collaborative Innovation, Thoron Capital (Managing Partner) 2. Anacostia Economic Development Corporation and Flaherty & Collins Development 3. Redbrick LMD 4. Friedman Capital Advisers 5. Four Points, LLC On August 8, 2014, DMPED interviewed each of the respondents through a review panel consisting of representatives from DMPED s Real Estate team, DMPED s Business Development & Strategy team, D.C. Office of Planning (Ward Eight Planner), and the District Department of Transportation s Infrastructure Project Management Administration. The selection panel presented a series of questions to the respondent teams between July 2014 and December 2014, which included additional questions on issues ranging from financing to infrastructure to team roles. In December 2014, the selection panel unanimously recommended Redbrick LMD Gragg Cardona as the Phase One Developer. On December 29, 2014, the District announced the selection of Redbrick LMD Gragg Cardona team as the District s development partner for the first phase of development of St. Elizabeths East. Page 9 of 23

10 c. Please describe any public hearings on the potential disposition and any public comment received during the public hearings. Numerous public meetings and hearings have been conducted regarding the potential disposition and development of the Property. On September 30, 2014, DMPED hosted a meeting with approximately three hundred (300) attendees for the public to hear presentations from the respondents and to ask questions directly of the teams. The community presentations went very well, and the attendees were able to ask all of their questions. Videos of the community presentations, copies of the handouts, copies of the presentations and each team s written responses to the community questions were posted on-line for those who were unable to attend the meeting in person at Members of the public were encouraged to submit written responses on each team s proposal directly to DMPED or via an on-line feedback form. The public comments were submitted to the Evaluation Panel for review and consideration. On September 19, 2015, DMPED held a public surplus hearing at the R.I.S.E. Demonstration Center with approximately fifty (50) attendees. Comments received have been largely supportive and positive. Community members were primarily interested in making sure that the arts and innovation uses were integrated into the redevelopment plans, as well as the opportunity for affordable housing. Many people also expressed desire for local hiring and jobs, as well as for Ward 8 business inclusion at the developer and general contractor level. A full transcript of the September 19, 2015 meeting is included with the accompanying surplus resolution package. On September 28 th, DMPED held an additional meeting to review the disposition plans with the community. The plans were further shared with the community on October 5, 2015 at the ANC 8E meeting, October 7, 2015, at the ANC 8C meeting, October 12, 2015, at the Congress Heights Community Association meeting, and October 24, 2015, in a meeting held at the request of Commissioner Cuthbert at the R.I.S.E. Demonstration Center. 4. The manner in which economic factors were weighted and evaluated, including estimates of the monetary benefits and costs to the District that will result from the disposition. The benefits shall include revenues, fees, and other payments to the District, as well as the creation of jobs. DC Official Code (b-1)(1)(B). a. Identify all relevant costs, including property value for the subject and surrounding property, cost of potential rehabilitation, current and / or past cost for upkeep on the property. The Developer s proposed sources and uses for the development of Property are provided in Attachment 3, along with the total development cost and the plan for funding those costs. Page 10 of 23

11 An independent appraisal was completed by Black Sun Valuation LLC, d/b/a Concordis Real Estate Advisors LLC dated as of October 2, 2015, which appraised the Property as follows: Parcel StE-10 Current Site Condition Phase One Use Appraised Value Vacant (except for temporary pathway) Residential $400,000 (land value) Parcel StE-11 Contains seven (7) vacant historic buildings Residential, Commercial/Innovation, Educational Institution, Programmed Open Space $920,000 (land value) -$8,840,000 (Cost Approach) Parcel StE-14 Vacant (except for temporary pathway) Residential $680,000 (land value) Parcel StE-17 Vacant Residential, Commercial, Office $2,400,000 (land value) The valuations were developed using a cost approach, which is intended to estimate the replacement cost of the buildings and site improvements. The appraiser analyzed the replacement cost of the project sites and building improvements based on comparable projects. The appraiser did not use a sales comparison analysis because of the lack of adequate data needed to develop a value estimate and anticipated market behavior for the property type. An income analysis was also not considered since the Property is currently vacant and is not an income producing property. DMPED has undertaken a detailed analysis of the Property specific development conditions and costs in determining the negotiated purchase price of the following: Parcel StE-10 Current Site Condition Phase One Use Purchase Price/Lease value Base Purchase Price for Parcel StE $259,200 for an estimated 30,728 square feet (of the total estimated 108,000 square feet for the townhomes). Vacant (except for temporary pathway) Residential The Based Purchase Price will be increased by an amount equal to (a) any additional square footage relating to the market rate housing being built on the Page 11 of 23

