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2008-06-04 ARRA PacketAGENDA Regular Meeting of the Governing Body of the Alameda Reuse and Redevelopment Authority Alameda City Hall Council Chamber, Room 390 2263 Santa Clara Avenue Alameda, CA 94501 1. ROLL CALL 2. CONSENT CALENDAR Wednesday, June 4, 2008 Meeting will begin at 7:00 p.m. Consent Calendar items are considered routine and will be enacted, approved or adopted by one motion unless a request for removal for discussion or explanation is received from the Board or a member of the public. 2 -A. Approve the minutes of the Regular Meeting of May 7, 2008. 2 -B. Approve the First Amendment to the Lease Agreement for St. George Spirits at Alameda Point. 2 -C. Approve a Second Amendment to the Agreement with Marc Associates to Extend the Term for Seven Months and Add $45,000 for a Total Budget of $120,000 for Provision of Intergovernmental Relations Services. 3. REGULAR AGENDA ITEMS 3 -A. Alameda Point Update 4. ORAL REPORTS 4 -A. Oral report from Member Matarrese, Restoration Advisory Board (RAB) representative. 5. ORAL COMMUNICATIONS, NON - AGENDA (PUBLIC COMMENT) (Any person may address the governing body in regard to any matter over which the governing body has jurisdiction that is not on the agenda.) 6. COMMUNICATIONS FROM THE GOVERNING BODY 7. ADJOURNMENT ARRA Agenda - May 7, 2008 Page 2 This meeting will be cablecast live on channel 15. Notes: • Sign language interpreters will be available on request. Please contact the ARRA Secretary at 749 -5800 at least 72 hours before the meeting to request an interpreter. • Accessible seating for persons with disabilities (including those using wheelchairs) is available. • Minutes of the meeting are available in enlarged print. • Audio tapes of the meeting are available for review at the ARRA offices upon request. CITY OF ALAMEDA • CALIFORNIA SPECIAL JOINT MEETING OF THE CITY COUNCIL, ALAMEDA REUSE AND REDEVELOPMENT AUTHORITY (ARRA), AND COMMUNITY IMPROVEMENT COMMISSION (CIC) WEDNESDAY - - - JUNE 4, 2008 - - - 7:01 P.M. Location: City Council Chambers, City Hall, corner of Santa Clara Avenue and Oak Street. Public Participation Anyone wishing to address the Council /Board /Commission on agenda items or business introduced by the Council /Board /Commission may speak for a maximum of 3 minutes per agenda item when the subject is before the Council /Board /Commission. Please file a speaker's slip with the Deputy City Clerk if you wish to speak. 1. ROLL CALL - City Council, ARRA, CIC 2. AGENDA ITEM 2 -A. Authorize the Executive Director /City Manager to Execute a Transfer of the Exclusive Negotiation Agreement with SCC Alameda Point LLC to a New Entity with D.E. Shaw or a Transfer of an Ownership Interest in the Master Developer Entity, SCC Alameda Point LLC to D.E. Shaw, Pursuant to Specific Terms and Conditions. (Development Services) 3. ADJOURNMENT - City Council, ARRA, CIC Beverly Jo s. �Maor Chair, Alam ... us and Redevelopment Authority and Community Improvement Commission APPROVED MINUTES OF THE REGULAR MEETING OF THE ALAMEDA REUSE AND REDEVELOPMENT AUTHORITY Wednesday, May 7, 2008 The meeting convened at 7:31 p.m. with Chair Johnson presiding. 1. ROLL CALL Present: Chair Beverly Johnson Boardmember Doug deHaan Boardmember Frank Matarrese Boardmember Marie Gilmore Absent: Vice Chair Lena Tam 2. CONSENT CALENDAR 2 -A. Approve the minutes of the Regular Meeting of March 5, 2008. 2 -B. Approve Sublease for Delphi Productions at Alameda Point. Approval of the Consent Calendar was motioned by Member Gilmore, seconded by Member Matarrese and passed by the following voice votes: Ayes: 4, Noes: 0, Abstentions: 0 3. REGULAR AGENDA ITEMS 3 -A. Alameda Point Update — Presentation of Quarterly Update of Project Master Scheduled Prepared by SCC Alameda Point LLC. Debbie Potter, Base Reuse and Community Development Manager, provided an update as required in the ENA project master schedule. In March, ARRA voted to provide a six month extension to the mandatory milestones in the ENA, and added additional requirements of a consultant costs account. She informed that Suncal has deposited the required funds pursuant to the amended ENA and are moving forward to achieve the first milestone, the Development Concept, in September. The second activity concluded Monday evening, the May 5`" Community Meeting on Transit Oriented Alternatives, an MTC- funded stationery master plan. The meeting included discussions on principles and land use policies that would encourage transit - supportive development at Alameda Point and ways the master developer could evaluate those principles. Member deHaan directed questions to Mr. Pat Keliher, SunCal's project manager for Alameda Point. Member deHaan asked whether staff and SunCal have a mechanism to recognize and track SunCal's progress, because the project is a monumental task. Mr. Keliher explained that the build -up is to September of the Development Concept. SunCal meets weekly with staff and provide monthly updates at the ARRA meetings, and there's an upcoming community meeting planned. Debbie Potter further explained that staff and SunCal recognize that when ARRA approved the six month extension, there was a requirement, in addition to the quarterly deposit, to spend $117,000 /month for consultant services. Staff is able to monitor what activities SunCal is doing with their consultants to move the planning effort forward. David Brandt, Deputy Executive Director, stated that given the compressed schedule, staff is not anticipating any interim products other than meeting materials, no sub plans, etc. Member deHaan discussed his understanding of using monetary expenditure as a baseline, but was concerned that spending money doesn't necessarily mean progress. He would like a break -down in more incremental, more defined product. Mr. Keliher acknowledged Member deHaan's concerns, and offered to choose core topics that ARRA would like to have reports on, and speak about substantive issues at the meetings. Chair Johnson discussed that the milestones are already in place and it's not necessary to add extra `interim' milestones. Member deHaan explained that all he's requesting is for SunCal to stick with timeline, report on current activities, and provide a progress report on key issues and accomplishments. Member Gilmore requested a brief description, and to provide context for what's going on, rather than just• the dry milestones that are shown on the chart. Member Matarrese agreed and said it is worthwhile to list whether we're behind, or on, schedule; and to show progress on something that is significant as a milestone so that the public can anticipate what's going to happen. It is also useful to check things off. Member deHaan expressed that he just doesn't want to see SunCal in the same position they were when they had to request an extension, as September is approaching quickly. Member Gilmore requested no powerpoints, explaining that time spent making the presentation should not take away from time spent working on the project. Mr. Keliher agreed. There was one public speaker, Bill Smith, who spoke on various topics, including public transit. 