2003-11-19 Special JT CC, CIC, ARRA MinutesUNAPPROVED
MINUTES OF THE SPECIAL JOINT MEETING OF THE
CITY COUNCIL, COMMUNITY IMPROVEMENT COMMISSION,
AND ALAMEDA REUSE AND REDEVELOPMENT AUTHORITY
Wednesday, November 19, 2003
The meeting convened at 5:00 p.m. with Mayor Johnson presiding.
ROLL CALL
Present: Beverly Johnson, Mayor, City of Alameda
Tony Daysog, Boardmember, City of Alameda
Barbara Kerr, Boardmember, City of Alameda
Frank Matarrese, Boardmember, City of Alameda
Marie Gilmore, Boardmember, City of Alameda
1. PUBLIC COMMENT ON AGENDA ITEMS ONLY
Peter Clark, a transit-oriented developer, proposes to build a transit system of automated trolleys
at Alameda Point connecting to BART at no cost to the City of Alameda in exchange for 40 acres
of land. All construction is pre-fab with no broken ground. He has been involved in other such
trolley systems around the country that have perfect safety records. He requested permission to
talk to staff about his proposal.
Doug deHaan stated that there is not much public evidence of progress at Alameda Point by the
master developer, although it has been almost two years. Three of the key companies that were
originally in the APCP partnership are no longer involved and two companies have replaced
them, which significantly changes the proposal that was approved. He feels it is important that
the remediation portion of the development process be completed as a whole and not piece meal.
2. PRESENTATION BY ALAMEDA POINT COMMUNITY PARTNERS
Aiden Barry, property manager for APCP, provided written responses to the Board’s questions
from a meeting held the previous week. His presentation outlining these responses is
summarized below.
APCP is comprised of Shea Homes, Centex Homes, Shea Properties, Morgan Stanley Real Estate
Fund, and Industrial Realty Group (IRG). As of October 1, 2003, an amendment to the MOU
created two operating groups: the Shea and Centex entities are the operating members, and the
real estate partners are the passive members. The operating members will oversee all activities
and fund current development. The passive members will have no control over day-to-day
operations but have a financial interest. Updated financial information has recently been
provided to the City that demonstrates sufficient funding to complete the project.
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Mr. Barry introduced Lori Fhelberg, who provided an overview of the entire project. She noted
the constraints of existing buildings and infrastructure, as well as Measure A. Her presentation
outlined the Village Center, including retail, marina, public facilities, and transit hub.
Highlighting the adaptive reuse area is Hangar Row, which may be useful for alternative energy
resources on the rooftops as well as interior tenants. Innovative transit ideas, including the
gondola crossing, are being researched. There will be a pedestrian-friendly, neighborhood
atmosphere, including a series of parks and paths. Housing areas will not be tracts of the same
designs but different configurations with varied sizes and price ranges.
Bob Burke, general manager of Shea Properties, introduced the specialists on the team. Sam
Swan of Cushman & Wakefield discussed their projects at Marina Village and Harbor Bay and
their adaptive reuse experience in Oakland, Emeryville and Berkeley. They anticipate working
with current tenants as well as attracting new tenants as development progresses. David Johnson
with Studios Architecture in San Francisco discussed their reuse projects, including a series of
hangars at Hamilton Field and the Ferry Building in San Francisco.
Aiden Barry also discussed the risk problems in developing the project, including the physical,
financial, and remediation constraints. They are anticipating an internal rate of return (IRR) of
22.5%, which is subordinate to the City’s goals. They are two to three years away from actually
starting the redevelopment of the project. Mr. Barry provided a brief summary of the background
of the master developer selection process, negotiations with the City, and progress to date,
including the draft Conditional Acquisition Agreement (CAA). He said it is time to put forth a
joint effort between APCP and the City to negotiate with the Navy on the conveyance strategy
that will allow the property to be transferred on a phased basis.
Member Gilmore asked about the IRR of 22.5% as it relates to the $3.5 million that the City put
forth to fund some of the pre-development costs. Phil Rafton, part of the financial team,
delineated the risks going forward (after final negotiations with the Navy), including entitlement,
traffic issues, development costs that are impacted by unknown conditions including soil and
seismic considerations, and market risks. Also, APCP was supposed to receive lease revenue
from MARAD but that was subsequently changed. Therefore, their risk remains the same even
with the City’s contribution, which is in the form of bonds.
Member Kerr stated that there is also risk involved for the City via the issuance of the bonds,
which have to be paid back. Also, all developers are faced with traffic and seismic problems.
She is concerned about building a 22.5% IRR into the CAA because a land price has not been
settled, and the City could end up with no return for the land. She also feels the City should have
considered another alternative, namely trying to sell the land as-is.
Chair Johnson pointed out that the $3.5 million would have to be spent regardless of how or by
whom the property is developed. It is necessary for the City to gain entitlement from the Navy.
Member Daysog expressed concerns about the issuance of the bonds and how it relates to the
portion of the CAA on fiscal neutrality. He would like language added to the CAA that not only
contemplates issuance of bonds but also budget cuts. Mr. Rafton indicated that discussions are
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ongoing with staff regarding the issuance of bonds but nothing has been finalized. Lease
revenues and not general obligations of the City will secure the bonds, so APCP is also
responsible for their repayment.
