8-2-North San Pedro Housing

BOARD AGENDA: 10/28/08

ITEM: 8.2



THE REDEVELOPMENT AGENCY OF THE CITY OF SAN JOSE









I SEE BELOW OCTOBER 14,2008







SUBJECT: APPROVAL OF ASSIGNMENT OF DDA BY THE OLSON

COMPANY TO INTRACORP SAN FRANCISCO AND

APPROVAL OF AMENDED AND RESTATED DDAS WITH

INTRACORP SAN FRANCISCO AND BARRY SWENSON

BUILDER FOR THE NORTH SAN PEDRO HOUSING SITE





RECOMMENDATION



It is recommended that the City Council and Agency Board conduct a public

hearing and take the following actions:



(a) The Redevelopment Agency Board approve an assignment of the Disposition And

Development Agreement (DDA) from the Olson Company to Intracorp San

Francisco (Intracorp); and,



(b) The City Council adopt a resolution approving the sale of certain sites

located on Agency-owned property (see attachment) generally located in

the blocks bounded by Highway 87 to the west, West Saint James Street to

the south, North Market Street to the east and a Union Pacific Railroad

right of way to the north to Intracorp, accepting the 33433 Summary Report

and Re-Use Valuation, and finding that the sale of the property will assist in

the elimination of blight, is consistent with the Implementation Plan for the

Julian Stockton Redevelopment Project Area, and that the consideration for

the property is not less than the fair reuse value for the proposed use, with

the covenants and conditions and development costs authorized by the

DDA.

Redevelopment Agency Board Page 2

NSP ASSIGNMENT AND AMENDMENT October 14,2008





(c) The Redevelopment Agency Board approve an Amended and Restated

Disposition and Development with Intracorp and authorizing the Executive

Director to execute ancillary documents contemplated by the DDA, to close

escrow subject to compliance with the terms of the DDA, and to negotiate

and execute amendments to the DDA substantially in conformance with the

intent of the DDA and as reasonably necessary to conform to lender

requirements; and,



(d) The City Council adopt a resolution approving the sale of certain sites

located on Agency-owned property (see attachment), generally located in

the blocks bounded by Highway 87 to the west, West Saint James Street to

the south, North Market Street to the east and a Union Pacific Railroad

right of way to the north, to Barry Swenson Builder (Swenson), accepting

the 33433 Summary Report and Re-Use Valuation and finding that the sale

of the property will assist in the elimination of blight, is consistent with the

Implementation Plan for the Julian-Stockton Redevelopment Project Area

and that the consideration for the property is not less than the fair reuse

value for the proposed use, with the covenants and conditions and

development costs authorized by the Disposition and Development

Agreement (DDA).



(e) The Redevelopment Agency Board approve an Amended and Restated

Disposition and Development Agreement with Swenson and authorizing

the Executive Director to execute ancillary documents contemplated by the

DDA, to close escrow subject to compliance with the terms of the DDA,

and to negotiate and execute amendments to the DDA substantially in

conformance with the intent of the DDA and as reasonably necessary to

conform to lender requirements.



OUTCOME



Approval of the proposed actions will lead to the development of needed market

rate housing on the North San Pedro Housing Project site.



BACKGROUND



On December 4,2003, the Agency issued a Request for Proposals (WP) for the

North San Pedro Housing Site. On January 30,2004, staff received proposals

from three development teams. The development team of Barry Swenson Builder

and The Olson Company was recommended for selection. In August 2005, the

Redevelopment Agency Board approved an Exclusive Negotiations Agreement.







OlsodSwenson DDA actions

Redevelopment Agency Board Page 3

NSP ASSIGNMENT AND AMENDMENT October 14,2008





The project was then delayed by several factors; first, the site was identified as a

potential location for a baseball park or as an exchange site for another ballpark

location. Next, the site was analyzed for possible location of a new downtown

music hall. Thereafter, site planning with the selected developers was delayed

while an RFP was issued for a supermarket on a portion of the site. Lastly,

environmental investigations and negotiations with CalTrans regarding the

condition of its property, which completed the site assembly, took longer than

expected.



On June 19,2007, the Redevelopment Agency Board approved two DDAs with

Barry Swenson Builder and The Olson Company. Each DDA has a schedule of

performance with specific timeframes for completion of development tasks. In

December 2007, Olson notified the Agency of their inability to proceed with the

project at the contract land price. Agency staff met with Olson to see if anything

could be done within the terms of the DDA to assist Olson in commencing with

the project. Since it was evident that Olson was not willing to perform, the

Agency issued a default notice. After further discussions between Agency staff

and Olson, Olson decided that their best option to cure the default was to assign

the DDA to Intracorp. Since then, staff has met with Intracorp to review the

project and negotiate modifications to the DDA.



Intracorp is five independent regional companies including four West Coast real

estate development companies based in Seattle, San Francisco, Southern

California and San Diego. The fifth company, Intracorp Capital, is headquartered

in Seattle and functions as a private investment firm that acquires or recapitalizes

profitable, private companies. Intracorp Companies and its component limited

liability companies are privately held and well known for their entrepreneurial

organization and quality development, such as their current San Francisco

projects: Arterra and Hayes.



ANALYSIS



PROJECT DESCRIPTION:



Olson's plan was to construct 136 stacked townhouse units on 3.69 acres, at a

density of 37 dwelling units per acre. Intracorp's plan is to construct 124

townhouses units on 3.43 acres. Intracorp's plan maintains the same density as

Olson's plan. Intracorp will also build the townhouses in phases. Each phase will

be approximately 20 to 45 units, slightly less than the 25 to 45 units that Olson

proposed. It is anticipated that there will still be four phases depending on market

conditions and absorption. The conditions of closing future phases still include

the close of escrow of 50% of the units in the previous phase and approval of



OlsodSwenson DDA actions

Redevelopment Agency Board Page 4

NSP ASSIGNMENT AND AMENDMENT October 14.2008





entitlements for that phase. The DDA provides the developer flexibility in the

order of the phases and the number of units in each phase, as long as it is within

the unit range allowed.



Swenson was in compliance with its schedule of performance when Olson entered

into default on the project. The Agency's discussion with Intracorp and the

financial market troubles have now delayed their project. Swenson proposed to

build three high-rise residential towers comprising at least 125 units per tower,

totaling no less than 375 units. The developer is now planning approximately 160

units in each tower. The first amendment would give Swenson the flexibility to

make the first tower either a rental or for-sale project. The site for the first tower

has increased in size by approximately 13,500 square feet to accommodate the

parking requirements for the tower. Swenson is negotiating a private financing

structure to proceed with the first tower as an apartment project. The Phase I1

tower, south of Julian Street, will commence construction upon the sooner of the

close of escrow, the lease of 75% of the units in the first tower, or Swenson

obtaining construction financing for the second tower, subject to substantial

completion of the Julian street realignment. The Phase I11 Swenson tower and

Phase IV low-rise 17 unit development will take place after the completion of

Phase I1 with the same conditions as applicable to Phases I and 11. Swenson can

also change the order of the phases of the project.



As originally set in the DDAs, Swenson and Intracorp will each have obligations

for street and other infrastructure improvements north of Julian Street and the

Agency will be responsible for street improvements, including restoring the grid

pattern, from Julian Street south to West Saint James Street. The Agency has

worked with the Departments of Transportation and Public Works to develop a

design to convert West Saint James Street to a two-way thoroughfare. This will

improve access to the northern portion of the Downtown Core and minimize

through traffic in the neighborhood to be built on the site.



The Developers are also obligated to design and build a new park north of Julian

Street with the first phases of the project and to expand Pellier Park in the final

phases of the project. In the event that one of the developers is unable to perform

on the first phases, the Agency will advance funds required to complete the new

park and be reimbursed when additional park fees are generated in subsequent

phases. As was originally negotiated in the DDAs, the developers will also

maintain the park for three years.









Olson/Swenson DDA actions

Redevelopment Agency Board Page 5

NSP ASSIGNMENT AND AMENDMENT October 14, 2008





PURCHASE PRICE:



The total purchase price of approximately $3 1 million being paid to the Agency by

the two developers has been maintained by allowing flexibility in phasing and land

value adjustments. Swenson will pay the Agency on a per-phase basis in

accordance with the Schedule of Performance in the DDA. Swenson's first phase

purchase price has increased from $5,000,000 to $5,840,000 because the size of

the first tower footprint increased when the developer elected to pursue an

apartment rental tower. Swenson's purchase price for the subsequent phases has

not changed. The acquisition prices of the subsequent phases are as follows:

Phase I1 - $5,500,000; Phase 111 - $6,000,000; Phase IV - $1,260,000.