4. ORAL REPORTS 4 -A. Oral report from Member Matarrese, Restoration Advisory Board (RAB) representative. Member Matarrese was unable to attend the meeting and did not have a report. 5. ORAL COMMUNICATIONS, NON - AGENDA (PUBLIC COMMENT) There were no speakers. 6. COMMUNICATIONS FROM THE GOVERNING BODY Member deHaan provided feedback and expressed his concerns about the May 5th community meeting regarding Transit Oriented Alternatives. He was concerned that the poor turnout was due to lack of publicity about the meeting, that notice of the meeting was not posted on the main bulletin board at City Hall, and there was no newspaper release, except for a 1/8 page advertisement. He discussed that last year's meeting on the same topic, held at Mastick Senior Center, had strong community input, lots of interest, lots of dialogue and the community was engaged. It was well - publicized and got the community talking about the issue. Debbie Potter explained that the meeting was noticed on the Alameda Point website, and an email blast to all previous interested -party lists was sent, as well as an email blast to SunCal's list. There was also a 1/4 page advertisement which ran three times in the newspaper. She acknowledged that the notice was not posted on the bulletin board; but that the methods of publicity for this meeting were actually the same, if not more, than what has been done in the past, with the addition of SunCal's email list, and has been an effective way of notifying people who have interest. Member deHaan expressed the importance of public relations and requested he receive the handouts prior to the meetings. 7. ADJOURNMENT Meeting was adjourned at 7:55 p.m. by Chair Johnson. Respectfully submitted, Irma Glidden ARRA Secretary Alameda Reuse and Redevelopment Authority Interoffice Memorandum June 4, 2008 TO: Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority FROM: Debra Kurita, Executive Director 2-B SUBJ: Approve the First Amendment to the Lease Agreement for St. George Spirits at Alameda Point BACKGROUND The Alameda Reuse and Redevelopment Authority (ARRA) governing body approves all Alameda Point subleases with a lease term greater than one year. The proposed first amendment to the St. George Spirits lease is for five years, plus five one -year options to extend. St. George Spirits entered into a ten -year lease agreement for Hangar 21 with the ARRA in February 2005. Hangar 21 is 65,000 sq. ft. At that time the developer, Alameda Point Community Partners, structured the lease with 10% increases every year for the first five years, then a reduction from $0.65/ sq. ft to $0.52/ sq. ft beginning in the sixth year through the tenth year. Additionally, St. George Spirits was given the right to terminate the lease, at their determination, between months 60 and 66 of the term. Consideration for the termination is the equivalent of six months rent. DISCUSSION In March 2008, St. George Spirits, through Cushman & Wakefield of California, submitted a proposal to extend their lease for an additional ten years, plus two, five -year options to extend; and to reduce the monthly rent from $35,750 per month to $26,000 per month, or .40 /sq. ft. This rate brings the monthly rent more in line with current market rate leases for the west hangars, with the average at $0.38/ sq. ft. St. George Spirits is very concerned about the uncertainty of the development on the wildlife refuge, specifically the potential construction of a Veteran's Administration facility (Attachment 1). They do not want new development to obstruct the views of San Francisco and the Bay from their tasting room. Therefore, the proposed amendment includes an option to terminate the lease at the end of the fifth year of the new teilil. The proposed amendment will reduce the rent to $27,300 per month beginning May 1, 2008, with 3% annual increases. There will be an initial five -year term, with five one -year options to renew. St George will need to give six months termination notice from the end of the current term, which affords them an option to move should their views become impaired. If St. George Spirits chooses to terminate the lease during the option period, they will be required to pay the rent owed through the end of the cuiTent Term. Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority BUDGET CONSIDERATION / FINANCIAL IMPACT June 4, 2008 Pg. 2 of 2 This amendment reduces the annual rent from $507,000 to $327,600 in the first year, with 3% increases annually through the remainder of the term, and retains a high profile, sales tax generating tenant in Alameda. RECOMMENDATION Approve the proposed first amendment to the lease agreement for St. George Spirits at Alameda Point. By: Resp tfully submitted, Attachment: 1. VA Preliminary Site Concept Leslie Litt e Development Services Director s :J• i Nanette Banks Finance & Administration Manager c,) -n n 0 Alameda Reuse and Redevelopment Authority Interoffice Memorandum June 4, 2008 TO: Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority FROM: Debra Kurita, Executive Director 2 -C SUBJ: Approve a Second Amendment to the Agreement with Marc Associates to Extend the Term for Seven Months and Add $45,000, for a Total Budget of $120,000, for the Provision of Intergovernmental Relations Services BACKGROUND The Alameda Reuse and Redevelopment Authority (ARRA) initially retained