Member Gilmore pointed out that the City could spend $3.5 million on the preliminary phases
and then APCP could decide to walk away from the project. Mr. Rafton responded that APCP
will also be spending approximately $1.8 million during the same time. He also indicated that
the $7 million spent thus far plus this $1.8 million is not generating 22.5% IRR.
Member Kerr asked what type of accounting the City will receive on the $1.8 million. Mr.
Rafton said that there will be an audit process completed on monies spent to date and another at
the conclusion of the ARRA-funded pre-development period. Ms. Kerr also inquired if there is
any contractual obligation between the “specialty team” companies introduced this evening and
APCP. Mr. Barry responded that Shea Properties created an RFQ for a group called Alameda
Point Adaptive Reuse (APAR) – an entity in name only for the RFQ. This group will aid APCP
in the adaptive reuse portion of the CAA. He also confirmed APCP’s intent to be totally in sync
with the City in negotiations with the Navy on all levels (local as well as Washington).
Lane Marceau, president of Shea Homes, further addressed Ms. Gilmore’s concerns about
APCP’s walk-away option. He reiterated that they have spent $7 million thus far and taken on
that entire risk with no vested rights to the property.
Member Gilmore asked if any of the APAR members of APCP have any experience with military
bases that are further along in their development than Alameda Point. Mr. Barry noted that IRG
has worked on McClellan Park, which is a little further along. Mr. Burke said that they have
worked on some parts of Hamilton Field and Tustin but not in advanced stages. They have,
however, done adaptive reuse work in similar large buildings on civilian sites since the 1970’s.
Ms. Gilmore also asked about the original MOU versus the amended MOU. In the original
MOU, there was an IRR of 18% with incentives if certain goals are met. The amended MOU
indicates that any area not addressed remains the same as the original. Mr. Barry indicated they
are in the process of drafting an Operating Agreement, which will detail each of the components
in the MOU. Mr. Marceau also clarified that there is a section in the amended MOU that
supersedes all previous sections regarding cash distribution, so the 18% IRR no longer exists.
Member Kerr asked about APCP’S status as a Delaware corporation and its ability to obtain
insurance, which had been a problem originally. Mr. Barry stated that the insurance requirements
in the Property Management Agreement were somewhat unique, but the corporation has been
able to satisfy them and is fully insured.
3. ADJOURNMENT TO CLOSED SESSION
CONFERENCE WITH REAL PROPERTY NEGOTIATOR
Property: Alameda Naval Air Station
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Negotiation Party: Alameda Point Community Partners; Navy; City of
Alameda; Community Improvement Commission;
and Alameda Reuse and Redevelopment Authority
Under Negotiation: Price and terms.
Mayor Johnson reconvened the public portion of the meeting. She announced that the ARRA,
City Council, and CIC met in closed session with the real property negotiators.
4. ADOPTION OF RESOLUTION AUTHORIZING THE ALAMEDA CITY
MANAGER, EXECUTIVE DIRECTOR OF THE COMMISSION AND THE
EXECUTIVE DIRECTOR OF THE AUTHORITY TO ENTER INTO A
CONDITIONAL ACQUISITION AGREEMENT BY AND BETWEEN THE
ALAMEDA POINT COMMUNITY PARTNERS FOR REAL PROPERTY AT
ALAMEDA POINT
Member Gilmore thanked APCP for all of the information submitted in writing and verbally at
the meeting. Member Daysog acknowledged that sufficient data has been submitted and a
decision needs to be made in order to move forward with the development plans.
Member Daysog moved for the adoption of the Conditional Acquisition Agreement, with
the notes so tailored, with an understanding that in performing its responsibilities, the
ARRA, City Council, and CIC shall contemplate reducing capital budgets in an effort to
achieve fiscal neutrality.
Member Matarrese seconded the motion with the additional policy statement and with the
language as annotated, noting that this is a conditional agreement and it lays out terms to
forward in understanding that the $3.5 million investment the City is going to make over
the next 15 months is something that is needed to continue the quest to develop the
property regardless of who is in the position of master developer or individual developer.
Member Gilmore expressed a desire to have time to digest what was presented at this meeting
rather than act at this time, especially since this was the first time the individual entities were
introduced.
Member Gilmore moved for a continuance of the item for another one or two weeks in
order to further review all of the material presented. Member Kerr seconded the motion.
Member Daysog stated that he has had an opportunity to review the CAA and review the
materials for many months and feels comfortable moving ahead at this time.
Member Gilmore’s motion failed by the following voice vote: Mayor Johnson: No;
Member Daysog: No; Member Kerr: Aye; Member Matarrese: No; Member Gilmore:
Aye.
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Member Daysog’s motion passed by the following voice vote: Mayor Johnson: Aye;
Member Daysog: Aye; Member Kerr: No; Member Matarrese: Aye; Member Gilmore:
No.
ADJOURNMENT
Mayor Johnson adjourned the meeting at 6:45 p.m.
Respectfully submitted,
Emily Parodi
Interim ARRA Secretary
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