Commercial Brokers - Request for Qualifications (RFQ) For Sale of Building. Sycamore North Mixed Use Development City of Hercules December 6, 2010

Transcription

1 111 Civic Drive Hercules, CA Commercial Brokers - Request for Qualifications (RFQ) For Sale of Building Sycamore North Mixed Use Development City of Hercules December 6, 2010 SUBMITTALS ARE DUE ON WEDNESDAY, DECEMBER 22, 2010 BY 5PM. The City of Hercules, California is seeking a qualified commercial real estate brokerage firm to provide marketing services for the sale of a mixed use building, to assist in evaluating pricing proposals and to manage the due diligence process and phasing of bids. The building is located in the City of Hercules and is on the block of Sycamore Avenue between South Front Street and Tsushima Streets. The building consists of 96 units on three wood-frame stories above approximately 40,000 square feet of retail space, over an underground residential parking garage. For sale is the entire building with both the residential and retail elements or just the residential element of the project. Submissions should be mailed to: Ariel Mercado City of Hercules 111 Civic Drive Hercules, CA Submittals will be reviewed by an evaluation panel. An award shall be made with reasonable promptness. This RFQ may be modified or terminated at any time by the City of Hercules. Interviews will held on Wednesday, January 5, 2011, commencing in the conference room at 111 Civic Dr, Hercules, CA Interested parties are asked to contact Ariel Mercado at (510) or amercado@ci.hercules.ca.us.

2 1. Introduction Sycamore North Project The Agency s original program for the Project consists of the following elements: For-Sale Condominiums (47 units) The 47 units consist of: 2 one-bedroom 32 two-bedroom 13 three-bedroom Rental Apartments (49 units) The 49 units consist of: 36 two-bedroom 13 three-bedroom Affordability Requirements The Agency has analyzed the affordability requirements imposed on the Project, the results of which are summarized in Exhibit 2 (City Council briefing by the City Attorney), and will consider an array of arrangements that address these requirements. Retail Spaces The retail spaces occupy the full concrete construction first floor of both wings of the Project, with storefronts arrayed along Sycamore Avenue and the central plaza, in air rights parcels legally separate from the residential elements of the Project. Concurrently, the City has sent out an RFQ for a retail brokerage/management firm to be responsible for providing design input and leasing the retail spaces. City staff is now in the process of negotiating three leases - Bean Bag Café, Patxi s Chicago Pizza, and Borocay Garden and Grill. (see attachment for space locations) Bean Bag Café is a neighborhood fixture in San Francisco and offers an all-day, value-priced menu and a full-service coffee bar. Patxi s Chicago Pizza was founded by a former principal of Zachary s Pizza, a Berkeley institution. Patxi s two locations are neighborhood dining experiences, not pizza stores. Boracay Garden and Grill offers affordably priced Filipino cuisine at its South San Francisco location. Mapping of the Project as Air Rights Parcels A Tentative Map has been prepared that divides the air space on the property, based on which a Final Map and Condominium Map are ready to be completed that will create the following legally separate parcels:

3 Four retail air rights parcels at the ground floor (Four parcels are necessary because the retail space is interrupted by the central plaza in the center, and by a residential lobby at the ground floor of each wing). The retail parcels have rights to access and use parking spaces located on the broad ramp at the rear of the parcel that provides access to the underground residential parking garage directly beneath the building. Either a single residential parcel (consisting of all of the residential floors, the lobbies, the plaza, the tower, and the ramp and parking); or three residential parcels (one for each of the two residential wings, including its lobby, and a third for the common residential components the plaza, tower, and the ramp and parking). The decision regarding one-versus-three parcels will be made based on whether one of the residential wings will be sold as condominiums. Development Team The development team consists of the following companies currently under contract to the Agency: Team Role Firm Name Primary Contact Development Manager Equity Community Builders Ben Golvin, Principal Randi Gerson, Project Manager Architect Daniel Solomon Design Partners Katrine Wong, Project Architect Construction Manager at Risk Oliver & Company Tom Angelo, Project Manager Structural Engineer OLMM Sunil Gupta MEP Engineer Stantec John Andary Geotechnical Engineer Engeo Joe Gray Civil Engineer/Surveyor DK Consulting Dan Drummond Waterproofing Consultant Simpson Gumpertz Heger Jeff Maugenest Lighting Consultant Auerbach Glasow French Patti Glasow Testing Engineer AME Dushyant Manmohan HOA Attorney Offices of Jeff Wagner Jeff Wagner HOA Consultant John H. Beatty & Associates John Beatty All development team members are expected to complete the scope of work for which they have been contracted; the Agency is prepared to assign all contracts to a purchaser. Copies of all contracts are available upon request. Project Costs A statement of the projected costs to complete the Project is provided as Exhibit 3, showing the current allocation of costs between the three components of the Project (for-sale condominium west wing, rental apartment east wing, and retail). Cost projections for soft costs are based on existing contracts. Construction costs are based on Trade Contracts currently entered into by the Construction Manager at Risk (approximately 95% of the work scope has been bid and contracted), plus the established budget

4 for the remainder of the work scope. To date the costs of the work under contract have represented an approximately 10% savings against the originally established budget. (The savings from the work bid to date are already reflected in the projected total cost; any savings achieved in the remainder of the bidding, and as a result of unused hard cost contingency, would reduce the total cost of the Project.) Project Financing The Agency has used three sources of funds to pay the development costs incurred to date: A CalHFA HELP loan ($1.6 million), committed to pay costs related to a 50-unit rental component of the project in which all 50 units are to be restricted to occupancy by (with rents affordable to) households earning up to 50% of the Area Median Income. The term of the loan is 10 years from commitment (through April, 2015). Documentation of the terms of this loan (CalHFA correspondence and the Loan Agreement) is included as Exhibit 4. A CalHFA RDLP loan ($3.75 million), committed to financing a portion of a 52-unit condominium project, of which 23 units are to be restricted to occupancy by (with sales prices affordable to) households earning up to 120% of the Area Median Income. The term of the loan is through August, Documentation of the terms of this loan (CalHFA correspondence and the Loan Agreement) is included as Exhibit 5. Proceeds from a bond issued by the Agency (the repayment source being Tax Increment funds from the Redevelopment Area in which the Project is located) The Agency has access to additional bond proceeds with which to pay some additional development costs. However, the Agency seeks to further leverage its past and future investments in the project using additional sources of non-agency financing accessed by parties other than the Agency. 2. Scope of Work As a result of changes in the condition of the housing market since the original conception of the project, as well as changes in approach under consideration by the City Council, the Agency now seeks from qualified Commercial Real Estate Broker statements of qualification for marketing services for the sale of a mixed use building, assisting in the evaluation of pricing proposals and managing the due diligence process and phasing of bids. The fundamental goal of the Agency is to ensure the completion and successful operation of the project through an ownership, financial and operating structure that requires the least amount of initial capital subsidy from the Agency.

5 The Agency will consider a variety of structures for the ownership, financing and operation of the residential component of the Project, including: A mix of for-sale and rental homes, as originally proposed, with an affordable component All rental homes, with an affordable component All for-sale homes, with an affordable component The selected Commercial Real Estate Broker from this RFQ and the Agency will review all Statements of Qualification and Interest from potential buyers, and make a recommendation to the City Council regarding its options for entering into negotiations with a potential purchaser. Should negotiations with the initially selected purchaser prove unsuccessful, the Agency will seek to enter into negotiations with the potential purchaser determined by the City Council to be the next most appropriate purchaser. The Agency intends to expedite the process of selecting a purchaser in order to provide as much time as possible between the selection and the projected completion of construction of the Project (in early September, 2011). Concurrent with this request, the Agency will also seek a qualified Bay Area-based regional non-profit housing development organizations statements of qualification for, and interest in, purchasing the residential element of the Project and providing financing for its completion. 3. Submission Requirements Submittals shall consist of six (6) copies of the completed proposal in the following format: A. APPLICANT 1. Company Information Each submittal must include the following information for each member of the proposed team: Name of Business Entity (including any Doing Business As names) Headquarters/Parent Company Location History of Firm Commercial real estate broker experience in California Internet Web Site Address (if any) Details of Entity s Business Structure (Corporation, Partnership, LLC) Date Founded Organizational Chart of Business Entity California and Other Pertinent Locations and Total Number of Employees at each Briefly explain your understanding of the project requirement Submit proof of insurability for workers compensation and consultant liability