12 Parcel, multiplied by (b) $8.00 (such amount, the SF Supplemental Payment ). Parcel StE-11 Parcel StE-14 Contains seven (7) vacant historic buildings Vacant (except for temporary pathway) Residential, Commercial/Innovation, Educational Institution, Programmed Open Space Residential 99-year ground lease, $1.00 annually Base Purchase Price for Parcel StE- 14(b) - $403,200 for an estimated 45,543 square feet (of the total estimated 108,000 square feet for the townhomes). The Based Purchase Price will be increased by the SF Supplemental Payment for any additional density provided for the market rate housing during the design process. Base Purchase Price for Parcel StE- 14(a) - $201,600, for an estimated 31,729 square feet (of the total estimated 108,000 square feet for the townhomes). The Based Purchase Price will be increased by the SF Supplemental Payment for any additional density provided for the market rate housing during the design process. 99-year ground lease, $100,000 annually; 2% annually increases. Parcel StE-17 Vacant Residential, Commercial, Office Option to purchase at (i) $10/SF (less ground lease rents) upon approval of density increase above 4.0 FAR; or (ii) $12/SF (less half the ground lease rents) upon rejection of density increase above 4.0 FAR. To develop the purchase price for Parcels StE-10 and 14, DMPED analyzed and considered the costs and development financial gap created by the zoning limitations for lot occupancy, requirement to create rear yards, the provision of 30% affordable for-sale housing opportunities Page 12 of 23

13 and the agreement by the Developer to create unique live-work spaces. Given that the project has yet to undergo review by the historic preservation authorities, DMPED agreed to a base purchase price, with an agreement that the price will increase by $8.00 per square foot allocated to the market rate housing units on Parcels StE-10 and 14. In addition, given the negative value provided in the appraisal for Parcel StE-11, coupled with the historic preservation requirements, Developer s commitment to an 80% affordable housing project and commitment to create at least 14,000 square feet of low-cost innovation space, DMPED negotiated a ground lease rate of $1.00/year for Parcel StE-11. Finally, DMPED agreed to allow the Development team to pursue a request to increase the density on Parcel StE-17. The District will ground lease the property at $100,000 annually. The current form of the LDA requires the undeveloped area portion of Parcel StE-17 to be used as Innovation Greenspace for interim uses, including creative art installations, technology displays, urban agriculture (including hydroponics), and/or STEM education programs. The ground lease for Parcel StE-17 anticipates that the Developer will have an option of purchasing Parcel StE-17 at $10 per square foot (approximately $3,484,800, less any ground lease payments), if the density is increased to 4.0 FAR or higher. The purchase price increase to $12 per square foot (approximately $2,613,600, less half of any ground lease payments) if the request to increase the density is not approved. As such, the purchase option for Parcel StE-17 will expire in seven (7) years, or earlier if certain improvements are started which allow for vehicular traffic to move along the planned 13 th Street extension adjacent to the Congress Heights Metro Station. b. Describe potential revenue that could be derived from the property and how it was maximized in selected disposition method. The proposed disposition and development of the Property will allow the District to derive land sale proceeds and deed transfer and recordation taxes. The Property has heretofore been underutilized and is not generating any revenue by virtue of its current use despite the value of the underlying land. With respect to land sale proceeds, the District will receive the purchase price proceeds/ground lease rents outlined above at closing on each Phase of the Property. The amount of these proceeds is based on development financing and economic considerations as discussed above. Because the project is proposed to contain for-sale residential units, the District will also receive ongoing transfer and recordation taxes whenever townhomes/duplex units are sold in the future. The proposed Development Program is projected to generate the following additional revenues and economic benefits for the District. Jobs: Temporary Construction Jobs (per Developer): 750 Permanent Jobs (per Developer): 750 Page 13 of 23

