Title
University Corners Transformational Projects Incentive Program Application (B)
Explanation
University Corners is a proposed mixed use development for the northwest corner of University Avenue and Northwest 13th Street. The project covers three City blocks extending northward towards Northwest 3rd Avenue and westward towards Northwest 14th Street. The CRA received an application for a group of developers led by the Swerdlow Group for the Transformational Projects Incentive Program for the University Corners project in February 2013. The application was revised and resubmitted in April 2013 and July 2013. The developer also provided supplemental information in August 2013.
The final revised application of University Corners project as presented to the CRA Board at its November 18, 2013 meeting consisted of 78,330 square feet of retail, 500 residential rental units, 142 hotel units, approximately 1,131 parking spaces and common areas and courtyards. The developers indicated that they would meet affordable housing and green building requirements. The final incentive request from the developers was for $48,786,336 ($24,182,156 Net Present Value) over 20 years to assist the project.
CRA staff prepared a report containing its review and analysis of the application which was discussed at the November 18, 2013 CRA Board meeting. At that time CRA staff recommended rejecting the application because it did not satisfactorily meet several program requirements including, affordable housing, Green Building requirements, and did not provide all of the requested application materials needed for analysis such as individual cost breakdowns, and property deeds, leases or letters of intent from tenants. Additionally the applicant requested more funding than it was eligible to receive and did not demonstrate a "but for" gap that could be verified.
CRA staff also recommended that the applicant enter into discussions with the CRA to discuss ways that the CRA could assist with public infrastructure elements of this private development project.
After hearing from CRA staff, the developers and members of the public, the CRA Board directed the developers to begin discussion with the CRA about potential public infrastructure assistance and to comply with Davis-Bacon Act wage requirements, hire locally, explain the public benefits of the project to the City, and that the project adhere to the affordable housing, green building requirements of the Transformational Projects Incentive Program in order to be considered for any public financing assistance the project.
Following the November 18, 2013 CRA Board meeting, the CRA staff and its consultants had frequent interactions and meetings with the development team to discuss the project and to identify project components where costs could be reduced, where revenues could be increased and to identify alternative sources of financing that could potentially assist this project. A detailed analysis of the actual parking needs was performed as part of the CRA's analysis.
At the March 17, 2014 meeting, CRA staff provided an update on the discussions to date and proposed ways to best assist this project to move forward. The CRA recommended the following: providing some CRA assistance with public infrastructure to the project, a reduction of the size of the parking garage to eight stories or fewer, and public ownership of a portion of the parking garage spaces. At this meeting the CRA board approved up to $3.5 million in public infrastructure assistance and requested that staff return with more specific cost breakouts for the public infrastructure assistance and also requested staff to ask NDC to begin negotiations with the University Corners developers for purchase of public spaces in the parking garage and New Markets Tax Credits to assist with a potential grocery store.
The CRA and University Corners developers met and identified 10 possible public infrastructure improvement projects for which University Corners provided specific cost breakouts. University Corners estimated hard costs for construction at a total of $2,453,660.45 and soft costs of $874,264.17 for a grand total of $3,327,925.62. CRA staff then had a third party construction manager provide unit costs for hard cost items for a total of $2,227,857.80 - $2,642,397.80* (*includes cost for stormwater vault as provided by University Corners). This cost information was then reviewed by CRA staff. While many of the unit cost projections differed, the grand total for the estimated hard costs were comparable. Due to the early stage of the project, these were preliminary estimates of costs and it is expected that these costs will continue to evolve as the project moves from preliminary to actual design phases.
At the April 21, 2014 meeting the CRA heard a presentation about the 10 possible infrastructure projects and confirmed prior approval of up to $3.5 million to assist with these public infrastructure costs.
Subsequent to this meeting, the CRA was informed that the option for the land purchase had been assigned to a new development team, Landmark Properties which is based in Athens, Georgia and specializes in student housing. Landmark Properties became the new lead developer for the project and indicated that it would be retaining the Swerdlow Group as a member of the team. Landmark Properties indicated its intent to proceed with the project as previously described and that it did not intend to make any material changes to the project's unit mix composition as submitted in the prior applications. Landmark Properties did, however, indicate that its plans for the parking garage involved returning to the original plans for a 10 story garage that would be privately-owned and managed. In light of this change, discussions between the CRA, NDC and the developers regarding the public portion of the parking garage were discontinued. Additionally, the developers indicated they did not want to pursue New Markets Tax Credits and that discussion was ended as well.
At the June 16, 2014 CRA Board meeting the new developer was introduced to the Board. Landmark Properties assured the Board that it intended to proceed with the project as previously described and did not intend to make material changes to the project's unit mix composition. The CRA Executive Director informed the Board that if any material change to the approved project were proposed, it would be brought to the Board for consideration. The Board's prior approval authorizing the public infrastructure assistance for the project granted at the April 21, 2014 meeting was reaffirmed, and staff was requested to prepare a development agreement.
After that time, Landmark Properties lost the option to purchase the property and then later renegotiated with the land owner to purchase the property in the fall of 2014 and currently owns the land. Following the land transfer, and with the project moving forward again, discussions regarding the development agreement resumed
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CRA staff has been meeting with the developers and their legal counsel to prepare the final development agreement to bring to the Board for approval. During this process, it has come to light that Landmark Properties wishes to make a change deemed to be substantial to the previously approved project for which the CRA Board approved up to $3.5 million for public infrastructure assistance. Landmark Properties is requesting a reduction in the size of the project's retail component from 78,330 to 60,000 square feet. CRA staff provided the developers with copies of the PowerPoint presentation with the CRA Board's requests that the project contain affordable housing, adhere to green building standards (LEED or equivalent) and comply with Davis-Bacon Act wage requirements, and has asked Landmark Properties to address any changes it wishes to make to what was previously agreed. Landmark Properties requested a special meeting to address the CRA Board to discuss its requested change.
At the January 15, 2014 Special Meeting the developer's request to the change of size for the retail was discussed and staff sought clarification from the Board on whether its prior requests for affordable housing, green building standards and other public amenities such as public parking and new transportation options should be included in the development agreement. After hearing from the public, the Board requested that staff set up a special meeting of the College Park/University Heights advisory board to gain feedback.
On January 2015 a Special Meeting of the College Park/University Heights was held to accommodate this request. The College Park/University Heights Board unanimously recommended to the CRA Board to allow the retail component of the Standard's application to be reduced to 60,000 square feet. A motion requesting the Standard's height be reduced to 70 feet failed due to lack of majority vote and was tied 4-4 with 1 member abstaining. The CPUH Board also recommended by a vote of 8-1 to request the CRA Board that the CRA review the financial justification of the $3.5 million investment as if it were to meet what would typically be a "but for" gap.
Today's presentation will provide an opportunity to answer questions and provide clarification on matters that have been raised in recent board meetings.
Fiscal Note
Approved infrastructure costs would be included in the College Park/University Heights FY2015 budget
Recommendation
CPUH Board to CRA Board: 1) Allow the retail component of the Standard's application be reduced to 60,000 square feet;and 2) Request the CRA Board review the financial justification of the $3.5 million investment as if it were to meet what would typically be a "but for" gap.
CRA Executive Director to CRA Board: 1) Consider change to the approved project as requested by the developer; and 2) Provide clarification on previous CRA Board requests.