6 2. Qualifications Describe why you believe your firm is best qualified to market and sell Sycamore North. What are your competitive advantages when compared to the competition? What extent of the Applicant s business is represented by commercial real estate? How successful has the Applicant been at selling commercial real estate of similar size and use? 3. Staffing - Identify all staff that will play a substantive role in the work. How experienced is the individual? What are his or her qualifications? Provide resumes for each professional assigned to the project, along with a copy of a current California real estate broker license. 4. Marketing Describe how you intend to market the property, and what outlets you intend to use. Does the Proposer have a local, regional or national network through which to market the property? Briefly describe the network and how it works. 5. Process- Describe your process or steps taken from marketing the building through sale. 6. References- Submit a list of three (3) references, preferably references who retained the Applicant for a project with similar requirements. B. COMMISSION Proposed method for determining compensation (i.e., percent of sales price; fixed price per closing; base fixed fee plus incentive ) C. BROKER S AGREEMENT Provide a copy of your proposed broker s agreement. The City reserves the rights to negotiate certain business terms. 4. Selection Evaluation Submissions that meet qualification requirements will be reviewed by a Evaluation Panel (TEP) consisting of City staff, City council members and an appointed community representative. The following factors, not in any priority, shall be used when reviewing proposals. 1. Current California real estate brokers license(s); 2. Qualifications; 3. Marketing; 4. Proposal completeness and clarity; 5. Capacity or resources available; and 6 Cost and Agreement Competitiveness.

7 5. Schedule Responses to the Request for Qualifications due Wednesday, December 22, 2010 at 5:00 pm Interviews will be conducted on Wednesday, January 5, Your response should be submitted to Ariel Mercado at Hard copies can be mailed to arrive by this deadline to: Attn: Ariel Mercado City of Hercules 111 Civic Drive Hercules, CA For questions or additional information regarding this RFQ, please contact Ariel Mercado at Thank you very much for your interest. Attachments: Site Location and City of Hercules Projects Sycamore Downtown Project Overview Sycamore North Retail Lease Spaces Sycamore North Floor Plans Exhibit 2 - City Council briefing by the City Attorney Exhibit 3 Project Costs, Valuation and Funding Scenarios

8 City of Hercules Development Project Sites INTERMODAL TRANSIT CENTER North Shore Business Park VICTORIA CRESCENT 6.5 Acres WATERFRONT PARCEL C 17 Acres HILLTOWN 44 Acres HERCULES San Francisco Oakland SYCAMORE CROSSING 11.5 Acres

9 Sycamore Downtown Northside Mixed Use Development Hercules, California Currently under Construction Hercules is a New Urbanist planned town located between the eastern shore of San Pablo Bay and Interstate 80. Sycamore Avenue is one of two major streets leading into the town from the freeway and was chosen as the site for a neighborhood retail center. Sycamore Avenue divides the site into two with a small 2 acre parcel to the north and a 13 acre parcel to the south. The first phase on the north side is being designed by WRT Solomon E.T.C. to contain 40,000 sq ft of retail and 96 units of for-sale and rental affordable units. The design consists of a five story street-wall building centered on a small plaza facing Sycamore Avenue. The south side is intended to complement the north side and to match it in scale and height. The second phase is planned to contain 40 units of affordable housing units, 25,000 sq ft of medical offices and 36,000 sq ft of retail. Parking is a combination of on-street angled parking, off-street surface lots and basement garages. Future phases are designed to be flexible to allow the potential of a small hotel, more office space and an anchor retail building. Housing Type: Market Rate for sale, Affordable Rentals Date of Completion: Phase I , Phase II Number of Units: 96 Units Parcel Size: 2 Acres Density: 48 DU Per Acre Unit Configuration: Stacked Flats, Townhouses Parking Ratio & Type: 1.2 cars / DU, both Surface and Garage Square Footage: SF, Residential 40,000 SF, Retail Construction Cost: TBD 1328 Mission Street, San Francisco, CA (phone) (fax)

