HomeMy WebLinkAbout01/18/2000, C6 - APPRAISAL SERVICES AGREEMENT: PALM STREET-COURT STREET PROJECTL!
FROM:
SUBJECT:
council
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CITY OF SAN LUIS OBISPO
Bill Statler, Director of Finance
APPRAISAL SERVICES AGREEMENT:
PALM STREET -COURT STREET PROJECT
CAO RECOMN ENDATION
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■ Approve an agreement with Ventura Appraisal Consulting Corporation to perform
property appraisals for the Palm Street -Court Street project in the amount of $20,000.
■ Appropriate $20,000 from the unreserved General Fund balance to fund this work.
DISCUSSION
Overview
As discussed below, perhaps the single most important "business" issue in considering the Palm
Street -Court Street proposal is determining the fair market value of the properties affected by the
project. Following an extensive proposal evaluation process, we recommend contracting with
Ventura Appraisal Consulting Corporation for this work. While we received proposals from
several well-qualified funs, we believe that Ventura Appraisal Consulting Corporation has the
most experience in appraising "reuse" projects like this one that involve public- private
partnerships.
Background
On September 20, 1999, Tom and Jim Copeland presented the Council with their conceptual
proposal for the development of properties on Palm Street and Court Street, and requested that
the City enter into an exclusive negotiating agreement (ENA) with them to "work out the project
details." In response to this request, the Council entered into an ENA on October 19, 1999 in
order to further explore the feasibility of the project concept.
One of the key features of the project concept is the sale or lease of City-owned properties to the
developer, and the sale or lease of properties owned by the developer to the City. As such, while
there are many other major policy issues to be resolved in considering this proposal — including
environmental, traffic, archaeological and parking concerns — determining the fair market value
of the affected properties is probably the single most important "business" issue.
Proposal Review and Selection Process
Requesting Proposals. We sent Request for Proposals (RFP) on November 16, 1999 to nine
firms that we believed were well- qualified to do this work based on the City's past experience,
contacts with other cities and recommendations from our economic advisor on this project (PCR
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Council Agenda Report— Appraisal Service Agreement: Palm Street -Court Street Project
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Kotin). Attached is the Description of Work section from the RFP. Before issuing the RFP, we
reviewed it with the developer, and provided copies to the Council.
We held a pre - proposal conference on November 30, 1999 to review the RFP and answer
questions by prospective proposers. Four firms attended this pre - proposal conference. We
received proposals from the following three funs by the December 13, 1999 closing date:
Reeder, Gilman & Associates $10,500
Ventura Appraisal Consulting Corporation $20,000
Schenberger, Taylor, McCormick & Jecker. . $28,000
Review Team and Evaluation Criteria. A review team composed of the City Administrative
Officer, City Attorney, Director of Public Works and Director of Finance evaluated the proposals
using the following criteria as set forth in the RFP:
■ Understanding of the work required by the City.
■ Quality, clarity and responsiveness of the proposal.
■ Demonstrated competence and professional qualifications necessary for successfully
performing the work required, by the City.
■ Recent experience in successfully performing similar services.
■ Proposed approach in completing the work.
■ References.
■ Background and related experience of the specific individuals to be assigned to this
project.
■ Proposed compensation.
As reflected above, contract award should not be based solely on price, but on a combination of
factors as determined to be in the best interest of the City.
Proposal Review. In addition to a detailed review of the written proposals, the review team held
follow -up interviews with each of the three proposing firms and performed detailed background
and reference checks.
The review team concluded that each of the proposers is qualified to do this work, and each
would bring particular strengths to the project. For example, Reeder, Gillman has appraised
several of the affected properties in the past, and Schenberger, Taylor, McCormick & Jecker has
extensive experience in appraising properties in downtown San Luis Obispo.