The Olson purchase price was set at $91,000 per unit. The Intracorp proposal is

based on paying $75.45 per square foot of land for each phase in accordance with

the Schedule of Performance. This amount is approximately the same per square

foot value as the Olson obligation. This change allows for the developer to have a

set price per phase even though the unit count might fluctuate per phase. The land

value was previously escalated at 3% per year after the first phase. The first

amendment provides for an annual price adjustment of 3% up or down based on a

common residential real estate value index. These minor modifications were made

to encourage the progressive development of future phases even if market

conditions remain challenging. The Intracorp purchase price for the property by

Phase, as currently planned, is as follows: Phase I, 21 units at $2,023,392; Phase

II,25 units at $2,743,583; Phase III,42 units at $3,875,311; and Phase IV, 36 units

at $2,846,467.



SCHEDULE:



It is anticipated that construction of the first phases will begin early in 2010 and

the build out will extend over an approximately four-year period.



33433 ANALYSIS:



The attached Summary Reports, pursuant to Section 33433 of the California

Redevelopment Law, was prepared by Keyser Marston Associates. These reports,

along with a copy of the proposed DDA, were made available for inspection as

required by California Redevelopment Law on October 14,2008. The Summary

33433 Reports summarize the key terms of the proposed DDA, the cost of the

agreement to the Agency, the fair reuse value, and conformance with the Agency's

Five Year Implementation Plan. Based on the analyses provided in the Summary









OlsodSwenson DDA actions

Redevelopment Agency Board Page 6

NSP ASSIGNMENT AND AMENDMENT October 14,2008





Reports, the consideration to be received by the Agency is not less than the fair

market value at its highest and best use with the covenants and conditions imposed

under the DDA.



EVALUATION AND FOLLOW-UP



The Agency will be bidding the Julian Realignment project next year and will

update the Board on the status of the project at that time.



PUBLIC OUTREACHIINTEREST



The proposed actions meet Criterion 1 for added outreach efforts since the land

sale proceeds exceed $1,000,000. This staff report was distributed to the City

Council and Agency Board and posted on the Agency's website 14 days prior to

the scheduled Agency Board meeting date. It was also made available for public

review in the Agency's public lobby.



4 Criterion 1: Requires Board or Council action on the use of public funds

equal to $1 million or greater..

Criterion 2: Adoption of a new or revised policy that may have implications

for public health, safety, quality of life, or financialleconomic vitality of the

City.

Criterion 3: Consideration of proposed changes to service delivery,

programs, or staffing that may have impacts to community services and have

been identified by staff, the Board or Council, or a community group that

requires special outreach.



COORDINATION



This action has been coordinated with Public Works, Transportation, Planning and

the Agency's General Counsel.









Olson/Swenson DDA actions

Redevelopment Agency Board Page 7

NSP ASSIGNMENT AND AMENDMENT October 14,2008





FISCAL IMPACT



The Agency will receive a $100,000 deposit within fifteen days of execution of the

amended DDAs; the deposits will apply towards acquisition of the respective first

phases. The deposits shall be applied towards the Purchase Price of approximately

$3 1 million for the Agency Property. Considering the estimated costs of

approximately $1 1 million associated with the Julian Street realignmentist. James

widening, the Agency expects to realize net proceeds over time of approximately

$20 million.







Brandenburg Mixed Use Project/ North San Pedro Housing Sites Project ~ ~ f i 3 -

03-01a and GP03-03-01b.









Executive Director



Attachment









OlsoiliSwenson DDA actions

SUMMARY REPORT PURSUANT TO

SECTION 33433

OF THE

CALIFORNIA COMMUNITY REDEVELOPMENT LAW

ON A

AMENDED AND RESTATED DISPOSITION AND DEVELOPMENT AGREEMENT BY AND

BETWEEN

THEREDEVELOPMENTAGENCYOF

THE CITY OF SAN JOSE

AND

ISF ACQUISITIONS, LLC,

A CALIFORNIA LIMITED LIABILITY COMPANY







I. INTRODUCTION



The California Health and Safety Code, Section 33433, requires that if a redevelopment agency

wishes to sell or lease property to which it holds title and if that property was acquired in whole

or in part with property tax increment funds, the agency must first secure approval of the

proposed sale or lease agreement from its local legislative body after a public hearing. A copy of

the proposed sale or lease agreement and a summary report that describes and contains

specific financing elements of the proposed transaction will be available for public inspection

prior to the public hearing. As contained in the Code, the following information will be included in

the summary report:



1. The cost of the agreement to the redevelopment agency, including land acquisition

costs, clearance costs, relocation costs, the costs of any improvements to be provided

by the agency, plus the expected interest on any loans or bonds to finance the

agreement;



2. The estimated value of the interest to be conveyed, determined at the highest and best

use permitted under the redevelopment plan;



3. The estimated value of the interest to be conveyed in accordance with the uses,

covenants, and development costs required under the proposed agreement with the

Agency, i.e., the reuse value of the site;



4. An explanation of why the sale of the site will assist in the elimination of blight, as

required by Section 33433; and



5. If the sale price is less than the fair market value of the interest to be conveyed,

determined at the highest and best use consistent with the redevelopment plan, then







Keyser Marston Associates, Inc. Page 1

\\Sf-fsl\wp\l9\19080\19080.109\136\136-003.doc; 10/14/2008

the agency will provide as part of the summary an explanation of the reasons for the

difference.



This report outlines the salient parts of the proposed Amended and Restated Disposition and

Development Agreement ("Amended and Restated Agreement") by and between the City of San

Jose Redevelopment Agency ("Agency") and ISF Acquisitions, LLC, a California limited liability

company ("Developer") for the development of a stacked townhouse or condominium residential

project on the North San Pedro Housing Site in downtown San Jose. As background to this

report, the Agency and the Developer's predecessor, Olson Urban Housing, LLC (Original

Developer) had entered into a Disposition and Development Agreement (Original DDA) for

redevelopment of the North San Pedro Housing Site in June, 2007. Thereafter, the Original

Developer, with the approval of the Agency, assigned all its rights under the Original DDA to ISF

Acquisitions. Based on the above, the purpose of this analysis is to determine the cost of the

Amended and Restated Agreement to the Agency.



This report is based upon information in the proposed Amended and Restated Agreement and

is organized into the following six sections:



1. Summary o f the Proposed Amended and Restated Agreement - This section

includes a description of the site, the proposed development and the major

responsibilities of the Agency and the Developer.



2. Cost of the Amended and Restated Agreement t o the Agency - This section

outlines the cost of the Amended and Restated Agreement to the Agency for costs

the

associated w~th Amended and Restated Agreement between the Developer and

the Agency.



3. Estimated Value of the Interest t o be Conveyed -This section summarizes the

value of the interests to be conveyed to the Developer.



4. Consideration Received and Reasons Therefore - This section describes the

consideration to be paid by the Developer to the Agency. It also contains a comparison

of the consideration and the fair market value at the highest and best use consistent

with the redevelopment plan for the interests conveyed.



5. Elimination of Blight - This section includes an explanation of why the sale of the site

will assist in the elimination of blight and the supporting facts and materials.



6. Conformance with Five-Year lmplementation Plan -This section describes how the

Amended and Restated Agreement is in conformance with the Agency's Five-Year

lmplementation Plan.









Keyser Marston Associates, Inc. Page 2

\\Sf-fsl\wp\l9\19080\19080.109\136\136-003.dac; 10114/2008

II. SUMMARY OF THE PROPOSED AMENDED AND RESTATED AGREEMENT



A. Description of the Site and Project



Site



The site is an approximately 149,565 sq.ft. (3.43 acre) infill redevelopment site in the northwest

auadrant of downtown San Jose. This Agency-owned site consists of four (4) individual sites

- .

(collectively, the "Sites" and individually, "Site") generally known as the Phase One Site, the

Phase Two Site, the Phase Three Site, and the Phase Four Site. The Sites are part of a larger,

approximately 9 acre site commonly referred to as the North San Pedro Development Site.



