SUMMARY:

Overview:
On March 20, 2007 (11), the Board of Supervisors adopted a resolution to consider proposals to develop the County-owned Cedar/Kettner property in downtown San Diego . The resolution set a hearing for July 31, 2007 for the Board to receive and consider responses to the County's Request for Proposals that was issued for the development and to receive a recommendation for selection of a developer. The goal of the development is to maximize revenue to the County and provide up to 750 parking spaces for County use as part of the Waterfront Park project. A Source Selection Committee reviewed the five proposals received and recommends Clark Realty Capital, LLC for the project. Today's action requests the Board's approval of the recommended developer and authorization for further negotiations with Clark Realty Capital, LLC to develop a Disposition and Development Agreement.

Recommendation(s):

CHAIRMAN ROBERTS:
1.    Find, that the proposed actions are not subject to the California Environmental Quality Act (CEQA) under Section 15004 (b) of the Guidelines because it is too early in the conceptualization, design, and planning process to evaluate the environmental impacts.

2.    Find, in accordance with Government Code section 25515.2 (h), that the proposals have been received.

3.    Adopt the Source Selection Committee's recommendation to select Clark Realty Capital, LLC as the developer of the Cedar/Kettner property.

4.    Approve and authorize the Director, Department of General Services, to execute three copies of the Exclusive Negotiation Agreement (ENA) for the Cedar/Kettner property with Clark Realty Capital, LLC.

5.    Authorize the Director, Department of General Services, to negotiate the business points of a Disposition and Development Agreement for the Cedar/Kettner property with Clark Realty Capital, LLC.

6.    Direct the Director of General Services to seek appropriate replacement office space in the San Diego area for the Public Safety Group and the Health and Human Services Agency’s Veteran’s Service office, currently located in the Star Builder’s Building.

7.    Direct the Director of the Department of General Services to return to the Board for approval of a Disposition and Development Agreement for the County's Cedar/Kettner property, should negotiations with Clark Realty Capital, LLC result in a tentative agreement, or alternatively, to report that negotiations were unsuccessful.

8.    In accordance with Board Policy A-87, Competitive Procurement, authorize the Director, Department of Purchasing and Contracting, to amend Contract No. 518514 with Keyser Marston Associates, Inc., real estate consultants, to add the provision for additional developer negotiation time; and to amend the contract as required to reflect changes to services and funding allocations, subject to the approval of the Director, Department of General Services. Waive the advertising requirement of Board Policy A-87.

Fiscal Impact:
Approval of the Exclusive Negotiation Agreement (ENA) will result in the receipt of a deposit in the amount of $150,000 from Clark Realty Capital, LLC. That fee, in addition to its initial application fee of $50,000, will be used to offset prior year County staff and consultant costs of $115,000 and estimated current year ENA costs of $142,000, a total of $257,000 in one-time costs up to completion of negotiations for a Disposition and Development Agreement (DDA) by January 2008. The original source of seed funding was Community Service Group management reserves, which will be reimbursed by the developer fees. There are no ongoing costs and no additional staff required.

Should a DDA be approved by the Board, staff and consultant costs for construction management oversight and contingency are estimated at $900,000. These costs will be partially offset by a further developer deposit of $150,000 to be delivered to the County at DDA execution, with the balance of funding to be requested from the General Fund.

The additional cost to relocate the two County offices in the Star Builder’s Building will be approximately $200,000 in one-time costs for both offices and $120,000 in net additional ongoing cost for both offices, assuming leased space is sought for both groups. General Fund resources will be requested for relocation of both the Public Safety Group and Health and Human Services Agency’s Veteran’s Service Office.

BACKGROUND:

On March 20, 2007 (11), the Board authorized the issuance of a Request for Proposals (RFP) for development of the County-owned Cedar/Kettner property. The primary objectives of the RFP were to maximize revenue to the County and to obtain up to 750 parking spaces for County use as part of the Waterfront Park project. Creative approaches for combining private development, including office, retail, and residential uses, and County parking were encouraged in the process.

Five proposals were received on May 25, 2007 in response to the RFP solicitation. Two proposals were determined to be not responsive to the minimum requirements of the RFP. Three developers were asked to meet with the review panel and to provide further detail of their proposals and presentations.

