HomeMy WebLinkAbout01 TUSTIN LEGACY 08-22-02AGENDA 'REPORT
NO. 1
08-22-02
150-50 ~
MEETING DATE: AUGUST 22, 2002 ~
TO:
FROM:
SUBJECT:
WILLIAM HUSTON, CITY MANAGER
REDEVELOPMENT AGENCY
TUSTIN LEGACY DISPOSITION STRATEGY AND SUBSEQUENT
DEVELOPER SOLICITIATIONS
SUMMARY:
Formalize the Disposition Strategy and Developer Solicitation process for future
marketing and sale of property at the former MCAS Tustin, the Tustin Legacy project.
RECOMMENDATION:
It is recommended that the City Council formally indicate its support for the following
Disposition Strategy and Developer Solicitation process for the Tustin Legacy Project:
,
A Master Developer Approach, rather than a Multiple Disposition Approach should
be pursued for future disposition of property with the exception of original
Packages 1 and 6a ( as expanded to include Reuse Plan disposal parcels 10 and
12) and potentially Reuse Plan disposal parcel 34 as shown on Exhibit A
(depending on the outcome of Navy bid responses to disposal parcel 35 and
further interaction and discussions with the successful bidder of this parcel).
.
A more specific performance measurement Request for Qualification (RFQ)
process should be used to select a master developer for future disposition sites in
the Tustin Legacy project as identified in item 1 above based on RFQ responses.
The City would then work with the selected developer, at developer's expense to
formulate a more refined development plan and business approach and offer to
serve as the basis for terms in a disposition and development agreement.
DISCUSSION:
As you will recall, the Disposition Strategy approved by the Tustin City Council as part
of the original Economic Development Conveyance (EDC) application submittal to the
Department of the Navy, envisioned that title and land and facilities to most of the
former MCAS Tustin would be transferred to the City. The City and its Redevelopment
Agency were then going to market large bulk sale packages to private sector Master
Developer(s). This reflected a strategy of selling a group of parcels to a land developer
Page 2
City Council Report
Tustin Legacy Disposition
in an amount of acreage large enough to achieve economics of scale in land and
infrastructure development. The original bulk sale packages were originally chosen to
include similar land use designations with the strategy assuming the ultimate sale of at
least eight or more packages to developers. Exhibit A which is attached, shows the
location of the original bulk sale packages. The developer solicitation process for
packages had only begun on three of the packages as follows:
,
Package 1- a 25.3 acre residential site which is a vacant site and was an annex
to the main former base facilities. A Two Stage process for developer selection
on this site was pursued. A Request for Qualifications (RFQ) was issued,
developers were short listed, and then a Request for Proposal and Business
Plan (RFP) were requested. The RFP responses were reviewed and
developers ranked. John Laing Homes was successful respondent and the City
Council recently approved an exclusive negotiation agreement with the
developer.
,
Package 6a- Retail site at Jamboree Road and Barranca Parkway. A RFQ was
issued, developers short listed, and a RFP will be sent out in the next several
weeks. The Short listed developer include Donahue Schriber, Vestar, Shea
Properties and Home Depot et al. Disposition of this site is also a priority to off-
set any revenue impacts to the City in the anticipated relocation of Ikea to the
City of Costa Mesa. The site includes Reuse Plan disposal sites 10 and 11
(approximately 56 acres). The RFP will also identify an option for future project
phasing and acquisition discussions on parcel 12 ( approximately 31 acres). At
some future point in time, the retained Army Reserve site is also a possible
acquisition opportunity (approximately 14.5 acres)
,
Package 5- Office/Industrial/General Commercial. This site included Package 5
excluding Reuse Plan disposal parcel 12 and was approximately 248 acres. The
RFQ was issued and the following developers short listed Lennar Partners,
Shea Properties, Lowe Enterprises and Legacy Partners. No work was begun
on the RFP given the direction of the EDC negotiation and ultimate EDC
transaction with the Department of the Navy. General disclosure and disclaimer
statements were included in the RFQ solicitation that indicated that the RFQ was
not a commitment or contract for the City or Agency to move forward or to enter
into any agreements. The City/Agency also disclosed that it also retained the
right to enter into discussions with any other party, or to cancel in whole or part
the RFQ and stage Two RFP solicitation process at any time in the process..
