AUC! AUC! AUC!

The Merry-Go-Round was intrigued to see listed on next Tuesday’s Council agenda a staff recommendation to start exclusive negotiations between the City and an entity called Alameda United Commercial LLC for development of two parcels at Alameda Point:  the old Bachelor Enlisted Quarters and 5.5 acres of taxiways located north of the Seaplane Lagoon.

To us, this seemed like a big deal.  Having decided to act as its own master developer, the City spent two years finalizing the conveyance of the former Naval Air Station and then preparing the key planning documents.  Last June, the City took title to 1,400 acres; this February, Council approved the planning documents; now, the time has arrived to start the ball rolling.

So, naturally, we wondered:  Who was “Alameda United Commercial LLC” and why had staff tapped them to become the City’s first business partner at the Point?  What kind of projects was Alameda United Commercial LLC proposing and how did those projects fit into the overall development plans – we don’t use the word “vision” – for the Point?

We’re still wondering.

To be sure, the published staff reports contain name, rank, and serial number:

  • “Alameda United Commercial, LLC,” it turns out, is part of a “designer/developer team” – the reports call it the “AUC Team” – with an outfit called Salvatore Caruso Design Corporation.
  • One of the proposed projects consists of renovating the BEQ “for a combination of assisted senior living, independent senior living, student housing and office space.”  The other involves “new development along the taxiways that includes hotels and residential condominiums” (a term sheet attached to the draft Exclusive Negotiating Agreement refers to “two hotels approximately 250 total rooms and 200 condominium units”).

But that’s it.

Nothing about the track record or financial resources of the “AUC Team.”

Nothing about how the respective projects mesh with the previously adopted “Conceptual Planning Guide” outlining “overall concepts and development strategies” for the Point or with the soon-to-be-adopted “precise plan” establishing “form and use regulations” for development of the Waterfront Town Center.

If we didn’t know how assiduously City Manager John Russo tries to cultivate a reputation for “transparency,” we’d almost think staff was hiding the ball.

We have to believe that Mr. Russo and Alameda Point Chief Operating Officer Jennifer Ott know more about the “AUC Team” and its plans than they have chosen to make public.  Surely, they wouldn’t recommend tying up the two parcels for six months or more – the period for which the “AUC Team” has exclusive rights to negotiate a DDA (disposition and development agreement) – without having far more detailed information than they’ve disclosed publicly.

We also suspect that Mr. Russo and Ms. Ott provided more specific facts and figures to Council at a closed session held on June 3 to review “real property negotiations” with the “AUC Team.” (Don’t bother checking out the minutes of the closed session for any clue about the substance of that meeting.  As usual, the minutes say only, “Direction was given to staff” – whatever that means).  For all we know, there may have been further private briefings – like those given to Council, according to the Mayor, about the open-space initiative – since then.

So why the reluctance to let the public in on the details?  Because that’s the way the City Manager has decided to do things.

We harken back to the Council meetings last fall at which Mr. Russo and Ms. Ott described the process that they intended to follow for managing development at the Point (and that they seem to be following in this case).  It’s a staff-run affair in which all the real work is done behind closed doors and a public hearing – like the one scheduled for Tuesday – becomes almost a formality.

During those meetings, Mr. Russo resisted vigorously – and successfully, thanks primarily to Mayor Marie Gilmore and Vice Mayor Marilyn Ezzy Ashcraft – efforts by two Council members to create a greater role for the public in the process.

First to try was Councilman Tony Daysog, who proposed setting up a “blue ribbon commission” of citizens to vet projects before Council authorized staff to negotiate terms with a developer.  “There’s never enough cooks in the kitchen,” Mr. Daysog, ever eager to offer an aphorism, told his colleagues.  (Apparently, he forgot the part about how the broth gets spoiled).

The Mayor and Vice Mayor quickly shot him down.  Mr. Daysog’s idea, declared Ms. Gilmore, “would take us down a different path.”  Undeterred, at the next meeting Mr. Daysog presented a spreadsheet outlining a nine-step “community engagement process.”  But neither the new title nor a new aphorism – “Santa likes to have his helpers” – persuaded the Mayor or her allies to let the public intrude on the City Manager’s preferred order of march.

Equally, and less predictably, unsuccessful was Councilwoman Lena Tam, who described an alternative method (which she attributed to Planning Board member John Knox White) for getting public input before the City chose a particular developer and project.  If staff came up with a “specific innovative use” for a parcel at the Point, it would present the idea at a public meeting at which any interested person could comment.  Only if the reception from the citizenry was favorable would the ENA process begin.

