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October 18, 2022
ITEM TITLE
Agreements: Approve an Exclusive Negotiating Agreement with Bayview Point, LLC and San Diego Metropolitan Transit System and a Consultant Services Agreement with Keyser Marston Associates for Development of City- and MTS-Owned Property
Report Number: 22-0264
Location: 707 F Street and 750 E Street
Department: Economic Development
Environmental Notice : The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required. Notwithstand ing the foregoing, the activity qualifies for an Exemption pursuant to Section 15061(b)(3) of the California Environmental Quality Act State Guidelines.
Recommended Action
Adopt a resolution A) authorizing the City Manager to enter into a three -party Exclusive Negotiating Agreement with San Diego Metropolitan Transit System and Bayview Point, LLC for the development of City- owned 707 F Street and MTS -owned 750 E Street ; and B) waiving the consultant selection process, authorizing the City Manager or his /her designee to execute a two-party Consultant Services Agreement between the City and Keyser Marston Associates, Inc., in an amount not to exceed $ 50,000 for negotiation and transaction structuring services.
SUMMARY
On December 18, 2018 the City of C hula Vista formalized a partnership with the San Diego Metropolitan Transit System (MTS) to seek partners that would develop a high density, mixed -use, transit -oriented development on the City-owned 707 F Street and MTS-owned 750 E Street properties. Subsequently, on April 18, 2019, the City released a Joint Request for Qualifications/Request for Proposals (RFQ/RFP) solicitation to identify the most qualified development teams that would develop a high -quality project with seamless planning and design across the nearly ten acres.
The schedule required submittals by July 2019 with evaluations and subsequent interviews with development teams taking place thereafter. Four submittals were received. All four teams were invited to participate in Phase II by submitting more fully conceptualized development proposals and project P a g e | 2
proforma. After close of the Joint RFQ/RFP, state law known as the Surplus Land Act was enacted to govern the disposition of real estate by local agencies. The Surplus Land Act requires specific noticing practices for the disposition of surplus land, and that public agencies must first make surplus land available for the development of affordable housing.
Last year, a legislative carve-out of the Surplus Land Act was created such that agencies could continue with their solicitations irrespective of the noticing and negotiation process included in the Surplus Land Act as long as they meet other criteria, such as providing the minimum level of affordable housing required by the Surplus Land Act.
To revive the joint solicitation, the development teams were invited to revise their project proposals and submit updated proforma’s reflecting current economic, market and financial conditions that had evolved since the solicitation began in 2018. Based on the revised project proposals and proforma received, the City and MTS agreed to invite two of the development teams back for interviews with an expanded Selection Committee.
In addition to the overall objectives specified in the Joint RFQ/RFP document, staff has weighed the economic impact anticipated to be created with each project proposal; including but not limited to: job creation, sales tax revenue generation, transient occupancy tax revenue generation, property tax revenue generati on, and the overall intensification of land use as envisioned by the planning documents governing the sites. In consideration of the foregoing, City staff recommends the selection of Bayview Point, LLC as the designated developer to exclusively work with City and MTS staff on a refined development project for City-owned 707 F Street and MTS-owned 750 E Street properties. Accordingly, staff recommends entering into a three-party Exclusive Negotiating Agreement (ENA) to establish a public-public-private partnership for the development of these sites.
Should the City Council approve the recommended action, MTS staff would follow by taking an item forward to its Board of Directors for approval of the same.
Following approval of a three-party ENA, staff will work with MTS and Bayview Point, LLC to negotiate the terms of a Disposition and Development Agreement (DDA). To remain compliant with the terms of the legislative amendment to the Surplus Land Act , the agencies would be required to enter into a DDA with Bayview Point, LLC no later than December 31, 2024. Staff anticipates returning to the City Council for the approval of a DDA prior to that date.
ENVIRONMENTAL REVIEW
The proposed activity has been reviewed for compliance with the California Environmental Quality Act (CEQA), and it has been determined that the activity is not a “Project” as defined under Section 15378 of the state CEQA Guidelines because the activity consists of entering into a three -party Exclusive Negotiating Agreement and a Consultant Se rvices Agreement , which does not result in a physical change in the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA. Notwithstanding the foregoing, it has also been determined that the activity qualifies for an Exemption pursuant to Section 15061(b)(3) of the State CEQA Guidelines. Thus, no environmental review is required.
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BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not applicable.
DISCUSSION
The City-owned 707 F Street property in Chula Vista is a 5.98 acre site that was previously used as the City’s Public Works Corporation Yard and has not been utilized for that purpose since approximately 1999 when the City’s Public Works administration and operations uses were relocated to 1800 Maxwell Road. Since vacating the site, the City has utilized it for various purposes. Over the last approximately 23 years the site has been leased to organizations for construction storage equipment, sand and gravel operation(s), and food storage and distribution services provided by South Bay Community Services. Improvements to 707 F Street outlived their useful life and were subsequently demolished.
