DATE: December 14, Board of Commissioners. Patrick Quinton, Executive Director

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1 DATE: December 14, 2011 TO: FROM: Bard f Cmmissiners Patrick Quintn, Executive Directr SUBJECT: Reprt Number Authrize the Third Amendment t Dispsitin and Develpment Agreement fr Statin Place Redevelpment with Hyt Street Prperties and a Parking Lease fr One Hundred Parking Stalls in the Statin Place Garage with Pearl Htel Investrs EXECUTIVE SUMMARY BOARD ACTION REQUESTED Adpt Reslutin N Adpt Reslutin N ACTION SUMMARY The first reslutin will authrize Amendment 3 t the Dispsitin and Develpment Agreement fr Statin Place Redevelpment (Statin Place DDA) as it affects Statin Place Lt 4, als knwn as Parcel 3. Statin Place Lt 4 (Lt 4) was cnveyed t Hyt Street Prperties (HSP) n April 26, 2004, as part f the trade f land fr the Fields Neighbrhd Park. Amendment 3 wuld make the fllwing changes t the Statin Place DDA: Changes the Scpe f Develpment frm residential with 30 units affrdable t husehlds at 120 percent Median Family Incme (MFI) t allw a htel use. Adds requirement t cmply with PDC s Green Building Plicy. Adds requirement t cmply with PDC s current versin f the Business and Wrkfrce Equity Plicy. Changes the Schedule f Perfrmance with an estimated Cnstructin Cmmencement date f Octber 1, Acknwledges PDC s apprval t assign the DDA frm HSP t Pearl Htel Investrs, LLC (PHI). As part f Amendment 3, HSP has agreed t extend the repurchase right fr affrdable husing as set frth in the Amended and Restated Agreement between the City f Prtland and Hyt Street Prperties, LLC (HSP DA) fr tw additinal years until September 8, This bligatin is described in Sectin V.D.3 f the HSP DA. In additin, HSP agrees that under the Hyt Street Yards DA, its affrdable husing bligatin shall be increased by 30 fr-rent r fr-sale husing units affrdable t husehlds at r belw 120 percent f MFI.

2 Bard Reprt N Statin Place Lt 4 December 14, 2011 Page 2 f 6 The secnd reslutin will authrize a ten-year lease with fur ten-year extensins with PHI fr 100 parking stalls in the Statin Place Garage t service the prpsed htel that PHI seeks t develp. This lease will generate an estimated $1.5 millin in revenue t PDC fr the initial 10-year term, with ptential fr equal r greater revenue fr subsequent extensins. PUBLIC BENEFIT The fllwing public benefits wuld be achieved: 1. Business Amenity: The Nrth Pearl Neighbrhd lacks a htel t service nearby businesses in need f a htel t cater t business visitrs and cntractrs. The prpsed htel wuld prvide a much needed amenity fr the neighbrhd. 2. Jb Creatin: During cnstructin, the htel will generate an estimated 200 cnstructin jbs. The prpsed htel will be perated by Marritt Crpratin, and during peratin, will emply apprximately 67 full time wrkers. 3. Business and Wrkfrce Equity Plicy. Amendment 3 requires cmpliance with PDC s Business and Wrkfrce Equity Plicy. 4. Green Building: The Statin Place DDA was executed prir t the adptin f PDC s Green Building plicy. Amendment 3 requires cmpliance with PDC s Green Building Plicy. 5. Increased Public Revenue: a. Ldging Taxes: The prpsed htel is anticipated t generate annual ldging taxes f apprximately $1,000,000, based n the current tax rate f 11.5 percent. b. Prperty Taxes: The imprved land is estimated t generate an additinal $385,000 in prperty taxes annually. c. City Fees and Permits: The prpsed develpment will generate an estimated $1,966,000 in fee and permit revenue t the city. d. Parking Revenue: Staff has negtiated a 10-year lease with fur 10-year extensins fr 100 parking stalls in the Statin Place Garage which will generate revenue f apprximately $105,600 annually fr that garage in the first three years. The Statin Place Garage is currently at abut 55 percent peak ccupancy and is wned by PDC. 6. Affrdable Husing: The affrdable husing prgram assciated with Statin Place Lt 4 was meant t serve a limited number f husehlds at 120 percent MFI. Althugh this bligatin will be eliminated, Hyt Street will extend PDC s repurchase right fr affrdable husing under the Amended and Restated Agreement between the City f Prtland and Hyt Street Prperties, LLC fr tw additinal years, until