Marc Associates in January 2006 to provide intergovernmental relations services for Alameda Point. As part of that work effort, Marc Associates assisted the ARRA in negotiations with the Navy on the draft conveyance term sheet. Following the withdrawal of Alameda Point Community Partners as master developer, Marc Associates was not re- engaged to provide services. However, with the selection of SunCal as the new master developer, Marc Associates was retained in September 2007. The current agreement must now be amended to extend the term for seven months to December 31, 2008, and $45,000 must be added to the budget for a total budget of $120,000. The proposed second amendment is attached. DISCUSSION The ARRA has been working with the Navy for the past 15 years on the conveyance of Alameda Point. As these conveyance efforts have continued, it has become important to brief and update Alameda's Congressional delegation and the Governor's office on the progress and status of the conveyance. In addition, ARRA staff works closely with other Bay Area Local Reuse Authorities (LRAs) to coordinate base closure activities. The ARRA can enhance the effectiveness of its federal efforts with intergovernmental relations assistance from a firm based in Washington D.C. These services are essential for drafting, sponsoring, and enacting special legislation. The ARRA is currently sponsoring special Federal legislation to provide for a range of conveyance options for transferring Alameda Point. The legislation is contained in H.R. 5658, the "Duncan Hunter National Defense Authorization Act for Fiscal Year 2009," which passed out of the House of Representatives on May 22. If the bill is approved by the Senate and signed by the President, it will become effective on October 1, 2008. Marc Associates has been instrumental in this special legislative effort. Over the next seven months, Marc Associates will continue to assist the ARRA with its education and outreach to the Members of Congress, the Governor's office, and other Bay Area LRAs regarding conveyance of Alameda Point. Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority BUDGET CONSIDERATION / FINANCIAL IMPACT June 4, 2008 Page 2 of 2 The cost of providing intergovernmental relations services, $120,000, is an ARRA Third Party expense that is paid by SunCal. Therefore, there is no impact on the City's General Fund. RECOMMENDATION Approve a second amendment to the agreement with Marc Associates to extend the term for seven months and add $45,000, for a total budget of $120,000, for the provision of intergovernmental relations services. LL:DP: sb ectfully submit ed Leslie Little Development Services Director By: ! eb • e ` otter Base Reuse and Community Development Manager Attachment: 1. Second Amendment to Consultant Agreement SECOND AMENDMENT TO AGREEMENT This Amendment of the Agreement, entered into this 4th day of June 2008, by and between ALAMEDA REUSE AND REDEVELOPMENT AUTHORITY, a Joint Powers Authority (hereinafter referred to as "ARRA "), and MARC Associates, Inc., a corporation, whose address is 1101 17"' Street, N.W., Suite 1102, Washington, DC 20036 -4707 (hereinafter referred to as "Consultant "), is made with reference to the following: RECITALS: A. On August 1, 2007 an agreement was entered into by and between ARRA and Consultant (hereinafter "Agreement "). B. On April 30, 2008, an amendment to agreement was entered into by and between ARRA and Consultant. C. ARRA and Consultant desire to modify the Agreement on the terms and conditions set forth herein. NOW, THEREFORE, it is mutually agreed by and between and undersigned parties as follows: 1. Paragraph 1 ( "Term ") of the Agreement is modified to read as follows: "The term of this Agreement shall commence on the 1st day of September 2007 and shall terminate on the 31st day of December 2008, unless terminated earlier as set forth herein," 2. Paragraph 3 ( "Compensation to Consultant ") of the Agreement is modified to read as follows: "Consultant shall be compensated for services performed pursuant to this Agreement in the amount not to exceed $120,000.00 (Exhibit "A -2 ")." 3. Except as expressly modified herein, all other terms and covenants set forth in the Agreement shall remain the same and shall be in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this modification of Agreement to be executed on the day and year first above written. MARC Associates, Inc, ALAMEDA REUSE & REDEVELOPMENT AUTHORITY By: Eve, Ni■ Debra Kurita Title: .t\ribrZ vi-6c MARC Associates, Inc. June 2008 Executive Director Page I of 2 RE FOR APPROVAL: :- Leslie A. Little Development Services Director Debbie Potter, Manager Base Reuse & Community Development APPROVED AS TO FORM: Teresa Highsmith City Attorney MARC Associates. Inc. dune 2008 I'nge 2 of 2 Exhibit A -2 SCOPE OF WORK FOR ALAMEDA POINT MARC Associates, Inc., founded in 1985, is a Washington -based government relations firm that specializes in public sector strategic services. The firm creates and manages federal strategies for clients before the Congress, the Executive Branch and regulatory agencies, providing the necessary strategic, political, and technical support needed to win. The 14- member firm was founded 20 years ago by Dan Maldonado, who brings over 30 years of Federal experience. He served 11 years as Chief of Staff and appropriations staff member for former California Congressman Edward Roybal. He also served in the Executive Branch as a Senior Legislative and Intergovernmental Director, and in the President's Regulatory Council as an Associate Director. The firm prides itself on its strong work ethic and is known for its integrity and results. The firm delivers access to top decision - makers in Congress and the Administration, and has an impressive record of assisting clients in achieving project and program objectives, pursuing governmental funding opportunities, and building political relationships and strategies in support of a client's objectives. MARC's long -term bipartisan ties enhance our ability to work effectively for our clients - regardless of the party in power. Our firm leverages its strong relationships with the California Senators; the California Congressional delegation; House and Senate leaders; Chairs and Ranking Members of key Committees and Subcommittees; the White House; and key Departmental and regulatory officials. STRATEGIC OBJECTIVE Provide intergovernmental relations services in support of conveyance of Alameda Point to ARRA. PROPOSED APPROACH In order to achieve this objective, Marc Associates will provide the following strategic, representational and support services: 1. Work closely with ARRA in developing Federal legislative and regulatory positions and Federal strategy. • Maintain constant contact with ARRA on strategic implementation, making adjustments to positions and strategy as Federal political and legislative factors evolve. 