After several years of business planning and negotiation with the Navy, the EDC was
recently approved on May 13, 2002. The approved EDC excluded a substantial portion
of the land that was originally requested by the City and planned for residential
Page 3
City Council Report
Tustin Legacy Disposition
development ( approximately 238 acres representing significant land sale proceeds
projected in excess of $100 million dollars for infusion into the business plan). As you
are aware, the Navy will sell the parcels excluded from the EDC through a bid sale.
Parallel to the EDC transaction, an agreement was reached with the Santa Ana Unified
School District which establishes an obligation for the City to pay as much as $60
million to the District.
The exclusion of the 238 acres from the original EDC request has raised significant
issues related to the capture of infrastructure funding from these sites, the phasing and
coordination of infrastructure development to serve the remainder of the project area,
and the need to expedite land sales and receipt of land sale proceeds to fund required
settlement obligations to the Santa Ana Unified School District. While it is very likely
possible that the Santa Ana Unified School District obligation can be met through the
sale of Packages 1 and 6a in the near term, the key question that becomes important at
this point in the process is whether the City should proceed with the Multiple Disposition
Approach originally proposed by the business plan or whether it should package
remaining parcels (excluding package 1 and 6a and possibly Reuse Plan disposal
parcel 34) to a Master Developer. To evaluate issues related to this question, the
MCAS Tustin consultant team from EPS Berkeley and Sacramento offices as well as
their sub-consultant Andy Barnes met with City and Agency staff. Based on the
discussions and review of City objectives to reduce potential risks to the City and to
expedite the City's exit strategy on the Tustin Legacy Project, all participants in the
process concluded that the City should pursue a Master Developer approach, rather
than a Multiple Disposition Strategy for packaging remaining parcels in the Tustin
Legacy Project ( excluding Packages 1 and 6a and leaving open the issue of Reuse
Plan Disposal parcel 34 pending the outcome of the Navy's bid sale and further
discussions with the successful bidder on parcel 35). Staff will be prepared at the
August 22 meeting to outline the implications for city objectives under either of the
alternate disposition approaches.
In proceeding with the Master Developer approach for remaining parcels in the Tustin
Legacy project, City staff would also request that the City Council formalize its support
for the solicitation approach. There are several alternative approaches that were
evaluated that might be used for solicitation of a Master Developer including a two step
RFQ and RFP process, a combined RFQ/RFP document, or an RFQ' process only.
Under Tustin's circumstances, the City's consultant team and City staff are
recommending that it would be best for the City to select a Master Developer based on
a detailed performance driven RFQ. The City staff and Consultant team would then
work with the selected developer, at developer's expense to formulate a development
plan and business approach to serve as the basis for the business transaction and a
disposition and development agreement. A key element of this approach is a very clear
requirement of the level of due diligence and planning, and city cost recovery that will be
Page 4
City Council Report
Tustin Legacy Disposition
expected from the developer prior to any sale of property. It should be pointed out that
even the RFQ process alone will be complex and involve a substantial amount of time
to assemble the information required and to define parameters of performance expected
from a developer and to draft an exclusive negotiation agreement which will be sent out
with the RFQ. Attached as Exhibit B to this staff report is a more detailed discussion of
each of the alternate solicitation strategies from EPS dated August 8, 2002.
The Technical Evaluation Team for the Tustin Legacy project would continue to be
used to review initial submittals received and to make recommendations to the full City
Council who would select the preferred developer and approve an exclusive negotiation
agreement. Staff will also be sure that all City Council members at initial submittal
stages receive responses to the RFQ.
Staff will be available to respond to any of the questions that the City Council might
have.
Assistant City Manager
EXHIBIT A
Exhibit A
EXHIBIT B
August 8, 2002
Economic &
Planning Systems
Public .Finance
Real Estate Economics
Regional Economics
Land Use Policy
Chris Shingleton .
