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HomeMy WebLinkAbout04 QUALIFIED DEVELOPERS FOR DISPOSITIONAgenda Item Reviewed: 4 ,.~ City Manager Finance Director MEETING DATE: SEPTEMBER 20, 2011 TO: WILLIAM A. HUSTON, INTERIM CITY MANAGER FROM: CITY MANAGER'S OFFICE & REDEVELOPMENT AGENCY SUBJECT: EXPERT PANEL RECOMMENDATIONS ON THE THREE MOST QUALIFIED DEVELOPMENT ENTITIES TO MOVE FORWARD IN THE DEVELOPER SELECTION PROCESS FOR DISPOSITION PACKAGES 1A NORTH AND 2A AT TUSTIN LEGACY SUMMARY The City Council's confirmation is requested of the three development entities determined most qualified by the City selected Expert Panel for Tustin Legacy Disposition Packages 1A North and 2A. RECOMMENDATION It is recommended that the City Council confirm the top three most qualified development entities for Tustin Legacy Disposition Packages 1A North and 2A, identified herein as recommended by the Expert Panel for these Disposition Packages, and authorize staff to move forward with Step 2, including the solicitation of specific proposals from each development entity. FISCAL. IMPACT The Tustin Legacy Disposition Strategy identified the preliminary projected expenditures likely and to be expected related to implementation activities associated with the Disposition Strategy. The Agency staff time and consultant support have been involved in setting up and supporting Step 1 of the Tustin Legacy developer screening process for Disposition Packages 1A North and 2A. In addition, the City Council previously authorized honorariums to those serving on the Expert Panels, which were budgeted and included in the Redevelopment Agency's Fiscal Year 2011-2012 budget and which have been identified in the Agency's adopted Enforceable Obligations Payment Schedule. Agenda Report -Expert Panel Recommendations September 20, 2011 Page 2 BACKGROUND The Tustin City Council on April 26, 2011, adopted a revised Tustin Legacy Disposition Strategy. On July 19, 2011, the Council confirmed an Expert Panel process for the Step 1 developer screening process for Early Opportunity Disposition Packages at Tustin Legacy based on product type, including the numerical scoring and qualifying criteria to be used in interviewing each development entity by each Expert Panel. A copy of the criteria used in the developer interviews is attached. As the Council will recall, the developer selection process is a two-step process for each Disposition Package. The first step involves a personal interview over sighted by a panel of City selected experts who will screen and recommend to the City Council a proposed list of the three firms that they believe are most qualified to proceed with a particular Disposition Package within the Tustin Legacy project. Based on concurrence by the City Council of the short listed top three firms, the three most qualified firms for each individual Disposition Package, or parcel solicitation, will submit a more detailed proposal and pro forma/business offer to the City in response to specific terms and conditions identified by the City. After the step 2 submittals, a technical evaluation team of City and Agency staff and outside consultants with specific expertise in areas of development and financing, etc., will review the proposals and provide a recommendation to the City Council of the preferred developer, including a ranking of each of the firms based on their responses. Based on these recommendations, the City Council will then be asked to select the developer for each Disposition Package and instruct staff to prepare any subsequent Development Agreement and sale documents for City Council approval. Based on previous City Council direction, staff issued developer solicitations for five initial developer disposition packages at Tustin Legacy, including the required return to the City of a Developer Questionnaire. Copies of the specific solicitation packages sent out to developer entities were previously provided to the City Council. In addition, information and a notice on the solicitation packages was also sent to any entity that submitted a developer interest form to the City, and to the Orange Council/Inland Empire Section of the Urban Land Institute, the Orange County Building Industry Association, the LA/Ventura Sections of Urban Land Institute, Building Industry Association, the Southern California Division of the National Association of Office and Industrial Properties ("NAIOP"}, the Orange County Business Council, the Association of Defense Communities, the LA Times, Orange County Register and Orange County Business Journal. Two development sites for which developer interest was solicited included: Agenda Report -Expert Panel Recommendations September 20, 2011 Page 3 Disposition Package 1A North, proposed for apartments. This site is approximately 7.5+/- net developable acres and will accommodate up to 211 units, if density bonuses are granted. There will be a requirement to provide 35 very low income, 20 low income, and 50 moderate income affordable units. • Disposition Package 2A is an approximate 20+/- net acre portion of Disposition Package 2 proposed largely for apartment product and ancillary retail/office uses. Up to 533 apartments could be accommodated, if density bonuses are granted. 