2. Track Federal legislative and regulatory developments affecting ARRA and Alameda Point. 3. Assist with development of key materials and documents. • Assist with the preparation of fact sheets to support legislative and regulatory positions, as well as letters to House and Senate Members and Administration officials. • Assist• in the drafting of legislative proposals, amendments, and Committee report language. 4. Provide energetic representation. • Actively work with Congress and Federal department /agency officials to achieve Federal objectives. Actively involve ARRA in advocacy efforts, Keep ARRA apprised of the latest developments on Federal activities through constant updates. 5. Maintain strong liaison with Alameda's Congressional delegation and California Senators. • Work with Alameda's House and Senate delegation to achieve success on Federal objectives. • Work with ARRA to respond to inquiries and concerns from Alameda's House and Senate delegation. 6. Organize trips and meetings. • Make all arrangements necessary for trips to Washington, DC, including: Arranging meetings with Alameda's Congressional delegation, California Senators, key House and Senate Members, and key Department /agency officials. • Assist with preparing materials for trips and meetings, including briefing materials and development of justification packets. COORDINATION After the development of the initial strategies for Alameda Point, assist in the implementation of those strategies, the timing and sequencing of action steps and adjustments to strategies on an ongoing basis. This work will require ongoing communication, along with periodic meetings with ARRA. ASSIGNMENT OF WORK MARC will manage the day -to -day Federal representation in the following manner: MARC will provide two senior managers: Eve M. O'Toole, Senior Vice President, will serve as the primary manager and ensure that all aspects of the work are accomplished in a timely, complete and effective manner. Dan Maldonado, the firm's CEO, will serve as the co- manager in implementing the Federal agenda. In developing strategies, MARC will utilize its Senior Strategist, Judy Lemons, former Chief of Staff to House Democratic Leader Nancy Pelosi. BUDGET A fixed monthly fee of $7,500 over a sixteen -month period. Reimbursement for any travel and related expenses must be approved in advance by ARRA. Alameda Reuse and Redevelopment Authority Interoffice Memorandum June 4, 2008 TO: Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority FROM: Debra Kurita, Executive Director SUBJ: Alameda Point Update BACKGROUND As part of regular monthly Alameda Reuse and Redevelopment Authority (ARRA) meetings, staff provides an update on Alameda Point activities, with a focus on SunCal's activities as master developer. SunCal provided a quarterly update of the project master schedule at the ARRA's May meeting. SunCal continues to work on updating its infrastructure cost assumptions. These new assumptions will help inform the revised project pro forma, which is under development. In addition, SunCal has been working on retaining a financial partner to assist with its obligations under the Exclusive Negotiation Agreement (ENA). SunCal's request for a transfer of the ENA to a new entity or transfer of an ownership interest in SCC Alameda Point LLC will be considered on June 4, 2008, at a special meeting of the ARRA, Community Improvement Commission (CIC), and City Council. Staff has been working on special legislation over the last three months to provide several options for conveying Alameda Point from the Navy to the ARRA, and ultimately to a master developer. The legislation is now part of H.R. 5658, the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009. Section 2851 of the Act, dealing with the Alameda Point land conveyance, is attached. DISCUSSION In January 2008, the Navy transmitted a letter to the ARRA objecting to the ARRA's extension of SunCal's Milestone Schedule and reiterating its unwillingness to renegotiate its price terms in the existing draft conveyance Term Sheet. In response, the ARRA sent the Navy a letter suggesting that the ARRA and Navy cooperate in the initiation of federal legislation to provide for a new means of conveying the former NAS Alameda Property to the ARRA. The Navy accepted the ARRA's suggestion. Subsequently, in late April 2008, Alameda proposed special Federal legislation in consultation with the Navy that would authorize an expedited property transfer of the former Naval Air Station (NAS) Alameda, now Alameda Point, identified for closure pursuant to Public Law 101- 510 (1990). Since 1993, the ARRA and the Navy have worked towards the reuse and redevelopment of Alameda Point. To date, transfer and redevelopment of Alameda Point has Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority June 4, 2008 Page 2 of 4 primarily been impeded by shifts in the local real estate market, the existence of public trust requirements governed by the State of California, and the extent of environmental remediation to be conducted. Given the complexities of conveyance, it was determined that special legislation to create a statutory framework for transferring Alameda Point from the Navy to the ARRA could simplify the process. The three conveyance options proposed under the legislation are as follows: • Conveyance Based on the Term Sheet — The first option is consistent with the ARRA's ENA with SunCal. As contemplated in the ENA, the first option provides that SunCal can accept the Tenn Sheet as negotiated, or it can work with the ARRA and the Navy to re- negotiate the Term Sheet. The