Directly north of and adjacent to the City-owned 707 F Street property, is the E Street Transit Center at 750 E Street which is owned by MTS. This site is 4.15 acres and provides ancillary support for the UC San Diego Blue Line Trolley. The site is currently improved with 267 vehicular surface parking spaces, bus transfer terminals and a small building currently occupied by Cool Down Coffee.
Together the sites comprise nearly one full City block.
General Plan Designation – E Street Visitor Transit Focus Area The Land Use and Transportation Element of City’s General Plan, establishes plans and policies to identify the general distribution of housing, businesses, industry, open space (including parks), educational facilities, and public buildings. According to the Land Use and Transportation Element, both the City -owned 707 F Street and MTS-owned 750 E Street properties are located within the E Street Visitor Transit Focus Area. The objective for this area is to “Encourage redevelopment of E Street between Interstate 5 and Broadway with mixed use, especially near the E Street Trolley Station, and an emphasis on visitor -serving uses, with some offices and multi-family residential.” To implement this objective, the General Plan establishes Land Use and Transportation (LUT) Policy LUT 55.5 to prioritize the distribution of uses as detailed in Figure 1 below.
Fig. 1 Land Use and Transportation (LUT) Policy LUT 55.5 Urban Core Specific Plan Designation – E Street Trolley Transit Focus Area In addition to the General Plan, the properties are located within the Urban Core (UC) UC -15 District of the Urban Core Specific Plan, which provides more refined regulatory provisions for development of the sites.
The UC -15 District is identified as the E Street Trolley Transit Focus Area. The Urban Core Specific Plan
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adopted in 2007 establishes that primary land uses in the UC-15 District are: residential envisioned at 90%; retail (between 1% - 10%) office (10% maximum and not allowed on the ground floor façade, except for access); and hospitality (between 1% - 10%). A comprehensive list of permitted, conditionally permitted and prohibited uses is available within the Urban Core Specific Plan Land Use Matrix (Attachment 2).
Development standards for the UC-15 District provide for a minimum Floor Area Ratio of 4.0 and a maximum Floor Area Ratio of 6.0. Minimum building height for the sites is 45 feet or approximately four stories and maximum building height is established at 210 feet or approximately 16 stories. Additional development standards such as setbacks, open space requirements and parking regulations are established by the Land Use & Development Standards section of the Urban Core Specific Plan (Attachment 1).
Market Conditions
Despite underutilization of the 707 F Street site since approximately 1999, the City had been reluctant to pursue its redevelopment. This was due t o market conditions in Western Chula Vista that were unable to support the development types and intensities envisioned for the property. Currently, western Chula Vista is experiencing a significant revitalization with momentum surging to redevelop vacant and underutilized properties. Much of this momentum is sustained by projects like the 1,600 -room Gaylord Hotel and associated 275,000 square foot convention center at the Chula Vista Bayfront which broke ground in July .
The Bayfront project has and continues to function as a catalyst for other redevelopment projects in Chula Vista.
Joint Request for Qualifications/Proposals
In April 2019, the City released a Joint RFQ/RFP solicitation to identify the most qualified development teams that would develop a high-quality project with seamless planning and design across the nearly ten acres. The schedule required submittals by July 2019 with evalua tions and subsequent interviews with the Selection Committee taking place thereafter. Financial objectives and public benefit identified the preferred land use composition for the City-owned 707 F Street property. A higher preference was established for employment generating uses that also provide long term revenue. The priority of land uses from highest to lowest was identified as follows:
1. Office
2. Hotel
3. Retail
4. Market Rate Housing – For Rent
5. Market Rate Housing – Sale of Planned Unit Development/Condominiums
6. Affordable Housing
MTS’s objectives for 750 E Street favor development of the aforementioned land uses in the opposite order of priority. This was due to MTS policies that support prioritizing affordable housing. In addition, MTS has policies in place that prevent the sale of their property. Thus, the priority list for MTS -owned 750 E Street was identified as follows:
1. Affordable Housing
2. Market rate rental housing
3. Office
4. Hotel
5. Retail
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The difference in priorities further support the coordinated solicitation of qualifications and proposals for these two properties as they are complimentary to each other and should be jointly planned, phased and developed as one coordinated master plan development.
