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HomeMy WebLinkAboutApproved Minutes - 2020-11-17 o s REDEVELOPMENT AGENCY MEETING MINUTES V NOVEMBER 17, 2020 °RFG°�' 1. CALL TO ORDER Chair Studebaker called the regular Redevelopment Agency meeting to order at 3:03 p.m. on November 17, 2020. The meeting took place virtually. 2. ROLL CALL Present: Chair Studebaker and Members O'Neill, Nguyen, LaMotte, Wendland, Manz, and Kohlhoff Staff Present: Martha Bennett, Executive Director; David Powell, LORA Counsel; Anne-Marie Simpson, Recording Secretary; Sidaro Sin, Redevelopment Manager; Shawn Cross, Finance Director Others Present: Sarah Zahn, Theresa Nute, and Eric Cress, UD+P Development Partners; Mick O'Connell, MJOC, LLC 3. BOARD BUSINESS 3.1 North Anchor Update Ms. Zahn gave a North Anchor project update, a residential component and a hotel component. Based on Urban Development + Partners' (UD+P) research and analysis, it was determined that condominiums would be an expensive option to build and would hold a risk to sales. UD+P subsequently decided to focus on the rental portion of the project. The design would include 75 apartments of various sizes, about 6,600 sq ft of ground floor retail and a 60-room hotel. • Based on the parking analysis, 65 parking spaces were planned currently for the hotel. The residential building would have 79 spaces which included 17 on-street spaces. The parking requirement had been met without additional below-grade parking, but the types of retail that could be accommodated might be limited based on the available parking. Below-grade parking at the west building was possible, but the site was small and not particularly efficient, and building below-grade parking was expensive. UD+P was anticipating discussions with the City regarding the value of providing additional parking. • UD+P and the Atticus Hotel operators had decided mutually that they would not be able to agree to business terms and a new hotel operator partner for this project was being sought. The project was at the point where the choices made would impact operations, so UD+P Redevelopment Agency Meeting Minutes Page 1 of 4 November 17, 2020 planned to get an operator partner onboard by January 2021 following the request for proposals (RFP) and interview process. Ms. Nute described UD+P's nationwide investor base, noting that it had a good concentration in the Pacific Northwest. Many of the investors had been involved with UD+P for several years, were familiar with real estate cycles, and knew how to evaluate a good project. Lake Oswego provided UD+P with an opportunity to create a new product to enable specific investment in just the hotel and/or the residential component of the North Anchor project. Meetings were taking place with potential Lake Oswego and non-Lake Oswego investors. The financing was going forward and a pro forma for the project was anticipated in the first quarter of next year. There was great local excitement for the project, and she believed that alone could pull in enough dollars for the equity piece. Councilor O'Neill received confirmation that American Financial was not one of the investment firms currently being approached for funds for the project, but Ms. Nute would be willing to meet parties interested in the project. He noted American Financial did exactly what Ms. Nute had described by investing in small cap funds for commercial property and were very familiar with hotels and apartments. They had a large number of investors across the country but were probably the power players of the Portland-Seattle area. He would provide Ms. Nute with contact information for American Financial. Councilor LaMotte understood the plans for the hotel needed to change a bit. He inquired about why UD+P was going to build apartments with high-end finishes instead of condos. Ms. Zahn replied that differences existed in the approach to construction of an apartment versus a condo; the most important from UD+P's perspective was that they would not build a condo building out of a wood frame construction, predominantly due to liability issues, but it was also a question of quality that would automatically increase costs by 20 percent on the basis of the construction alone, especially in a low-rise building. Different choices were made regarding the finish level between apartments and condos. Insurance and other choices would add up significantly, especially when it concerned a smaller number of units. She confirmed the apartments would be offered at market price. Councilor Wendland inquired about pricing and whether the units would be similar to those at the Windward or the Bay Roc. Ms. Zahn responded that UD+P was currently projecting the pro formas for rents that would start in about two years given the project's timelines, and believed the closest comparison would be the Windward. Councilor Nguyen asked if UD+P planned to maintain ownership of and management of the apartment complex. Ms. Zahn replied that UD+P's horizon tended to be eight to 10 years from the start of a project until they divested. Their funds did not have a set end period or a sunset requirement and UD+P was a longer-term holder. The residential apartments would be managed by UD+P's own property management company and they would closely monitor and maintain those assets for an eventual sale, but it would be in the market for quite some time. Councilor Kohlhoff asked about the possibility of the purchaser of a UD+P apartment building in the future turning the apartments into condos. Ms. Zahn