January 13, 2005

Burnside Bridgehead Evaluation Committee Presents Initial Findings

Members Detail Perceived Pros And Cons Of Proposals

At yesterday's work session, following the three presentations by the potential developers for the Burnside Bridgehead, members of the evaluation committee offered to the Portland Development Commission their initial set of findings on those proposals.

For each developer, the committee broke their findings down into perceived benefits and drawbacks in four separate categories. To save time, the committee read only highlighted findings. In what follows, we've included the full set of findings for each development team, but placed the ones the committee highlighted in bold text.

It should be noted that some specific data points in these pros and cons may not reflect the current state of a developer's proposal, since new elements or alterations have been added in recent days. Following the findings for each developer, the Commission asked questions of the committee.

For what it's worth, since people are interested in City Council reaction to these proposals, after the three developer presentations we asked Commissioner Sam Adams if they had been helpful, or provided anything new. He didn't seem to think so, and said he was awaiting the findings of the evaluation committee. However, he did seem impressed the least with the presentation from Opus Northwest.

Committee Findings For Beam Development

1. Program & Design
Pros
• 217,400 square foot office space is second greatest; office use is a priority for CEIC
• Innovative uses such as artists lofts and live/work, flex work space
• Largest project, most square footage
• Greatest square footage and number of housing units
Cons
• Design feels boy and clumsy, weakest design
• Lack of unity of design
• Calls for acquisition of Union Arms Apartments
• Least number of home ownership units
• Requires amendment to Burnside/Couch Transportation Plan

1. Development Capability
Pros
• Involves REACH Community Development to do affordable housing
• Involved NW Housing to do work/live lofts
• Developer experiences in CES (East Bank Commerce Center)
• Team has experience in CES (East Bank Commerce Center)
• Developer locally owned & controlled
• Open to consider adding a more experiences development partner (letter dated 1/4/05)
Cons
• Master developer has no experience with projects of this scale
• Master developer is inexperienced in new construction
• Multiple architects and contractors could be harder to manage
• Master developer is inexperienced in significant retail space marketing

1. Business Deal
Pros
• Eligible for NMTC
• Has letters of interest for 65% of space
• Lack of specialized retail space could lead to more flexibiltiy over time
• Greatest total investment leads to more future taxes generated
Cons
• Project is more difficult to debt finance due to innovative uses and lack of large "credit" tenants
• Gap = $20 million
• Unclear how reliable letters of interest are
• Scale of innovative uses may be challenge to market
• This is the riskiest proposal to implement

1. Implementation
Pros
• Sensitive to CES context & goals
• Building project all in one phase is better for CES
• Developer committed to active public involvement in project design
• Most projected jobs generated
• Public comments strongly favor this proposal
Cons
• Design is not easy to phase due to parking design

City Commissioner Adams asked about Beam's ability to handle the development, given the committee's concerns about its experience with projects of this size.

"This team would be strengthened if it had a partner," said Lew Bowers (from PDC's development department). "If addressed, [that would] significantly address the weaknesses we see here." He said that Beam was "certainly scrappy" and possessed "a lot of positive attributes".

Adams asked about improving the perceived "boxy" feel to the Beam design. Committee members said that design changes are inevitable no matter which team is selected, and that "all teams have the capability to modify the design and work with the public".

"What struck me about Beam is they started out with a very solid understanding of Eastside neighborhoods and the business community," remarked one member of the committee, adding that "in this respect and in their defense" Beam came closest to matching up with the Central Eastside.

PDC chair Matt Hennessee said that the public reaction has changed the way the developers are approaching the project. "What's the process from here based on the new information gotten tonight from the teams?" he asked.

Don Mazziotti, PDC's executive director, said that the evaluation committee would have to be provided with all the new information and take it into consideration. "I would guess there's going to be a substantial volume of dialogue from the developers between now and and 23rd of February," he said. As it stands now, the PDC is scheduled to make its develoepr selection on that date. "There are some very difficult questions here that need to be plumbed."

Hennessee raised the issue of the letters of interest Beam has collected for 94% of the leasable space. "We need to understand how to evaluate that," he said. "It seems as if that makes it the strongest proposal."

Conversation at this point turned to the first real instance of discussing the so-called "gap" in financing. A member of the evaluation committee said that they had asked PDC to decide the appropriate amount of public money for the project, and how much really is or is not available.

Bowers suggested that it's "not the evaluation committee's role to decide how much public money" is acceptable, but instead to "identify the gap in each project" and not "to assume how the gap is filled".

Portland Development Commissioner Janice Wilson said it was "important to udnerstand what's available in the Central Eastside" and that there are a number of other resources that might be available, such as New Market Tax Credits. "Look at all the proposals, other than financing, rate everything, then be clear to us what the gap is," she said. "If you feel it's the best proposal except for the gap, we would want to know that."