The phased approach to the Joint RFQ/RFP was strategic. Phase I of the solicitation was designed to evaluate the qualifications of each development team by assessing each team’s experience and credentials in planning, designing, financing and constructing high density, mixed-use development projects. During Phase I, a team of raters was assembled that included staff from both the City and MTS. These raters ranked all four development teams and determined they all met the minimum qualifications. While all four teams were scored and the RFQ portion of the solicitation had only assumed a maximum of three proposals to move forward, staff decided to invite all four developers to participate in Phase II. As a result, in September 2019 all development teams were provided a 90 -day period to develo p more fully conceptualized development proposals for the sites. The 90 days concluded on December 3, 2019 with the City having received Phase II submissions from all four development teams.
Phase II of the RFQ/RFP was designed to exact specific development proposals from each development team to determine if their qualifications matched their project proposals. It was further designed to validate the feasibility of their vision and review their basic financial proforma. During Phase II of the process, a Selection Committee was assembled and comprised of: City staff; MTS staff; the City’s Economic, Market and Financial Analysis consultant, Keyser Marston Associates; and two outside developers with experience in developing, residential, retail, industrial, o ffice and hotel projects throughout the United States, California and Chula Vista. On December 9, 2019 the Selection Committee met with all four development teams and received presentations on each team’s vision for the sites, including each team’s financing structure for the proposed developments. In evaluating each development proposal during Phase II, the Selection Committee assessed the composition, configuration and characteristic of each proposed development, as well as the ability for each development to be financed and constructed. In January 2020, each member of the Selection Committee completed ratings on the proposals.
Phase II of the Joint RFQ/RFP concluded in February 2020. The next month, the Governor declared a state of emergency at the onset of the COVID-19 pandemic.
Surplus Land Act
During the Joint RFQ/RFP solicitation period a California State Assembly Bill (AB) 1486, also known as the Surplus Land Act, was introduced and passed the Assembly. After close of the solicitation submittal peri od in July 2019, the Senate approved the bill and it was later signed into law by the Governor in October 2019.
This law became effective during Phase II of the joint solicitation process and included sweeping changes that removed the ability of local agencies to prioritize economic development activities over the production of affordable housing.
The law mandates that surplus land must first be offered for sale or lease to affordable housing developers through a written notice of availability sent to all entities that are on the list of affordable housing developers maintained by the State Department of Housing and Community Development (HCD). The law requires HCD to maintain an up -to-date listing of all notices of availability throughout the state on its website. The law prohibits any local agency that has received an offer from an entity desiring to lease or purchase surplus land from disallowing residential use on the site as a condition of sale or lease. Further more, if the local agency receives offers from more than one entity, it must give priority to the developer who proposes the greatest P a g e | 6
number of units and the deepest level of affordability for the affordable units. The law also provides the local agency the ability to negotiate concurrently with all entities that provided a notice of interest to purchase or lease its surplus land. Prior to agreeing to terms for the disposition of surplus land, the local agency is required to provide HCD with a description of the process followed and a copy of any r ecorded restrictions against the surplus land. If the local agency is found to violate the law the local agency could be liable for up to 50 percent of the final sales price.
Given that the Surplus Land Act was enacted after the City had begun its solicita tion, staff contacted HCD to inquire whether the agencies could continue pursuit of the solicitation irrespective of new regulations established by the Surplus Land Act. HCD’s response confirms that the City is subject to the Surplus Land Act and that the only mechanism available for the City to continue with its solicitation would be for the City Council to take legislative action to deem the property “exempt surplus land” pursuant to Government Code Section 54221(f)(1) or pursue a legislative amendment. Even if the City Council had deemed the property as “exempt surplus land,” the City would still be obligated to comply with the provisions of the Surplus Land Act, which requires development of either: 1) a housing development with ancillary commercial ground floor uses with 100 percent of the residential units restricted for low or moderate income households; or, 2) a mixed-use development with no less than 300 residential housing units with at least 25 percent restricted for lower income households. Deeming the property as surplus land would also require the agencies to restart the joint solicitation process that began in 2018. As a result, the agencies began working on a legislative amendment, but timing prevented consideration by the State as part of the 2020 legislative process.
Legislative Amendment
In late 2020, in pursuit of a legislative amendment, Senate Bill (SB) 51 was introduced in the State Senate. SB 51 proposed a carve -out of the Surplus Land Act such that agencies could continue with their solicitations irrespective of the noticing and nego tiation process included in the Surplus Land Act as long as they meet other criteria, such as providing the minimum level of affordable housing required by the Surplus Land Act.
SB 51 passed the Senate and Assembly in 2021 and became law later that year.
Since the effectiveness of SB 51 in July 2021, the City and MTS have revived the joint solicitation they began pursuing in 2018 and allowed for all four development teams to revise their project proposals and submit updated proforma reflecting current economic, market and financial conditions that had evolved since 2018.
Revised project proposals and updated proforma were received by the development teams in January 2022.