City of Tustin
300 Centennial Way
Tustin, CA 92780-3715
Subject:. Scope of Work; Tustin Legacy Master Developer Solicitation; EPS/t9100.2
Dear Chris:
In line with our recent discussions, the attaChed document sets forth two alternative
Scopes of Work, along with a preliminary schedule of tasks, for soliciting a Master
Developer for the remainder of the Tustin Legacy project: one that would involve a
Request for Qualifications (Ri=Q)/Request for Proposal (RFP) process, and one that
would result in selection of a preferred developer based on an RFQ response only. The
intent of this initial draft is to lay out the principal elements of the two approaches in
order to distinguish their differences with respect to schedule and costs, and to provide
a basis for more detailed scoping and budgeting after further discussion with staff. A
third alternative, which would combine the RFQ and RFP into a single solicitation
document was also evaluated, but, for reasons described below, is not recommended for
further consideration.
BACKGROUND AND APPROACH
After several years of business planning and negotiation with the Navy, the Economic
Development Conveyance for the former MCAS Tustin was approved, with the
exclusion of a substantial portion of the land that was planned for residential
development. Parallel to the EDC transaction, an agreement was reached with the Santa
Ana Unified School District which established an obligation for the City to pay as much
as $60 million to the District within a year of EDC approval. It is envisioned that this
obligation would be met through sale of parcels EDC 1 and 64 in~ the near term. The
remainder of the EDC land would be subject to disposition to a single master developer.
The City is motivated to complete the processes and transaction agreements necessary to
implement the master developer disposition as soon as possible, while ensuring that the
City achieves its community development objectives and secures the best financial deal
possible. In preparation for negotiating a Development and Disposition Agreement
(DDA) with the master developer, it will be necegsary for the developer to generate
BERKELEY SACRAMENTO DENVER
250] Ninth Street, Suite 200 phone: 510-841-9190 ~-~:!~'~¥.:~,%~ phoebe: 916-649-8010 · phon~: 303-623-3557
Berkeley, CA 94710-2515 fax: 510-841-9208 ~:~?? fax: 916-649-2070 ~x: ~1.~'t-~64~-9049~-~
www.epsys.corn
City of Tustin
Page 2
updated market analysis and engineering cost data, and to refine the general land uses
defined in the Specific Plan/Reuse Plan into a development master plan. This
information is essential to provide the basis for financial negotiations and the
formUlation of business terms that allow the City to realize the fUll value of its property.
The City l~as essentially two options in the solicitation process, as follows:
RFQ Process. The City could select a developer on the basis of qualifications only,
through an RFQ process. The selection criteria would relate the capability and track
record of the developer, their financial strength, and their demonstrated experience in
working with cities on complex, public/private projects. Once selected, the developer
would be required to conduct due diligence on market parameters and development
costs, and formulate a development master plan in consultation with the City. The
developer would then submit a bUsiness plan proposal reflecting agreed upon data,
assumptions, and land use program. The City and developer would then proceed to
negotiate first a term sheet, then a DDA, using the business plan proposal as a starting
point. It may be expected that agreement on the DDA would be facilitated by the
consensus on the underlying development program and economics.
Often, the developer funds the due diligence and planning process, including City costs,
from signing of the Exclusive Negotiation Agreement (ENA) through execution of the
DDA, with credit for these expenditures applied against future land sales, providing the
deal is completed. The developer would be at risk for those costs in the event that the
City and developer were not able to come to terms on a DDA.
RFQ/RFP Process. With this approach, the City would select a short list of developers
based on the RFQ responses, and an RFP would be sent t° each of them. These
developers would then prepare a business plan proposal for submittal to the City. In
preparing these responses, each developer would need to conduct a certain amount of
due diligence on market and development costs issues, and formulate a preliminary
development master plan based on the Specific/Reuse Plan. It may be expected,
however, that the level of research, analysis, and development programming would be
more limited than that conducted in consultation with the City by an already selected
preferred developer, because of the risk of not being selected by the City. Thus, it is
likely that after selection of the preferred developer based on the RFP response,
additional due diligence and plan refinement would be necessary to establish an agreed
upon basis for negotiating a DDA.
