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HomeMy WebLinkAboutCAO-08-010 - Centre Block Evaluation Committee Recommendations ~" "~- - - - ~:~~~~~f ~~c~rr~i~~~.~~rr.~~~r'. f~frce REPORT Report To: Finance and Corporate Services Committee Date of Meeting: June 16, 2008 Submitted By: Rod Regier, Centre Block Evaluation Committee Chair Prepared By: Rod Regier, Hans Gross Dan Chapman Michael May Wards}Involved: Date of Report: June 10, 2008 Report No.: CAO-08-010 Subject: Centre Block Evaluation Committee Recommendations RECOMMENDATION: That Andrin Investments Limited be selected as the successful proponent for the redevelopment of Centre Block on the basis of the evaluation and recommendation of the Centre Block Evaluation Committee as set out in Report #CAO-08-010, and on the basis of Andrin's preliminary design concept as presented to Finance and Corporate Services Committee this date; and further that Staff be directed to continue negotiations with Andrin Investments Limited on the details of a non-binding Letter of Intent to be used as the basis for the preparation of a development agreement for Centre Block. BACKGROUND: Centre Block Terms of Reference and Request for Proposals On October 16, 2006 Kitchener City Council approved the Terms of Reference for a second request for proposals on Centre Block as well as the structure of the Centre Block Evaluation Committee (Report CAO-06-060). Council also directed staff to issue a Request for Expressions of Interest and Proposals for Centre Block Redevelopment under the approved Terms of Reference and directed the Evaluation Committee to conduct a review of the development proposals which would include a public consultation process on the final proposal(s). It was also directed to conduct negotiations with the finalist developer(s) on the terms of the land sale and purchase of parking by the City. The Terms of Reference document comprehensively sets out the City's vision for the redevelopment of Centre Block and provides the framework and process for the selection of a successful proponent. The process was developed by the Centre Block Steering Committee with guidance and extensive advice from the City's Fairness advisor, James McKellar. The Centre Block Evaluation Committee has rigorously adhered to the following four-step process: • Step 1 -Submission of Expressions of Interest • Step 2 -Screening of Expressions of Interest • Step 3 -Interview & Scoring of Proponents to select the final Proponent(s) • Step 4 -Submission/Evaluation of detailed proposal(s) and selection of the successful Proponent The City of Kitchener is currently completing Step 4 of the process. Centre Block Evaluation Committee The mandate of the Centre Block Evaluation Committee was to: Evaluate the Expression of Interest Proposals received and screen applicants to be interviewed based on their ability to provide a successful redevelopment. Interview the selected proponents and short list them to two final proponents. Gather public input on the final two detailed proposals and use that input as one piece of information in evaluating those proposals. Conduct negotiations with the final proponents} and make a recommendation to City Council on the final, preferred development proposal for Centre Block. The Committee includes the CAO as well as senior staff from Economic Development, Planning, Purchasing, the Kitchener Downtown Business Association. It also included citizen advisors with expertise in financial, building design, development/real estate/planning, and development construction. A list of Centre Block Evaluation Committee members is attached. City Vision, Objectives and Design Guidelines for Centre Block The Centre Block Terms of Reference (as approved by city council} stated that the Centre Block redevelopment proposal should include provisions for city owned or leased parking, new high- quality residential development, street level commercial and/or retail, use of reclaimed bricks and timber from former buildings on the site, and the incorporation of 11 Young and 156/158 King Street West in the redevelopment. The terms of reference outlined a vision and set out design guidelines for the project. In essence, the City of Kitchener required a development proposal with the following elements: 1. A vibrant people place -with lively street life, outdoor patios, day/night vitality, window shopping, human scale development, comfortable outdoor meeting places, mixed uses. 2. Creative building design and spaces -making use of existing historic buildings, using high quality building materials, artistic signage, public art, attractive roof and skylines, interactive landscaped spaces and landmark buildings. 3. Recreating "Main Street" -with active uses, along King Street and maintaining a flow between indoor and outdoor uses, appropriate proportions and rhythm. 4. Add urban green -through the potential use of trees along public roads, landscaped planting beds, planters and green roofs. 