The North San Pedro Development Site is generally located in the blocks bounded by Highway

87 to the west, West St. James Street to the south, North Market Street to the east, and a Union

Pacific right-of-way to the north.



The North San Pedro Site is improved with vacant industrial buildings, parking lots, and open

spacelcleared land. The Site is located in the Julian Stockton Redevelopment Project Area.



Prior to the sale of the Sites to the Developer, a tentative map will be prepared that shows the

proposed subdivision of the North San Pedro Development Site into separate parcels, four of

which will be the Sites. At conveyance of each of the four Sites, a final map will be recorded that

subdivides the North San Pedro Development Site into separate parcels, including the four

individual Sites.



Developer - ISFAcquisitions, LLC

ISF Acquisitions, LLC, a California limited liability company, is the Developer. The principal

office of the Developer is located at 595 Market Street, Suite 920, San Francisco, California

94105.



Project



The project ("Project") will be the design, development, and construction on each of the four

Sites of for-sale or rental residential units that may include townhouses or condominiums. A

total of approximately 124 units will be constructed. The Project is part of a coordinated

development of the North San Pedro Development Site by the Developer and Green Valley

Corporation dba Barry Swenson Builder (Swenson).



Phase One through Phase Three of the Project will include (a) residential units to be located on

each applicable Site (Residential Units), (b) adequate residential parking for the Residential

Units to be provided primarily in attached parking located below the Residential Units; and (c)

on-site and off-site improvements, including the on-site park improvements on the New Park





Keyser Marston Associates, Inc. Page 3

\\Sf-fsl\wp\l9\19080\19080.109\136\136-003.doc; 1011412008

Site (New Park Improvements), and off-site improvements to be performed by the Developer

(the Developer Off-Site Improvements).



Phase Four of the Project will include: (a) residential units to be located on the Phase Four Site

(Phase Four Residential Units); (b) adequate residential parking for Phase Four to be provided

primarily in attached parking located below the Phase Four Residential Units; and (c) on-site

and off-site improvements, including the construction of park improvements to the Pellier Park

Expansion Site (Pellier Park Improvements).



The Developer will coordinate with Swenson to ensure that the Project will be designed and

developed as an integrated complex in which the Project will be of first-class architectural

quality and character, both individually as to each Phase as well as in the context of the total

development of the North San Pedro Development Site, consistent with those standards

contained in the developmental approvals. Finish materials will be selected for quality and

permanence, conveying an intended image of an urban character for such improvements

appropriate in a downtown core area.



All off-site and public improvements and any public and open spaces required for the Project will

be designed and developed with the same degree of quality. Particular attention will be paid to

cy

the quality of materials. The ~ ~ e n and the Developer will cooperate and direct their

consultants, architects and/or engineers to cooperate so as to ensure the continuity and

coordination vitally necessary for the proper and timely completion of the development of the

Sites. The Developer, Swenson, and the Agency will work cooperatively to ensure that all site

improvements and park improvements are started and scheduled to be completed prior to the

sale of the first residential units.



The exact scope, size, unit count, and other aspects of the proposed Project will be determined

only after the Developer has complied with the appropriate governmental requirements and

obtained the appropriate governmental approvals, including a site development permit and

building permit, and all associated appeal periods have expired for the proposed Project.



lnclusionary Units / Inclusionary Housing Requirement



The Project is subject to the Agency's lnclusionary Housing Policy. The Developer will comply

with the lnclusionary Policy unless the Project is exempt from the requirements thereof. If the

Project is not exempt from the lnclusionary Policy, Developer will, at the close of escrow for the

conveyance of each Site, either pay the in-lieu fee, execute and record an affordability

agreement against such Site, or build a stand-alone affordable project. The parties acknowledge

that there is currently no exemption in place which would exempt the Project from the

requirements of the lnclusionary Policy.



Any Assisted Units will be distributed throughout the Project and not grouped or clustered or

otherwise separated from other non-Assisted Units. Developer will provide a mix of unit types





Keyser Marston Assaclates, Inc Page 4

\\Sf-fsl\wp\l9\19080\19080 109\136\136-003.dac, 10/14/2008

(le., number of bedrooms) for the Assisted Units in the same proportion as the Project's overall

mix of unit types, and will require that the Assisted Units be of comparable quality with similar

amenities available to other non-Assisted Units in the Project excluding any upgrades paid

separately for by the buyer of any unit. Owners of the Assisted Units will have equal access and

enjoyment to all common facilities of the Project.



6. Agency Responsibilities



Subject to the specific terms and conditions stated in the Amended and Restated Agreement,

the Agency's responsibilities under the proposed Amended and Restated Agreement are as

follows:



1. For each of the four Sites, provided that all conditions precedent to Site conveyance

have occurred, the Agency will separately and individually convey the Phase 1-4 Sites

"as is" to the Developer pursuant to the terms of the Amended and Restated

Agreement. The purchase price will be paid in four cash installments as detailed in

Section 111.8 of this report. There will be a separate close of escrow for each Site.



2. As condition precedent to the transfer of the Phase One Site to the Developer, the

Agency will obtain City of San Jose (City) approvals for the realignment of Julian Street

"

and re-establishment of the street grid on the North ~ a Pedro Development Site. To

accomplish this, the Agency will obtain City approvals for the vacation of the applicable

street dedications, and obtain from the City the real property underlying those portions

of Julian Street which are part of the four Sites. When these conditions are met, the

Agency will, at its sole cost and expense, construct or cause to be constructed street

improvements, curb, gutters, sidewalks, utilities, streetlights, trees, and landscaping

and other such facilities and improvements, as well as all required utility connections to

the Sites to allow for development. Street improvements necessary to realign Julian

Street and re-establish the street grid on the North San Pedro Development Site

include extending Devine Street east to North San Pedro Street, extending Terraine

Street south to West Saint James and by vacating those portions of Julian Street from

North San Pedro Street to Devine Street and from Devine Street to West Saint James

Street.



3. Perform all of the Agency's indemnity obligations to the Developer under this Amended

and Restated Agreement.



4. Pay one-half of the escrow fee, one-half of city documentary transfer tax, pay any

county documentary transfer tax, and pay the portion of a CLTA title insurance policy

as detailed in the Amended and Restated Agreement.



5. Approve or disapprove the Developer's Design Review submittals in accordance with

the requirements of the Design Review Process. The Agency will have the right of





Keyser Marston Associates, Inc Page 5

\\Sf-fsl\wp\l9\19080\19080.109\136\136-003.doc; 10/14/2008

6. Cooperate with the Developer in connection with the preparation of the Tentative Map

Applications for each Phase of the Project and the preparation and recording of the

Final Maps for each Phase of the Project. The Agency will review and approve the

complete Tentative Map Applications prior to the Tentative Map Application being

submitted to the City for approval and will review all changes to the Tentative Map

Application prior to approval by the City. The Agency will cooperate with Developer in

connection with the preparation of the Tentative Map Applications and the preparation

and recording of the Final Maps, including, if necessary, executing the Tentative Map

Applications and the Final Maps, provided that the preparation of the Tentative Map

Applications and the preparation and recording of the Final Maps will be at the

Developer's sole cost and expense.

*



7. Upon recordation of the Final Map, the Agency as owner of the Development Site will

make the irrevocable offer of dedication of the New Park Site and the Pellier Park

Expansion Site to the City.



8. At completion of each phase of the Project, furnish the Developer with the Certificate of

Compliance for the applicable phase of the Project, at the written request of the

Developer.



9. The parties acknowledge that a portion of the Coleman Avenue Overcrossing crosses

through a portion of the Phase Two Site. Prior to the close of escrow for the sale of the

Phase One Site to the Developer, the Agency will reserve an easement for the benefit

of the City for street right of way and related purposes for existing Coleman Avenue

Overcrossing (Coleman Right of Way).



10. The Agency will not be liable for any real estate commissions or brokerage fees. The

Agency and the Developer each represent that neither has engaged any broker, agent,

or finder in connection with this Amended and Restated Agreement.



11. The Agency is entitled to assign its rights or obligations pursuant to this Amended and

Restated Agreement to the City at any time without the prior written consent of the

Developer.



