No TLC from TLC

Mike O’Hara, the familiar face of Tim Lewis Communities, is probably the guy who will present the latest version of the developer’s plan for the Encinal Terminals to Council for approval Tuesday night.

The Merry-Go-Round predicts that, after the dog-and-pony show is over, at least one member of the audience will rush to the podium to declare herself “excited” by the project.  Moreover, since Tim Lewis is proposing to build 589 new housing units on just nine acres of the 16.73-acre site, we expect that the “Housing! Housing! Housing!” crowd will extol the developer for putting a large dent in the “regional housing crisis.”

So be it.  But there is one question we’d like to see someone ask Mr. O’Hara before he gets to take his bows:

So, tell us, Mike, just what are the odds that this project actually is going to get off the ground?

Given Tim Lewis’s track record, we think that is an eminently fair question to ask.  And it’s a question worth asking, if for no other reason than to guard against the sense of false optimism that may arise from looking at the slides and listening to the sales pitch.

Mike O'Hara

Mike O’Hara on site (Credit: Alameda Magazine)

Maybe, too, a forthright answer will prompt second thoughts about the idea that the best way to remedy the affordable-housing shortage is to green-light every residential project that a private developer brings to City Hall.

Tim Lewis is also the developer of the 380-unit Del Monte warehouse project, which the outgoing Council led by Mayor Marie Gilmore approved as its last official act in December 2014.  The Development Agreement between Tim Lewis and the City lasts for 15 years.  It sets no deadlines for starting or finishing the warehouse renovation, and, indeed, it states that the developer “shall have the vested right to develop the Project in such order, and at such rate and at such times, as Developer deems appropriate in the exercise of its business judgment. . . .”

So far, Tim Lewis has taken full advantage of the leeway it was given by the City.

The Development Agreement requires Tim Lewis to submit annual progress reports.  The first report, presented in June 2016, stated that the plans for the warehouse renovation were undergoing plan-checking by the City.  “[C]ommencement of infrastructure improvements is expected in 2016,” the report stated. “[V]ertical building construction is expected to start in late 2016, with first occupancies in 2017.”

None of those target dates was met.

A year later, the warehouse still stood vacant, but Tim Lewis’s next report, presented in April 2017, assured Council that bulldozers would start rolling very soon.  “Construction drawings are currently undergoing plan check with the City; building permits are expected in mid-2017,” the report stated.   The developer “anticipates commencement of infrastructure improvements on the site in mid-2017, with building construction commencing soon thereafter.”

None of those target dates was met, either.

Three years after project approval, some people – even politicians – were getting worried.

In December 2017, Mr. O’Hara appeared before Council to present the last version of the Encinal Terminals development plan (which Council rejected).  During the Q-and-A period, Councilman Jim Oddie brought up the lack of progress on the Del Monte warehouse.  “Are we ever going to see anything built there?” he asked. “We need housing.  [My concern is], three years from now, we’ll still have nothing.”

Mr. O’Hara sought to placate the Councilman.  “I have really good news for you,” he told Mr. Oddie.  “I’m happy to say that today we have an agreement in place, we have a partner, we have the financing in place, and over the next couple of months we’ll be putting that whole deal together and be able to start on that building here very soon.”

We’re still waiting.

The last official word from Tim Lewis came in the report presented this April.  “Construction drawing plan review is complete” – Finally! Those pesky plan-checkers sure took a long time! – “and building permits are expected by mid-2018,” the report stated, “at which time Developer anticipates commencement of infrastructure improvements on the site, with building construction commencing soon thereafter.”

It’s now September 2018, 45 months after Council approved the Del Monte warehouse master plan and related agreements.  Assistant Community Development Director Andrew Thomas confirmed to us Thursday that no permits have yet been pulled for the project.  Ride your bike along Buena Vista Avenue to see for yourself whether anything’s been done.

(If you take the trip, you’ll notice the new building on the corner of Sherman Street.  That’s the 31-unit senior housing project now known as Littlejohn Commons, which was developed by the Alameda Housing Authority and its affiliated non-profit public-benefit corporation, Island City Development.  Construction started in December 2016, and the final certificate of occupancy was issued in August.  Tim Lewis provided a portion – $3.6 million – of the financing, but it did none of the construction work other than rough-grading the site.  According to a staff report to the AHA Board, “late delivery of the site improvements by Tim Lewis” set the completion date back two months and caused about $300,000 in additional costs.)

None of the three annual reports submitted by Tim Lewis provided any explanation for the delay in beginning work on the warehouse renovation, but, at the December 2017 Council meeting, Mr. O’Hara blamed it on – you guessed it – rising construction costs.  “Over the last couple of months we’ve been close to permit-ready,” he told Council, but “we’ve had to deal with what everybody in the construction industry and the real estate development industry has been dealing with for the last couple of years – rampant cost increases.  They affect everybody; they’ve affected us; they affected our ability to create a viable, feasible structure with one of the groups that we’ve worked with. . . .”

