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Home My WebLink AboutFIN 2018-12-04 Item 2B - Discussion - Sale of Longacres Parcel IOLA like Ar-- o City of Tukwila o Allan Ekberg, Mayor 908; INFORMATIONAL MEMORANDUM TO: Finance Committee FROM: Derek Speck, Economic Development Administrator CC: Mayor Ekberg DATE: November 28, 2018 SUBJECT: Status Update on Sale of Longacres Parcel ISSUE This memo is a status update on the potential sale of the Longacres parcel, which is the approximately 3 acre parcel of city-owned, vacant land adjacent to Longacres Way and the Sounder commuter rail station. BACKGROUND On March 5, 2018 the City Council approved Resolution #1927 which declared certain city- owned properties as surplus, authorized the Administration to engage in a process to receive offers and selecting the buyer, and established a process to set the minimum price for each of the properties. One of those properties is the Longacres parcel, which is a 3.18-acre parcel of vacant land located adjacent to Longacres Way across the street from the Sounder commuter rail station (Assessor Parcel Number 242304-9034). In September 2018 the City issued a Request for Proposals (RFP) for the Longacres parcel. Proposals were due on October 31, 2018. The City received three proposals. DISCUSSION The purpose of this agenda item is to give the Council a status update on the process. Following is an overview of the proposals, listed alphabetically. Overview of Proposals Alliance Momentum Pulte Price $2,240,000 $1,600,000 $2,030,000 Concept Multi-family Multi-family residential 300 residential residential over 5 levels of parking condominium flats on for rail commuters. podium Possibly office. Income or Rent None None None Restrictions 13 INFORMATIONAL MEMO Page 2 Staff reviewed the proposals in early November and coordinated with Leugar LLC, the owners of the adjacent parcel, since one of the key criteria is the ability of the buyer to purchase and develop both parcels concurrently. The following comparison is staff's opinion on how the proposals rank on the criteria. Comparison of Criteria Criteria Alliance Momentum Pulte Price Highest Lowest Middle Fit with City's Vision Good Good Good Tax Revenue/Cost of Good Good Good Service Sell with Adjacent To be determined To be determined Most likely Property Owner Over Half of Units Sold Yes Yes Yes or Rented at Market Rates Financial Capacity Strong Strong Strong Experience Strong Strong Strong Alliance offered $2,240,000, Pulte offered $2,030,000, and Momentum offered $1,600,000. When it adopted Resolution #1927, the Council established that the minimum price shall be its fair market value as established by an appraisal conducted by an appraiser certified by the State of Washington. The City contracted with Kidder Mathews to perform the appraisal. It concluded the market value of the City's parcel is $1,560,000. Each proposal exceeded the minimum price but Alliance ranked highest since it offered the highest price. Additional considerations on price are explained later in this memo. All of the proposals fit the City's vision for transit-oriented development adjacent to the commuter rail station. Because residential condominiums have not been recently built in Tukwila, Pulte's concept may be better for the City since it would offer a type of housing not currently available. Pulte's target market would be young and mobile professionals who live in downtown Seattle but are seeking lower housing costs. All of the proposals have been ranked as the same in terms of the amount of tax revenue they would generate for the City relative to the City's cost to provide service since they all include multi-family residential. It is likely there would be some differences as the concepts get more refined but at this time the concepts are so preliminary we don't have enough information to provide a more detailed comparison on this criteria. 14 INFORMATIONAL MEMO Page 3 Leuqar LLC has reviewed the proposals and indicated a willingness to sell to any of the applicants; however, Leuqar has not signed a letter of intent (LOI) with any of them at this time. Pulte offered Lequar$6.5 million, which is the highest offer Leuqar received. That price is acceptable to Leuqar but they understand the City received its highest offer from Alliance and it does not make sense to enter into a LOI if the City is not interested. All of the proposals meet the criteria for at least half of the residential units to be rented or sold at market rates since none of them are proposing any rent or income restrictions. All of the applicants have the financial capacity and experience to finance projects of this scale and type. All of the applicants are experienced developers with proven ability to design and construct projects of this scale and type. Alliance is currently constructing multi-family residential in Tukwila (on Baker Boulevard) and has built many quality multi-family residential developments in the Seattle area and so would rank as best for experience in our local market with this type of project. This would be a larger project than Momentum has built in Washington State but is smaller than what they've built in China. Pulte is a large, national residential builder. They have not built condo flats in the Seattle region but are planning a project that will include condo flats in Bothell. Elsewhere in the U.S. they have built projects similar to what they've proposed for the Longacres parcel. Price Considerations Because all of the proposals are good and the applicants are qualified, staff would typically recommend the City enter into negotiations with Alliance since they offered the highest price. However, since Pulte offered the highest price to Leuqar, it is unlikely that Leuqar would choose to sell to Alliance. Both Alliance and Pulte would only complete the purchase of the City's property if they can also purchase Leuqar's property. All of the offers exceed the City's minimum price (based on the fair market value per the appraisal) of$1,560,000. However, the City may want to insist on receiving the price that Alliance offered. In addition, staff feels that the City should at least receive a fair price relative to the price that Leuqar would receive based on each parcel's appraised value relative to the appraised value of the total site. The City's appraisal also included a fair market value estimate of Leuqar's parcel if developed on its own, and both parcels if developed together. Staff feels the City should receive at least $2,174,314. That number is based on 25% of$8,530,000 (the value if developed together). The 25% is based on the City's percentage of the fair market value if both parcels were developed separately. See table below. Comparison of Values Appraised Value Proportional Value If Developed Separately If Developed Together City Parcel $1,560,000 25% $2,174,314 25% Leuqar Parcel $4,560,000 . 75% $6,355,686 75% Total $6,120,000 100% $8,530,000 100% 15 INFORMATIONAL MEMO Page 4 Next steps Staff has communicated the current offer price differences to Pulte and Alliance and is waiting for Pulte to match the price offered by Alliance. If that happens, staff will return to Council seeking authorization to enter into exclusive negotiations with Pulte. FINANCIAL IMPACT This item would have no financial or budget impact at this time. If the City sells the property, it would receive revenue based on the final sale price. RECOMMENDATION This item is being provided as discussion only. ATTACHMENTS None 16