Combined RFQ/RFP Document. An approach that has been suggested for
consideration woUld combine the RFQ and RFP into a single solicitation document,
seeking developer qualifications and a proposed business plan in one step. We do not
believe this approach is viable, for the following reasons. If the solicitation is sent to all
developers who would be considered for an RFQ, the City would essentially be asking a
large number of developers to spend significant time and money to develop a detailed
business plan on what would inherently be a long shot for any particular developer.
Thus, it is likely that response woUld be very poor. Alternatively, if the City were to
preselect a limited number of developers to receive the solicitation, without the
9100p tx l.doc
City of Tustin
Page 3
screening of a broad range of potential developers through an RFQ, it is possible that
strong candidates not already known to the City would be excluded from the process.
This would unnecessarily restrict the marketing of the property and diminish the City's
competitive leverage in selecting a preferred Master Developer. For these reasons, we
do not believe it is in the City's interest to pursue this approach.
SUMMARY OF KEY DIFFERENCES IN ALTERNATIVE
APPROACHES
The key differences between these approaches are time and costs. The solicitation
process with an RFP following the RFQ would add at least six months to the process.
Depending on how close the developer's plans are to the City's objectives, the due
diligence and planning process and subsequent DDA negotiations could also be longer,
since the original submittal will be the result of a unilateral process by the developer,
rather than a collaborative one.
From the developers perspective, the RFQ/RFP process is more expensive, since they
will be required to do a development program and business plan unilaterally prior to
being selected, then revise these, perhaps substantially, after being selected. The
business plan submittal will also be entirely at risk, since there is a good chance they will
not be selected. The expense and risk of the process might make developers more
reluctant to cover City costs in the subsequent planning and negotiations process. It is
also possible that some candidate developers will not respond to the solicitation due to
the cost and uncertainty of the process.
RECOMMENDED APPROACH
Under the circumstances in Tustin, we believe it would be best for the City to select a
master developer based on the RFQ responses, then work with them, at the developer's
expense, to formulate a development master plan to serve as the basis for the negotiation
of an agreement. A key element of this approach is a very clear requirement for the level
of due diligence and planning, and City cost recovery, that will be expected from the
developer after selection and prior to the negotiation of the business terms.
EXCLUSIVE NEGOTIATION AGREEMENT (ENA)
The culmination of the solicitation process will be the signing of an ENA with the
selected developer. Negotiations of the business term sheet and DDA will then proceed
under the terms of the ELNA. Often, it takes four to six weeks to negotiate the ENA prior
to commencement of the DDA negotiations. To shorten this process, and to ensure that
candidate developers are fully informed of and agree to what is required of them in the
9100ptxl.doc
City of Tustin
Page 4
DDA negotiation, it will be useful to attach an ENA to the RFQ (or RFP, if the two step
process is selected), and require that developers sign it as part of their submittals. The
crafting of this ENA attachment will be a critical part of the work that needs to be done
to initiate the solicitation process, along with the careful composition of the RFQ and/or
RFP documents, and proper advertising of the opportunity.
Sincerely,
ECONOMIC & PLANNING SYSTEMS, INC.
usbach
Managing Principal
9100ptx1.doc
Scope of Work
Tustin Legacy Master Developer Solidtation
August 8, 2002
OPTION I: RFQ/MASTER PLAN DDA PROCESS
TUSTIN LEGACY MASTER DEVELOPER SOLICITATION
TASK I.l: PREPARE RFQ
The Request for Qualifications (RFQ) will provide an initial introduction of the property
to potential respondents, and will also elicit information needed to judge the
qualifications of each respondent to serve as Master Developer of the remaining Tustin
Legacy parcels. EPS will work with the City to develop an RFQ, which will likely
include the following components:
Site Conditions: A physical description of the properties, including surrounding
land uses, on-site structures and interim uses, transportation context, infrastructure
and utilities, drainage, hazardous materials and the remediation program, and Navy
conveyance schedules.
Market Overview: A summary of current market conditions in Orange County and
the Tustin/Irvine sub-market, and the opportunities presented by the Tustin Legacy
project.