10 Sycamore North Retail Lease Spaces

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12 City of Hercules/Hercules Redevelopment Agency Agenda Item Transmittal Meeting Date: December 7, 2010 Agenda Item Number (Assigned by City Clerk): Agenda Item Wording: Sycamore North Funding: Conduct Discussion Regarding Affordable Housing Mix Requirements Submitting Department: Interim Executive Director; Agency General Counsel Contact: Charles A. Long, Interim Executive Director; Alfred A. Mick Cabral, Agency General Counsel For action by: City Council _X_ RDA Board PFA Commission Placement on agenda: Intro./Presentation Consent Calendar Public Hearing Communications Council Rpts./Reso _X_ C.M. Rpts/Reso. Intergov. Issues Department Recommendation: Staff recommends that the Agency Board conduct a discussion regarding the affordable housing mix requirements for the Sycamore North development. Alternatives: 1. Do not conduct the discussion and give directions to staff. Discussion: Inclusionary Housing Requirements For Sycamore North Accurately calculating the number of affordable housing units required to be included in the Sycamore North project depends upon the applicable statutory criteria and Agency policy considerations. The Agency has considerable discretion to determine how the inclusionary housing requirements will be met. The Agency s basic options are: affordable housing units, 15 of which would be available to very low income households and 14 to low or moderate income households. Health & Safety Code 33413(b) requires 30% of all new and substantially rehabilitated dwelling units developed by an agency to be available at affordable housing cost to, and occupied by, persons and families of low and moderate income. At least 50% of that 30% must be available at affordable housing cost to, and occupied by, very low income households. In the case of Sycamore North, the most recent project description provides that 96 residential units will be constructed. Directly applying Health & Safety Code 33413(b) would require 29 of those units to be affordable housing units. Of those 29 units, 15 would have to be available to

13 very low income households; the remaining 14 would be available to low or moderate income households affordable housing units, 6 of which must be available to very low income households and 8 of which must be available to low or moderate income households. The phrase developed by an agency under item 1 above has been interpreted to mean that the units are constructed and owned by the Agency. If the Agency intends to construct and sell all residential units, instead of constructing and owning them, the 30% requirement may become 15% under Health & Safety Code 33413(a). If that is the case, then of the 96 units, 14 must be affordable, 6 of which must be available to very low income households and 8 of which can be low or moderate income households. 3. Aggregate affordable housing units throughout the Redevelopment Project Areas and provide either 14 or 8 low or moderate income units, or perhaps none at all. The Agency has the right to aggregate affordable housing units in one or more project areas to meet affordable housing requirements. Health & Safety Code 33413(b)(2)(A)(v). In order to avail itself of this option, the Agency would have to conduct a public hearing and find, based on substantial evidence in the record before it, that aggregation will not cause or exacerbate racial, ethnic or economic segregation. What this allows, however, is the Agency to calculate all affordable housing units throughout the merged project areas and credit them to the Sycamore North project, or any other project within the merged project area. The Agency has over-delivered very low housing units, so by aggregation it can eliminate them in their entirety in the Sycamore North project. An evaluation will have to be made of the Agency s delivery of low and moderate income households to see whether aggregation is feasible for those income levels. 4. Purchase or acquire affordable housing covenants and reduce the number of affordable units in the Sycamore North project. The Agency has the right to purchase or acquire affordable housing covenants on multifamily units that restrict the cost of renting or purchasing those units. This option requires a public hearing, specific findings to be made and can only be used to satisfy 50% of the affordable housing requirements. It can, however, use affordable housing covenants to reduce the delivery of affordable housing units in the Sycamore North project. 5. Deliver the 76 affordable units as planned, or some other configuration. The Sycamore North project presently envisions 76 affordable housing units composed of 49 very low rental units and 27 moderate for sale units. That configuration substantially exceeds the Agency s legal requirements, but the Agency is allowed to do so. The affordable housing mix affects the project s value, but the final mix is a policy decision for the Agency Board to make. 6. Creatively explore all options and choose the best one for Hercules. The Agency has considerable discretion in fashioning the affordable housing mix on Sycamore North, and every other project. The law requires compliance but encourages

