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HomeMy WebLinkAboutPENNY FLATS (BLOCK 33) - PDP - 32-05 - REPORTS - CORRESPONDENCE-HEARINGIf the team is not successful, or finds the project too risky, the exclusive negotiating agreement would terminate, and the City would be free to pursue other options. If you would like to pursue this recommendation, or any of the other options, I'd be pleased to prepare a process outline for your and Council's review. Page 8 CADOCU M E-1 \AAspen\LOCALS-1 \Temp\gwprint\BLOCK3-2. DOC r, Sustainability, Green building standards, Affordability It is possible to pursue other public policy objectives along with the desire to see additional housing in the downtown. If the City opts to convey the property under favorable terms or conditions to a private developer, we could insist that the eventual development of the site include certain characteristics. Among these that might be most attainable are building practices that conserve energy and materials, and conforming to green building or sustainability standards. The City has already set that trend in the area with the new City Office Building at 215 Mason. More difficult would be the inclusion of some proportion of affordable units. However, the City has many tools at our disposal that could be packaged with a property offering to make the inclusion of affordable units more feasible. These might include a set -aside of first time home buyer commitments, CDBG/HOME funds dedicated to the project, private activity bonds, or DDA investment in public improvements in exchange for a commitment. By involving the Fort Collins Housing Authority, it might be possible to cut costs with the fee waivers available only to that entity under state statute. Recommendation I recommend that we proceed with a property offering. There is tremendous policy support and political direction for downtown as a stable residential neighborhood, in addition to its many other public and private functions. There are currently no offers pending from developers for the property. Nor has the City entered into any negotiations for sale of the site. Thus, the "decks are clear" for the City to structure an offering that meets our needs. Establishing an exclusive negotiating agreement with a developer, or development team, offers us advantages in this situation. There would be limited costs to developers in proposing their interest in the site. Similarly, the City could get a sense of the market and design options without hiring consultants. Briefly, we would advertise for "statements of qualification" or "statements of interest' from developers. These proposals would include a preliminary development program, or vision, for the site; we would not require specific designs. The City would choose a development team for a defined period of time, and commit to exclusive negotiations with that team. During the term of this exclusive agreement, the developer would be required to research the property, the market, and to refine their development proposal (including density, architecture, mixed use elements, etc). Reports to the City at certain deadlines would be expected. We could expect that a property price would become the subject of negotiations at this point. The developer's proposal would be based on a better knowledge of the downtown residential demand, and the costs of bringing the units to market. If successful, staff would present to Council a proposal to sell or option the site to the developer. Page 7 C:\DOCUME-1 \AAspen\LOCALS-1 \Temp\gwprint\BLOCK3-2. DOC Negotiated sale Renewal agencies have often used "exclusive negotiating agreements" with developers when wanting a specific piece of property developed in a specific use or combination of uses, particularly when the market demand for those uses is unknown. Rather than accept specific proposals for development, which may be designed more for cosmetics than feasibility, the agency asks for a statement of qualifications and interest from developers. One is chosen, and a period is set for exclusive negotiations. During the period, certain tasks would be expected of the developer. These might include preparing a market analysis, designing a project for the site, etc. This technique has the advantage of being fairly low risk for both parties. The developer can 'tie up" the property as part of the agreement, with little or no financial commitment. Other obligations, such as market study and design, are fairly inexpensive. The City would gain the expertise of a qualified developer, and perhaps achieve a significant policy objective. Our cost would be in staff time, and the opportunity costs of tying up the property for a period. (It's worth noting that there are no other expressions of interest in the site at this time.) Swap Property owners have occasionally approached the City about property swaps. One such idea was recently offered, and then withdrawn, whereby the City would swap Block 33 for Block 32. If approached, the City should seriously consider such options, and weigh whether they accomplish key policy objectives; e.g., residential development, site for structured parking, etc. However, actively pursuing land swaps severely limits the options available to us for residential development of Block 33. Rolling option If the City can find a buyer for the property who would meet our objectives for development, a technique to lower the carrying costs for the site would be a rolling option. With this strategy, the developer could purchase, or "take down", portions of the site as the market absorption materializes. The developer would not have to buy the entire site in one chunk, and pay commercial interest rates during a relatively long phased construction and sales program. Lease With a lease, the City would retain ownership of the site, and lease it long-term for property development. This assumes a long enough lease term to see the developer gain a financial return through a long period of rental income, and perhaps even sale of the developed site into the secondary market, with an institutional investor taking the long term cash flow. There are advantages to this if the City sees the long-term need for the site