12. Agency agrees that in the event of a delay in the close of escrow for a particular Site

for reasons outside of the Developer's control, there will be no price escalation to the

Developer for the purchase price of that Site, as detailed in the Amended and Restated

Agreement.





Keyser Marston Associates, Inc. Page 6

\\Sf-fsl\wp\l9\19080\19080.109\136\136-003.doc: 10114/2008

13. If Developer, using commercially reasonable efforts, is unable to construct 35 or more

residential units per gross acre for any phase of the Project, pursuant to the

Development Approvals, Agency staff and the Developer will meet and confer to

discuss mutually acceptable alternatives to the Project.



14. If Swenson fails to enter into a Cost Sharing Agreement with the Developer or a Park

Maintenance Agreement with the Developer and the City, the Agency will enter into a

Park Maintenance Agreement with the Developer and the City. Pursuant to such

agreement, the Agency will be responsible for the park maintenance costs that would

have been payable to Swenson under such agreements.



C. Developer Responsibilities



Subject to the specific terms and conditions stated in the Amended and Restated Agreement,

the Developer's responsibilities under the proposed Amended and Restated Agreement are as

follows:



1. Prior to close of escrow for conveyance of each of the four Sites, satisfy all conditions

required by the Agency, including the following:



Prepare, complete, and submit Tentative Map Applications, and prepare, complete,

and record the applicable Final Maps for that applicable phase of the Project.



Provide evidence of financing for the applicable phase of the Project, including an

unconditional, firm, and enforceable cotpmitment by a recognized institutional

lender for the construction loan necessary to compete the applicable phase of the

Project.



Provide evidence of executed construction agreements to begin construction of that

particular phase of the Project.



Submit Design Development Documents and 50% Construction Documents to the

Agency and receive Agency approval of said documents for that particular phase of

the Project.



Obtain required land use and other governmental approvals for each phase of the

Project, including the condominium plan and documents required by California Civil

Code Sections 1350 et seq. commonly known as the Davis-Stirling Common

Interests Development Act.



Prior to the Close of Escrow for each Phase, Developer will have obtained all

Development Approvals necessary to commence construction of such Phase and

such Development Approvals will allow not less than thirty five (35) Residential





Keyser Marston Associates, Inc. Page 7

\\Sf-fsl\wp\l9\19080\19080.109\136\136-003.doc; 10/14/2008

Units per gross acre for each such Phase and, with respect to Phase Two, Phase

Three and Phase Four, Developer will have closed escrow on not less than fifty

percent (50%) of the Residential Units of the preceding Phase.



Prior to the Close of Escrow for Phase One, the Agency, City, and Developer will

have entered into the New Park Parkland Agreement and the Pellier Park Parkland

Agreement in a form acceptable to the Developer; and



Have complied with the requirements of the California Environmental Quality Act

(CEQA).



2. Developer acknowledges that the Agency has provided Developer with copies of

various environmental reports and other documents related to the condition of the

Sites. In addition, Developer has inspected the Sites and obtained a Phase II

Environmental Site Assessment Report dated December 6, 2005, prepared by

SECOR, an environmental consultant hired by Developer ("Developer's Phase II

Report")



3. Developer will separately and individually purchase each of the Phase 1-4 Sites "as is"

from the Agency as detailed in Section 111.8 of this report. There will be a separate

close of escrow for each Site. The Developer has the sole responsibility and expense

to determine the condition of the Sites, including the presence of any hazardous

materials.



4. Developer will perform all the of the Developer's indemnity obligations to the Agency

under this Amended and Restated Agreement.



5. Upon conveyance of each of the Sites, Developer will diligently develop and construct

each Phase of the Project, including diligently pursuing all design approvals,

entitlements, commencement and completion of construction within the time specified

in the Amended and Restated Agreement.



6. All costs of developing the Site and constructing all improvements thereon will be

financed by the Developer.



7. The Developer and any contractor engaged by the Developer will pay prevailing wages

for construction of the Project.



8. Developer acknowledges that the North San Pedro Development Site will need to be

subdivided into separate parcels. Developer, working with Swenson, will prepare

tentative map applications proposing to subdivide the Development Site into separate

parcels for the four phases of the Project. On a Tentative Map Application either

prepared by Developer or Swenson or as a separate Tentative Map Application, an







Keyser Marston Associates, Inc. Page 8

\\Sf-fsl\wp\19\19080\190800109\136\136-00doc 10/14/2008

irrevocable offer of dedication of a parcel for an on-site park of not less than one (1)

acre will be made to the City for public park purposes on the North San Pedro

Development Site ("New Park Site"). On a Tentative Map Application either prepared

by Developer or Swenson or as a separate Tentative Map Application, an irrevocable

offer of dedication of a parcel adjacent to Pellier Park will be made to the City for public

park purposes as an expansion of Pellier Park ("Pellier Park Expansion Site").

Developer will prepare a final map conforming to the Approved Tentative Map ("Final

Map"). Within the time periods set forth in the Schedule of Performance, Developer will

file Final Maps for each Phase with the City for approval. Upon approval by the City,

the Final Maps will be recorded in the Office of the Santa Clara County Recorder.

Notwithstanding anything to the contrary contained herein, the Final Map for each

Phase will be recorded in the Office of the Santa Clara County Recorder prior to the

Close of Escrow for the sale of such Phase. The Agency will cooperate with Developer

in connection with the preparation of the Tentative Map Applications and the

. . . ..

preparation and recording of the Final Maps, including, if necessary, executing the

Tentative Map Applications and the Final Maps, provided that the preparation of the

. ..

Tentative Map Applications and the preparation and recording of the Final Maps will be

at the Developer's sole cost and expense.



9. The Developer and the Agency, in cooperation with Swenson, will enter into an

agreement with the City through its Department of Parks, Recreation & Neighborhood

Services (PRNS) for the design, construction, and maintenance of the New Park

lmprovements (New Park Parkland Agreement) and for the design, construction, and

maintenance of the Pellier Park lmprovements (Pellier Park Parkland Agreement). The

intent is for the Developer and Swenson to design and construct the parks for the

Project and be responsible for park maintenance of the new parks for three years after

completion to assure that landscaping is well established. The Developer and Swenson

will design and construct the New Park lmljiovements concurrently with their first

phases. After the street grid is restored, Pellier Park will be expanded and squared off

to reflect the grid pattern and the Pellier Park lmprovements will be constructed.



10. The cost of the New Park Parkland Agreement and the Pellier Park Parkland

Agreement will be collectively referred to as the Parkland Agreements, and the costs of

the New Park lmprovements and the Pellier Park lmprovements will be collectively

referred to as the Park lmprovement Costs. The Agency will be responsible for Park

lmprovement Costs that would be applicable to Swenson if Swenson fails to enter in

either of the Parkland Agreements or if Swenson enters into a Parkland Agreement but

defaults on its obligation to pay its share of Park lmprovement Costs under either such

agreement.



11. Developer acknowledges that if park maintenance costs are to be allocated and paid

by the homeowners associations of the buildings to be developed on the Development

Site, then a memorandum of Cost Sharing Agreement (Cost Sharing Agreement) will





Keyser Marston Associates, Inc Page 9

\\Sf-fsl\wp\l9\19080\19080 109\136\136-003 doc, 10/14/2008

be recorded against each of the Developer's Sites and the sites to be developed by

Swenson. Prior to recordation of the Cost Sharing Agreement, the Cost Sharing

Agreement will be approved by the Agency.



12. The Agency, Developer and Swenson will coordinate the design, permitting and

construction of the Off-Site Improvements.



13. Developer will submit to the Agency for its approval covenants, conditions, and

restrictions (CC&R3s)for each phase of the Project. The CC&R's will provide that the

homeowner's of such Phase will pay their allocable share of costs under the applicable

park maintenance agreement (Cast Sharing Agreement) and will include a provision

requiring the Developer and any Future Owners to maintain and repair any public art

located on the applicable Phase of the Project.



14. Developer will pay one-half of the escrow fee, one-half of any city documentary transfer

tax, and pay the portion of the CLTA title insurance policy as detailed in the Amended

and Restated Agreement. The Developer will pay all ad valorem taxes and

assessments due after closing.