replied it was always a possibility but had not yet been discussed. Some steps could be taken at the front end to make a Redevelopment Agency Meeting Minutes Page 2 of 4 November 17, 2020 condominium possible later on. The Windward planned, designed, and constructed one of their buildings with the intent that it could be eventually sold. Mr. Cress added that he saw no barrier to converting the apartments to condominiums based on the current plans. The proposed floor plans were generous enough to allow for the conversion. Beyond 10 years, the building's structure would have been proven and the risk would be lower. If plans were to build and sell as condominiums within a 10-year period, they would have to be overbuilt to protect the owner from the liabilities. UD+P could probably take steps to make sure the building was not converted, but that was not contemplated in the current design. Councilor Wendland noted the parking analysis showed that the retail constraints created a need for parking and asked if the project would be more cost effective to build without the retail in favor of just housing. Ms. Zahn did not believe the parking strategy would change without retail. The current constraint was the number of parking stalls proposed was at the lower end of the allowable range. For example, a 5,000 sq ft restaurant would take most of the retail space and the current number of parking spaces would be insufficient. A solution would have to be found, or that type of retailer could not be accommodated. She believed that in the long term, retail was the right thing to do along B Avenue even though the current market could make retail challenging. Residential units or parking stalls along the street at ground level was not a great solution. UD+P would like retail there as an approach to good community design. One factor was the cost of balancing where dollars should be spent on a project, such as whether to build more parking stalls or finding other ways to invest in the project. UD+P had made the decision at this point to build the required parking and to not invest in significantly more parking. They believed people would still come to the retail and park on the street or find other ways to get to and patronize the project. Councilor Wendland noted the city had a lot of empty retail space, a housing shortage, as well as some parking challenges in the project area. He had seen projects UD+P had done in Portland and believed they would do a good job for Lake Oswego. Councilor Manz asked if UD+P would lease out the proposed hotel to a management company who would then become an equity partner. Ms. Zahn responded that the business terms currently being contemplated were for UD+P to be the developer and provide the equity and the debt financing for the project. They would partner with an operator who would be under a hotel management agreement with UD+P. Many of the operators were also investors or part owners and UD+P would not be opposed to that if the right operator was found. Councilor Nguyen inquired if UD+P planned to build the hotel and residential building at the same time. Ms. Zahn replied the intent was to bring the two projects through land use together. The ownership would be separate for the two assets and as UD+P divests from the project the assets would likely have separate owners and operators. They would be taken through permit process as two separate projects and the intent and the hope was to build them together. UD+P would work with their contractor to sequence the projects efficiently to save money. Also needed was the flexibility for the two different real estate types to allow for adjustments based on the market. UD+P wanted to move quickly, but did not want to tie a residential project to a hotel project and have to delay it for several months while financing was arranged. Councilor LaMotte asked staff if consideration was still being given to fast tracking where possible while avoiding issues with the building permit process. Mr. Sin replied that fast-tracking was still being considered and staff was working very closely with the planning, building, and Redevelopment Agency Meeting Minutes Page 3 of 4 November 17, 2020 engineering staff and with UD+P and their design team to expedite and streamline the project so the City knew what to expect. Mayor Studebaker asked if the timeline for obtaining an operating agreement in January was firm. Ms. Zahn responded that it was a good possibility. UD+P would request in the RFP that the companies provide a template management agreement for review as part of the selection process which would put them in a stronger position to negotiate a management agreement. The most significant challenge for completing a management agreement in a timely manner would be to know the terms of the business deal with the City as well as the hotel and knowing how the hotel would be mutually operated. She was confident the agreement would be in place in January or early February. 4. EXECUTIVE SESSION Under authority of ORS 192.660 (2)(e) to conduct deliberations with persons designated to negotiate real property transactions and (f) to consider records that are exempt by law from public inspection The Board met in Executive Session from 3:53 to 4:22 p.m. 5. ADJOURNMENT, LORA Chair Studebaker adjourned the meeting at 4:30 p.m. Respectfully submitted, 4A-k) 'cii/lAttte— Kari Linder, Recording Secretary Approv d by the LORA Board on February 18, 2021 Joseph M. Buck, Chair Redevelopment Agency Meeting Minutes Page 4 of 4 November 17, 2020