Description of the Plan: The overall concept for redevelopment,, and a description of
the Tustin Specific/Reuse Plan, including a discussion of the City's goals for Tustin
Legacy. In addition, summary information regarding allowable building types, as
well as open space, circulation, and infrastructure plans for the project should be
included.
Implementation Program: A description of the infrastructure needs and estimated
infrastructure costs associated with redevelopment, as well as an initial phasing
concept, the desired role of the Master Developer, and the general business terms of
the City will be provided.
Selection Process and Criteria: A description of the process, timeline, and criteria for
short-listing and selecting a master developer. A key element of this section will be
a detailed discussion of the requirement of the developer to prepare a preliminary
development master plan, based on a thorough updating and documenting of
market potentials and development costs. This plan will be prepared in
consultation with the City, and will provide the basis for subsequent negotiation of
the business terms of the DDA.
Submission Requirements: The materials required of the prospective developer.
Specifically, respondents will be asked to submit a description of development
entity; past experience with projects of a similar scope and complexity; in-house
development capabilities, management team and structure, audited corporate
5 9100ptxl.doc
Scope of Work
Tustin Legacy Master Developer Solicitation
August 8, 2002
financial statement, financing sources, and any partners that would be included on
the team. In addition, respondents will be asked to describe their vision for the
property consistent with the land use framework established by the Specific/Reuse
Plan, including the development concept in terms of the location of uses and tenants,
character of development, amenities, and general approach to sequencing and
marketing of the site.
EPS will also assist the City in compiling a list of prospective master developers with the
capability to undertake the project.
TASK 1.2: SUMMARIZE AND EVALUATE RESPONSES
Following receipt of developer responses to the RFQ, EPS will assist the City in
evaluating the submittals, and preparing a short list of developers to be interviewed.
EPS will obtain supplemental information as needed to fully analyze the qualifications
of prospective master developers. A detailed evaluation matrix will be prepared
identifying the strengths and weaknesses of each respondent and assigning a total score
to each proposal based on the criteria set forth in the RFQ. The evaluation matrix will
reflect comments, questions, and scoring provided by City staff, Barnes & Company,
and other members of the Developer Selection Team. Depending upon the number of
respondents, the evaluation matrix will be used to identify three to five respondents that
appear most qualified to be Master Developer of Tustin Legacy.
TASK 1.3: CONDUCT DEVELOPER INTERVIEWS
The developer interviews will provide an opportunity for the City to meet key members
of each respondent's team, and will also enable the City to get clarification on key
aspects of the proposals. EPS will assist the City in structuring the interview process,
creating a scoring system to evaluate each developer, and preparing a list of questions
and issues that require clarification from each of the respondents identified in Task 1.3.
EPS and Barnes & Company will attend interview sessions, and will assign a score to
each respondent.
TASK 1.4: SELECT PREFERRED DEVELOPER
The City will be selecting a preferred developer based on the RFQ and interview scores
assigned to each respondent. EPS will provide the City with documentation, such as a
description of the process and basis for recommended developer, as needed to support
this process. The City would then enter into an Exclusive Negotiation Agreement (ENA)
with the preferred developer. The ENA will set forth the terms and conditions of the
exclusive arrangement, and identify the roles, responsibilities, and obligations of the
parties during the negotiation period. It would also set forth the conditions and
remedies for default of the exclusive agreement on the part of both parties. EPS will
9100ptxI.doc
Scope of Work
Tustin Legacy Master Developer Solidtation
August 8, 2002
assist the City as needed in defining and negotiating the terms of the ENA. As
discussed in the cover letter, it may be appropriate to attach an ENA to the RFQ, and
have the developer sign it as part of the submittal.
TASK 1.5: PREPARE PRELIMINARY DEVELOPMENT MASTER
PLAN
The developer will be responsible for conducting a thorough due diligence analysis of
market potentials, updating and refining infrastructure and site development costs, and
preparing other information necessary to draft a preliminary development master plan.
This plan will take the Specific/Reuse Plan as a starting point, but will update and refine
the plan to a higher level of detail with respect to product types, densities, urban design
considerations, infrastructure and utilities, site preparation, phasing, and development
strategy. The plan will be prepared in consultation with City staff, so that there is a
general consensus on the content and character of the plan, and the underlying
assumptions upon which it is based, as a starting point for negotiation of the term sheet
and DDA. EPS will assist the City in evaluating various aspects of the plan, and
working with the developer to work through issues that arise.