14 First Source Agreement in place for DC Residents Ward 8 hiring goals: 30% of new hires Tax Revenues: Approximately $150M (per Developer) over 20 years inclusive of real property taxes, sales and use taxes and other business-related taxes (per Developer) All construction period related taxes and revenues Additional Community Benefits: The current form of LDA anticipates that the Developer will enter into a Memorandum of Community Benefits with ANC 8C to create the following benefits: R.I.S.E. Foundation - The Developer will create the R.I.S.E. Foundation, a 501(c) nonprofit social organization created to support and lead community based social and economic initiatives. The Foundation will be led by a board of directors whose members include persons and or groups actively concerned for and engaged in growth of educational, economic, and social opportunities for residents of Wards 8 and 7. The Developer plans to fund the Foundation by a $500,000 contribution from the Developer, made in installments of $25,000 per year. The initial $25,000 donation will be contributed to the Foundation within ninety-days of the Developer beginning construction of the proposed rental apartments or office building, whichever is first. The R.I.S.E. Foundation will be privately managed by a qualified nonprofit entity, independent of the Developer. The Developer has agreed to transfer the responsibility for the management of the Foundation to a Board of Trustees, which will include trustees who reside or own a business in Ward 8. The trustees will, with the community s input and participation, decide how the Foundation dollars are to be spent within the Ward 8 community. Further, the trustees will establish selection criteria and will form a panel and selection process to award grants for qualified grant recipients throughout the community. Hosting Community Based Creative Economy Incubation The Developer will engage Ward 8 community development organizations to facilitate, develop and undertake a mix of creative economy initiatives and programs in connection with the Phase 1 redevelopment of the historic St. Elizabeths East campus including, but not limited to: - STEAM Education Workshops, Demonstrations, and programs - Social Entrepreneurship Training & Development - Creative and Cultural Arts Entrepreneurship, Development, and Programming - Business Incubation & Collaborative Work Space Ward 8 Homebuyers Club In addition to creating for sale and rental affordable housing opportunities, the Developer has created a Homebuyers Club to help prepare Page 14 of 23

15 families and individuals interested in purchasing one of the townhomes at St. Elizabeths. The Developer intends to work with a Ward 8 based community organization to facilitate the establishment of the Club. Work Force Development Initiatives The Developer has agreed to engage with Ward 8 community organizations to provide community outreach services, community engagement, and workforce development for Ward 8 residents. Live / Work Housing The Developer has agreed to create up to 15 live / work units which will provide both housing and workspace opportunities for small business owners and entrepreneurs. Community Retailer Initiative The Developer has agreed to offer Ward 8 entrepreneurial small retailers opportunities to conduct mobile and or pop-up retail opportunities on the campus in a manner consistent with District regulations; and leasing opportunities within the retail space to be developed on Parcel StE -17. Student Internships & Apprenticeships - The Developer has agreed to work with Ward 8 community organizations to provide apprenticeship and internship opportunities for Ward 8 and District youth who are interested in real estate development and/or the construction trades. First Source Hiring The Developer has agreed to comply with all First Source Employment Agreement requirements and to provide access to Ward 8 residents for all new jobs created within the project. The First Source Agreement provides that the Developer will use good faith efforts to ensure that at least 30% of all new jobs created by the Project will be performed by DC residents residing in Ward 8. CBE Contracting The Developer indicated that it will work with a Ward 8 2nd tier general contracting firm to provide services to the development team to facilitate CBE participation goals for the Project. The Development team also indicated that it will work with Ward 8 organizations to establish a Workforce Development Initiative to help Ward 8 residents and small businesses access job and business opportunities available through the Project. The Developer has commitments with several local partners, although the partners are subject to change as the project evolves, with the exception of YouthBuild, which is specifically mentioned in the Developer s First Source Agreement as a partner for apprenticeship programming. 5. Please describe all disposition methods considered and provide a narrative of the proposed disposition method that contains comparisons to the other methods and shows why the proposed method was more beneficial for the District than the others in the areas of return on investment, subsidies required, revenues paid to the District, and any other relevant category, or why it is being proposed despite it being less beneficial to the District in any of the measured categories. DC Official Code (b-1)(1)(C). Page 15 of 23