53 very low, 53 low and 51 moderate income affordable units will be required. Based on responses to the questionnaires sent out to each firm, 9 firms qualified to be interviewed for Disposition Package 1A North and 8 firms for Disposition Package 2A. The Expert Panel for these initial apartment sites met on August 31St and September 1St and interviewed each development entity. The Expert Panel recommends three development entities in each package as the most qualified to move to step 2 in the City's developer selection process. The top three development entities for each package are identified below, along with the ranking of other development entities which were interviewed. (Expert Panel composite scores for each site and each developer are included as Attachment 1}. An additional summary of these top entities is provided in Attachment 2 to this report. Disposition Package 1A North Top Three (listed in no order of ranking) Bridge Housing Corporation The Irvine Company, LLC St. Anton Partners Ranking of Others Archstone New Development Holdings, LP Lincoln Property Company Southwest, Inc. Fairfield Residential Company, LLC GLJ West Development Company, LLC Meta Housing Corporation United American Properties, Inc. Agenda Report -Expert Panel Recommendations September 20, 2011 Page 4 Disposition Package 2A Top Three. Firms (listed in no order of ranking) BRE The Irvine Company, LLC Archstone New Development Holdings LP Ranking of Other Firms St. Anton Partners Mill Creek Residential Trust, LLC Lincoln Property Company Southwest, Inc. Fairfield GLJ West City Council concurrence of the short listed top three firms identified above is now requested. Each firm will then move to step 2 in the City's developer selection process for Disposition Packages 1 A North and 2A. Special thanks are extended to members of the Expert Panel that so graciously gave of their expertise, time and energies in the City's developer selection interview process including: • Annie Gerard with Apt Market Research • Sandra Kulli with Kulli Marketing • Joseph Cesta, Vice President with Marcus & Millichap (replaced Claire De Briere with The Ratkovich Co.) • Lisa Stipkovich, retired Anaheim Redevelopment Director • Richard Hunsaker, civil engineer and retired owner of Hunsaker & Associates • Mike Hunter with Land Advisors Org. (replaced David Smith with Thomas Cox Architects). Staff will be available to respond to any questions from the City Council. Christine Shingleto Assistant City Man er Attachments: 1-Expert Scores of Disposition Package 1A North and 2A 2- Summary of Background on Top Three Development Entities Attachment 1 Expert Panels Scores of Development Entities on Disposition Packages 1A North and 2A Tustin Legacy- Step 1 Developer Selection Screening Process Numerical Scoring & Qualifying Criteria for each Disposition Packages (Questr~rn.~ ~~i/1 be designed for Fanet around each criteria based an Pr®duet Type) Criteria ; I'oiY~t i (max vcorc ig `~' for itctxi~, l -G, 1 1. Demonstrated California Experience In Developing High Quality Products Over an Extended Period of Time. 2. Demonstrated Experience in "Place Making" including the design and ~` installation of Landscaping and Hardscape. 3. Demonstrated Experience in Designing and Installing Horizontal Off- Site Backbone Infrastructure and In-Tract Infrastructure and in Support of Vertical Improvements (Buildings). 4. Demonstrated Experience in Delivering Projects as Planned within the Project Budget and on Schedule. 5. Demonstrated Successful Experience in Managing a Development Entity over an Extended Period of Time and through numerous Business Cycles. 6. Demonstrated Access to Capital including the ability to provide sufficient Equity and Leveraged Monies through such vehicles as capable investment partners andlor institutional lending facilities. Emphasis will be placed on the long term relationship with recognized capital sources, 7. Litigation/Bankruptcy: 1) has Development Entity been involved in any major litigation impacts their project capability (Y!N); 2) has "0" or Entity been involved in a Bankruptcy or Foreclosure (YtN). "Disqualified There no points if answer is No, response would be neutral. If response completely" is Yes to sub-question 1 or 2, Developer is disqualified. TOTAL NUMERICAL SCORE: i maximum score is 34 Dints, that is, 5 Dints for each element Panelist's Summary of Ranking and Scoring Disposition Package lA North Ranking Development Enti Score 1 Irvine Company 29.67 2 St. Anton 27.b7 3 Bridge 26.33 4 Archstone 26.17 5 Lincoln Property 22.80 6 Fairfield 22.17 7 GLJ West 21.83 8 Meta Housing 20 9 United American 17.75 I, Debra A. Sowder, certify that I have reviewed and totaled the individual numerical scoring and qualifying criteria sheets produced by the expert panel based on interviews of the above developer entitles, rounding to the nearest hundredth. Debra A. Sowder ~_ _ ~_ '~ Panelist's Summary of Ranking and Scoring Disposition Package 2A Ranking Development Enti Score 1 Irvine Company 29.67 2 BRE 28.67 3 Archstone 26.67 4 St. Anton 26.33 5 Mill Creek 23.42 6 Lincoln Property 22.83 7 Fairfield 22.17 8 GLJ West 21.83 I, Debra A. Sowder, certify that I have reviewed and totaled the individual numerical scoring and qualifying criteria sheets produced by the expert panel based on interviews of the above developer entities, rounding to the nearest hundredth. D ra A. Sowder ,r ~,~~ Attachment 2 Background Summary on Top Three Development Entities Initial Apartment Sites Information Provided by each Entity to Expert Panel Disposition Package 1A Irvine Company • Founded in 1864, is among the largest privately held real-estate investment companies in the nation, with a portfolio that includes office, apartments, retail, resort and new housing properties. • Manages over 94 million square feet of investment property in Orange County, Los Angeles, San Diego and the Silicon Valley. • Best of portfolio includes: 484 office buildings, 116 apartment communities with 43,293 apartment homes, 41 retail centers, 5 marinas, 3 hotels and 3 golf courses. • Has a relationship with the City of Tustin that goes back to the early 19$0's with development of Tustin Ranch; they currently have 2,170 apartment homes with 177 rent- restricted affordable apartment units in Tustin. • Several recent developments include The Village at Irvine Spectrum built in 2005, Esperanza built in 2008, Palmeras built in 2008, The Park at Irvine Spectrum built in 2009. New apartment communities under