Her approach, Ms. Tam said, would “provide an opportunity for residents to weigh in to see whether the specific use being contemplated is something which Alamedans would entertain” before any effort was expended on an ENA.  This time, Mr. Russo himself jumped in to object.  The Tam/Knox White plan was “odd” and unrealistic, he said.  The Mayor then volunteered that she found it confusing, and the Vice Mayor queried, “Are we really going to resolve this when we have other agenda items?”

In the end, the only constraint imposed by Council on Mr. Russo’s discretion was to direct staff to prepare a list of “evaluation criteria” to use in the developer selection process.  Ms. Ott dutifully wrote down all of the suggestions made by individual Council members, which allowed them to score points with their favorite interest groups by including items like commitment to prevailing wage agreements (Ms. Tam) and “sensitivity to environmental protection” (Stewart Chen, D.C.).

But the “evaluation criteria” also set forth a list of “evaluation questions” to be asked of prospective developers.  Among other things, they inquire about the developer’s “experience in managing/implementing similar projects of same or larger scale”; its “verifiable financial commitments or contributions” for the project, and its “objective in pursuing the project” – i.e., long-term investment or quick profit.  The responses surely would yield a lot of useful information about a potential candidate.

Unfortunately, Council failed to specify when staff should ask these questions or what they should do with the answers.  One might have assumed, especially given the concerns expressed by Mr. Daysog and Ms. Tam, that staff would get the information – and make it public – before it asked Council to authorize an ENA.  But that’s not what Mr. Russo has chosen to do with the first projects.

The draft ENAs do require the “AUC Team” to submit a “Statement of Qualifications” describing their experience and financial resources – but only after they’ve been awarded the ENA.  The City Manager is given “sole discretion” to determine whether the SOQ is “insufficient.”  If he thinks it is, he can kill the deal.  No provision is made for disclosing the information contained in the SOQ to the public – ever.

So the City Manager remains firmly in the driver’s seat, and the rest of us are simply along for the ride.  We’ll just have to, well, trust Mr. Russo’s judgment that the “AUC Team” and its projects are right for Alameda Point.  That isn’t too much to expect, is it?

But even passengers occasionally are allowed to ask questions.  Since the Mayor strictly forbids any interaction between citizens and staff at Council meetings, we’ll raise a few here.

For one thing, we’d like to know what led the “AUC Team” to be “chosen for the privilege” (to use Councilman Daysog’s phrase) of being selected as the entity with which to negotiate the first development agreement for the Point.

Thanks to Michele Ellson of The Alamedan, we know a little more about the “AUC Team” than staff chose to disclose.  AUC’s principal is a woman named Zhen Zhen Li, whose credentials consist of “help[ing] lead the development of child care centers” in the Bay Area, “working to secure final approvals for a six-unit condominium complex in Palo Alto,” and “working on a commercial renovation project on Market Street in San Francisco.”  With all due respect, Donald Trump (or even Ron Cowan) she ain’t.

The Alamedan reported that the other member of the “AUC Team,” Salvatore Caruso Design Corporation, collaborated with Ms. Li in converting a San Jose liquor store into a child care center in 2009.  Perhaps more relevant to the projects proposed for the Point, Mr. Caruso also worked on renovating the St. Claire Hotel in San Jose and developing a 1.97 million square foot hotel, condo, and office complex in Shanghai.  We suspect some on Council would be interested in finding out how “green” these projects were and whether they used union labor.  We’re more concerned about whether they came in on time and on budget.

Then there’s the money.  The sources of financing available to the “AUC Team” remain a mystery.  The Alamedan quoted Ms. Li as saying that she doesn’t intend to seek foreign investors through the U.S. Citizenship and Immigration Service’s EB-5 visa program.  If not, where’s the capital coming from?  And on what terms?  We just hope it’s not the Lehman Brothers bankruptcy estate.

We’d also like to know how the two projects proposed by the “AUC Team” fit into the existing plans for development at the Point.

Throughout the planning process, Mr. Russo has insisted on sticking to the 1,425-unit cap on residential development imposed by the conveyance agreement between the U.S. Navy and the City.  If this cap is exceeded, every additional market-rate housing unit carries a $50,000 per unit penalty.