However, the review team believes that the proposal from Ventura Appraisal Consulting
Corporation provides the overall best value, both in terms of their proposed cost as well as their
experience in performing similar appraisal assignments. Of the three firms, we believe they have
the most experience with "reuse" and "private -public partnership" projects, which we
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Council Agenda Report — Appraisal Service Agreement: Palm Street -Court Street Project
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specifically highlighted as desirable past work experiences in the RFP. Once the appraisal is
finished, we believe their experience and advice will be especially valuable to us in developing
property acquisition and disposition strategies and structuring an agreement.
Next Steps
As noted in the RFP workscope, we need a final proposal from the developer before we can
proceed with the appraisal. In short, we need to know exactly which properties are affected. We
anticipate that we will receive this by February 2000. Based on a finalized project concept, it is
likely that there will be some adjustment (most likely a reduction) to the workscope, and a
resulting adjustment in the fee. However, the final compensation for appraisal services should
not exceed $20,000.
Once the workscope is finalized and we authorize Ventura Appraisal Consulting Corporation to
proceed, the appraisal will be completed within 60 days. After the appraisal is completed, we
may request follow -up consulting services from them. Any fees for these services will be on a
time and materials basis.
CONCURRENCES
The proposal review team concurs with this recommendation.
FISCAL IMPACT
Funds for this work are not currently included in the City's budget. Accordingly, we recommend
appropriating $20,000 from the unreserved General Fund balance to fund this work. Adequate
fund balance is available to fund this appropriation and retain fund balance at minimum policy
levels.
ALTERNATIVES
■ Contract with Another Firm. While the other two firms are qualified to perform this
work, we believe the Ventura Appraisal Consulting Corporation proposal provides the
best overall value to the City.
■ Re- Solicit Proposals. We received three responsive and competitive proposals, and as
such, we do not believe there would be any value in re- soliciting proposals. Additionally,
this would resuft in a significant, undesirable delay in evaluating the feasibility of this
project.
■ Defer or Do Not Go Forward with the Appraisal Work. This is a critical component
of the research needed in negotiating an agreement. Deferring —or not going forward
with the appraisal at all—would be the same as no longer pursuing this concept. Given
the priority assigned to this project by the Council, we do not recommend this option.
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Council Agenda Report — Appraisal Service Agreement: Palm Street -Court Street Project
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■ Require the Developer to Pay for this Work. Given the proprietary and confidential
nature of appraisals, and the importance of this information to the City in successfully
negotiating an agreement with the developer, we believe the work product should clearly
belong to the City. As such, we recommend that the City pay for this work.
ATTACHMENTS
■ Agreement with Ventura Appraisal Consulting Corporation
■ Excerpt from RFP: Section A— Description of Work
AVAILABLE FOR REVIEW IN THE COUNCIL OFFICE
■ Request for Proposals for Appraisal Services
■ Proposals from Reeder, Gilman & Associates, Ventura Appraisal Consulting Corporation
and Schenberger, Taylor, McCormick & Jecker
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APPRAISAL SERVICES AGREEMENT
THIS AGREEMENT is made and entered into in the City of San Luis Obispo on this day
of , by and between the CTTY OF SAN LUIS OBISPO, a municipal
corporation, hereinafter referred to as City, and VENTURA APPRAISAL CONSULTING CORPORATION,
hereinafter referred to as Appraiser.
WITNESSETH:
WI EREAS, on November 16, 1999, City requested proposals for appraisal services for the Palm Street-
Court Street Project per Specification No. 90049.
WHEREAS, pursuant to said request, Appraiser submitted a proposal, which was accepted by City for said
NOW THEREFORE, in consideration of their mutual promises, obligations and covenants hereinafter
contained, the parties hereto agree as follows:
1. TERM. The term of this Agreement shall be from the date this Agreement is made and entered,
as first written above, until acceptance or completion of said services.
2. INCORPORATION BY REFERENCE. City Specification No. 90049 and.Appraiser's proposal
dated December S, 1999 are hereby incorporated in and made a part of this Agreement.
