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SR-11-27-2012-3HCity Council Meeting: November 27, 2012 Agenda Item: 30 To: Mayor and City Council From: Andy Agle, Director of Housing and Economic Development Subject: Request for Proposals for Bergamot Station Arts Center Development Recommended Action Staff recommends that the City Council adopt the project objectives listed in this report and authorize staff to issue a Request for Proposals (RFP) to development teams led by Bergamot Station Ltd./Worthe Real Estate Group, Lionstone Group /Industry Ltd. and REthink Development /Kor Group for development of the City -owned property located at 2525 Michigan Avenue, home to the Bergamot Station Arts Center. Executive Summary An evaluation panel has completed a review of qualifications submitted by five prospective development teams who responded to the Request for Qualifications for the opportunity to develop the 5.6 -acre, City -owned site located at 2525 Michigan Avenue ( "Site'). The evaluation panel recommends that three teams be invited to respond to a RFP. The recommended short- listed teams are led by Bergamot Station Ltd./Worthe Real Estate Group, Lionstone Group /Industry Ltd., and REthink Development /Kor Group. Background On March 20 2012, the City Council endorsed the Bergamot Station Arts Center Preferred Concept and authorized the issuance of a Request for Qualifications (RFQ) for the purpose of soliciting development team qualifications for the City- owned, 5.6 acre site located at 2525 Michigan Avenue, known as the "Bergamot Station Arts Center." The Site was purchased by the City with transit funds in 1989 with the goal of serving future transit needs in Santa Monica and providing a source of revenue for the Big Blue Bus. The Expo Light Rail Line Phase II extension is currently under construction and will include a stop at Bergamot Station, due to open in 2016. 1 The City currently leases the Site to Bergamot Station LLC for $603,797 a year. The lease expires on December 31, 2015. The Site contains five buildings totaling 76,020 square feet and is occupied by approximately 30 small creative businesses including art galleries, product designers, a non - profit theatre company and a cafe. The lessee owns land adjacent to the City -owned property. This privately owned portion of Bergamot Station Arts Center is not included in the RFQ nor will it be included in the RFP. The Expo Light Rail Line will bring significant changes to the Site and overall area. The Bergamot Station Arts Center Preferred Concept is an overarching vision for the Site that was developed in accordance with the principles, policies and recommendations set forth in the LUCE and the City's Creative Capital strategy. The Preferred Concept balances the City's three primary goals for the Site: 1.) to support the arts, 2.) to deliver a transit - oriented development, and 3.) to maximize revenue for the Big Blue Bus operations. The concept emphasizes retaining the concentration of art galleries and other art uses, providing space for a museum, creating revenue - producing and visitor - serving uses, including a hotel and restaurants /bars, and delivering infrastructure improvements to compliment the arts center and new Expo station. The Preferred Concept was the result of eight months of community consultation that was started in July 2011 in order to create consensus for a community vision for the future of the Site within the larger context of the Bergamot Area Plan, which is currently in development. Discussion The RFQ was issued on May 21, 2012, with submittals due to staff on July 11, 2012. Five development teams submitted Statements of Qualifications (SOQ's). An evaluation panel comprised of a City- retained real estate financial advisor and staff from the Community and Cultural Services, Planning and Community Development, Big Blue Bus, Public Works and Housing and Economic Development departments reviewed the SOQ's. The RFQ evaluation criteria required that development teams have professional experience in successfully developing and managing high - quality, mixed -use projects 2 that include a variety of uses, including hotels, as well as experience in managing and promoting cultural arts centers. Development teams were expected to demonstrate experience in deploying innovative strategies involving adaptive reuse of older buildings, the creation of transit - oriented urban infill developments, and the creation of vibrant, sustainable, cultural activity centers. The evaluation criteria also rated development teams' successful experience with community involvement and similar public - private partnerships, as well as the ability to secure financing for complex, mixed -use developments. After reviewing the SOQs of the five teams, the evaluation panel selected four teams to present their experience and qualifications in person. The evaluation panel has completed its review and recommends that three teams be invited to respond to an RFP. The teams, as noted below, will be required to keep the lead, core development partners through the RFP process. Sub - consultants may be added or changed. Teams Recommended to Receive RFP A. The first recommended team includes Bergamot Station Ltd., Worthe Real Estate Group, Frederick Fisher and Partners, and Howard Robinson & Associates. ® Bergamot Station Ltd.'s founder Wayne Blank is an experienced art center developer /operator and an entrepreneurial arts advocate and dealer. Mr. Blank is the original developer of Bergamot Station and owns Shoshana Wayne Gallery. Along with Howard Robinson, Mr. Blank also developed CRAFTED at the Port of Los Angeles, an arts and crafts marketplace located in San Pedro. ® Jeffrey M. Worthe is a Principal of M. David Paul Ventures and President of Worthe Real Estate Group, headquartered in Santa Monica. The firm's main focus is the acquisition and development of office, mixed -use, sound stage and warehouse projects in California. Currently, the firm owns over of five million square feet of properties. Mixed -use projects that are complete or under construction include the redevelopment of a former USPS sorting center warehouse into Warner Brothers studio broadcasting, creative office space, a health club and two -acre park, and The Pointe in Burbank, a ground -up building housing KCET Studios, creative office, park and underground parking structure with 1,400 spaces. Plans for a new hotel development in Santa Monica are underway. 