As a practical matter, staff has been planning for a maximum of 1,225 new housing units for the Point, since 200 units have been allocated to the Alameda Point Collaborative.  Just a month ago, staff proposed putting 800 units in the Waterfront Town Center (and Council insisted that this was a minimum number).  That left 425 units for the rest of the Point.

Ms. Ott told Council that this balance would be split between re-development of the BEQ (and the Bachelor Officers Quarters) and construction of new housing in the “Main Street Neighborhood,” the area located north of the Town Center across from the Bayport development.  But the two projects proposed by the “AUC Team” comprise 200 units at the BEQ and another 200 condos on the taxiways.  Unless the condos are counted against the Town Center allocation, the projects will exhaust the allotment remaining under the cap and leave nothing for the Main Street Neighborhood.

This would represent a significant change in the previously approved residential development scheme.  The Main Street Neighborhood always has been described as the site for low-density housing.  Indeed, it is the only area in which single-family homes are allowed under the recent re-zoning of the Point.  By seeking to move forward with the projects proposed by the “AUC Team,” has staff decided to subject any new single-family housing built in the Main Street neighborhood to the $50,000 per unit penalty?  If so, why?

There’s also the issue of whether the project proposed by the “AUC Team” for the taxiways is consistent with the “precise plan” prepared at great expense – albeit most of it paid from a grant – for the Waterfront Town Center.

The 5.5 acres in the deal lie south of three large hangars, including the building now occupied by the Bladium Sports Club.  According to the precise plan, this “Taxiway District”

provides for infill development compatible with preserving the character of the NAS Alameda Historic District.  Redevelopment within this zone is controlled to preserve character-defining view corridors and to relate to the massing and spacing of the historic Hangar structures.  Uses in this area are flexible, with the eastern end transitioning from the adjacent mixed-use multi-family residential in the Town Center towards the commercial and maritime functions of the existing Hangar buildings to the west, although the uses remain flexible to take advantage of evolving market trends.

The plan’s Land Use Development Guidelines limit building heights in this area to 50 feet and specify 80-foot “view corridors” between the buildings.

Now, we don’t doubt that a project featuring two hotels and high-rise condos would benefit from the views looking over the Seaplane Lagoon onto the Bay.  But one might question how “compatible” such a project is “with preserving the character of the NAS Alameda Historic District.”  It would be ironic indeed if, the very day Council gives its final approval to the precise plan (also an item on Tuesday’s agenda), it also gave the go-ahead to staff to negotiate with a developer who has something very different in mind.

We’re certain that the Mayor and Vice Mayor readily – and enthusiastically – will vote to give the City Manager everything he’s asking for.  We’re depending on Councilman Daysog and Councilwoman Tam to implore Mr. Russo to clue the rest of us in on what’s going on.  Maybe they can even get him to invite Ms. Li or Mr. Caruso to make a guest appearance.

Sources:

BEQ project: 2014-07-15 staff report re ENA for BEQ2014-07-15 Ex. 2 to staff report re ENA for BEQ (ENA)

Taxiways project: 2014-07-15 staff report re ENA for taxiways2014-07-15 Ex. 2 to staff report re taxiways – ENA

Evaluation criteria: Evaluation criteria (final)

About Robert Sullwold

Partner, Sullwold & Hughes Specializes in investment litigation
This entry was posted in Alameda Point, City Council, Development, Housing and tagged , , , , , , , , , , , , . Bookmark the permalink.

One Response to AUC! AUC! AUC!

  1. The 2008 Station Area Planning Study makes reference to the Bachelor Enlisted Quarters by pointing out that while it is among the historic building inventory, “All of the preserved buildings are intended to be adapted and reused. However, Measure A, precludes them from being used as residential and consequently buildings, such as the BEQ, will be difficult to reuse given the limited demand for similar non-residential space and the high cost of upgrading the building to current codes.” The study, found here http://alamedaca.gov/sites/default/files/department-files/2013-05-07/station_area_planning_study_-_2008.pdf also has map on page 51 that offers a possible residential conversion layout.

    It’s unclear, absent a Measure A exemption or a multifamily housing overlay via a new Housing Element, how the BEQ gets approved for multifamily housing. The city’s Density Bonus might offer a solution, but on what exactly would such a bonus award be based?

    I’m all for seeing the BEQ renovated, especially with senior housing, but the same economic constraints of rehabbing this complex exist today as they did a decade ago. It will be of great interest to see how AUC pencils this project out.

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