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2005-10-18 SRA Special Meeting MinutesSRA Minutes October 18, 2005 Page 1 of 6 MINUTES OF THE BOARD MEETING OF THE SALEM REDEVELOPMENT AUTHORITY HELD ON OCTOBER 18, 2005 A Special Meeting of the Salem Redevelopment Authority (SRA) Board was held in the upper floor hall of Old Town Hall, Derby Square, on Tuesday, October 18, 2005 at 7:00 pm. Roll Call Chairman Michael Brennan called the meeting to order, and on roll call the following members were present: Michael Brennan, Michael Connelly, Christine Sullivan, and Russell Vickers. Conrad Baldini was absent. Also present were Lynn Duncan, Executive Director and Tania Hartford, Economic Development Planner. REDEVELOPMENT AUTHORITY PROJECTS 1. Old Salem Jail: Presentations and Interviews Presentations and interviews with two of the four finalists for the redevelopment of the Old Salem Jail Complex were held. Old Salem Jail Partnership Old Salem Jail Partnership made their presentation to the board. In the presentation, Mr. Singleton stated that he was willing to offer the SRA a non-refundable deposit of 10% of the proposed purchase price, which is more than the $60,000 that the SRA is currently asking of developers. Mr. Vickers asked if it were possible to accommodate the unit layout in the jail with no additional penetrations into the walls and if so, would that result in bifurcation of the windows by vertical interior elements. The developer answered that there would be chair walls. There would be no additional penetration through the walls. Mr. Vickers asked how the garage ventilation would work and if it would be mechanicall y ventilated or if the windows on the plans would be naturally ventilated. The developer answered that the garage would be mechanically ventilated with 3 x 5 louvers on every floor with a 3 x 4 shaft going up to the roof from each level so that any gases coming from the garage would be vented through the roof. Mr. Vickers asked for clarification of the openings that would be required in the stonewall along the site to accommodate vehicular access. The developer answered that there will be two openings in the wall and another access point along Bridge Street. Mr. Vickers asked how the circulation in the parking garage as well as the tandem parking spaces would work. The developer answered that the tandem spaces would be allocated for one unit so that the two cars parked in tandem would be owned by the same unit. The cars would go in on one level and exit on another. The developer stated that there are so few cars that the number of trips per day would be very small. Mr. Vickers stated that the proposal has one of the highest profit returns while still paying the highest acquisition price for the property. The project also has the lowest total development costs on a net square foot basis. He asked how confident they were of construction costs, how they had been SRA Minutes October 18, 2005 Page 2 of 6 determined, if the contractor had been involved, and if the costs of historic restoration were factored into the figure. The developer stated that he took his contractor, JJ Welch, on one of the site visits to the Jail. He said he also used the numbers from the Reuse Study as a base for his figures. He said that they feel very comfortable with their construction numbers and believed in their proposal and the contractor. He compared the project to the Police Station building. Peter Smith asked about the new market, noting that the Police Station was bid approximately 3 years ago. He went on to ask about the developer’s sense of inflation and construction costs. The developer responded that they expected a 20% increase in costs over the Police Station. They noted that the Police Station had been their most expensive rehab ever done. Mr. Vickers asked about the price of condos, how much value does the underground parking add to the condo sales values versus surface parking, and why they had elected to have larger units averaging 1,538 square feet. The developer said that they had backed into the numbers taking into account the site and the historic architecture. They thought that they had gotten to a good number. They had a lot of people approach them over the last few years about this project and expressed an interest in buying units, if redeveloped. Mr. Vickers asked if the plan for approvals and permitting was realistic and if their financing commitment would be a full commitment within eight weeks. The developer answered 24-30 months was realistic and he was quite comfortable. In recent years they have had a number of projects like that. They want to be aggressive and feel that the project is near perfect for the market and that they want to get started. They noted that the Old Police Station project was delayed due to the oil that was found on the site. Mr. Vickers asked who they intended to attract to the commercial space, what the commitment was to actually selling these spaces, and if they would definitely be using one of the spaces for their headquarters. The developer answered that they envisioned the commercial space would be office spaces. Ms. Sullivan asked about providing 12 parking spaces for the housing authority project nearby. The developer said that they were not intending to accommodate these spaces but that maybe they could put some parking in the basement. Parking is at a premium and it was difficult to accommodate these spaces. Ms. Sullivan asked the role of the preservation consultant. The developer said that their goal is to ensure that any historic fabric on the site is dealt with appropriately. They will be looking at the buildings, evaluating what is on site, and making sure that the Secretary of