15. Developer agrees that prior to the issuance'of a Certificate of Compliance for

completion of the Project, Developer will not assign all or any part of this Amended and

Restated Agreement without the prior written consent of the Agency, provided that ISF

Acquisitions, LLC may assign its rights under this Amended and Restated Agreement

to a limited liability company under the management and control of ISF Acquisitions,

LLC, lntracorp San Francisco, LLC, andlor lntracorp Real Estate, LLC without further

approval of the Agency.



16. The Developer will comply with the lnclusionary Policy unless the Project is exempt

from the requirements thereof.



17. The Developer will have an option to develop a fifth phase of the Project (Phase Five)

on a portion of the North San Pedro Development Site currently slated to be developed

by Swenson as the fourth phase of its separate Amended and Restated Agreement

with the Agency (on Swenson Phase Four Site, as defined in a separate Amended and

Restated Disposition and Development Agreement with the Agency). However, the

parties acknowledge that phase four of Swenson's development is

dependenffconditioned on the Agency acquiring the land from Legacy (Legacy Parcel).

For purposes of this Amended and Restated Agreement, Swenson's "Phase Four Site"

(as defined in the Swenson DDA) will be referred to herein as the "ISF Phase Five

Site". The Developer will have an option to acquire the ISF Phase Five Site and

develop a Phase Five if Swenson does not proceed with acquisition of that same site

for its own phase four development. If Swenson then elects to purchase the land from

the Agency, the Developer's Phase Five Option will terminate.





Keyser Marston Associates, Inc. Page 10

\\Sf-fsl\wp\l9\19080\19080.109\136\136-003.doc: 10114/2008

18. The Developer's Phase Five, if developed, will include: (a) residential units to be

located on the Phase Five Site ("Phase Five Residential Units"); (b) adequate

residential parking for Phase Five to be provided primarily in attached parking located

below the Phase Five Residential Units; and (c) necessary on-site and off-site

improvements.



19. If the option is exercised, Developer will separately purchase the Phase 5 Site "as is"

from the Agency as detailed in Section 111.8 of this report. There will be a separate

close of escrow for the Phase Five Site.



20. Developer will comply with the Parkland Dedication Ordinance set forth in the City of

San Jose Municipal Code. Developer acknowledges that pursuant to the Final Map, the

Agency dedicated the New Park Site and the Pellier Park Expansion Site to the City for

public park purposes. The Developer will not seek any credit under the Parkland

Dedication Ordinance for the dedication of the New Park Site or the Pellier Park

Expansion Site. The Developer will not be responsible for any park improvements or

park fees in excess of the requirements of the Parkland Dedication Ordinance for each

phase of the Project developed by the Developer.









Keyser Marston Associates, Inc. Page 11

\\Sf-fsl\wp\19\19080\190800109\136\136-003doc 10/14/2008

Ill. COST OF THE AMENDED AND RESTATED AGREEMENT TO THE AGENCY



This section presents the total cost of the Amended and Restated Agreement to the Agency, as

well as the "net cost" of the project after consideration of the project revenues. The net cost can

be either an actual cost, when expenditures exceed receipts, or a net gain, when revenues

created by implementation of the Amended and Restated Agreement exceed expenditures.



A. Estimated Cost to the Agency



The Agency has incurred approximately $19.3 million in costs to-date associated with land

acquisition, relocation expenses, demolition, and remediation of the overall North San Pedro

Development Site. For this Amended and Restated Agreement, the Agency anticipates that it

to

will incur approximately $10,732,000 of additional expend~tures fund the costs for acquisition

of the Caltrans (now Legacy) Parcel, the construction of the Julian Street Realignment

Improvements, and for miscellaneous consultant costs. Overall Agency costs are estimated at

$30.02 million. The Agency will receive a $700,000 grant from the U.S. Environmental

Protection Agency (EPA) for infrastructure costs. Deducting this amount, total adjusted Agency

costs are $29,322,000 (rounded).



As stated earlier in this report, the Project is part of a coordinated development of the North San

Pedro Development Site by the Developer and Green Valley Corporation dba Barry Swenson

Builder (Swenson). For purposes of this analysis, the total costs can be allocated to the

Developer (44.2%) and Swenson (55.8%) based on their respective land areas as a percentage

of total site size, as follows.



Aaencv Costs Allocated bv Land Area

Q@j Swenson Allocation ISF Acauisitions

Allocation



Land Area 333.823 sq.ft. 184,258 sq.ft. 149.565 sq.ff.

Allocated by % of LandArea 55.2% 44.8%



Total Expenditures to-date $19,289.668 $10,647.186 $8,642,482



Anticipated Costs:

Legacy Parcel acquisition $465,000 $256,663 $208,337



M~scellaneous consultants 667,000 368,159 298,841

Jullan Street realignment 9,600,000 5,298,846 4,301,154

Total Ant~c~pated Costs $10,732,000 $5,923,668 $4,808,332



Total Agency Costs $30,021,668 $16,570,854 $13,450,874

Less: EPA Grant (700,000) (386,374) (313,626)



Adjusted Total Agency $29,321,668 $16,184,480 $13,137,788

Costs $29,322,000 $16,184,000 $13,137,000

(Rounded)







Keyser Marston Assadates, Inc. Page 12

\\Sf-fsl\wp\l9\19080\19080.109\136\136-003.dac, 10/14/2008

The Agency also has a contingent liability to fund Swenson's obligations for park improvement

costs in the event that the Swenson Project is delayed.



As shown above, after deducting the EPA grant, the estimated Agency Costs under the

Amended and Restated Agreement are $29,322,000 (rounded). Of these Agency costs,

$13,137,000 is allocated to ISF Acquisitions.



The estimated Agency Costs under the Original DDA were estimated to be $29,610,000

(rounded). Of these Agency costs, $14,421,000 (48.7%) was allocated to the Olson Company

and $15,189,000 (51.3%) was allocated to Swenson, based on their respective land areas.



For this Amended and Restated Agreement, the $29.32 million in Agency costs will be funded

by bond proceeds. Interest on Agency financing of approximately $29.32 million is estimated to

be approximately $27.9 million over 30 years at an assumed interest rate of 5%. Principal and

interest will be repaid over a 30-year period. On a present value basis, the interest cost is

nominal.



B. Revenues t o the Agency



In the Amended and Restated Agreement, the agreed upon land payments are linked to land

area instead of the unit count per phase. The land areas taken down in each phase are as

follows:



Amended and Restated Agreement -

Phase Schedule for Take Down Land Area

Phase One January 20,2010 26,657 sq fl

Phase Two May 20,2011 35,525 sq fl

Phase Three September 12,2012 51,104sqfl

Phase Four June 30,2014 36,279 sq.fl



Based on the proposed development program, the estimated land payment is:

"





Amended and Restated Agreement -

Phase Schedule for Take Down Land Payment

Phase One January 20,2010 $2,023,392

Phase Two May 20,2011 2,743,583

Phase Three September 12, 2012 3,875,311

Phase Four June 30,2014 2,846,467

Total $11,488,753

Per Sq Ft of Land Area - 149,565 sq fl $77



Present Value $ 9,344,000

Per Sq.Ft. of Land Area - 149,565 sq.fl. $63









Keyser Marston Assocrates, Inc Page I 3

\\Sf-fsl\wp\l9\19080\19080.109\136\136-003 doc, 10114/2008

The payment will occur over time. Presently, the land payments are expected in 2010, 2011,

2011 and 2014. Discounting these payments at 6%, the present value of the land payments is

estimated to be $9,344,000. Therefore total Agency revenues are $9,344,000.



For purposes of this Agreement, it is assumed that the Developer will not exercise its option to

separately purchase the ISF Phase 5 Site (Legacy Parcel) from the Agency.



C. Net Cost to the Agency



Total Agency costs are estimated to be $13,137,000. Agency revenues are estimated to be

$9,344,000. As a result, the net cost to the Agency is $3,793,000, as summarized below:



Estimate

Agency's Gross Cost $ 13,137,000

(Less) Agency Revenue 9,344,0001



Net Cost to Agency $ 3,793,000



The Agency also has a contingent financial liability to fund the Swenson portion of the park

improvement costs if the Swenson Project is delayed.