3. CITY'S OBLIGATIONS. For providing services, as specified in this Agreement, City will pay
and Appraiser shall receive therefore compensation in a total sum not to exceed $20,000.00.
4. - APPRALSER'S OBLIGATIONS. For and in consideration of the payments and agreements
hereinbefore mentioned to be made and performed by City, Appraiser agrees with City do everything required by
this Agreement and the said specification.
5. AMENDMENTS. Any amendment, modification or variation from the terms of this Agreement
shall be in writing and shall be effective only upon approval by the City Administrative Officer.
6. COMPLETE AGREEMENT. This written Agreement, including all writings specifically
incorporated herein by reference, shall constitute the complete agreement between the parties hereto. No oral
agreement, understanding, or representation not reduced to writing and specifically incorporated herein shall be of
any force or effect, nor shall any such oral agreement, understanding, or representation be binding upon the parties
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Appraisal Services Agreement —Page 2
7. N0110E. All written notices to the parties hereto shall be sent by United States mail, postage
prepaid by registered or certified mail addressed as follows:
City City Clerk
City of San Luis Obispo
990 Palm Street
San Luis Obispo, CA 93401
Appraiser Lindsay F. Nelson, President
Ventura Appraisal Consulting Corporation
770 County Square Drive, Suite 100
Ventura, CA 93003
8. AUTHORITY TO EXECUTE AGREEMENT. Both City and Appraiser do covenant that each
individual executing this agreement on behalf of each party is a person duly authorized and empowered to execute
Agreements for such party.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year
first above written.
ATTEST:
City Clerk
CITY OF SAN LUIS OBISPO
By: _
Mayor
APPROVED AS TO FORM: APPRAISER
By:
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Section A
DESCRIPTION OF WORK Excerpt from
Request for Proposals
OVERVIEW
The City of San Luis Obispo wants to contract with a highly qualified appraisal firm to value City-owned
properties proposed for acquisition (through either sale, lease or trade) as part of a private development
proposal in the City's downtown known as Chinatown -Court Street. In valuing the City's properties, we
recognize that appraisals of other privately -owned properties may be necessary.
BACKGROUND
As set forth in Appendix 1, the developer presented the Chinatown -Court Street concept to the Council at
a study session on September 20, 1999, and requested that the City enter into an exclusive 120 -day
negotiating agreement (ENA) to "work out the project details."
On October 19, 1999, the Council approved an ENA with the developer. The ENA itself is provided in
Appendix 2; and the Council Agenda Report recommending approval of the ENA and providing
background information on the project is provided in Appendix 3. So far, the community has favorably
received the project concept. However, is it is still in a very conceptual phase at this time, and there is
much work and City review yet to follow.
Before the finalizing the project proposal, the developer has scheduled a series of community workshops,
which are currently underway. The developer has contracted with Peter Calthorpe —a nationally
recognized expert on downtown design and "smart growth" concepts —to facilitate these workshops.
Because of this, we do not expect a finalized project proposal for another 60 to 90 days. Following this,
assuming the developer decides to go forward with the project and files a formal development application,
there will be an extensive development review process as well as detailed "development and disposition
agreement" negotiations.
About the Developer. Tom and Jim Copeland own a large chain of sporting goods stores (Copeland's
Sports), and have successfully developed a retail and theater project in the City's downtown known as the
Downtown Centre.
PROJECT CONCEPT
As discussed above, the proposal is still in a very conceptual stage. It is important to emphasize this
point: at this time, there is not much more to it than the 15 -page pamphlet provided in Appendix 1.
However, preliminary information about building square footage and parking space needs is provided in
Appendix 4. The proposal affects two separate sites: "Court Street" and "Palm/Morro/Monterey." These
are mostly used for public and private parking, although there are two existing single -story structures on
them —one privately -owned and one owned by the City. Based on information provided by the
developer, there are six distinct construction projects on these two sites, summarized as follows:
Court Street Site — Proposed Uses
■ Retail and Office Development Retail and office uses of about 75,000 square feet on a 39,300
square foot site owned by the City and currently used as a surface parking lot providing 118 -
metered public spaces.