14 creativity. There are variations of each of the above options that can be implemented to enhance the value of Sycamore North to the benefit of the community. Prior Council/Board Actions: This follows up the ongoing discussion of the Sycamore North financing options. Attachments: None Financial Impact Description: None: this is a discussion item only. Funding Source: Account Number: Budget Recap: Total Estimated cost: $ New Revenue: $ Amount Budgeted: $ Lost Revenue: $ New funding required: $ New Personnel: $ Council Policy Change: Yes No Subcommittee Review and Approval: Finance Business Development Municipal Utility Trans. & Housing Public Safety Traffic Calming Date: Date: Date: Date: Date: Date: Review and Approval - As needed: City Manager Review (Signature): City Attorney Review (Signature): Finance Department Review (Signature): Others:

15 Sycamore Downtown Mixed Use Development Summary of Project Costs and Required City Financing Project Costs Residential Retail TOTAL Land Cost Site Improvement Cost 2,449, ,009 3,147,130 Building Costs 34,813,086 6,672,097 41,485,183 General Conditions/OH/Fee 4,896, ,722 5,715,901 Hard Cost Contingency 1,215, ,353 1,452,057 Soft Costs 10,943,247 7,138,582 18,081,829 Total Development Costs 54,317,337 15,564,763 69,882,100 78% 22% 100% Hard Costs 42,158,386 8,189,828 50,348,214 Contingency 1,215, ,353 1,452,057 Soft Costs 10,943,247 7,138,582 18,081,829 TOTALS 54,317,337 15,564,763 69,882,100 Soft Costs Breakdown Residential Retail TOTAL Architect fees 2,022, ,326 2,496,451 Consultants Contracted to Owner 303,225 71, ,352 Retail Storefront Architect 111, ,900 Retail Consulting Contracts 13,716 13,716 Printing/Reimburseable Expenses 81,000 19, ,000 Soils/Geotechnical 138,552 32, ,975 Testing/Special Inspections 121,500 28, ,000 Entitlements Consulting 140,128 32, ,997 Utility Fees 772, ,042 1,061,627 Permits Fees 4,274,480 1,002,656 5,277,136 Insurance during construction 247,604 58, ,684 Developer product liability insurance 738, ,788 Condominium documents and fees 14,040 14,040 Taxes during sales 105, ,000 Legal & accounting 18,720 18,720 Project Administration 850, ,500 1,050,000 FF&E 50,000 50,000 Marketing/Lease-up Costs 235, ,000 TI Allowances 3,712,410 3,712,410 Leasing Commissions 557, ,643 Leasing Costs 195, ,390 Post construction repairs allowance 141, ,000 Association dues 45,000 45,000 Operating expenses during lease-up 123, ,000 Contingency 521, , ,000 Total Soft Costs 10,943,247 7,138,582 18,081,829 Updated: 12/6/20101:30 PM