legislation requires that this option be exercised, i.e., that there be an executed Term Sheet, by July 2009. This date coincides with the ENA's expiration date, and it addresses the ARRA's, Navy's, and SunCal's concern that negotiations could continue on well beyond the ENA term. The legislation provides an additional incentive for SunCal, via the ARRA, to conclude a Term Sheet with the Navy. Currently, approximately 100 acres of Alameda Point property, referred to as Phase 3, are not included in the master developer footprint. Under the current Term Sheet, the Navy is retaining Phase 3 to auction, as it is the only portion of the property that is not subject to the Public Trust. Under the legislation, the Navy has agreed to negotiate with SunCal for a land price for Phase 3 and forgo its decision to auction the property, if SunCal is interested in acquiring Phase 3. SunCal has expressed interest in owning and developing Phase 3 in the past. • Conveyance Based on a Land Price Formula — This option is also consistent with the ENA. Option 2 provides for a pre - determined land price formula. This approach removes any uncertainty in establishing a land price and eliminates the need for lengthy negotiations with the Navy. Under this option, SunCal would make a $10 million down payment to the Navy and pay the Navy 12% of its gross residential and commercial building proceeds from sales to third party buyers. Buildings and lands held in the Public Trust or used for construction of affordable housing would be exempt from the required 12% of proceeds payment to the Navy. SunCal could select this option if it determined that it could not successfully re- negotiate the Term Sheet as provided for in Option 1, or if Option 2 is a more viable approach for establishing the land purchase price. SunCal would have an opportunity to develop Phase 3 under this option. • Conveyance Based on Public Bids — Option 3 is the option the ARRA, working with the City, would pursue in the event SunCal does not go forward with the project. Option 3 provides that the City would, with the Navy's cooperation, conduct a public bid process to sell Alameda Point. The Navy would receive 80% of gross sales proceeds. If the City conducts the bid process, the conveyance would be consistent with the Public Trust requirements because the City, as Trustee, will execute the Public Trust Land Exchange Agreement prior to the public bid process or following selection of the buyer(s). With the City conducting the auction, prospective buyers have certainty that the City, as Trustee, can Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority June 4, 2008 Page 3 of 4 complete the land exchange and provide the necessary land for the mixed -use project. The Navy cannot provide this certainty as it is not the Trustee. Potential bidders would determine their land payment offers based on the potential Alameda Point land uses contained in the City's General Plan. Unlike the CIC's upfront commitment to pledge tax increment under the existing Term Sheet, the CIC would negotiate its financial contribution to the project after the buyer is selected. Public amenities would also be negotiated at that time. The selected bidder would assume all entitlement risk. In addition to specifying conveyance options, the legislation addresses Federal -to- Federal property transfers that are currently under negotiation between the Navy, the United States Fish and Wildlife Service (USF &W), and the Department of Veterans Affairs (VA). The Navy's obligation to provide environmental remediation to specific standards is also addressed. The attached legislation, which has been adopted by the House of Representatives, was modified from the draft legislation provided by ARRA staff to the House Armed Services Committee. There are now several provisions, including the ARRA's obligation to make reasonable efforts over a three -year period to accommodate the continued use of the property by Federal agencies, specifically the USF &W and VA, that the ARRA and Navy will seek to modify through the legislative conference committee process. It is anticipated that that process will get underway in mid -June and will conclude later in the summer. If the House and Senate adopt the legislation, it will take effect on October 1, 2008. In anticipation of legislation being passed that will provide a statutory deadline for concluding negotiations on a term sheet, staff is exploring a possible amendment to the ENA that would establish execution of a conveyance term sheet with the Navy as a mandatory milestone. Currently, the ENA has a number of non - mandatory milestones that generally are work products that involve third party agencies such as the Navy, the State Office of Historic Preservation, USF &W, and environmental regulators, which SunCal cannot directly control. If the legislation is approved, a set deadline for concluding a conveyance term sheet is established, and it may be appropriate for that work task to become a mandatory milestone. BUDGET CONSIDERATION / FINANCIAL IMPACT Work on special Federal legislation addressing conveyance options for Alameda Point is being carried out as part of Alameda's obligations pursuant to the ENA with SunCal, and SunCal reimburses costs associated with this effort. Therefore, there is no impact on the City's General Fund. RECOMMENDATION This report is for information only. No action is required. Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority R.p ;•�' ully submitted June 4, 2008 Page 4 of 4 Leslie Little Development Services Director By: bie'o'te Base Reuse and Community Development Manager Attachment: 1. Alameda Point Legislation ATTACHMENT 1 SEC. 2851. LAND CONVEYANCE, FORMER NAVAL AIR STATION, ALAMEDA, CALIFORNIA. (a) Conveyance Required- The Secretary of the Navy shall convey to the redevelopment authority for the former Naval Air Station Alameda, California (in this section referred to as the ' redevelopment authority'), all right, title and interest of the United States in and to the real and personal property comprising Naval Air Station Alameda, except those parcels identified for public benefit conveyance and certain surplus lands at the Naval Air Station Alameda described in the Federal Register on November 5, 2007, In this section, the real and personal property to be conveyed under this section is referred to as the 'NAS Property'. (b) Multiple Conveyances- The conveyance of the NAS Property may be conducted through multiple parcel transfers. (c) Consideration Options- As consideration for the conveyance of the NAS Property under subsection (a), the Secretary of the Navy and the redevelo ment authorit shall a•ree u on one of the followin• o •tions: (1) Not later than nine months after the date of the enactment of this Act, the redevelopment authority shall accept the consideration terms described in the document negotiated between the redevelopment authority and the Secretary of the Navy known as the draft ' Summary of Acquisition Terms and Conditions' and dated September 18, 2006, as such language may be amended, with value to be determined for the portion of the NAS Property known as Parcel 3, and subsequently make payments to the Secretary in accordance with such document. (2)(A) The redevelopment authority shall ensure that the entity that acquires title to the NAS Property for development (in this paragraph referred to as the development entity') submits to the Secretary of the Navy a down payment of $10,000,000 dollars at the time the initial portion of the NAS Property is conveyed to the development entity. (8) In addition, the redevelopment entity shall submit to the Secretary 12 percent of all gross residential and commercial building sales to the first bona-fide, arms-length third-party buyer, whether as new construction or the sale of rehabilitated existing structures. In the event that the development entity transfers all or any portion of the NAS Property to a third party, including any subsidiaries, before the completion of new or rehabilitated construction, the development entity shall satisfy the payment requirement as prescribed in this paragraph at such time as the NAS Property is conveyed to a bona-fide, arms- length third-party buyer. This obligation shall not apply to the sale of any buildings on land held in the public trust by the State of California or sales of land or buildings for the purposes of constructing or otherwise providing affordable housing, as determined by the Secretary. (3)(A) The redevelopment authority shall submit 80 percent of the gross proceeds received by the redevelopment authority from the redevelopment authority's competitive solicitation of any portion of the NAS Property not encumbered by the public trust. (B) To comply with this paragraph, the redevelopment authority shall-- (1) prepare, for review and approval by the Secretary of the Navy, commercially reasonable solicitation materials consisting of a request for qualifications and a request for proposals for the conveyance or lease of the NAS Property, as appropriate, in accordance with established contract principles, and such approval by the Secretary shall not be unreasonably withheld; and (ii) pay to the Secretary the required share of monies received by the redevelopment authority by reason of any contract or agreement executed as a result of the solicitation. (d) Existing Uses- During the three-year period beginning on the date on which the first conveyance under this section is made, the redevelopment authority shall make reasonable efforts to accommodate the continued use by the United States of those portions of the NAS Property covered by a request for Federal Land Transfer so long as the accommodation of such use is at no cost or expense to the redevelopment authority. Such accommodations shall provide adequate protection for the endangered California Least Tern in accordance with the requirements of the existing Biological Opinion for Naval Air Station Alameda dated March 22, 1999, and any future amendments to the Biological Opinion. (e) Remediation- The Secretary of the Navy shall, to the extent practicable, remediate the NAS Property to the standard included by the Secretary and the redevelopment authority in the document referred to in subsection (c)(1). (f) Savings Provision- Nothing in this section shall be construed to affect or limit the application of, or any obligation to comply with, any environmental law, including the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. 9601 et seq.) and the Solid Waste Disposal Act (42 U.S.C. 6901 et seq. (g) Description of Property- The exact acreage and legal description of the real property to be conveyed under this section shall be determined by a survey satisfactory to the Department. (h) Master Lease- The Lease in Furtherance of Conveyance, dated June 2000, as amended, between the Secretary of the Navy and the redevelopment authority shall remain in full force and effect until conveyance of the NAS Property in accordance with this section, and a lease amendment recognizing this section shall be offered by the Secretary. (1) Treatment of Amounts Received- Amounts received by the United States under this section shall be credited to the fund or account intended to receive proceeds from the disposal of the NAS Property pursuant to the Defense Base Closure and Realignment Act of 1990 (part A of title XXIX of Public Law 101-510; 10 U.S.C. 2687 note). (j) Additional Terms and Conditions- The Secretary of the Navy may require such additional terms and conditions in connection with the conveyance under subsections (a) as the Secretary considers appropriate to protect the interests of the United States. CITY OF ALAMEDA • CALIFORNIA SPECIAL JOINT MEETING OF THE CITY COUNCIL, ALAMEDA REUSE AND REDEVELOPMENT AUTHORITY (ARRA), AND COMMUNITY IMPROVEMENT COMMISSION (CIC) WEDNESDAY - - - JUNE 4, 2008 - - - 7:01 P.M. Location: City Council Chambers, City Hall, corner of Santa Clara Avenue and Oak Street. Public Participation Anyone wishing to address the Council/Board/Commission on agenda items or business introduced by the Council/Board/Commission may speak for a maximum of 3 minutes per agenda item when the subject is before the Council/Board/Commission. Please file a speaker's slip with the Deputy City Clerk if you wish to speak. 