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Palm/Morro/Monterey Site — Proposed Uses
■ Chinatown Mired -Use Project on Palm Street Mixed -use project of about 60,000 square feet
for retail, office and residential uses. This would take place on several parcels. The City owns
most (but not all) of them, which we use for public parking as well as City offices at 955 Morro
Street.
■ Civic Offices on Palm Street. About 50,000 square feet of office space on property currently
owned by the City and others. Current uses include private and public surface parking as well as
a privately- owned, 2,700 square foot, single -story office building at the northeast comer of Palm
and Morro Streets. While the concept plan shows this as City office space, the City has made no
commitment at this time to occupy or purchase this space. However, we are reviewing this issue
and we may decide to do so later.
■ Retail and Office Development on Monterey Street About 22,000 square feet of retail and
office space on property currently owned by the City and used for public parking.
■ Plazas and Walkways. Several plazas and walkways are conceptually proposed for this area,
including the proposed closure/abandonment of Morro Street between Palm and Monterey
Streets.
■ Underground Parking. Two-to-three level underground parking structure under most of this site,
providing between 300 to 450 public parking spaces.
CITY PROPERTIES
Unique City Role
Normally, the City's appropriate role is to respond to private sector development proposals. However,
this project concept is unique in that City-owned property—currently in use as public parking lots and
City offices —is an essential component of the project concept. Therefore, in this case the City also has a
"proprietary" role in addition to its usual "regulatory" one. As set forth in the ENA and accompanying
"Issues to Be Addressed Daring the Initial ENA Term," there are a number of major policy issues that
have to be addressed in considering the project concept. However, the single most important question for
the City to answer in its "proprietary" role is: how much are the City's properties worth?
The affected City properties are identified in Appendix 5, summarized as follows:
■ Court Street Parking Lot As noted above, the City currently uses this site as for public parking,
providing 118 - metered spaces.
■ Cily Offices. The City rises this 4,850 square foot, single -story building located at 955 Morro
Street for offices for our Utilities and Public Works administration and engineering staff. This
site also includes eight parking spaces for City vehicles.
■ Morro Street Right -of -Way. As noted above, the proposal calls for abandoning Morro Street. It
is possible that the City owns the entire street in fee -title. However, if this is not the case, then a
significant portion of the street (if abandoned) would revert to the adjoining property owners,
which include the City as well as others.
■ Palm/Monterey Street Parking Lot There are 143- metered spaces in this parking lot.
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Property Disposition
The form of disposition of the City's properties has not been determined (such as sale, lease or trade). In
the case of the Court Street site, this is less complicated because all of the sit"oth "horizontally and
vertically," would be used solely by the developer. The Pahn/Morro/Monterey site is more complex,
because there would be a City use (public parking) under all of the site; and a combination of private uses
(retail, office and residential) and public uses (civic offices) over the site. For the purposes of this
appraisal, the appraiser should assume sale of the property.
From a policy perspective, we will be concerned with the parking impacts of this proposal, both in terms
of the existing public and private parking spaces that will be lost, and the new parldng demand generated
by the new development.
WORBSCOPE
Valuation of City-Owned Properties
Stated simply, the City needs to know the market value of its properties. In this instance, market value
will depend largely on assumptions as to entitlements and likely future use for the properties if they were
to be sold for private use, given the current underlying zoning and the resolution of any remaining
entitlement contingencies. One such set of assumptions —but only one —would be the uses proposed in
the Chinatown -Court Street project. Since the values developed in the appraisal will be used in
negotiations with the developer and we would like to avoid too much dependence on "circular" logic, the
appraiser will be asked to determine value also based on more generalized but still defensible assumptions
as to zoning and future use.