"Calculating the gap at this stage is virtually impossible," said Portland Development Commissioner Doug Blomgren. "We're making assumptions on sand." He urged the evaluation committee to offer its own sense of the "reasonableness" of the assumptions. "What is your best reasoning telling you is going to be the hole that can't be filled?"

Portland Development Commissioner Eric Parsons asked about the scale of innovative uses in the Beam proposal, and the evaluation committee's sense of likely market acceptance in that regard.

Bowers said that there are "some benchmarks" that could be used to evaluate that issue, referring to Beam's experience with the Eastbank Commerce Center (which Brad Malsin, head of Beam, had also managed to fill with tenants extraordinarily quickly). "That does give some indication that there is a market," he said, adding that "the flip side of innovative uses" is that you can't compare the potential "to the tried and true".

Wilson pointed out that the Commission's work session was taking place in what had become PDC's new headquarters because the need the creative services market said was there didn't pan out. It didn't work, she said, because of the ecnomy and because there wasn't a market for it. Therefore, she had concerns over the Beam proposal's inclusion of arts spaces as "an integral part of htis project" because "we do have a painful history on this particular issue".

Bowers said that the evaluation committee had asked Beam to clarify how flexible the arts spaces might actually be. Beam told the committee that the design approach is to not make these spaces "single purpose" but adaptable to the needs of the market.

For what it's worth, we should point out for clarity and context, that's part of the intent of the so-called "menu-driven" approach the Beam developers talk about. The fact that any given tenant can choose the level of build-out that's appropriate for their needs also means that the spaces inherently are as "bare bones" as they can be, which also means their usage can be adapted to any number of alternative circumstances.

Another committee member pointed out that the committee had some disagreement over the development's inclusio of office space, and whatever or not it was, of needed to be, an important part of the project. Beam, the committee member said, seems to think so, but they themselves were not quite as sure.

"This bears some special analysis," said Mazziotti. "I don't think that staff would conclude that we'd want to add to the inventory of office space anytime soon." However, he added: "If commitments go beyond letters of interest to commitments, that changes the picture substantially." He also suggested that some of Beam's potential tenants, going by the letters of interest, "might be in the position to be equity holders in the project" -- and that this might help address the matter of any financial gaps.

Committee Findings For Gerding/Edlen Development

1. Program & Design
Pros
• 226,220 square foot office is greatest amount; office use is a priority for CEIC
• Anchor retailer provides critical mass of activity
• More home ownership units
• Greatest number of affordable apartment units
Cons
• Requires amendment to Burnside/Couch Transportation Plan

1. Development Capability
Pros
• Most experienced developer with similar projects
• Architect most experiences in mixed use development
• Strong demonstrated ability to lease retail & office space
• Most experienced with LEED
• Developer locally owned & controlled
Cons
• Can they focus on this project given other projects?

1. Business Deal
Pros
• Most thorough financial projections
• Eligible for NMTC
• Gap could be reduced through change in program or delay of office
Cons
• Largest gap of $57million
• Shows gap of $1.7 million for Home Depot

1. Implementation
Pros
• Open to another anchor or no large anchor (letter dated 1/10/05)
• Developer committed to active public involvement in project design
Cons
• Public comments strongly opposed to Home Depot specifically and large scale corporate "category killer" retail in general, on this site
• Office component is last phase and requires greatest part of public investment ($16 million)

City Commissioner Adams asked if it was "viewed as a positive that this developer was willing to change their original concept" and remove big box retail. Lew Bowers called this "definitely a positive" in that it "shows flexibility and responsibility to communtiy input and needs".

Adams further asked if the fact that Gerding/Edlen had originally proposed big box retail for the site "shows [they are] out of touch with teh Central Eastside". Bowers said that for him personally, it did not mean this, but meant instead that they had an idea, tried it, and changed it when it wasn't wanted.

"One thing that's come forward," said another member of the evaluation committee (appointed to represent the Kerns neighborhood), "is a large group of neighborhoods on the Eastside very itnerested in this project." Citing a coalition based in Southeast Uplift, of nine neighborhoods and one hundred businesses that had been individually polled, this member said there was a "real negative concern about the financial imapct of big box" -- adding that the Eastside is "not known as a big box type of neighborhood".

Adams returned to this previous question, asking if Gerding/Edlens rmeoval of big box from their proposal was a positive, of it that's outweighed by the negative of their proposing big box in the first place.

(Incidentally, it's not entirely lost on us that, intentionally on Adams' part or not, this reflect the "first instance" argument we've been making since the developers' proposals first became public, something we had just discussed with him prior to the evaluation committee findings.)

"Good question," the committee member said. "Don't know if I have a good answer for it." He said that while it's a plus that they changed the design, the "design change is not particularly stunning".