the Interior standards are followed as well as the standards of the local historic commission and the National Park Service. They will be looking at the new construction and the character of the site and making sure that the character is not compromised. Ms. Sullivan asked if they would be seeking historic tax credits. The developer answered that they would. Ms. Sullivan asked if there were equity partners and the response was no. Ms. Sullivan asked if there were presale requirements and the response was that there would most likely be 20% of the gross. Ms. Sullivan asked if the presale could be avoided. The developer responded that they could but they asked why they would do that. Ms. Sullivan asked if a pre-sale requirement would delay construction. SRA Minutes October 18, 2005 Page 3 of 6 The developer stated that he did not think it would. He stated that he did not think that 20% presale would be hard to achieve. Mr. Brennan asked if the soft cost funding would be coming from them. The developer said that it would with some reimbursement at closing. Mr. Brennan asked if the day they are designated that they start presales. The developer stated that they always do this. He said that if they fail they will not acquire the property and they will walk away from the project and the SRA would keep 10% of the acquisition cost. Peter Smith asked if they were unable to meet the presales requirement as part of the financing commitment, would they have a release of funding to move forward with the project. The developer said that it would prevent them from proceeding and that they would sacrifice their 10% deposit of $106,000. They said that they would put a date certain for the closing and that they were sure that if they had 6 presales they would be able to proceed. They thought that the presales were a test of the market and not of their finances. The bank would like to see reassurance. Ms. Sullivan asked what their capabilities and potential approval and potential delays were. The developer replied that it might be historic approvals. They would like to get the project done as soon as possible. They also noted the parking and Bridge St. vehicular access as possible delays. Mr. Brennan asked about their need for vehicular access off Bridge Street and how they intend to achieve obtaining approval for that access. The developer said that they would work with the state and city on the access approval. They added that they might be able to do the project without access but it is not guaranteed. Ms. Sullivan asked who would manage the day-to-day operations. The developer replied that they would be using the same team that was used on the Police Station. They added that Welch Contractors would be used and that he had realized $350,000 in savings by using them. Mr. Connelly asked about the historic preservation side of the development, such as discovering something unexpected, and whether they had enough money built into the contingency. The developer noted that they have experience with the Secretary of the Interior standards. Mr. Singleton echoed that as well and noted that they have been doing this work for some time. Their historic preservationist noted that having them on board early helps with working with the Mass Historic Commission. Lynn Duncan asked about the courtyard drive through and what the purpose was. Mr. Luster noted that it is a one-way road for emergency access and for a drop off point. Ms. Sullivan asked if there was handicapped access. The answer was yes. The Classic Group/Boardwalk Enterprises The Classic Group with Boardwalk Enterprises made their presentation. Mr. Vickers asked about comparable development experience on historic restoration and adaptive reuse projects. The developer replied that this project is a step beyond the primarily residen tial projects they normally undertake. SRA Minutes October 18, 2005 Page 4 of 6 Mr. Vickers asked how the team would propose modifying their plans to meet the Secretary of Interior Standards and the Massachusetts Historical Commission preservation restriction. The developer replied that they intent to meet all the standards for preservation. Mr. Vickers asked about the schedule for obtaining an equity investor. The developer replied that they are still sorting through the details. They stated that they would like to use this project as a corn erstone project. Mr. Vickers asked if they needed an equity investor in both the housing and commercial parts of the project. The developer replied that they are looking for a real estate developer to invest in the project with the objective to get some return on the commercial as well as the residential portions of the project. Mr. Smith asked if the restaurant and museum would be helping the residential portion of the project. The developer stated that they would lease back the commercial portion of t he project to the investor. The residential portion of the project will see some profit as well. Mr. Smith asked whether they had done a market study on the restaurant and museum concept. The developer answered that they had done a study and found that the lower price points and high turnover of tables would help them turn a profit. They also stated that they would have a visible “theme” that would attract customers. Mr. Smith asked if the restaurant building was expensive to construct. The developer answered that is was but that it looked more expensive than it actually would be. Mr. Vickers asked the feasibility of operating a restaurant and family museum within the same complex as high price condominiums. The developer compared the concept to that of P.F. Chang Restaurants, which are located within residential areas. Ms. Sullivan asked if