2 In addition, the proponent was asked to: provide a development that uses the entire site provided a development that maximizes the land available in accordance with Kitchener's Zoning By-Law regulations provided a maximum amount of diverse residential development ensure that active uses are focused along ground levels that face public streets and spaces provide outdoor spaces within the site for comfortable pedestrian movement, meeting, relaxing eating or reading purposes and with linkage to indoor activities incorporate Crime Prevention Through Environmental Design (CEPTED} principles in site and parking design. incorporate Leadership in Energy and Environmental Design principles into the buildings develop the entire site in a timely manner The Centre Block Terms of Reference were published in November 2006. Three Expressions of Interest were received in January, 2007. The Centre Block Evaluation Committee conducted a review of the Expressions of Interest, including interviews with each of the proponents. Two proponents subsequently withdrew from the competition, leaving Andrin as the sole proponent. The Evaluation Committee recommended that Andrin proceed to the fourth stage of the process with the preparation of a complete development proposal. On April 2, 2007, the Committee informed Finance and Corporate Services Committee of Council of the finalist proposal from Andrin and the public consultation process for the proposal. The public consultation process for Andrin's Centre Block proposal was launched on June 25 and lasted until August 3, 2007. Detailed information on the public consultations can be found under the Communications Section of this report. REPORT: Committee Summary Evaluation of Andrin Proposal: The Centre Block Evaluation Committee has reached a consensus position in support of Andrin's proposed site plan and financial arrangement for the purchase of Centre Block and the construction of City of Kitchener parking spaces on Centre Block. The Andrin proposal meets all of the criteria set out in the Centre Block Terms of Reference adopted by Council in October 2006. Andrin proposes ahigh-quality mixed-use development which includes diverse residential development, ground floor retail, combinations of safe, connected public and private outdoor spaces. They have proposed the allocation of 250 parking spaces in a portion of the underground structure to be retained in City ownership. The project sets a new standard for architecture and urban design for a high density residential project in the Waterloo Region. It achieves maximum density on the site and makes a significant contribution to Kitchener's downtown as a vibrant urban place by attracting new residents and contributing to an improved balance between employment and residents in the downtown. The proposal addresses the City's requirement for Leadership in Energy and Environmental design BLEED}, supporting Kitchener's Environmental Strategy. It also advances the objectives of the City's Economic Development Strategy, Economic Development Investment Fund by creating anew magnet for talented young people and investment, strengthening the brand of Downtown Kitchener. 3 The developer has a track record of high quality reurbanization projects in Kitchener, the Greater Toronto Area and in the United States. They have the financial, technical and marketing expertise to successfully build this project. Andrin's proposal was subjected to a rigorous public consultation process. Public opinion gathered through this process was strongly supportive of the project. The specific feedback from the public was utilized in discussions with Andrin regarding the details of their proposal and has resulted in changes to the proposal that improve its ability to achieve the City's objectives. Centre Block Valuation: To determine the appropriate value for the Centre Block properties, the Evaluation Committee followed the procedure outlined in the Terms of Reference. Independent appraisals from two professionally qualified companies were obtained by the City and by Andrin. As the difference between the two appraisals was greater than 10%, on the advice of the City's Fairness Advisor, James McKellar, the City and Andrin jointly sought a third professional opinion on the value of the lands and buildings from a recognized real estate valuation company -Altus Group using a "residual value methodology". Results of this process are outlined below. The residual land value methodology differs from the real estate appraisals in that it is based on a detailed assessment of the project financial proforma. A detailed list of hard and soft costs as well as a reasonable assumed profit margin are subtracted from the anticipated revenue from the project to determine the residual land value. Following detailed discussions regarding the Centre Block proposal proforma, Andrin submitted a financial proposal to the Evaluation committee. They propose to pay the City of Kitchener $2.3 million for the vacant portion of the land, $100,000 for the land portion for the retail on King, and $700,000 for the heritage buildings at 11 Young and 156/158 King for a total of $3,100,000. Table 1. Centre Block Appraisals and Valuation Results Appraisal firm Commissioned by Valuation City Management & Appraisals -Terry Macklin, August 2007 City of Kitchener $5,160,000 Edward C. Kennedy & Associates, October 2007 Andrin Investments Limited $2,640,000 Altus Group, May 2008 Jointly by Kitchener and Andrin $3,100,000 Parking: Andrin Investments Limited has offered to provide the city with its required parking spaces at a price of $35,000 per space indexed to inflation. This price is supported by the Altus Group as well as the work of the City of Kitchener in determining the value of its "Cash in Lieu of Parking" policy. 