3 • Frederick Fisher & Partners has over 29 years of experience in architecture and project management, leading the development of many large -scale institutional projects, including the Annenberg Center for Information Science and Technology at Caltech, PS1 Contemporary Arts Center, the Broad Art Foundation and Bergamot Station. • Howard Robinson & Associates, LLC is a land -use consulting firm representing property and business owners, assisting clients through the planning entitlement process. Mr. Robinson has worked with Mr. Blank for many years and is a partner with Mr. Blank in CRAFTED. B. The second recommended team includes The Lionstone Group, Industry Ltd, Boulevard Partners, Lew Wolff, Marc Pally and Rios Clementi Hale Studios • The Lionstone Group, founded in 2001, is a privately owned real estate investment firm that currently owns approximately $2 billion of real estate investments across the U.S. Lionstone is an active participant in the Santa Monica office submarket with nearly one million square feet of creative office /mixed -use space in downtown and the Bergamot Transit Village Mixed Use Creative District. Lionstone has also completed 14 development projects of approximately 10 million square feet, including ground -up apartment projects. • Industry Ltd, headquartered in Santa Monica, is a real estate development and construction management firm specializing in creative office and commercial space, adaptive reuse and historic renovation. Industry Ltd.'s subsidiary, Industry Partners, provides real estate sales, leasing and market research services and has a leasing portfolio in excess of three million square feet, including the Lantana Campus and 1630 Stewart/Penn Station in Santa Monica. Jim Jacobsen, founder of Industry Ltd. and founding partner of Industry Partners, has built a 20 -year career specializing in creative and lifestyle workspace on the Westside of Los Angeles. He has maintained long -term relationships with The Lionstone Group and a number of Santa Monica companies including Jerry Bruckheimer and POP Sound /Post. • Boulevard Partners is an investment and development firm committed to urban infill and sustainable projects. Scott Ginsburg, Managing Partner at Boulevard, managed the redevelopment of the award - winning Lincoln and Rose Shopping Center in Venice, anchored by Whole Foods Market, a project with many sustainable initiatives and extensive community outreach. • Lew Wolff, CEO of Wolff Urban Management Inc., a real estate acquisition, investment, development and management firm and also serves as Co- Chairman of Maritz, Wolff & Co, a privately held hotel investments group that manages top- tier luxury hotels. Mr. Wolff entered the hotel business in the 1980s, with projects including the San Jose Holiday Inn and Burbank Airport Hilton. Recent hotel activities include the development and management of the Hyatt Place -Mesa AZ 4 (154 rooms) and the acquisition, renovation and management of the Westin Saint Claire- Downtown San Jose (171 rooms). ® Marc Pally is a public art consultant with extensive experience in public art and cultural planning for civic, institution and private sector clients. He drafted and administered the Art in Public Places Policy for the CRAIA in 1985 and has worked on large- scale, multi - phased public art projects including planning, artist selection, concept and development, installation and operations with recent clients including Macerich Company (for Santa Monica Place), Sony Pictures Entertainment in Culver City, and the City of San Francisco. Since 2006, he has been the Artistic Director of Glow in Santa Monica. ® Rios Celementi Hale Studios is a multi - disciplinary design firm that has collaborated extensively with Lionstone Development. Projects include W Hotel Metro Plaza in Hollywood, Paramount Studios Master Plan + Technicolor building renovations, Metro Lankershim Pedestrian Bridge, Activision Headquarters in Santa Monica, and Euclid Park, Douglas, Joslyn, Clover, Marine and Ozone Park Playgrounds in Santa Monica. C. The third recommended team includes REthink Development, Kor Group, David Hertz, FAIA- Studio of Environmental Architecture, Hornberger + Worstell, Lord Cultural Resources and Merry Norris Contemporary Art. ® REthink Development is headquartered in Santa Monica and specializes in sustainable, LEED - certified mixed -use infill development and adaptive reuse projects including Lofts at Cherokee Studios in Hollywood, a 22,000- square foot,. mixed -use building with home recording studios, which was awarded the national AIA Top 10 Green Building Award. Principal and Co- Founder Greg Reitz is an expert on green building activities and sustainability programs. ® Kor Group is a fully integrated real estate investment, development and management firm based in Los Angeles. Since its inception in 1999, Kor has acquired and developed hospitality, residential and office assets valued in excess of $2 billion, including the Viceroy Hotel in Santa Monica, a 162 -room hotel that Kor acquired and transitioned from a budget hotel to a contemporary boutique hotel, selected as "Top 100 Hotels in the US and Canada" by Travel + Leisure in 2009. Prior to joining Kor, Brian De Lowe, Principal and lead partner on the