16 For purposes of redevelopment, the primary options available and considered for disposition were via fee simple or ground lease. DMPED carefully considered these options in light of upfront capital needs, development feasibility and long-term project feasibility. DMPED determined that for Parcel StE- 17, which contains seven historic assets, the property would be ground leased for a period of 99 years. For Parcels StE- 10 and 14, because the property is proposed to be a for-sale residential project, the most feasible disposition method to negotiate a fee simple disposition for cash proceeds at closing. For Parcel StE- 17, the District proposes to ground lease the parcel. The Developer will have the option to purchase the property if the D.C. Zoning Commission accepts or rejects its request to increase the permitted density on the site from 2.5 FAR to 4.0 FAR. The purchase option for Parcel StE-17, however, expires upon the earlier of (i) (a) WMATA commencing construction of the new bus terminal and planned Congress Heights Metro station improvements adjacent to the site, or (b) an easement agreement with WMATA and the District allowing for alternative access to 13th street; or (ii) seven years (7) years from the date of the agreement. Page 16 of 23

17 Attachment 1 Approved Phase One Plan Residential (Parcels StE-10, 11 and 14) View Attachment 1

18 Residential (Parcels StE- 10, 11 and 14) Phase One Plan Attachment 1

19 Commercial (Parcel StE- 17) Conceptual View Attachment 1

20 Commercial (Parcel StE- 17) Conceptual Plan Attachment 1

21 Attachment 2 Surplus Analysis

22 Attachment 3 Sources and Uses Sources and Uses Parcel StE St. Elizabeth's East Total Uses Line Item Total Value Land Purchase Price $ - Total Project Hard Costs $ 47,139, Total Project Soft Costs $ 6,910, Total Financing Costs $ 2,644, Developer Fee $ 5,637, Total Project Cost $ 62,332, Total Sources Line Item Total Value Permanent Financing - 1st Lien $ 20,783, Permanent Financing - Other $ 12,596, Equity (LIHTC) $ 16,364, Deferred development fee $ 1,500, Historic Tax Credits $ 11,088, Total Sources $ 62,332, Sources and Uses Parcel StE St. Elizabeth's East Total Uses Line Item Total Value Land Purchase Price $ 2,178, Total Project Hard Costs $ 56,690, Total Project Soft Costs $ 9,659, Developer Fee $ 2,052, Total Project Cost* $ 70,579, Total Sources Line Item Total Value Permanent Financing - 1st Lien $ 45,876, Equity (Equity Partner) $ 24,702, Total Sources* $ 70,579, *Does not include underground parking costs funded by District

23 Sources and Uses Parcels StE- 10, 14A-14B - St. Elizabeth's East Total Uses Line Item Total Value Land Purchase Price $ 864, Total Project Hard Costs $ 1,373, Total Project Soft Costs $ 543, Total Project Cost $ 2,781, Total Sources Line Item Total Value Permanent Financing - 1st Lien $ 2,086, Equity $ 695, Total Sources $ 2,781,540.00