Keyser Marston Associates, Inc. Page 14

\\Sf-kl\wp\l9\19080\19080.109\136\136-003.doc; 10/14/2008

IV. VALUE OF THE INTEREST TO BE CONVEYED



Fair Reuse Value



In December 2003, the Agency authorized the release of a Request for Proposals (RFP)

seeking developers to redevelop the North San Pedro Development Site for high-density

residential development. After an extensive and thorough review and interview process, the

proposal received by the development team of Barry Swenson Builder and The Olson Company

was selected as being the strongest and most consistent with the goals and evaluation criteria

outlined in the RFP. Subsequently, the Olson Company assigned all its rights under the Original

DDA to ISF Acquisitions. ISF Acquisitions' proposal is to construct approximately 124 stacked

townhouses or condominiums in 4 phases. The average density is approximately 37 units per

acre.



ISF Acquisitions will purchase the Sites from the Agency in four phases for the purchase price

of $1 1,488,753 (averages $77 per gross sq.ft. of each Site), pursuant to the Amended and

Restated Agreement (see Section 1II.B). The payment will occur over time. Presently, the land

payments are expected in 2010,201 1,2011 and 2014. The present value of the land payments

is estimated to be $9,344,000 (averages $63 per gross sq.ft. of each Site).



The fair reuse value for the Site is directly a function of a very specific development program as

specified in the terms and conditions of the Amended and Restated Agreement and the

development economics of the specific use. The Agency is requiring the Developer to: (1)

develop a high density residential project with no Agency funds other than the Agency financing

the cost of off site public infrastructure, (2) pay prevailing wages for construction of the Project

and (3) meet the inclusionary housing requirement. Development of the Project must occur

within the timeframe stated in the Amended and Restated Agreement, e.g., speculation is not

allowed.



Based on the reuse conditions that the Developer is required to satisfy, the Developer is offering

to pay $1 1,488,753 for the Sites. The proposed payment is considered to represent the fair

reuse value for the Sites based on current market conditions.



Value at Highest and Best Use



KMA has also estimated the value of the interest being conveyed to the Developer is sold by the

Agency at its highest and best use allowed under the Redevelopment Plan. The highest and

best use must satisfy zoning, building codes, affordable housing requirements, market

conditions, and the Agency requirement that new investment occur within a set timeframe, e.g.,

speculation is not allowed.









Keyser Marston Associates, Inc Page 15

\\Sf-fsl\wp\l9\19080\19080.109\136\136-003 doc, 1011412008

The Developer is offering to pay $1 1,488,753 ($77 per sq.ft.) for the Sites. The proposed

payment is considered to represent the fair market value for the Sites based on market

conditions, given the requirement to build residential and that land speculation is not allowed.









The consideration being paid to the Agency is not less than the fair reuse value at the use and

with the covenants and conditions imposed under the DDA. The consideration being paid to the

Agency is also not less than the fair market value that the Agency could expect to receive for

the Site at its highest and best use with the conditions that a major high density residential

development must occur.



The Agency has determined that this specific Project as provided in the Amended and Restated

Agreement offers the best complementary uses for other land uses in the Julian Stockton

Redevelopment Project Area. The Project will enhance the area by increasing the supply of

housing downtown and stimulate other private investments. Therefore, the Project will further

the overall goals of the Agency's Downtown Strategy Plan 2010 adopted by the San Jose City

Council and the Agency to revitalize the downtown core.



VI. ELIMINATION OF BLIGHT



The Site in which the Project will be constructed is located in the Julian Stockton

Redevelopment Project Area on the blocks bounded.by Highway 87 to the west, West St.

James Street to the south, North Market Street to the east, and a Union Pacific right-of-way to

the north. The neighborhood of the Site is an emerging residential area on the northern edge of

downtown San Jose. To the north and east are both new housing developments and traditional

neighborhoods around Ryland Park and North First Street. South of the Site lies a mixture of

commercial, public, and residential properties, including the new residential high-rise

development City Heights under construction by the Developer. The Guadalupe Freeway

(Highway 87) borders the Site to the west.



To reinforce and enhance the vitality of the downtown as a public and commercial center for

San Jose, the Agency made a substantial investment in the revitalization effort to create a

downtown core that serves as both a daytime and nighttime activity center. The revitalization

effort includes the development of cultural, art, entertainment, commercial, and residential

components.



The Agency has determined that the Site is ideal for a high quality, high density residential

development. The Site, located at the edge of the downtown core just north of the active

restaurant row along North San Pedro Street, is a significant land assembly site for housing to

support the downtown core. The realignment of Julian Street to re-establish the street grid

pattern is an integral part of the proposed Project as it will create an attractive pedestrian

oriented neighborhood adjacent to the Downtown Core area. After the street grid is restored





Keyser Marston Assouates. Inc Page 16

\\Sf-fsl\wp\l9\19080\19080 109\136\136-003 doc, 10/14/2008

through the Julian Street realignment project, the existing Pellier Park will be expanded and

squared off to reflect the grid pattern.



The Project will assist in the removal of blight by increasing the supply of housing downtown on

an underutilized Site; creating public spaces, including a new one-acre park and the expansion

of Pellier Park; strengthening the Julian Stockton Redevelopment Project Area as a first-class

residential location in San Jose; and providing a catalysffcreate momentum for additional private

investment in the Downtown Area. The Project will increase employment, both during the

construction phase and thereafter. In addition, the City's general fund will show increased

property taxes and utility user fees.



Thus, the Agency is entering into this Amended and Restated Agreement in order to achieve its

objectives to stimulate further residential development in the downtown area and remove blight

in the downtown area.



VII. CONFORMANCE WITH FIVE-YEAR IMPLEMENTATION PLAN



The primary Five-Year lmplementation Plan program objective for the Julian Stockton

Redevelopment Project Area is to eliminate conditions that negatively impact economic

development of the community. To that end, the Agency is selling the Site for reuse as a

stacked townhouse residential condominium Project.



Furthermore, the Implementation Plan also establishes a priority objective of increasing the

community's economic base by encouraging investment in the redevelopment project area. The

Project will further encourage the Julian Stockton Redevelopment Project Area as a mid- to

high-density residential neighborhood consistent with the goals of the Agency's Downtown

Strategy Plan to attract residential uses to downtown San Jose. The Project will be developed in

the near-term and it will maximize the Site's ability to draw additional uses to the downtown. As

such, the Project will increase the real property tax base and provide utility user tax within the

Julian Stockton Redevelopment Project Area. The Project conforms to the lmplementation Plan

and will achieve the goals specifically defined in the implementation plan.









Keyser Marston Associates. Inc. Page 17

\\Sf-fsl\wp\l9\19080\19080.109\136\136-003.doc; 10/14/2008

SUMMARY REPORT PURSUANT TO

SECTION 33433

OF THE

CALIFORNIA COMMUNITY REDEVELOPMENT LAW

ON A

AMENDED AND RESTATED DISPOSITION AND DEVELOPMENT AGREEMENT BY AND

BETWEEN

THE REDEVELOPMENT AGENCY OF

THE CITY OF SAN JOSE

AND

GREEN VALLEY CORPORATION,

A CALIFORNIA CORPORATION DOING BUSINESS AS BARRY SWENSON BUILDER





1. INTRODUCTION



The California Health and Safety Code, Section 33433, requires that if a redevelopment agency

wishes to sell or lease property to which it holds title and if that property was acquired in whole or in

part with property tax increment funds, the agency must first secure approval of the proposed sale

or lease agreement from its local legislative body afler a public hearing. A copy of the proposed

sale or lease agreement and a summary report that describes and contains specific financing

elements of the proposed transaction will be available for public inspection prior to the public

hearing. As contained in the Code, the following information will be included in the summary report:



1. The cost of the agreement to the redevelopment agency, including land acquisition costs,

clearance costs, relocation costs, the costs of any improvements to be provided by the

agency, plus the expected interest on any loans or bonds to finance the agreement;



2. The estimated value of the interest to be conveyed, determined at the highest and best

use permitted under the redevelopment plan;



3. The estimated value of the interest to be conveyed in accordance with the uses,

covenants, and development costs required under the proposed agreement with the

Agency, i.e., the reuse value of the site;



4. An explanation of why the sale of the site will assist in the elimination of blight, as

required by Section 33433; and



5. If the sale price is less than the fair market value of the interest to be conveyed,

determined at the highest and best use consistent with the redevelopment plan, then

the agency will provide as part of the summary an explanation of the reasons for the

difference.