"I think it's clear that it's a positive thing," said another member of the committee, however. She described GED as a "local company" that is responding to public input. "Sure it's a problem that they came forward and perhaps didn't see what they were bringing forward in the beginning," she said. But she argued that the change they've made "shows ties and commitment".

Chair Hennessee chimed in to say that he was "concerned about the number of times we've been criticized" for acting as if GED was "the only developer in town" and about the changes that PDC seems "to give preferential treatment to them".

(Jack Bogdanski, are you reading this? We think there's an off-chance this means Hennessee is reading the local blogs, and he might be talking to us.)

"On the one hand, I'm happy that GED took a look at listening intently on the issue of big box," he said, "[but] I'm concerned when we to some degree see so much office space as a pro." He cited the earlier conversation which seemed to indicate that including a large amount of office space might actually be a negative.

"I feel that you and we and our staff feel that it's very important we have a level playing field here and that it's not as if somehow Gerding/Edlen has some special treatment or anything like that," he said. "I would love to see our City develop more developers."

At that last remark, several members of the Beam team, sitting near where we were camped out, began vigorously nodding their heads.

"I would like to see how phasing of the project afects the gap," said Commissioner Blomgren.

A memebr of the evaluation committee, mostly on behalf of the chair of the Central Eastside Urban Renewal Advisory Committee who was not present, weighed in on the question of whether there is a "glut" in office space. "[There is] not necessarily a glut in office space on the Central Eastside," she said. "And this has been a stated goal in the Central Eastside."

Committee Findings For Opus Northwest

1. Program & Design
Pros
• Most attractive design
• Created best public space
• Anchor retailer provides critical mass of activity
• Least dense development (lease square footage)
• Greatest square footage committed to affordable housing
• More home ownership opportunities
Cons
• Least office space 22,000 square feet; office use is a priority for CEIC
• Least parking
• Doesn't offer variety of housing types, however is flexible on the design and products (letter dated 1/3/05)

1. Development Capability
Pros
• Developer experienced with projects of this scale
• Developer experienced in construction and leasing of retail space
• Strong visionary architect
• Developer has LEED experience
• Opus is its own general contractor which potentially can lead to lower costs
Cons
• Developer least experienced in residential

1. Business Deal
Pros
• Smallest gap $6.2 million which is in part due to least amount of office space
• Internally financed allows more flexibility and more certainty
• Eligible for MNTC
• Lowest risk of implementation, therefore greatest likelihood for future property tax generation
Cons
• Highest rent assumption for retail
• Smallest project, least future taxes generated

1. Implementation
Pros
• Open to another anchor (Costco, Fred Meyer) or nor large anchor (letter dated 1/3/05)
• Does not require c hange to Burnside/Couch plan
• Developer committed to active public involvement in project design
Cons
• Public comments opposed to Lowe's specifically, and large-scale, corporate, "category-killer" retail in general on this site
• Project may not be catalyst desired. May become an island
• Least projected jobs created

Before questions regarding these findings got underway, one of the members of the evaluation committee made a remark upon the "pro" of Oopus saying they are open to including no big box retailer. "We've heard their views on that today," this member said. In tone, their intent appeared to be much the same as our own criticisms of Opus' position as to an anchor -- meaning that their "new" position is actually disingenuous, and they are still, technically, pushing for a large-scale anchor tenant.

On the matter of the "con" regarding the Opus proposal running the risk of becoming an "island" a member of the committee said that that "concern about it being separate" was not a consensus opinion of all committee members.

"The first two develoeprs seemed connected to the community," said Chair Hennessee, "and this one seems to be the least connected." Recognizing that Opus "did a lot of door-to-door work" on their Bridgeport Plaza project, Hennessee expressed some concerns as it relates to this project.

"How connected, really, is this group [and] how much time have they taken to get connected to the community?" he asked. "Not how much time will they take, but how much have they?"

We have to say, as the skeptics we are, that we were pleasantly surprised that Hennessee specifically took a moment to draw this distinction when it came to Opus. It's clearly another example of how the "first instance" argument (whether or not anyone is getting it from us) is taking hold amongst some of those ultimately responsible for making the selection of a developer for this project.

That said, some members of the committee had other views, one saying that Opus was "committed to engaging withthe public" and emphasizing that they were the first developer to state that whatever developer is selected "what we see as the design is not what we are going to end up with".

"If they don't have the connection now," Bowers added, "they've certainly shown the capability to become connected."

And with that, the three-hour work session finally drew to a close. Adams did ask if there would be a chance to ask questions of the developers themselves, but it was decided not to do so due to the late hour. It's seemed as if it was expected that such questions will be directed to the development teams themselves, probably directly rather than in the format of a public meeting.

The next opportunity for public discussion on the Bridgehead project is an open house to be held on Saturday, January 22, from 2:00 until 4:00 PM at the Oregon Convention Center. According to Commissioner Wilson, this will take the form of small and informal table discussions which will then be reported back to the entire group during the second half of the open house.

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