Boardwalk Enterprises had funds to complete this project. The representative from Boardwalk answered that they did have financing and franchise rights to the concept. Mr. Vickers asked the schedule for the project and the proposed schedule for completion and construction. The team answered that they intend to open the restaurant in October 2007 and work backwards on the construction schedule from that target date. They stated that they intend to do a historical survey of the site. They stated that it would be a collaborative of architects and contractors that they always work with and they would compress their project goals and move quickly. Ms. Sullivan asked if they had a preservation consultant on the team. The team stated that they had experience with historic preservation. Ms. Sullivan asked if they planned to install dormers and the team answered no. Ms. Sullivan asked if they have worked with the Secretary of Interior Standards and the standards of the Massachusetts Historical Commission. The developer answered that they normally exceed the standards. SRA Minutes October 18, 2005 Page 5 of 6 Ms. Sullivan stated that the team did not really give the board much in terms of financial projections and instead just focused on what would be put in the building. The developer stated that they had experience in historic restoration and a lot of this project is the same as what they normally would do. They stated that they did not want to go through the exercise of looking at all the costs until they actually had the project. Mr. Smith clarified that the team did not include all the necessary soft costs in the projections. The developer stated that they put the soft and hard costs together in their financial projections. Ms. Sullivan stated that they were a finalist and were asking the board to trust them yet they did not have any real numbers. The developer answered that the board had to think 5, 10, 15 years out and think about what they wanted to see on the site. This project offers a mixed use for the life of the project. They stated that they are different from other proposals and asked the board to take a chance. Ms. Sullivan stated that the answer to “trust us” is not going to fly with the board. Ms. Duncan asked whether the museum and restaurant would be a good fit with high-end condominiums. The developer stated that people want to feel incorporated into the environment. Mr. Smith asked whether an owner of a $550,000 condominium owne r with fit with a museum that attracts a number of people and cars. The developer answered that most of the traffic would be foot traffic without a lot of impact on the condominiums. Mr. Smith asked the capacity of the restaurant. The developer answered it would be a 200-seat restaurant. Mr. Connelly asked whether they intended to start the franchise in Salem without this site. The developer stated that they have been focused on this site and if it’s not at this site, they would have to look at whether it makes sense to find another site in Salem or somewhere else. Mr. Connelly asked whether they had an agreement to park at the abutting church. The developer answered that they did have a written agreement with limited parking usage at the church. Mr. Connelly stated that he wanted a project that was out of the box but not out of the lines. He stated that he wanted a good project on the site and this one created the most buzz. He questioned whether the project would actually work. Ms. Sullivan stated that she has other questions regarding presales and other financing questions but she cannot ask them because they do not have those details worked out. The developer responded that they would not need presales due to the marketability for a condominium that is not normally sold in this area with a price point between $500-800,000. He stated that their condos are custom, with a new look. Mr. Smith asked if they expected the SRA to buy into this price point, that is higher than normal, and that relies on an equity investor without a lender. The developer answered that it was hard for a lender to buy into this type of project but they could get money from the equity partner to move forward. Ms. Duncan clarified that they were asking the SRA to designate them as a developer without an equity investor on board. The developer stated that they would secure an equity investor within 60-90 days. SRA Minutes October 18, 2005 Page 6 of 6 Mr. Brennan asked if they would be able to provide a $30,000 non-refundable cash deposit. The developer answered that they would. Ms. Sullivan asked if they would be looking to guarantee to the equity partner other projects in Salem. The developer stated that it was not necessary to guarantee other projects, they would just come. CONCLUSION Arthur King approached the board and asked whether Mr. Singleton paid the $125,000 for the Old Police Station. Ms. Duncan replied that he had. Mr. King stated that Mr. Singleton built a subdivision on Cedar Avenue in Georgetown and never did what he promised to do. He stated that his daughter lived in the subdivision and was made a lot of promises that were not kept. Ms. Duncan explained that reference checks would be performed on all applicants. Michael Brennan stated that they would be doing reference as well as financial checks. Mr. Vickers stated that the board would take into consideration his complaints. Mr. Brennan stated that they will do reference checks on all the finalists and his complaints are noted and on the record. ADJOURNMENT There being no further business, Michael Connelly moved to adjourn the meeting. Russell Vickers seconded the motion, and the motion passed (4-0). Meeting stands adjourned. Respectfully submitted, Debra Tucker Clerk