some time in the future for Civic Center expansion. This does not appear to be in any of the current planning documents. Page 6 CADOCU ME-1 \AAspen\LOCALS-1 \Temp\gwprint\BLOCK3-2. DOC Stormwater outfall The Howes Street Outfall bisects the site from north to south. It is wider (25 feet) than the normal alley right-of-way (20 feet). The combined easement of 45 feet presents both a limitation on use of the property for full development, and a site design challenge/opportunity. The alignment of the easement corresponds to the Civic Center spine, which is planned to be 80 feet wide, and offers a clear visual and pedestrian connection between civic buildings to the south and residential development at Martinez Park to the north. Nevertheless, there is an unusually large part of the site where no improvements may be constructed, and future outfall maintenance may disrupt the property. Valuation method and estimate of value Valuation for residential land is often based on the permitted density allowed by local authorities. Locally, this valuation technique is based on a range of $12,000 to $15,000 per unit for raw land. As discussed above, a reasonable development scenario for the property, with parking as the primarily limitation, results in 94 dwelling units. This suggests a value range of $1,128,000 to $1,410,000 for the property, excluding the northwest quarter block under the Trolley Barn. We might expect a developer or appraiser to adjust this value downward to reflect the extraordinary costs of below -grade parking in comparison to the typical neighborhood multi- family parking where land prices include enough acreage to provide parking at grade. Offering Options Our priority for disposition of the property should guide the technique we choose. For example, if we want to maximize the value and cash return to the City, we might work through marketing firm with the broadest exposure to regional and national buyers. If, on the other hand, our decision is driven by a desire for residential development, we will choose a technique that increases the chances of that outcome. All of the options presented below are available to the Council, once they declare a public purpose to the transaction. They will have to act to dispose of the site under any scenario. Bid The City could simply place the property "on the block" for the highest bid. Price would be determined by the market's judgement of highest and best use, within the permitted zoning requirements. The bidding process could be limited to certain property uses; e.g., residential development. It's unlikely there would be much information available to the City about design and density. Page 5 C:\DOCUME-1 \AAspen\LOCALS-1 \Temp\gwprint\BLOCK3-2.DOC • Returning under -developed property to a higher use, with increased public revenues. • Bringing new life to older public investments, particularly schools. • Bring more disposable income to the downtown to support retail, especially stores that cater to frequent residential needs; e.g., grocery, hardware, etc. To reach these goals, the housing must necessarily appeal to a broad cross section of prices and household types, including families. While it is desirable evaluate the potential for affordable housing, it should not be the primary goal. Similarly, there are other projects proposed or under construction in the downtown to appeal to the "top of the market'. The depth of that market is speculative and unproven. City involvement in a residential project would be more appropriate if targeted at the broad center of the housing market, taking into account the potential for some scattered subsidized units. Property Cost and Valuation City Purchase The city purchased the block in several separate transactions. Exempting the Trolley Barn from the equation, the total cost of the three -quarter -block area was approximately $1.02 million. Portions of the block were then put into public infrastructure - the Howes Street Ouffall - as discussed elsewhere in this paper, recapturing some of the value to the public (It should be noted that Poudre Valley REA had to do clean up on site, and got a closure letter. Still, it is possible that contamination could be encountered during excavation for underground parking or foundations.) Zoning and permitted uses The current zoning (D - Downtown District, Civic Center Subdistrict) permits a broad range of residential, institutional, commercial/retail, and accessory uses. It also allows a limited number of low -impact industrial uses. It's a true mixed -use district. Limitations on use in property offering: Since the planning documents call for primarily residential development, it will be necessary to place some limitations on future development. For example, there might be a requirement for a certain number of dwelling units, or a certain proportion of residential floor area, say 80% or 90%, and a limitation on other permitted uses. This would assure future development that does not default to an easier or more profitable program, at the expense of the public policy objectives. Secondarily, there may be some requirement for mixed use, with some minimum proportion of floor area, say 5% or 10%. Such uses as ground floor office along Maple, or a day care center, have been discussed favorably. The addition of secondary requirements will limit the potential number of developers, and complicate any sale transaction. Page a C:\DOCUME-1 WAspen\LOCALS-1 \Temp\gwprint\BLOCK3-2.DOC E7 With a project that is predominantly residential, some of the permitted non-residential uses would be more appropriate than others. Among those discussed in recent years are: • Day care on the northeast quadrant. • General office use at the ground level along Maple Street. • A small movie theater. • Restaurants. • In the Trolley Barn, a public transportation museum; offices for historic non-profit entities; public storage; reintroduction of a functioning trolley. Retail development appears to be less feasible, and the Downtown Strategic Plan would concentrate retail elsewhere in the downtown. The historic significance of the brick Trolley Barn will guide the choice of materials and architectural detailing of any