4 FINANCIAL IMPLICATIONS: The Centre Block Terms of Reference outline that the City will pay for its parking on Centre Block with a combination of land sales and cash allocated in EDIF. In its 2008 Budget, Council confirmed the availability of $5,500,000 million in EDIF for this purpose. Combined with the sales value of $3,100,000, the City of Kitchener has available a total of $8,600,000 less transaction and land remediation costs with which to purchase parking. Preliminary estimates indicate that the available funding is less than the total cost of parking to the City. An estimated funding shortfall of $0.4 million is presented by the current proposal. For the time being, it is assumed that this shortfall would be funded out of the remaining uncommitted EDIF allocation with a view to recovering it from the future parking enterprise. City staff will continue to negotiate financial terms with Andrin Investments Limited and will refine cost estimates with the goal of funding the parking requirement entirely out of the existing EDIF provision and land sale revenues without a requirement for any additional funding. COMMUNICATIONS: Public Consultation on Community Vision & Objectives: Since November 2005, Kitchener residents and taxpayers have been consulted on the redevelopment of Centre Block. Through public consultations such as the 2005 Centre Block Design Charette, the 2006 Centre Block Citizens' Forum and the 2006 Downtown Design Guidelines process, citizens played an important role in clearly defining the communities shared vision for what we want to see on a redeveloped Centre Block. That public feedback directly impacted the vision and objectives for the block which were approved by city council in October 2006. Public Involvement in Centre Block Committees: Throughout the life of the Centre Block redevelopment project, members of the public have sat alongside city staff on two individual project committees -the Centre Block RFP Committee and the Centre Block Evaluation Committee. Citizens representatives on the committee brought with them specific expertise in areas such as design, development and finance. At all times throughout the project, the Kitchener Downtown Business Association has had a representative on each of the project committees. Public Consultation on Andrin's Proposal: In February 2007, city council directed city staff and the Centre Block Evaluation Committee to conduct extensive public consultations on Adrin's proposal to redevelop Centre Block (CAO-07- 010}. Those consultations were the most extensive public consultations on a private sector development within the region in recent memory. They far exceeded the extent to which similar private-sector developments in the region have been subject to public feedback before approval to proceed. Running for a period of approximately six weeks, the public consultations on Andrin's proposal included seven different ways citizens to share their feedback, including: 1. A dedicated website with information and an online feedback form. 2. A brochure and feedback form which was delivered to every house in the City. 5 3. Three public meetings. 4. A conceptual model of Andrin's proposal for viewing at various locations throughout the City. 5. A dedicated email address where residents sent their comments. 6. A dedicated phone line residents could call into to leave their feedback. 7. A dedicated mailing address for residents to mail in their comments. Results of Public Consultation on Andrin's Proposal: The results of the public consultations on Andrin's proposal were released to the public on August 14, 2007. In total the city received 247 formal responses as part of the public consultations. Additionally, city staff estimate that approximately 700 people provided informal verbal feedback at public meetings and the tour of the conceptual model. Overall, the feedback received was overwhelmingly positive. A more detailed summary of the feedback received on the proposal is attached to this report. Aspects of the plan that many citizens highlighted as positive components include: ^ Greenspace/public courtyard ^ Mixed use of retail and residential, with the possibility of cafes, stores and restaurants ^ Design/architecture ^ Heritage preservation -reuse of materials from past buildings, and the plan to restore the Mayfair as a hotel and spa ^ Building height ^ Green roofs ^ Parking Citizens also made suggestions as to how Andrin Limited could improve the proposal. Some of those ideas include: ^ Adding a larger retail component, including a grocery store ^ Enhancing the planned greenspace/public courtyard and improving access ^ Changing the design/architecture to incorporate more contemporary elements with the City's historic features ^ Modifying the parking plan ^ Reusing more materials from previous buildings on the site, such as the Forsyth factory ^ Adjusting the height of the buildings Some people said towers were too tall; while others said they weren't tall enough) The results of the public consultations were shared with Andrin who has prepared a response to the public feedback which it will share with city council and make public. CONCLUSION: The Centre Block Evaluation Committee strongly recommends Investments Limited as the successful proponent of the Centre the development concept and the general terms of the financial p parking value), recognizing that Council will not be in a position such time as their proposal has gone through the full process inc a development agreement and the site plan review. Council's approval of Andrin Block Redevelopment Project, roposal by Andrin ~i.e land and to make a final decision until ;lading detailed negotiations of 6 The Evaluation Committee believes that Andrin's proposal meets the city's objectives for the block, has wide public support and fits within the financial framework the city anticipated. At Council's direction, staff will continue its negotiations with Andrin on the content of a confidential non-binding Letter of Terms, setting out the key business terms of the proposed transaction, to be used in the negotiation of a formal development agreement. The confidential non-binding Letter of Terms will be used as the guiding principles on which basis the detailed development agreement will be structured. The City's commitment will only occur upon the subsequent approval of Council and the execution of the Development Agreement. Rod Regier, Chairperson Centre Block Evaluation Committee Michael May Director of Communications Hans Gross Director of Economic Investment and Project Administration Dan Chapman General Manager of Services Financial 7