Evaluation of Proposals and Selection

A Source Selection Committee, comprised of prominent citizens active in the development and financial communities, was convened to review proposals, interview the three finalist teams, and to recommend a final selection.

Proposals were evaluated on the following criteria:

• Developer experience in projects of comparable size.
• Developer experience in public/private development projects.
• Development team experience.
• Financial capacity of developer.
• Conformance with applicable City of San Diego laws and regulations.
• County parking, particularly as to number of spaces offered to the County.
• Quality of Urban Design.

Following review of the proposals with the three finalists, the Source Selection Committee recommended that Clark Realty Capital, LLC (Clark) be selected as developer of the property. Clark was selected for the following main reasons:

• 700 self-park, non-tandem parking spaces were offered to the County, the greatest number of spaces offered.
• Clark 's offer has the highest net value of all proposals at $36,950,000, which includes the value of the parking spaces, capitalized value of parking space revenue offered to the County, and off-site parking costs.
• Clark 's timeline for delivery of the parking is competitive with other proposers.

Approval of today's requested actions will authorize County staff to negotiate a Disposition and Development Agreement with Clark Realty Capital, LLC. Following completion of negotiations, which is anticipated to take up to six months, staff will return to the Board to request approval of the Disposition and Development Agreement and passage of an Ordinance authorizing the sale of the Cedar/Kettner property to Clark Realty Capital, LLC. Attachment A presents details of Clark 's proposal and the competing offers.

Authorization for Additional Contract Authorization for Negotiations

Keyser Marston Associates, Inc. (KMA) has provided invaluable assistance to County staff on this complex transaction thus far. Today's request to the Board would increase the maximum authorization for Keyser Marston's services from $100,000 to $217,000 and will enable the retention of KMA on the project through the completion of negotiations for a Disposition and Development Agreement. KMA will provide negotiation assistance, analytical support and possible retention of subconsultants during this phase of the project. This request to increase the amount of the contract with Keyser Marston & Associates is justified because of the nature and complexity of the project, and because the contractor has provided previous real estate consulting services for this same site to the County during previous negotiation efforts. Since much of the process of developer selection has already been undertaken to date, it is not feasible to competitively bid to another firm the remaining work effort that needs to be undertaken between now and the completion of developer negotiations within six months.

Star Builder's Building – Relocation of County Occupants

Today's action requests authorization for the Director of General Services to initiate a site search and lease negotiations for replacement office space for the Public Safety Group (2,579 square feet) and the Health and Human Services Agency's Veteran's Service Office (2,415 square feet), both of which are currently located in the Star Builder's Building. Clark 's proposal calls for removal of the Star Builder's Building from the Cedar/Kettner block. The first year net additional cost to relocate both offices will be approximately $200,000 in one-time costs and $120,000 in net additional ongoing cost. Assuming leased space is sought for each group, General Fund resources will be requested for relocation of the Public Safety Group Executive Office and the Health and Human Services Agency's Veteran's Service Office.

Mandatory Compliance

California Environmental Quality Act. The requested actions to approve the Exclusive Negotiation Agreement with Clark Realty Capital, LLC, direct the Director of General Services to seek appropriate replacement office space for the Public Safety Group and the Health and Human Services Agency, and amend the contract with Keyser Marston Associates, Inc. for real estate consulting services is not subject to CEQA under Section 15004 (b) of the Guidelines because it is too early in the conceptualization, design, and planning process to evaluate the environmental impacts. The necessary environmental review will be performed when the project design and planning is complete for the Cedar/Kettner property.

San Diego County Administrative Code. The proposed actions comply with the provisions of Section 67 of the San Diego Administrative Code, which prohibits the County from contracting with persons employed by the County or businesses where persons employed by the County, either currently or within the past 12 months, serve as officers, principles, partners or major shareholders.

Linkage to the County of San Diego Strategic Plan

The Cedar/Kettner development project fulfills the goals of the Fiscal Stability Initiative because it proposes to fund the parking need for County staff entirely from revenue provided from the sale of the Cedar/Kettner property. It also fulfills the goals of the Environment Initiative because it will enable parking to be removed from the County Administration Center for development of the Waterfront Park .

Respectfully submitted,

Walter F. Ekard Chief Administrative Officer