TASK 1.6: NEGOTIATE TERM SHEET
The term sheet will specify the essential business terms of the relationship between the
City and the Master Developer, and the terms and conditions for disposition of the land,
over the life of the project. It will define the roles, responsibilities, and obligations of the
respective parties; the financing plan; the schedule and conditions for taking down land;
the method of pricing land acquisitions from the City; participation structures;
development phasing and performance standards; default conditions and remedies; and
other terms and conditions of the transaction. During the course of negotiations of the
term sheet, the development master plan will be finalized through iterative discussion of
plan elements and business terms.
EPS will serve' as the City's financial consultant in negotiating the business terms, and
will be an active member of the negotiation team throughout, providing strategy,
analysis, and negotiation services. EPS will be responsible for developing and utilizing
the definitive pro forma cash flow model for the project. This model will be
transparent, in that all parties will be able to readily understand the assumptions and
analysis embodied in it. It is important to have one model be the official version, in
order to avoid ""dueling pro formas," and "pollution" from competing assumptions,
which leads to uncertainty as to what is actually being assumed in any given analysis.
EPS will also conduct issue-specific research and analysis to evaluate and resolve deal
points as they arise. Barnes & Company would also be an active member of the
negotiation team, providing the developer's perspective and insight into Master
Developer positions.
9100p tx1.doc
Scope of Work
Tustin Legacy Master Developer Solidtation
August 8, 2002
TASK 1.7: NEGOTIATE DDA
Once the term sheet has been agreed upon, a DDA will be negotiated. The DDA
provides more detail on the mechanics and execution of the business terms, and defines
the legal and administrative mechanisms to implement the transaction. The City's
counsel will be involved in the drafting of precise legal language for the DDA, and in
ferreting out business and legal issues that are not fully addressed in the more
conceptual term sheet. EPS will support the negotiations with strategic input and
analysis as necessary to resolve issues and craft appropriate clauses to implement the
transaction. Barnes & Company will also assist in this effort.
9100ptx1.doc
Scope of Work
Tustin Legacy Master Developer Solicitation
August 8, 2002
OPTION II: RFQ/RFP PROCESS
TUSTIN LEGACY MASTER DEVELOPER SOLICITATION
Some of the tasks in this alternative approach are identical to those in the first
alternative. Others are different to some degree, or entirely new. For the convenience
of the reader, tasks that are different from those in the prior section are marked with an
asterisk enclosed in parentheses.
TASK II.1: PREPARE RFQ
The Request for Qualifications (RFQ) will provide an initial introduction of the property
to potential respondents, and will also elicit information needed to judge the
qualifications of each respondent to serve as Master Developer of the remaining Tustin
Legacy parcels. EPS will work with the City to develop an RFQ, which will likely
include the following components:
Site Conditions: A physical description of the properties, including surrounding
land uses, on-site structures and interim uses, transportation context, infrastructure
and utilities, drainage, hazardous materials and the remediation program, and Navy
conveyance schedules.
Market Overview: A summary of current market conditions in Orange County and
the Tustin/Irvine sub-market, and the opportunities presented by the Tustin Legacy
project.
Description of the Plan: The overall concept for redevelopment, and a description of
the Tustin Specific Plan/Reuse Plan, including a discussion of the City's goals for
Tustin Legacy. In addition, summary information regarding allowable building
types, as well as open space, circulation, and infrastructure plans for the project
should be included.
Implementation Program: A description of the infrastructure needs and estimated
infrastructure costs associated with redevelopment, as well as an initial phasing
concept, the desired role of the Master Developer, and the general business terms of
the City will be provided.
· (*) Selection Process and Criteria: A description of the process, timeline, and criteria
for short-listing and selecting a' master developer.
Submission Requirements: The materials required of the prospective developer.