construction include Crescent Villate, and Phase II of the Park at Irvine Spectrum. • Primary strength as a company, and catalyst for success, has been its role as master planner, first and foremost. • Fitch has assigned the Irvine Company a credit rating of "A". • Do not develop or purchase properties for short-term gain; own and manage for the long- term. Bridge Housing Corporation • With over a 25 year track record and an initial history that began in the California Bay Area, Bridge is anon-profit developer acknowledged throughout California as specialists in building and managing inclusionary and deed restricted housing, creating affordable housing and managing the challenges of doing so. • They have had experience with over 100 real estate developments, representing 13,000 homes and apartments. • They currently have over 7,000 apartments under management with a portfolio value of more than $3 billion. • Has had a strong relationship with the City of Irvine and Irvine Company and has built several significant affordable housing projects in Irvine under these partnerships. St. Anton Partners • With a 16 year history, the company is a fully integrated owner-driven company, developer, general contractor and property manager, that is solely owned by Steve Eggert and Peter Geremia and which develops, constructs, and owns an institutional quality portfolio of conventional and affordable multi-family rental residential communities throughout California. • Since 1995, the company has developed over 5,500 rental apartment units and invested in land and commercial projects with an aggregate value of over $1 billion. • With no recent projects in Southern California that have been completed, they have completed a number of projects in Sacramento, Elk Grove, Roseville, Davis and North Highlands. They are in the pre-development phase on projects within the Anaheim Platinum Triangle and in Fullerton in Southern California. • Has continued to own and operate all multi-family projects developed or purchased since 1995. • In 2008, company was ranked 8th nationwide by Affordable Housing Finance for total units produced. • During the past five years, St. Anton has managed to build between 600 and 800 units every year, increasing the profitability of the company by an average of 23% annually. • Has over $40 million of internal equity, and funds many of its projects with its own internal capital • In addition to its internal resources, St. Anton since founding has raised in excess of $225 million in equity with financial partners such as John Hancock Equity, Bank of America Equity, Union Bank Equity, Citi Community Capital, MMA Equity, Paramount Equity, Hudson Equity and Edison Equity. Since 1998, the company has also strong debt relationships with Bank of America, Union Bank, Citi Community Capital, Prudential, US Bank, BMAC Mortgage, Wells Fargo and others. Disposition Package 2A Irvine Company <see company description under Disposition Package 1A above> BRE • A publicly traded real estate investment trust (REIT) for 41 years, BRE develops, acquires and manages apartment communities in the Western U.S. • Owns and operates 75 apartment communities totaling over 21,318 units in California, Arizona and Washington. • A number of their projects include Park Viridian in Anaheim, Renaissance at Uptown Orange, 5600 Wilshire in Los Angeles, the Stuart at Sierra Madre Villa, the Pinnacle at MacArthur Place, Pinnacle at Talega in San Clemente, Pinnacle at Westridge in Valencia, Bridgeport Coast in Santa Clarita, The Heights in Chino Hills, Villa Granada in Santa Clara, The Galleria in Moreno Valley, Taylor in Seattle and Belcarra in Bellevue Washington. • Their objective is to hold and manage as long-term, revenue producing investments and their communities are constructed to the highest quality standards to produce and maintain shareholder value. • Their annual goal is to invest more than $250 million in new developments and acquisitions. • They have a market capitalized value of more than $4.8 billion. • All new developments are internally financed, with no financing contingencies required for acquisition or development. • At any given time, approximately 10-15% of BRE's total assets are in the development pipeline. • A major factor in their continued success is their internal Property Operations Department. Archstone New Development Holdings, LP • Is an Archstone company, which is a fully integrated national real estate company specializing in development and operation of multi-family residential properties. • While Archstone's roots can be traced back to 1963, the modern day Archstone has been operating since 1991. • Archstone's portfolio includes approximately 67,000 units under management or within its development pipeline, including approximately 18,500 units (28% of its portfolio). • A number of their projects include Archstone Gateway in OrangelAnaheim, Archstone Vanoni Ranch in Ventura, Archstone Pacific View in Carlsbad. • Day to day operations and strategic direction are run by Archstone's executive management team with major decisions requiring consent of Lehman (47% interest in company) plus either Barclays (24% interest) or Bank of America (26% interest). • Current West Coast operations are managed by Vice President Rich Lamprecht who was previously with Irvine Company Apartment Communities for 20 years. • Capitalized asset value in excess of $15.1 billion, with a net worth of $4.6 billion as June 30, 2011. • Average daily availability of $350-400 million funding during the month of August 2011. • Major equity partners within the last three quarters have included Hines and Qatari Diar Real Estate Investment Company, Allianza and CPPIB. There have also been a number of large debt closings in the past 12 months indicating strong financial relationships involving JP Morgan Chase, Wells Fargo, HUD, and Fannie Mae.