The flaw in that explanation is revealed by the answer itself.  Rising construction costs have “affect[ed] everybody,” Mr. O’Hara says.  So how come, thanks to developers, an “extraordinary residential building boom” is “shaking up Oakland,” as the East Bay Times recently proclaimed?  Even closer to home, how come Alameda Point Partners, whose Site A project is larger but was approved later than the Del Monte warehouse project, was able to start infrastructure work in May?

Presumably, all of these projects faced the same construction cost pressures Mr. O’Hara laments.  But somehow those developers were able to overcome this difficulty, and Tim Lewis was not.

Why?  We don’t know for sure, but we’ll point out one key distinction between Tim Lewis and the developers whose projects are moving forward.

The latter group consists primarily of large multi-family residential development companies.  For example, the managing partner of Alameda Point Partners is Trammell Crow Residential, which describes itself as “the premier multifamily real estate company” in the country, having developed more than 250,000 units in major markets since 1977.  Similarly, Lennar Multifamily Communities, which is ranked seventh (right behind Trammell Crow) on the list compiled by the National Multifamily Housing Council of the largest apartment developers in the U.S., is developing two properties in downtown Oakland (17th and Broadway and 19th and Harrison) on which work is well under way.  Developers for other downtown Oakland projects boast similar expertise in multi-family residential projects.

Tim Lewis plays in a different ballpark.

The website for Tim Lewis Communities – displayed by Google as “Tim Lewis Communities | Your Luxury Homebuilder” – identifies 11 properties being developed by the firm in California (other than in Alameda) and Nevada.  None is a multi-family, multi-story residential project.  Instead, all 11 consist of amalgamations of one- and two-story detached single-family homes.  The same appears to be true for all of the 24 “previous communities” shown on the Tim Lewis website.  (We sent an email to Becca Perata, the P.R. consultant for the developer, asking for a list of multi-family residential projects done by Tim Lewis in the last 10 years.  She did not respond.)

For example, the project geographically closest to Alameda is “The Enclave” in Dublin, which comprises 48 single-family homes ranging from 2,723 to 3,160 square feet in four model configurations:  “The Angel Island,” “The Baker Beach,” “The Golden Gate,” and “The Mt. Diablo.”   Prices for currently available units range from $1,270,900 to $1,531,474.

Now, we’re reluctant to attribute Tim Lewis’s delay in beginning work on the Del Monte warehouse project solely to a lack of experience with multi-family residential development.  For all we know, building detached single-family homes may qualify a developer to take on multi-family apartment complexes, too (although we doubt that a pilot who’s logged hours only on Cessna propeller planes would be trusted to fly an Airbus A-380).  If so, the explanation must lie elsewhere.  Perhaps renovation projects are just more difficult to finance and execute than new construction (although Carmel Partners, the firm planning to rehabilitate 146 units of existing Coast Guard housing in Alameda, already had lined up its financing when it presented its proposal to Council in January).

We can’t be sure that anyone on the dais will ask Mr. O’Hara our question.  The political advisors to Mr. Oddie, who asked a version of it last December, may remind him that the Tim Lewis partnership developing Encinal Terminals gave $5,000 in 2014 to “Alamedans United,” the misnamed PAC that pushed for the election of Mr. Oddie’s colleagues, Malia Vella and Marilyn Ezzy Ashcraft.   He might well not want to alienate a potential contributor to his re-election campaign.  And, of course, the public speakers aren’t allowed to ask questions – or, rather, they can ask them but no one will answer.

In the event someone on the dais does turn out to be in an inquisitive mood, we’ve got another question to ask Ms. O’Hara:

Has Tim Lewis finally agreed to enter into a project labor agreement with the Alameda County Building and Construction Trades Council that will compel it to use only union contractors on the project?

That issue was still up in the air in July, when Mr. O’Hara presented the latest development plan for Encinal Terminals to the Planning Board.  Of the 11 public speakers on this agenda item, three were affiliated with construction trades unions.  Vince Sugrue of Sheet Metal Workers Local 104 reported that the Building and Construction Trades Council had met with Tim Lewis several times, but the developer had yet to agree to a PLA.  “We cannot allow developers to be the stewards for workers on these projects,” Daniel Gregg of Carpenters Local 713 admonished the Board in declaring his union’s opposition to the project.  “We need to have a commitment to labor.”