Specifically, respondents will be asked to submit a description of development
entity; past experience with projects of a similar scope and complexity; in-house
development capabilities, management team and structure, audited corporate
9100ptx1.doc
Scope of Work
Tustin Legacy Master Developer Solicitation
August 8, 2002
financial statement, financing sources, and any partners that would be included on
the team. In addition, respondents will be asked to describe their vision for the
property consistent with the land use framework established by the Specific/Reuse
Plan, including the development concept in terms of the location of uses and tenants,
character of development, amenities, and general approach to sequencing, and
marketing of the site.
EPS will also assist the City in compiling a list of prospective master developers with the
capability to undertake the project.
TASK II.2: SUMMARIZE AND EVALUATE RESPONSES
Following receipt of developer responses to the RFQ, EPS will assist the City in
evaluating the submittals, and preparing a short list of developers to be interviewed.
EPS will obtain supplemental information as needed to fully analyze the qualifications
of prospective master developers. A detailed evaluation matrix will be prepared
identifying the strengths and weaknesses of each respondent and assigning a total score
to each proposal based on the criteria set forth in the RFQ. The evaluation matrix will
reflect comments, questions, and scoring provided by City staff, Barnes & Company,
and other members of the Developer Selection Team. Depending upon the number of
respondents, the evaluation matrix will be used to identifY three to five respondents that
appear most qualified to be Master Developer of Tustin Legacy.
TASK II.3: CONDUCT DEVELOPER INTERVIEWS
The developer interviews will provide an opportunity for the City to meet key members
of each respondent's team, and will also enable the City to get clarification on key
aspects of the proposals. EPS will assist the City in structuring the interview process,
creating a scoring system to evaluate each developer, and preparing a list of questions
and issues that require clarification from each of the respondents identified in Task 1.3.
EPS and Barnes & Company will attend interview sessions, and will assign a score to
each respondent.
(*) TASK II.4: SELECT SHORT LIST OF QUALIFIED
DEVELOPERS
Based on the evaluation matrix completed in Task 11.2 and the developer interviews
conducted in Task II.3, EPS will assist the City in preparing a short list of developers to
prepare a more detailed proposal. EPS will obtain supplemental information as needed
to fully analyze the qualifications of prospective master developers in order to select the
short list.
10
9100ptx1.doc
Scope of Work
Tustin Legacy Master Developer Solicitation
August 8, 2002
(*) TASK II.5: DRAFT RFP
EPS will work with the City to prepare a Request for Proposal (RFP) document for use
by the short-listed master developer candidates. The submission requirements will be
finalized in conjunction with the City, but could include the following:
Development Master Plan and Development Strategy. Each developer will be
required to propose, in narrative and graphic terms, a strategy for developing the
Tustin Legacy site, including the mix and distribution of land uses, product types
and densities, urban design considerations, an infrastructure phasing program,
identification of key identity elements, a marketing and tenanting strategy, and an
initial discussion of building character and siting. This information would be
expressed in the form of a preliminary development master plan, and
implementation .strategy.
Management Plan. Each developer will be asked to describe a plan for managing
the Tustin Legacy project. Components include a more thorough discussion of
management team composition, including the internal decision making process
within the developer's organization, as well as an implementation strategy
identifying short- and long-term steps to be taken as it programs, markets, and
implements development.
Financial Proposal. Each developer will be asked to make a financial proposal that
describes likely financial resources (including debt and equity financing) and public
financing requirements. The financial proposal should also identify specific
strategies for funding backbone infrastructure, discuss how the project's phasing can
be accomplished in a cost effective manner, identify the phased take down of land,
describe proposed land pricing and participation proposals, provide a preliminary
forecast of project costs and revenues, and provide projections of income to the City
of Tustin. In addition, the financial proposal should address job generation, assessed
value creation, and other potential economic benefits to the City.
Terms and Conditions. The City should include a statement of terms and conditions
of the RFP to ensure it has substantial latitude and minimum risk in conducting the
process.