3 Bard Reprt N Statin Place Lt 4 December 14, 2011 Page 3 f This repurchase right will give the Prtland Husing Bureau the pprtunity t seek ut a prject that culd serve a mre diverse incme mix. In additin, HSP agrees that under the Hyt Street Yards DA, its affrdable husing bligatin shall be increased by 30 fr-rent r fr-sale husing units affrdable t husehlds at r belw 120 percent f MFI. This actin will supprt the fllwing PDC gals: Strng Ecnmic Grwth and Cmpetitiveness Sustainability and Scial Equity Healthy Neighbrhds A Vibrant Central City Effective Stewardship ver ur Resurces and Operatins, and Emplyee Investment PUBLIC PARTICIPATION AND FEEDBACK Due t the lw risk and financial implicatin f this prject and minimal ptential fr cntrversy, there was n public participatin sught as part f this amendment. The design and cncept f the revised scpe f develpment was presented by the develpment team t the Pearl District Neighbrhd Assciatin Land Use Cmmittee n Nvember 15, COMPLIANCE WITH ADOPTED PLANS AND POLICIES River District Urban Renewal Plan (1998): The prpsed htel wuld prvide a much needed business amenity fr the Nrth Pearl Neighbrhd and service nearby emplyers, thus supprting the fllwing gals f the River District Urban Renewal Area Plan: Gal 3: T becme a cmmunity f distinct neighbrhds. Gal 6: T enhance the ecnmy and functinal efficiency f the city. Prtland Develpment Cmmissin Strategic Plan (2010): The develpment f a htel catering t business visitrs in the Nrth Pearl District wuld reinfrce the fllwing bjectives: Jbs: The Central City is the ecnmic and emplyment cre f the regin.. Investment: The Central City is a magnet fr nging public and private investment t drive emplyment, enhance quality f life and generate taxes. FINANCIAL IMPACT Amendment 3: There is n public funding fr the htel. Parking Lease: The prpsed parking lease will carry a ten-year term with fur ten-year extensins with PHI fr 100 parking stalls in the Statin Place Garage t serve the prpsed htel. This lease will result in $105,600 in parking revenue t PDC fr the first year and will be subject t annual increases based n neighbrhd market rates. The lease prpsed fr apprval specifies that annual increases cannt be less than three percent r mre than

4 Bard Reprt N Statin Place Lt 4 December 14, 2011 Page 4 f 6 six percent. Fr the initial 10-year term the revenue is estimated t amunt t $1.5 millin unless PDC chses t exercise its right t reduce the number f spaces in the third and fifth years f the lease. This revenue is nt currently budgeted in utging years fr the River District Urban Renewal Area. RISK ASSESSMENT Amendment 3: As there is n PDC financing invlved in either the previus wrkfrce husing prgram r the revised htel prgram, the risk t PDC investment is minimal. HSP wns Lt 4. If HSP, r its assignee, des nt cmmence cnstructin f a htel in accrdance with the Schedule f Perfrmance (as defined in the DDA Amendment) then PDC has the right t reinstate the Statin Place DDA husing affrdability requirements n Lt 4. PDC s right t re-enter and re-sell the prperty will terminate as f the date that a building permit is issued fr the cnstructin f a htel n Lt 4. Previusly this right terminated as f the date the develper btained a Certificate f Cmpletin frm PDC. Parking Lease: The fllwing factrs have been cnsidered in the parking lease: If htel develpment des nt prceed: The parking agreement will terminate autmatically if the htel prject has nt btained a Certificate f Occupancy by January 1, Market changes in parking rates: Parking rates are subject t annual increases based n cmparable market rates f the neighbrhd. Annual increases cannt be less than 3 percent r mre than 6 percent. If redevelpment f garage ccurs: In the event f a planned demlitin and/r redevelpment r the Statin Place Garage, PDC, r its successr, has the right in year 18 t terminate the agreement with tw years ntice. Parking garage capacity in utging years: The Statin Place Parking Garage is currently at 55 percent peak ccupancy. In rder t have the ability t free up additinal parking fr future develpments, changes in the number f parking spaces have been arranged as fllws: Frm year 1 3, 100 spaces. At 3 years, PDC has right t reduce t 80 spaces. At 5 years, PDC has right t reduce t 70 spaces. At every 10-year renewal ptin, PHI will be guaranteed 70 spaces and parties can mutually agree t increase r reduce spaces. Parties acknwledge that fr any f the events abve, the shared use f parking culd be cnsidered.