City staff will work closely with the selected appraiser in establishing a reasonable and defensible set of
assumptions about future use. Furthermore, we recognize that any such assumptions will be identified as
such in the appraisal, and attributed to the City and other third party sources in the final document.
The final product is likely to contain two estimates of value: one reflecting the underlying zoning and
likely future private uses without reference to the Chinatown -Court Street project; and another estimate of
value (or at least a discussion of likely impacts on value) assuming that the uses are as proposed in this
project.
Valuation of Privately -Held Properties
As discussed below, it may also be necessary to appraise the four privately -held properties that are
directly involved in the project concept as well as those owned by the City:
■ This is essentially one project proposal. However, the project will take place on property owned
or controlled by both the City and the developer. There are undoubtedly concerns on the part of
both parties that there could be a situation where "my property has a high appraisal;
unfortunately, yours has a lower appraisal." Since the properties are in the same vicinity, we
have to assure our citizens that there was a reasonable basis for evaluating all of the properties
that are included in the resulting business arrangements.
■ The Palm/Morro/Monterey site is proposed as a "vertical" development with a multi-level
parldng structure under the majority of the property; and private - sector stores, housing and offices
(some of which my be owned or leased by the City) over most of the underlying parldng
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structure. With such a `vertically integrated project," it may make sense to strive for a common
appraisal approach on the different underlying ownerships.
Proposers should discuss this methodological issue in their proposal, and set forth their initial thoughts
based on:
■ Their professional judgment and experience in valuing redeveloping properties.
■ Greatest public assurance that all properties in the resulting business transaction were valued
fairly and consistently.
As the work proceeds, the selected appraiser will need to work closely with the City's Steering Committee
and our economic advisor (Allan Kotin of PCR- Kotin) in analyzing the complex assumptions that will
need to be made in valuing the affected public and private properties, which are likely to go beyond the
typical analysis of comparables and income projections, and incorporate redevelopment principles.
Redevelopment Concepts
As noted above, this project has many elements that are similar to those that might be undertaken by a
redevelopment agency. However, the City does not have a redevelopment agency, and we have no plans
to form one. This means we may have fewer tools to work with (although our charter city status provides
us with greater flexibility than if we were a general law city), and the City staff has limited experience in
this area. For this reason, we have contracted with PCR -Kotin to assist us in evaluating this development
proposal.
The Successful Proposer
Similar Experience. We want to hire a qualified appraiser that has extensive experience in valuing
properties in circumstances similar to those present in this case. This means experience with:
■ Properties undergoing redevelopment and intensification.
■ Valuing properties before entitlements have been fully resolved, and making clear assumptions
about complex issues accordingly. We recognize this may result in multiple evaluations as the
project progresses through the development review process.
■ Development and disposition of publicly -owned properties for private purposes.
■ Properties within or immediately adjacent to a downtown core.
Local Knowledge. Past appraisal experience in the San Luis Obispo real estate market is not required.
However, we do believe that knowledge about the local market and policy environment will be important
in producing a timely and thorough analysis. As such, appraisers who do not have specific experience in
the San Luis Obispo market should discuss how they would address this in their proposal, including the
possibility of collaborating with local appraisers.
Final Work Products
In order to assure that City staff and other consultants working on the Chinatown -Court Street project
clearly understand the appraisal results, the selected appraiser will submit seven copies of a draft
appraisal report, followed three to five days later by a briefing in San Luis Obispo to discuss the
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appraiser's findings. In addition, the selected appraiser may subsequently be asked to attend a closed
session with the City Council.
As set forth in the Proposal Submittal Form, proposed compensation should separately identify proposed
costs for valuing City and privately -owned properties. Additionally, it should separately identify the cost
for the follow -up briefing with City staff. Lastly, an optional fee should be quoted for attending a closed
session of the Council, should this be required.
We want to complete the appraisal within 60 days after contract execution.
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