Based on the revised projects and proforma received, the City and MTS agreed to invite two of the development teams back for interviews with an expanded Selection Committee. Interviews with the two development teams took place in June 2022.
Revised Phase II Evaluations
In June 2022 the expanded Selection Committee interviewed two of the developer teams—Affirmed Housing and MountainWest Real Estate affiliate Bayview Point, LLC . Each development team proposed vastly different project proposals. Primary differences in the proposals include variations in intensity of development and the concentra tion of certain asset classes and land uses over others. Summaries of the refined development proposals submitted by Affirmed Housing and Bayview Point, LLC are detailed in Figure
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Affirmed Housing Bayview Point, LLC
Residential 570 units
347 affordable (for rent)
223 market rate (for rent)
806 units
265 affordable (for rent)
541 market rate (for rent)
Office/Retail 76,000 sq. ft. (office)
0 (retail)
75,008 sq. ft (office)
33,100 sq. ft. (retail)
Hotel 0 400 rooms
Height 72 feet 216 feet
Fig. 1 Summary of Affirmed Housing and Bayview Point, LLC Development Proposals Through the Joint RFQ/RFP process the City and MTS were able to assess each development teams’ ability to deliver on their proposed projects. The expanded Selection Committee determined that Affirmed Housing and Bayview Point, LLC were similarly poised to deliver the projec t types they individually proposed. In addition to the overall objectives specified in the Joint RFQ/RFP document, staff has weighed the economic impact anticipated to be created with each project proposal; including but not limited to: job creation, sales tax revenue generation, transient occupancy tax revenue generation, property tax revenue generation, and the overall intensification of land use as envisioned by the planning documents governing the sites. In consideration of the foregoing, City staff recommends the selection of Bayview Point, LLC as the designated developer to exclusively work with City and MTS staff on a refined development project for City-owned 707 F Street and MTS-owned 750 E Street properties. Accordingly, staff recommends entering into a three-party ENA (Attachment 3) to establish a public -public-private partnership for the development of these sites.
Should the City Council approve the recommended action, MTS staff would follow by taking an item forward to its Board of Directors for approval of the same.
Negotiation and Transaction Structuring
The City and MTS require the services of a professional firm to assist with evaluating the refined development proposal; as well as negotiations with the selected developer and structuring the transactions with each agency. Staff has identified Keyser Marston Associates , Inc. as uniquely qualified to provide these professional services based on having participated as part of the Selection Committee during the Joint RFQ/RFP process as a consultant to the City since the process began in 201 8. Based on these unique qualifications, staff is recommending that the City Council waive the normally applicable consultant selection process and hire Keyser Marston Associates, Inc. on a “sole source” basis as permitted under Sections
2.56.070B(3) and 2.56.070B(4) of the Chula Vista Municipal Code.
Next Steps
Following approval of a three-party ENA, staff will work w ith MTS and Bayview Point, LLC to negotiate the terms of a DDA. To remain compliant with the terms of the legislative amendment to the Surplus Land Act the agencies would be required to enter into a DDA with Bayview Point, LLC no later than December 31, 2024. Staff anticipates returning to the City Council prior to that date. The legislative amendment to the Surplus Land Act requires disposal of the property by March 31, 2026, or the City would be required to restart the process of making its property available to affordable housing developers pursuant to the provisions of the Surplus Land Act prior to negotiation and subsequent disposal.
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DECISION-MAKER CONFLICT
Staff has reviewed the property holdings of the City Council members and has found no prope rty holdings within 1,000 feet of the boundaries of the property which is the subject of this action. Consequently, this item does not present a disqualifying real property -related financial conflict of interest under California Code of Regulations Title 2 , section 18702.2(a)(7) or (8), for purposes of the Political Reform Act (Cal. Gov’t Code §87100, et seq.).
Staff is not independently aware, and has not been informed by any City Council members of any other fact that may constitute a basis for a decision-maker conflict of interest in this matter.
CURRENT-YEAR FISCAL IMPACT
Pursuant to the terms of the ENA, Bayview Point, LLC is required to make a $100,000 Negotiation Payment to the City. All City payments to Keyser Marston Associates, Inc. for services provided for negotiation and transaction structuring will be made from the Negotiation Payment collected from Bayview Point, LLC. As a result, there is no current year fiscal impact by adoption of this resolution.
ONGOING FISCAL IMPACT
There is no on-going fiscal impact as a result of this resolution.
ATTACHMENTS
1. Urban Core Specific Plan Land Use Matrix
2. Urban Core Specific Plan Development Standards (UC-15 District)
3. Three-party Exclusive Negotiating Agreement
4. Consultant Services Agreement
Staff Contact: Kevin Pointer, Principal Economic Development Specialist Eric Crockett, Deputy City Manager