11
9100ptx1.doc
Scope of Work
Tustin Legacy Master Developer Solicitation
August $, 2002
(*) TASK II.6:
PROPOSALS
SUMMARIZE AND EVALUATE DEVELOPER
EPS will assist the City in preparing a comprehensive evaluation of the proposal
submissions. As a part of this task, EPS will specifically evaluate the three components
described above and will also incorporate comments and other feedback provided by
City staff, Barnes & Company, and other members of the Developer Selection
Committee. EPS will develop a concise summary of recommendations based on pre-
defined criteria, and a scoring system defined in collaboration with City staff.
EPS, with assistance from Barnes & Company, will evaluate the financial information
provided in each proposal based on its understanding of the local and regional real
estate market, and experience with reuse and redevelopment strategy. Through the
evaluation of the proposals, EPS and Barnes & Company will identify issues and
questions to be explored further with the developers in the interview process.
(*) TASK II.7: CONDUCT DEVELOPER PRESENTATIONS AND
INTERVIEWS
Each developer will make a presentation of its proposed development master plan and
business proposal to the Developer Selection Committee, or other designated group.
Following the presentations, EPS will assist the City in conducting in-depth interviews
with each of the candidate developers to clarify elements of their proposals, understand
the thinking underlying them, and probe aspects of the proposals that reflect the
capacity of the developer to successfully carry out its role as Master Developer.
(*) TASK II.8: SELECT PREFERRED DEVELOPER
Subsequent to the interviews, scores will be given to each developer on key criteria,
taking into account the scores on the written proposals. On the basis of this combined
scoring, a preferred developer will be selected. The City will then enter into an
Exclusive Negotiation Agreement (ENA) with the preferred developer. The ENA will
set forth the terms and conditions of the exclusive arrangement, and identify the roles,
responsibilities, and obligations of the parties during the negotiation period. It would
also set forth the conditions and remedies for default of the exclusive agreement on the
part of both parties. EPS and Barnes & Company will assist the City as needed in
defining and negotiating the terms of the ENA. As mentioned earlier, it may be best to
include the ENA in the RFP and have developers sign it as part of their submittals.
12
9100ptxl.doc
Scope of Work
Tustin Legacy Master Developer Solicitation
August 8, 2002
(*) TASK II.9: NEGOTIATE TERM SHEET
The term sheet will ~pecify the essential business terms of the relationship between the
City and the Master Developer, and the terms and conditions for disposition of the land,
over the life of the project. It will define the roles, responsibilities, and obligations of the
respective parties; the financing plan; the schedule and conditions for taking down land;
the method of pricing land acquisitions from the City; participation structures;
development phasing and performance standards; default conditions and remedies; and
other terms and conditions of the transaction. During the negotiation of the term sheet,
the development master plan will be finalized through iterative discussion of plan
elements and business terms.
EPS will serve as the City's financial consultant in negotiating the business terms, and
will be an active member of the negotiation team throughout, providing strategy,
analysis, and negotiation services. EPS will be responsible for developing and utilizing
the definitive pro forma cash flow model for the project. This model will be
transparent, in that all parties will be able to readily understand the assumptions and
analysis embodied in it. It is important to have one model be the official version, in
order to avoid ""dueling pro formas," and the pollution of assumptions, which leads to
· uncertainty as to what is actually being assumed in any given analysis. EPS will also
conduct issue-specific research and analysis to evaluate and resolve deal points as they
arise. Barnes & Company will also be an active member of the negotiation team,
providing the developer's perspective and insight into Master Developer positions.
This task will begin with the developer conducting due diligence to refine and/or verify
the market and financial assumptions used to formulate the development proposal. The
updated information will be incorporated into a revised development master plan and
business proposal. The City would then enter into negotiations that would define the
business terms of the transaction and refine the development master plan on an iterative
basis.
TASK II.7: NEGOTIATE DDA
Once the terms sheet has been agreed upon, a DDA will be negotiated. The DDA
provides more detail on the mechanics and execution of the business terms, and defines
the legal and administrative mechanisms to implement the transaction. The City's
counsel will be involved in the drafting of precise legal language for the DDA, and in
ferreting out business and legal issues that are not fully addressed in the more
conceptual term sheet. EPS will support the negotiations with strategic input and
analysis necessary to resolve issues and craft appropriate clauses to implement the
transaction. Barnes & Company will also assist in this effort.
9100ptx1.doc