Tim Lewis’s apparent reluctance to give the construction trades unions what they want is understandable.  As we’ve previously reported, PLAs are estimated to increase construction costs by 13 to 20 percent.  If “rampant cost increases” truly are responsible for Tim Lewis’s delays thus far, imagine what adding even another 10 percent for union labor will do to the economic viability of the Encinal Terminals project.

We’ll bet Tim Lewis’s corporate office has done this kind of analysis.  But, again, we can’t be certain.  We sent an email to Mr. O’Hara and his boss, Jim Meeks, asking whether Tim Lewis had agreed since July to a PLA for the construction work at Encinal Terminals.  Like Ms. Perata, they didn’t respond.

This would be interesting information to have, especially if the answer is no.  If it is, will the same union representatives (and others) who showed up at the Planning Board meeting appear before Council to oppose the project?  If they do, what position will organized labor’s good friends on the dais take?  (And we don’t mean just Mr. Oddie and Ms. Vella, who rely on the unions to fund their campaigns; all three of the other Council members are running for mayor, and they surely don’t want to be branded as enemies of the working family.)

And what, if anything, could they do about it?  We’ve heard many times from the City’s Mr. Thomas that the state Housing Accountability Act prohibits a local body from rejecting a residential development project that complies with all “applicable, objective general plan, zoning, and subdivision standards and criteria” unless it finds that the project would have an “unavoidable impact on public health or safety that cannot be mitigated in any way other than rejecting the project or reducing its size.”

The failure to enter into a PLA with the construction trades unions wouldn’t seem to cause an “unavoidable impact on public health or safety” sufficient to justify turning down the Encinal Terminals project.  Indeed, we can think of only one – okay, maybe two; no, make that three – local labor leaders with the chutzpah to claim that it does.  And if one of the Council members picked up this argument and tried to run with it, we’d look to City Attorney Janet Kern to throw the flag.

Neither of the questions we’ve posed may get asked Tuesday night.  But it might be enlightening if they were.  It also would be entertaining:  As far as the Merry-Go-Round is concerned, nothing beats watching a politician or a big shot squirm.

Sources:

Del Monte warehouse renovation: 2014-12-02 Ex. 3 to staff report – DA2016-06-13 Ex. 1 to staff report to PB – TL Partners I, LP Letter2017-05-08 Ex. 1 to staff report to PB – TL Partners I LP Letter dated April 27 20172018-04-23 Ex. 1 to staff report to PB – TL Partners I LP Letter dated April 11 2018

Del Monte senior housing: 2016-11-16 AHA memo re senior housing2018-06-20 AHA memo re senior housing

Encinal Terminals: 2018-09-04 Ex. 1 to staff report – Master Plan

North Housing: 2018-01-02 Presentation by Developer

About Robert Sullwold

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

One Response to No TLC from TLC

  1. Paul S Foreman says:

    Alameda Citizens Task Force (ACT} has filed a letter of objection to Encinal Terminals. Our letter contains the same objections that we raised to the last iteration of the project and the current version submitted to the Planning Board last month. They are the miscalculation of of the maximum allowable units (589) which results in a true density of 65 units per acre on a 9 acre plan, the failure to objectively determine if the project will be revenue neutral, exacerbation of our poor jobs to housing ratio, concerns about limited ingress and egress in disasters, inappropriate funding mechanism for maintenance of the shore line and other public spaces, and an inadequate plan to integrate the tidelands with the project..

    However, we have added a new issue to this letter which is right on target with your article:

    “THE CITY HAS NOT ASSURED THAT THIS PROJECT WILL BE PROPERLY COMPLETED.

    This is a much larger project than Del Monte and has the unique features of being built on a fragile man-made peninsula with a very narrow access to the mainland and significant shoreline access. With this in mind, we are left with the following questions:

    a. With no development agreement how does the City assure developer cooperation in CFD’s, a Municipal Service District or a Geologic Hazards Abatement District and provide for a strictly monitored financing and completion schedule. (note the very slow progress of Tim Lewis’s Del Monte project)

    b. Due to the unique features of this project noted above, what vetting has been done to assure that the developer has any experience in building a project of this nature?

    c. Considering the uniqueness of this project why is the City not attempting to negotiate with the developer to have this project built by union tradesmen pursuant to a PLA so as to assure that only fully qualified tradesmen will be employed on the project?”

    Your article does not mentioned the lack of a development agreement, which is a critical difference between this project and the other two large projects, Site A and Alameda Marina, and also the original ET Plan.

    I asked Mr. Thomas about this and he responded that with no City land included in the project, the developer can not be forced to enter into a development agreement, but there will be public shoreline and other public spaces which I assume will be City responsibility.

    ET, in my view, continues to be the poster child for bad city planning. ACT supports expanding our housing inventory, especially affordable housing, but we cannot support this flawed project.

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