Keyser Marston Associates. Inc. Page I

\\Sf-fsl\wp\19\19080\19080.109\136\136-004.doc;10/1412008

This report outlines the salient parts of the proposed Amended and Restated Disposition and

Development Agreement ("Amended and Restated Agreement") by and between the City of San

Jose Redevelopment Agency ("Agency") and Green Valley Corporation, a California corporation

doing business as Barv Swenson Builder ("Developer") for the development of for-sale or rental

residential units that may include high-rise residential condominiums or stacked townhouses in

downtown San Jose. The purpose of this analysis is to determine the cost of the Amended and

Restated Agreement to the Agency.



This report is based upon information in the proposed Amended and Restated Agreement and is

organized into the following six sections:



1. Summary of the Proposed Amended and Restated Agreement - This section

includes a description of the site, the proposed development and the major

responsibilities of the Agency and the Developer.



2. Cost of the Amended and Restated Agreement to the Agency - This section outlines

the cost of the Amended and Restated Agreement to the Agency for costs associated

the

w~th Amended and Restated Agreement between the Developer and the Agency



3. Estimated Value o f the Interest t o be Conveyed -This section summarizes the value

of the interests to be conveyed to the Developer.



4. Consideration Received and Reasons Therefore -This s~ction describes the

consideration to be paid by the Developer to the Agency. It also contains a comparison of

the consideration and the fair market value at the highest and best use consistent with the

redevelopment plan for the interests conveyed.



5. Elimination of Blight - This section includes an explanation of why the sale of the site

will assist in the elimination of blight and the supporting facts and materials.



6. Conformance with Five-Year Implementation Plan -This section describes how the

Amended and Restated Agreement is in conformance with the Agency's Five-Year

Implementation Plan.









Keyser Marsfon Associates, Inc. Page 2

\\Sf-fsl\wp\19\19080\19080.109\136\136-004.doc; 10114/2008

11. SUMMARY OF THE PROPOSED AMENDED AND RESTATED AGREEMENT



A. Description of the Site and Project



Site



The site is an approximately 184,258 sq.ft. (4.23 acre) infill redevelopment site in the northwest

quadrant of downtown San Jose. This site, which is being assembled by the Agency (Agency is

in the process of acquiring a parcel from Legacy), consists of four (4) individual sites

(collectively, the "Sites" and individually, "Site") generally known as the Phase One Site, the

Phase Two Site, the Phase Three Site, and the Phase Four Site. The Sites are part of a larger,

approximately 9 acre site commonly referred to as the North San Pedro Development Site.



The North San Pedro Development Site is generally located in the blocks bounded by Highway

87 to the west, West St. James Street to the south, North Market Street to the east, and a Union

Pacific right-of-way to the north.



The North San Pedro Site is improved with vacant industrial buildings, parking lots, and open

spacelcleared land. The Site is located in the Julian Stockton Redevelopment Project Area.



Prior to the sale of the Sites to the Developer, a tentative map will be prepared that shows the

proposed subdivision of the North San Pedro Development Site into separate parcels, four of

which will be the Sites. At conveyance of each of the four Sites, a final map will be recorded that

subdivides the North San Pedro Development Site into separate parcels, including the four

individual Sites.



-

Developer Green Valley Corporation dba Barry Swenson Builder



Green Valley Corporation, a California corporation doing business as Barry Swenson Builder, is the

Developer. The principal office of the Developer is located at 777 North First Street, 5Ih lo or, San

Jose, CA 95112.



Project



The project ("Project") will be the design, development, and construction on each of the four Sites

of for-sale or rental residential units that may include townhouses or condominiums. A total of

approximately 492 units will be constructed. The Project is part of a coordinated development of

the North San Pedro Development Site by the Developer and ISF Acquisitions, LLC (ISF

Acquisitions).



Phase One of the Project will include (a) a high-rise residential condominium tower of at least 10

stories with a total of at least 125 units to be located on the Phase One Site (Phase One Tower),







Keyser Marston Associates, Inc. Page 3

10/1412008

\\Sf-fsl\wp\19\19080\19080.109\136\136-004.doc;

(b) adequate residential parking for the Phase One Tower to be provided primarily in attached or

adjacent parking structures; and (c) on-site and off-site improvements, including the on-site park

improvements on the New Park Site (New Park Improvements) and off-site improvements to be

performed by the Developer (the Developer Off-Site Improvements).



Phase Two of the Project will include: (a) a high-rise residential condominium tower of at least 10

stories with a total of at least 125 units to be located on the Phase Two Site (Phase Two Tower);

(b) adequate residential parking for the Phase Two Tower to be provided primarily in attached or

adjacent parking structures; and (c) on-site and off-site improvements, including the construction of

park improvements to the Pellier Park Expansion Site (Pellier Park Improvements), and off-site

improvements to be performed by the Developer (the Developer Off-Site Improvements).



Phase Three of the Project will include: (a) approximately 14 units of stacked townhouses to be

located on the Phase Three Site (Phase Two Residential Units); (b) adequate residential parking

for the Phase Three Residential Units to be provided primarily in attached parking located below

the Phase Three Residential Units; and (c) on-site and off-site improvements, including off-site

improvements to be performed by the Developer (the Developer Off-Site Improvements).



Phase Four of the Project will include: (a) a high-rise residential condominium tower of at least 10

stories with a total of at least 125 units to be located on the Phase Four Site (Phase Four Tower);

(b) adequate residential parking for the Phase Four Tower to be provided primarily in attached or

adjacent parking structures; and (c) on-site and off-site improvements, including off-site

improvements to be performed by the Developer (the Developer Off-Site Improvements).



The Developer will coordinate with ISF Acquisitions to ensure that the Project will be designed

and developed as an integrated complex in which the Project will be of first-class architectural

quality and character, both individually as to each Phase as well as in the context of the total

development of the North San Pedro Development Site, consistent with those standards

contained in the developmental approvals. Finish materials will be selected for quality and

permanence, conveying an intended image of an urban character for such improvements

appropriate in a downtown core area.



All off-site and public improvements and any public and open spaces required for the Project will

be designed and developed with the same degree of quality. Particular attention will be paid to

the quality of materials. The Agency and the Developer will cooperate and direct their

consultants, architects andlor engineers to cooperate so as to ensure the continuity and

coordination vitally necessaty for the proper and timely completion of the development of the

Sites. The Developer, ISF Acquisitions, and the Agency will work cooperatively to ensure that all

site improvements and park improvements are started and scheduled to be completed prior to

the sale of the first residential units.









Keyser Marston Associates. Inc. Page 4

\\Sf-fsl\wp\l9\19080\19080.109\136\136-004.doc; 1011412008

The exact scope, size, unit count, and other aspects of the proposed Project will be determined

only after the Developer has complied with the appropriate governmental requirements and

obtained the appropriate governmental approvals, including a site development permit and

building permit, and all associated appeal periods have expired for the proposed Project.



Inclusionary Units / Inclusionary Housing Requirement



The Project is subject to the Agency's lnclusionary Housing Policy. The Developer will comply with

the lnclusionary Policy unless the Project is exempt from the requirements thereof. If the Project is

not exempt from the lnclusionary Policy, Developer will, at the close of escrow for the conveyance

of each Site, either pay the in-lieu fee, execute and record an affordability agreement against such

Site, or build a stand-alone affordable project. The parties acknowledge that there is currently no

exemption in place which would exempt the Project from the requirements of the lnclusionary

Policy.



Any Assisted Units will be distributed throughout the Project and not grouped or clustered or

otherwise separated from other non-Assisted Units. Developer will provide a mix of unit types

(~.e.,number of bedrooms) for the Assisted Units in the same proportion as the Project's overall

mix of unit types, and will require that the Assisted Units be of comparable quality with similar

amenities available to other non-Assisted Units in the Project excluding any upgrades paid

separately for by the buyer of any unit. Owners of the Assisted Units will have equal access to

and enjoyment of all common facilities of the Project.



B. Agency Responsibilities



Subject to the specific terms and conditions stated in the Amended and Restated Agreement, the

Agency's responsibilities under the proposed Amended and Restated Agreement are as follows:



1. To-date, the Agency has assembled three of the four individual Sites, overseen

remediation efforts on a portion of the Sites, coordinated planning on the re-

establishment of the street grid components of the Project, and negotiated with Legacy

regarding acquisition of an additional parcel (Legacy Parcel) for development of the

Project.