1. ROLL CALL - City Council, ARRA, CIC AGENDA ITEM 2-A. Authorize the City Manager/Executive Director to Execute a Transfer of the Exclusive Negotiation Agreement with SCC Alameda Point LLC to a New Entity with D.E. Shaw or a Transfer of an Ownership Interest in the Master Developer Entity, SCC Alameda Point LLC to D.E. Shaw, Pursuant to Specific Terms and Conditions. (Development Services) 3. ADJOURNMENT - City Council, ARRA, CIC Beverly Jo ns.tlNaflor Chair, Alam . 1us1 and Redevelopment Authority and Community Improvement Commission CITY OF ALAMEDA Memorandum To: Honorable Mayor and Members of the City Council Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority Honorable Chair and Members of the Community Improvement Commission From: Debra Kurita City Manager/Executive Director Date: June 4, 2008 Re: Authorize the City Manager/Executive Director to Execute a Transfer of the Exclusive Negotiation Agreement with SCC Alameda Point LLC to a New Entity with D.E. Shaw or Transfer of an Ownership Interest in the SCC Alameda Point LLC to D.E. Shaw Pursuant to Specific Terms and Conditions BACKGROUND On July 18, 2007, the Alameda Reuse and Redevelopment Authority (ARRA), Community Improvement Commission (CIC), and City (together "Alameda") approved an Exclusive Negotiation Agreement (ENA) with SCC Alameda Point LLC (Developer), which is an entity of Sun Cal Companies (Sun Cal), for the redevelopment of Alameda Point. The 24-month ENA established key performance milestones; provided for reimbursement of ARRA staff and third party costs; identified activities to be completed involving third party entities; specified key personnel assigned to the project; and described the process for transferring the ENA. The ENA was amended in March 2008 to provide more time to complete two tasks: preparation of the Development Concept and related documents, and preparation of the draft master plan. In addition, Sun Cal was required to deposit $350,000 a quarter, and spend $117,000 a month, for consultant costs to ensure progress on developing the required documents. Sun Cal has now requested authorization to secure a financial partner to complete its obligations under the ENA. The addition of a financial partner is considered a Transfer under the ENA and requires approval by the boards of the ARRA and the CIC, and by the City Council. Agenda Item #2-A CC/ARRA/CIC 6-4-08 Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority Honorable Mayor and Members of the City Council Honorable Chair and Members of the Community Improvement Commission DISCUSSION June 4, 2008 Page 2 of 5 Alameda selected Sun Cal as the Alameda Point master developer based on its expertise in developing complex mixed-use projects, the experience of its key personnel, and its financial wherewithal to spend the necessary funds to entitle a large project over a 24-month timeframe. Each of these factors is critical to assuring the successful completion of property conveyance from the Navy, environmental remediation of the site, and receipt of planning approvals to build a mixed-use project. Although Sun Cal indicated from the beginning that it would secure a financial partner to assist in redeveloping Alameda Point, the company initially said that it would self-fund the ENA-period expenditures. However, with the changing real estate market, Sun Cal is now requesting authorization to either transfer the ENA to a new developer entity, or to transfer an Ownership Interest (as defined in the ENA) in the master developer entity, SCC Alameda Point LLC, to a financial partner. Given the importance of the master developer's role in redeveloping Alameda Point, the decision to modify the master developer entity, SCC Alameda Point LLC, is significant. Therefore, transferring the ENA or transferring an interest in the existing master developer entity is prohibited under the ENA without the prior written consent of Alameda, which is given at Alameda's sole discretion. Sun Cal has selected D.E. Shaw, an international hedge fund headquartered in New York, as the financial partner. D.E. Shaw is Sun Cal's financial partner on a 57,000-acre project outside of Albuquerque, New Mexico. That project is currently in the pre- development stage. Financial information on D.E. Shaw was delivered to the City's economic consultant, Economic & Planning Systems (EPS), and EPS confirmed that D.E. Shaw has liquid assets sufficient to fully fund the investment required to develop any foreseeable Alameda Point development plan. The analysis by EPS indicates that D.E. Shaw's core areas of investment are in high tech companies. Although its portfolio includes some significant investment in real estate, D.E. Shaw's experience with the development of complex real estate projects is limited in comparison to other specialized real estate funds. Sun Cal and D.E. Shaw have negotiated a term sheet that will form the basis of an operating agreement for the new relationship. The term sheet has been signed by the parties, and, pursuant to the ENA, was delivered to EPS on Wednesday, May 28, 2008. Sun Cal has elected to treat this information as confidential, which is its right under Section 10 of the ENA. Consequently, the term sheet was made available only to EPS and is not available for review by the ARRA staff, Alameda, or the public. Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority Honorable Mayor and Members of the City Council Honorable Chair and Members of the Community Improvement Commission June 4, 2008 Page 3 of 5 A typical term sheet contains provisions such as the amount of money pledged by each party, how the money will be spent, which party is responsible for day-to-day project management, how profits will be disbursed among the parties based on an established internal rate of return, and under what circumstances the managing member of the partnership and its key staff can be fired. These issues were of key concern to Alameda when the ENA was originally approved last July and are reflected in the ENA provision that gives Alameda the absolute discretion to approve or reject any proposed transfer of an ENA interest. The executed term sheet, which is a non-binding summary of terms and conditions, addresses some of these issues but leaves much of the detail to be specified in an operating agreement, which has yet to be finalized. Without an operating agreement that contains the precise business provisions of the new relationship or entity, and that reflects