16 Sycamore Downtown Mixed Use Development - Sales & Lease Residential Summary of Project Costs and Required City Financing Project Valuation Senario 1: 49 Units for Rental and 47 Units for Sale 49 Very Low Income Rental 3,628, Low Income Sales 4,701, Market Rate Sales 5,281,639 Selling Costs 1.5% (149,750) Sale of Retail Component estimated at NOI of $24/sqft & 7% CAP Rate 12,343,000 ESTIMATE OF TOTAL PROJECT VALUE 25,805,157 Senario 2: All Sales - 14 Low-to-Moderate Units, 15 Very Low Units, 67 Market Rate Units 14 Low Income Sales 1,109, Very Low Income Sales 2,900, Market Rate Sales 16,155,491 Selling Costs 1.5% (302,475) Sale of Retail Component estimated at NOI of $24/sqft & 7% CAP Rate 12,343,000 ESTIMATE OF TOTAL PROJECT VALUE 32,205,500 Senario 3: All Sales - 24 Moderate Units and 72 Market Rate Units 24 Moderate Income Sales (incl. $30,000 DPA) 5,594, Market Rate Sales 17,433,317 Selling Costs 1.5% (345,411) Sale of Retail Component estimated at NOI of $24/sqft & 7% CAP Rate 12,343,000 ESTIMATE OF TOTAL PROJECT VALUE 35,025,000 Note: Assume 10% vacancy rate If 8% CAP rate, then $10,800,000 Updated: 12/6/20101:30 PM

17 Sycamore Downtown Mixed Use Development - Sales & Lease Residential Summary of Project Costs and Required City Financing Project Funding Senario 1: 49 Units for Rental and 47 Units for Sale Committed Funds TOTAL 2007A HSG Bond 11,732, B HSG Bond 10,334,216 CalHFA Loans 5,350,000 TOTAL COMMITTED FUNDS 27,417,154 Project Value Estimate Residential Rental 3,628,553 Residential Sales 9,833,605 Sale of Retail Component estimated at NOI of $24/sqft & 7% CAP Rate 12,343,000 ESTIMATE OF TOTAL PROJECT VALUE 25,805,157 Additional Funds Based on Project Valuation TOTAL COSTS 69,882,100 SPENT TO DATE (26,010,469) 60% Loan on Project Value (15,483,094) TOTAL GAP Equity Return (10,322,063) Additional RDA Investment (18,066,474) TOTA FUNDS NEEDED 28,388,537 Note: Assume 10% vacancy rate If 8% CAP rate, then $10,800,000 Updated: 12/6/20101:30 PM

18 Sycamore Downtown Mixed Use Development - Sales & Lease Residential Summary of Project Costs and Required City Financing Project Funding Senario 2: All Sales - 14 Low-to-Moderate Units, 15 Very Low Units, 67 Market Rate Units Committed Funds TOTAL 2007A HSG Bond 11,732, B HSG Bond 10,334,216 CalHFA Loans 3,750,000 TOTAL COMMITTED FUNDS 25,817,154 Project Value Estimate Residential Sales 18,769,832 Sale of Retail Component estimated at NOI of $24/sqft & 7% CAP Rate 12,343,000 ESTIMATE OF TOTAL PROJECT VALUE 31,112,832 Additional Funds Based on Project Valuation TOTAL COSTS 69,882,100 SPENT TO DATE (26,010,469) 60% Loan on Project Value (18,667,699) TOTAL GAP Equity Return (12,445,133) Additional RDA Investment (12,758,799) TOTA FUNDS NEEDED 25,203,932 Note: Assume 10% vacancy rate If 8% CAP rate, then $10,800,000 Updated: 12/6/20101:30 PM

19 Sycamore Downtown Mixed Use Development - Sales & Lease Residential Summary of Project Costs and Required City Financing Project Funding Senario 3: All Sales - 29 Moderate Units and 67 Market Rate Units Committed Funds TOTAL 2007A HSG Bond 11,732, B HSG Bond 10,334,216 CalHFA Loans 3,750,000 TOTAL COMMITTED FUNDS 25,817,154 Project Value Estimate Residential Sales 22,682,000 Sale of Retail Component estimated at NOI of $24/sqft & 7% CAP Rate 12,343,000 ESTIMATE OF TOTAL PROJECT VALUE 35,025,000 Additional Funds Based on Project Valuation TOTAL COSTS 69,882,100 SPENT TO DATE (26,010,469) 60% Loan on Project Value (21,015,000) TOTAL GAP Equity Return (14,010,000) Additional RDA Investment (8,846,631) TOTA FUNDS NEEDED 22,856,631 Note: Assume 10% vacancy rate If 8% CAP rate, then $10,800,000 Updated: 12/6/20101:30 PM