development. Price point and expected market Housing is intended to accomplish a variety of goals in a downtown setting. These include: • Creating a 24-hour downtown, with residents who feel ownership in the area as "their neighborhood". • Providing housing close to the downtown employment center, thereby reducing traffic and air pollution. Page 3 C:\D000ME-1\AAspen\LOCALS-1 \Temp\gwprint\BLOCK3-2.DOC If there are mixed -use commercial components, they should be sited on the south, along the Maple or Mason Street frontages. Mixed use, components With a strong policy basis for residential development, it must be decided: "What kind of residential development is desirable?" The zoning permits a wide range of residential styles, excluding single family detached. Beyond that, the site could legally support ownership or rental units, single-family attached or multi -family, multi -story units or flats. The scale issue discussed above clearly suggests a preference for multi -story buildings, with a fairly high density. In evaluating the potential for the site, staff found that providing adequate parking may be the single most important limiting factor. To achieve higher densities, surface parking would not be possible. Too much land would be devoted to parking to achieve the intensity of development suggested - four to five stories on part of the site. Thus, underground parking is a necessity. To be marketable to a broad residential consumer market, parking ratios need to be at two spaces per unit. Preliminary layout suggests that about 188 parking stalls could be accommodated in an underground garage. (The sketch below shows the eastern half of the site in a typical parking layout.) At two stalls per unit, this leads to a maximum of 94 homes. This translates to a net density of about 45 units per acre. N v-� �. I Re The sketch below shows how a project at this density might lay out on the site, rising in height from three stories on the north, to four and five stories on the south. Page 2 C:\DOCU ME-1 \AAspen\LOCALS--1 \Temp\gwprint\BLOCK3-2. DOC Policy Basis For purposes of this report, little detail needs to be reproduced here from the various adopted planning documents. The City's support for residential development is well set forth in the Downtown Plan, and current Downtown Strategic Plan Update, and recent Downtown Development Authority actions in support of residential projects. Further, the Civic Center Master Plan specifically called out housing on this block, although this report will recommend a somewhat different housing type and orientation, to honor the new direction set by the Downtown Strategic Plan. Any future offering of the site to the private sector should include a more detailed accounting of the policy documents, with specific statements of adopted policy language. Site Design Context Block 33 lies in the transition between well -established neighborhoods to the north and west, and the evolving Civic Center to the south and east. The City -owned Trolley Barn on the northwest corner reminds us of the industrial heritage of the site. This building is a significant historic asset, and in 1992 was designated as a Local Landmark. While it might be sold for private adaptive reuse and incorporated into some future development, the City has several options for its use. It should be retained in City ownership, and not included in a property offering; therefore, there must be a decision about how much surrounding property to retain. For purposes of this analysis, the northwest quadrant of the block would be retained for the Barn and its yards. Because the City has received State Historic Fund grants, any development occurring near the Trolley Barn, and all alterations to the barn itself, for the next ten years must first be reviewed by the Colorado Historical Society. The CHS's interest would be in the impact alterations or new development may have on the building's historic character. Scale Because of the site context, building scale is an important consideration. Nearby residential development is low - a maximum of two and one-half stories. The Trolley Barn is 18 feet tall, rising to 26 feet at the parapet. Civic Center buildings on the blocks to the south rise to four and five stories. Block 33's strategic position between these downtown elements suggests a careful transition, with lower building elements on the north, and higher, more intensive development to the south. Page t CADOCUME--1 \AAspen\LOCALS-1 \Temp\gwprint\BLOCK3-2. DOC RECOMMENDATION ON OFFERING BLOCK 33 FOR RESIDENTIALDEVELOPMENT Policy Basis • DT Plan • Civic Center Master Plan • DDA support Page 1 Site Design Page 1 • Context • Scale • Mixed use, components • Price point and expected market (contrast with recent high end projects) Property Cost and Valuation Page 4 • City purchase • Zoning and permitted uses • Limitations on use in property offering • Stormwater outfall • Valuation method and estimate of value Offering Options Page 5 • Bid • Negotiated sale • Swap • Rolling option • Lease • Sustainability, Green building standards, Affordability Recommendation Page 7 MEMORANDUM March 4, 2004 To: Mayor and City Councilmembers From: Greg Byrne, CPES Director Thru: John Fischbach, City Manager Subject: BLOCK 33 OFFERING FOR RESIDENTIAL DEVELOPMENT The City Manager has directed that staff forward to Council a copy of the attached report. In it we recommend putting three-quarters of Block 33 into the market for residential development. The technique recommended, an exclusive negotiating agreement, is explained in more detail in the report. Entering into such an agreement would require Council action. Eventually leasing or conveying the property to a private party would also require Council action. If the Council is in general agreement with this approach, the staff will prepare a "property offering" for action at a future regular meeting. A staff team (CPES, Admin Services, Transportation, Utilities) would review proposals and select a development team for Council concurrence. It would be very helpful to have a "sense of the Council', through the Leadership Team, before we proceed with the work required to put this recommendation into action.