5 Bard Reprt N Statin Place Lt 4 December 14, 2011 Page 5 f 6 WORK LOAD IMPACT Wrk required f PDC is built int existing staff wrk plans and n new staff is required. ALTERNATIVE ACTIONS The Bard culd elect t nt apprve ne r bth reslutins, r culd direct staff t negtiate changes t ne r bth reslutins. CONCURRENCE The Executive Cmmittee f the Prtland Husing Bureau (PHB) has reviewed this prpsal and supprts the change f use f Statin Place Lt 4 given that the repurchase right fr affrdable husing with HSP is extended t the year 2014 and that HSP agrees that its affrdable husing bligatin shall be increased by 30 fr-rent r fr-sale husing units affrdable t husehlds at r belw 120 percent f n the remaining Hyt Street land in the River District URA. Attachment C is a letter f supprt frm the Prtland Husing Bureau. On Octber 14, 2011, the PDC Financial Investment Cmmittee frwarded a recmmendatin t apprve Amendment 3 t the Statin Place DDA. BACKGROUND Statin Place Lt 4 (referred as Parcel 3 in the DDA) was cnveyed t HSP fr $4,054, n April 26, 2004, and was part f a land trade fr a piece f prperty part f the Fields Neighbrhd Park. HSP is under cntract t sell the prperty t PHI fr the develpment f a htel t serve business visitrs. Statin Place Lt 4 was ne f fur prperties invlved in the Statin Place DDA and subsequent Amendment 1 (executed June 1, 2003) and Amendment 2 (executed May 3, 2004). The riginal Statin Place DDA was executed September 27, 2002 and was a fur party DDA amngst PDC; Hyt Street Prperties, LLC (HSP); Statin Place, LLC (REACH); and H. Williams Advisrs, Inc (HWA). The Statin Place DDA invlved the fllwing prperties (identified in Attachment A): Statin Place Lt 1 (Parcel 1a) Cnveyed t REACH fr the develpment f affrdable senir husing, Statin Place Twer Statin Place Lt 2 (Parcel 1b) Originally t be cnveyed t REACH, later cnveyed t Sneed, LLC (Ziba) Statin Place Lt 3 (Parcel 2) Statin Place Parking Garage, wned by PDC, with HWA as fee develper Statin Place Lt 4 (Parcel 3) Currently vacant, unimprved prperty cnveyed t HSP fr the develpment f at least 175 cndminiums, f which 30 are t be affrdable t husehlds at 120 percent MFI r lwer, specifically withut PDC subsidy. This requirement was mdified in Amendment 2 t the Statin Place DDA by allwing a rental develpment t substitute fr a cndminium develpment stipulating that future negtiatins between PDC and HSP culd determine the scpe f a rental husing develpment and its affrdability cmpnent, and wuld result in anther amendment t the DDA.

6 Bard Reprt N Statin Place Lt 4 December 14, 2011 Page 6 f 6 As part f Amendment 3, HSP agrees t mdify tw prvisins under the Amended and Restated Agreement between the City f Prtland and Hyt Street Prperties, LLC in rder t prvide fr wrkfrce and affrdable husing pprtunities within the district. First, HSP has agreed t extend the City s repurchase right under the Amended and Restated Agreement between the City f Prtland and Hyt Street Prperties, LLC fr tw additinal years, until This repurchase right included as part f the Amended and Restated Agreement will give the City f Prtland an additinal pprtunity in 2014 t purchase a prperty that culd be develped t serve a mre diverse incme mix. Furthermre, Sectin V.A. f the HSP DA clarifies the parties intent t cperate t meet husing affrdability gals n the 34 acres f land primarily lcated between NW 10 th and 12 th in the nrthern end f the Pearl District. (This area des nt include Lt 4). HSP agrees t increase its affrdable husing bligatin by 30 fr-rent r fr-sale husing units affrdable t husehlds at r belw 120 percent f MFI n the remaining Hyt Street land in the River District URA. PHI desires t lease 100 parking stalls at Statin Place Garage t service the htel fr ne tenyear term and up t fur ten-year extensins thereafter. By allwing up 50 years f available parking, the parking agreement is cterminus with the management agreement with the htel peratr. The stalls will be unmarked thrughut the garage and will be leased at market rate, subject t annual increases based n the rate fr mnthly parking passes in the neighbrhd. Annual increases cannt be less than 3 percent and nt mre than 6 percent. In rder t ensure flexibility fr future develpment, PDC has the right t reduce spaces t n less than 80 spaces at year three and t 70 spaces at year five. The parties will mutually agree t increase r reduce the number f spaces at every 10-year extensin. ATTACHMENTS: A. River District Financial Summary B. Prject Summary C. Letter f Supprt Prtland Husing Bureau

7 Bard Reprt N Statin Place Lt 4 Attachment A December 14, 2011 Page 1 f 2 URA FINANCIAL SUMMARY

8 Bard Reprt N Statin Place Lt 4 Attachment A December 14, 2011 Page 2 f 2

9 Bard Reprt N Attachment B December 14, 2011 Page 1 f 1 PROJECT SUMMARY Prject Name: Statin Place Lt 4 (Parcel 3) Descriptin: Lcatin: URA: Current Phase: Next Milestne: Vacant Land NW 9 th Avenue and NW Marshall Street NE Crner River District Review f revised prpsal Executin f DDA Amendment and Parking Agreement Cmpletin Target: June 30, 2015 Outcme: Prgram change frm husing t htel; Ten year parking lease with fur (4) ten-year extensins fr 100 parking stalls in the Statin Place Garage Site/Prject Map:

10 Bard Reprt N Statin Place Lt 4 Attachment C December 14, 2011 Page 1 f 1