team, was the Vice President of Business Development for Viceroy Hotel Group where he oversaw all aspects of the company's acquisition and business development activities in North America and South America. While with Viceroy and Kor, he also served as Development Director, leading the acquisition, development and redevelopment of adaptive reuse and hotel projects in the U.S. and Latin America. ® David Hertz, FAIA Architects is headquartered in Santa Monica and specializes in sustainable design. The firm has been involved in several local adaptive reuse 5 projects including the conversion of the historic Parkhurst Building on Main Street and Pier Avenue into a retail store, and the reuse of a restaurant and market on 20th and Olympic into one of the highest rated LEED Platinum buildings in the country. The firm also designed the Abbot Kinney Hotel, an 82 room boutique hotel with 5 restaurants over a subterranean robotic 250 space parking garage, working with Rethink Development. ® Mark Hornberger of Hornberger + Worstell directs the firm's master planning and design efforts with recently completed projects including the SFMOMA Parking Structure with rooftop sculpture terrace and event space and various projects involving hotels and adaptive reuse of older buildings. ® Lord Cultural Resources provides specialized planning services to the museum, cultural and heritage sectors, and has worked with over 1,900 cultural institutions in 50 countries. ® Merry Norris is an arts advocate, consultant and public art champion in Los Angeles, providing curatorial services to private collectors, public institutions, developers and boutique hotels since 1978. Ms. Norris assisted in the establishment of MOCA and serves as trustee for SCI -Arc, and Pasadena Museum of CA Art. She is a member of the City of LA's Mayor Advisory Design Panel. RFP Proiect Objectives Staff requests authorization to issue a Request for Proposals (RFP) for the Site to the three recommended development teams. The RFP would request comprehensive and thorough development proposals to implement the City's vision for the Site. To ensure that the RFP clearly states the City's vision, goals, and objectives for the Site, staff recommends that Council adopt project objectives for inclusion in the RFP. The recommended objectives for development of the Site are: ® The development must include at least 75,000 square feet of arts- related space that is affordable to non - profit and arts organizations, with emphasis on retaining existing Bergamot Station Arts Center tenants and providing space for the Santa Monica Museum of Art. ® The development shall include open space, infrastructure and other amenities to support public access to the light rail station as well as improving the environment and functionality of the Site. 0 • The development shall maximize the preservation of existing buildings, where feasible. • The development should incorporate additional uses which support the Site as a cultural destination, including evening and weekend activation and uses that help generate revenue for the Site. These uses should include a hotel, restaurant and bar and could also include other creative office and cultural uses that will maximize the market feasibility of the project. • Parking for the development should consider LUCE parking approaches and shared parking considerations. Parking that is exclusively reserved for the future tenants should be minimized, while shared parking should be maximized for public availability. • The development should maximize the amount of ground lease revenue to the City in order to support the operations of the Big Blue Bus. The development, at a minimum, must provide at least $610,000 per year in ground rent to the City. • The development must exemplify exceptional architecture and sustainable design and construction as well as have a focused transit - oriented development approach. • The development must exemplify the concepts identified in the Bergamot Transit Village and Mixed Use Creative District Area Plan process. Conceptualization and design of the Site must be coordinated with the specific planning process to ensure that each process informs the other. Financial issues • Conveyance of the Site would be structured as a long -term ground lease. • The development team would be required to submit an analysis that demonstrates the project's financial feasibility. • Within the context of the other guiding principles, maximization of the ground lease income and public revenue sources will be considered in the evaluation process. Next Steps At the conclusion of the Request for Proposal process, staff would recommend that Council authorize an Exclusive Negotiating Agreement with a recommended development team during which time the development would be further refined, entitlements would be considered and business terms negotiated. 7 Environmental Analysis Issuance of a Request for Proposal is not subject to the California Environmental Quality Act. Any proposed development would be subject ultimately to review pursuant to the California Environmental Quality Act. Public Outreach Public participation in the two community workshops, multiple focus groups with local gallery owners and regional cultural arts organizations and entrepreneurs, individual meetings with over 25 local stakeholders and feedback received from the Arts Commission, Planning Commission and City Council from July 2011 to March 2012 provide the basis for the project objectives recommended to be included in the RFP and would provide a basis for reviewing the RFP. Financial Impacts & Budget Actions There is no immediate financial impact or budget action necessary as a result of the recommended action. Prepared by: Jason Harris, Economic Development Manager Approved: Forwarded to Council: Andy Agle, Di Housing and Development E Rod Gould City Manager