key provisions essential to successful project execution, it may not be appropriate to consent to the requested transfer of the ENA or transfer of an Ownership Interest in the ENA. Therefore, staff is recommending the ARRA Board, CIC, and City Council establish key provisions that must be part of any executed term sheet, leading to a fully signed and negotiated operating agreement, as a condition of consenting to the requested transfer. Staff is recommending that any term sheet or operating agreement introducing a new partnership entity include a limited number of core provisions. These provisions are largely based upon the concerns expressed by Board members during the hearing at which the original ENA was approved and are as follows: • Sun Cal retains responsibility for the day-to-day management of the new entity. Sun Cal was selected as master developer because of its expertise, and the new entity should retain that expertise to move Alameda Point through the entitlement process. This is especially important if the new financial partner is less experienced with complex real estate development projects. • Sun Cal maintains 15% of the equity in the new relationship or entity through the term of the ENA. Sun Cal has self-funded its due diligence and ENA activities to date. It should retain a financial stake in the new venture to help ensure its commitment to the project. Sun Cal cannot be removed as managing partner during the term of the ENA except for cause, such as breach of fiduciary duty or causing a default under the ENA, and then only if Alameda accepts the replacement managing member. This provision ensures that Alameda receives the experience and expertise it bargained for when it Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority Honorable Mayor and Members of the City Council June 4, 2008 Page 4 of 5 Honorable Chair and Members of the Community Improvement Commission selected Sun Cal as its master developer and entered into an ENA for entitlement of Alameda Point as a mixed-use project. • Require an initial capital contribution from the members of the entity of $10 million. Staff estimates that $10 million will be required to conduct all of the obligations under the ENA, such as preparing the Development Concept and master plan, conducting environmental review, completing conveyance, and negotiating the Disposition and Development Agreement (DDA). Staff recommends that the entity have sufficient funds available and under the control of the managing partner to fulfill its obligations under the ENA. • As managing member, Sun Cal should retain the authority to make all decisions except major decisions. Major decisions should be limited to the terms and conditions of the conveyance of Alameda Point from the Navy and the terms and conditions of the DDA. Retaining decision-making authority is key to carrying out the obligations of master developer and ensuring timely completion of the project. It is a key interest of Alameda that its selected master developer, Sun Cal, retain complete control over the master planning and entitlement process. • Prohibit cross-default and cross-collateralization. D.E. Shaw is a financial partner with Sun Cal on other real estate deals. In no event should the operating agreement for the Alameda Point entity provide that a default by a party under a different agreement be a default under the operating agreement, nor should the operating agreement provide an opportunity for funds generated by this project, or the value created through successful entitlement of Alameda Point, to be pledged to another project, thereby adversely affecting the viability of Alameda Point. EPS's review of the executed non-binding term sheet has concluded the following: • Sun Cal will have day-to-day management responsibility, but D.E. Shaw retains complete discretion on removing Sun Cal and providing a "Replacement Managing Investor" subject to Alameda's approval. This would permit Sun Cal to be removed for any reason including a cross-default on another project. • The term sheet does not require Sun Cal to have an equity investment in the entity. • There is no minimum financial commitment or initial up-front contribution of dollars. Honorable Chair and Members of the Alameda Reuse and Redevelopment Authority Honorable Mayor and Members of the City Council Honorable Chair and Members of the Community Improvement Commission June 4, 2008 Page 5 of 5 • SunCal will have authority to take actions to complete the obligations of the ENA, but D.E. Shaw must authorize all major decisions. Major decisions are not defined in the term sheet. Staff recommends that if SunCal provides Alameda with an executed term sheet containing the provisions recommended by staff and outlined above, then the Executive Director /City Manager should grant written approval of the Transfer, pending receipt of an executed operating agreement consistent with the provisions of the term sheet as outlined in this staff report within 30 days of Alameda action. In the event that the executed term sheet and /or operating agreement does not contain the provisions outlined above, staff would seek direction from the ARRA Board, the CIC, and the City Council regarding the requested transfer and proposed conditions. BUDGET CONSIDERATION /FINANCIAL IMPACT Authorizing the Executive Director /City Manager to execute a transfer of the ENA or a transfer of an Ownership Interest in the master developer entity, SCC Alameda Point LLC, does not modify the financial provisions contained in the ENA regarding reimbursement of staff and ARRA third party consultant costs. Therefore, there is no fiscal impact to the City's General Fund to granting a transfer of the ENA or a transfer of an Ownership Interest in the master developer entity, SCC Alameda Point LLC. RECOMMENDATION Authorize the Executive Director /City Manager to execute a transfer of the Exclusive Negotiation Agreement with SCC Alameda Point LLC to a new entity with D.E. Shaw or a transfer of an Ownership Interest in the master developer entity, SCC Alameda Point LLC, to D.E. Shaw, pursuant to the terms and conditions outlined above. Res Ily submitted, Leslie Little Development Services Director By. Debbie Potter Base Reuse and Community Development Manager