2. For each of the four Sites, provided that all conditions precedent to Site conveyance

have occurred, the Agency will separately and individually convey the Phase 1-4 Sites

"as is" to the Developer pursuant to the terms of the Amended and Restated

Agreement. The purchase price will be paid in four cash installments as detailed in

Section 1 18 of this report. There will be a separate close of escrow for each Site.

1.



3. As condition precedent to the transfer of the Phase Two Site to the Developer, the

Agency will obtain City of San Jose (City) approvals for the realignment of Julian Street







Keyser Marston Associates, Inc. Page 5

\\Sf-fsl\wp\19\19080\19080 109\136\136-004.doc; 10114/2008

and re-establishment of the street grid on the North San Pedro Development Site. To

accomplish this, the Agency will obtain City approvals for the vacation of the applicable

street dedications, and obtain from the City the real property underlying those portions

of Julian Street which are part of the four Sites. When these conditions are met, the

Agency will, at its sole cost and expense, construct or cause to be constructed street

improvements, curb, gutters, sidewalks, utilities, streetlights, trees, and landscaping

and other such facilities and improvements as required by the City (the Julian Street

Realignment Improvements), as well as all required utility connections to the Sites to

allow for development. Street improvements necessary to realign Julian Street and re-

establish the street grid on the North San Pedro Development Site include extending

Devine Street east to North San Pedro Street, extending Terraine Street south to West

Saint James and by vacating those portions of Julian Street from North San Pedro

Street to Devine Street and from Devine Street to West Saint James Street.



4. It is a condition precedent to the transfer of the Phase Four Site to Developer and the

Agency's and Developer's obligations to proceed with Phase Four that the Agency will

have acquired the Legacy Parcel and will have obtained regulatory approval of the

environmental condition of the Phase Four Site from the appropriate governmental

agency to allow the intended development of the Phase Four Site ("Phase Four

Condition"). If, on or before the time set forth in the Schedule of Performance, the

Phase Four Condition is not satisfied, then this Amended and Restated Agreement

solely as it relates to Phase Four will terminate and neither Developer nor the Agency

will have any further rights andlor obligations hereunder with respect to Phase Four.



5. Perform all of the Agency's indemnity obligations to the Developer under this Amended

and Restated Agreement.



6. Pay one-half of the escrow fee, one-half of state, county or city documentary transfer

tax, and pay the portion of a CLTA title insurance policy as detailed in the Amended

and Restated Agreement.



7. Approve or disapprove the Developer's Design Review submittals in accordance with

the requirements of the Design Review Process. The Agency will have the right of

review (including, but not limited to, architectural review) and approval of all plans,

drawings, and related documents for the development of the Project submitted by the

Developer, including Design Development Documents and 50% Construction

Documents.



8. Cooperate with the Developer in connection with the preparation of the Tentative Map

Applications for each Phase of the Project and the preparation and recording of the

Final Maps for each Phase of the Project. The Agency will review and approve the

complete Tentative Map Applications prior to the Tentative Map Application being







Keyser Marston Associates. Inc. Page 6

\\Sf-fsl\wp\l9\19080\19080.109\136\136-004.doc: 1011412008

submitted to the City for approval and will review all changes to the Tentative Map

Application prior to approval by the City. The Agency will cooperate with Developer in

connection with the preparation of the Tentative Map Applications and the preparation

and recording of the Final Maps, including, if necessary, executing the Tentative Map

Applications and the Final Maps, provided that the preparation of the Tentative Map

Applications and the preparation and recording of the Final Maps will be at the

Developer's sole cost and expense.



9. Upon recordation of the Final Map, the Agency as owner of the Development Site will

make the irrevocable offer of dedication of the New Park Site and the Pellier Park

Expansion Site to the City.



10. At completion of each phase of the Project, furnish the Developer with the Certificate of

Compliance for the applicable phase of the Project, at the written request of the

Developer.



11. The Agency will not be liable for any real estate commissions or brokerage fees. The

Agency and the Developer each represent that neither has engaged any broker, agent,

or finder in connection with this Amended and Restated Agreement.



12. The Agency is entitled to assign its rights or obligations pursuant to this Amended and

Restated Agreement to the City of San Jose at any time without the prior written

consent of the Developer.



13. If ISF Acquisitions fails to enter into a Cost Sharlng Agreement with the Developer or a

Park Maintenance Agreement with the Developer and the City, the Agency will enter

into a Park Maintenance Agreement with the Developer and the City. Pursuant to such

agreement, the Agency will be responsible for the park maintenance costs that would

have been payable to ISF Acquisitions under such agreements.



C. Developer Responsibilities



Subject to the specific terms and conditions stated in the Amended and Restated Agreement,

the Developer's responsibilities under the proposed Amended and Restated Agreement are as

follows:



1. Prior to close of escrow for conveyance of each of the four Sites, satisfy all conditions

required by the Agency to be in full force or effect, including the following:



Prepare, complete, and submit Tentative Map Applications, and prepare, complete,

and record the applicable Final Maps for that applicable phase of the Project.









Keyser Marston Associates, Inc. Page 7

\\Sf-fs1\wp\19\19080\19080.109\036\136-004.doc: 10/14/2008

Provide evidence of financing for the applicable phase of the Project, including an

unconditional, firm, and enforceable commitment by a recognized institutional

lender for the construction loan necessary to compete the applicable phase of the

Project.



Provide evidence of executed construction agreements to begin construction of that

particular phase of the Project.



= Submit Design Development Documents and 50% Construction Documents to the

Agency and receive Agency approval of said documents for that particular phase of

the Project.



Obtain required land use and other governmental approvals for each phase of the

Project, including the condominium plan and documents required by California Civil

Code Sections 1350 et seq. commonly known as the Davis-Stirling Common

Interests Development Act.



Prior to the Close of Escrow for Phase Two, Phase Three, and Phase Four,

Developer will have closed escrow on not less than 50% of the residential units of

the preceding phase.



Prior to the Close of Escrow for Phase One, the Agency, City, and Developer will

have entered into the New Park Parkland Agreement and the Pellier Park Parkland

Agreement in a form acceptable to the Developer; and



Have complied with the requirements of the California Environmental Quality Act

(CEQA).



2. Developer acknowledges that the Agency has provided Developer with copies of

various environmental reports and other documents related to the condition of the

Sites. In addition, Developer has inspected the Sites and obtained a Phase II

Environmental Site Assessment Report dated December 6, 2005, prepared by

SECOR, an environmental consultant hired by Developer ("Developer's Phase II

Report").



3. Developer will separately and individually purchase each of the Phase 1-4 Sites "as is"

. .

from the Agency as detailed in Section 111.8 of this report. There will be a separate

close of escrow for each Site. The Developer has the sole responsibility and expense

to determine the condition of the Sites, including the presence of any hazardous

materials.



4. Developer will perform all the of the Developer's indemnity obligations to the Agency

under this Amended and Restated Agreement.









Keyser Marston Assoc!ates, Inc Page 8

\\Sf-fsl\wp\19\19080\19080 109\136\136-004 doc, 1011412008

5. Upon conveyance of each of the Sites, Developer will diligently develop and construct

each Phase of the Project, including diligently pursuing all design approvals,

entitlements, commencement and completion of construction within the time specified

in the Amended and Restated Agreement.



6. All costs of developing the Site and constructing all improvements thereon will be

financed by the Developer.



7. The Developer and any contractor engaged by the Developer will pay prevailing wages

for construction of the Project.



8. Developer acknowledges that the North San Pedro Development Site will need to be

subdivided into separate parcels. Developer, working with ISF Acquisitions, will

prepare tentative map applications proposing to subdivide the Development Site into

separate parcels for the four phases of the Project. On a Tentative Map Application

either prepared by Developer or ISF Acquisitions or as a separate Tentative Map

Application, an irrevocable offer of dedication of a parcel for an on-site park of not less

than one (1) acre will be made to the City of San Jose for public park purposes on the

-

North San Pedro Development Site ("New Park Site"). On a Tentative Map Application

either prepared by Developer or ISF Acquisitions or as a separate Tentative Map

Application, an irrevocable offer of dedication of a parcel adjacent to Pellier Park will be

made to the City of San Jose for public park purposes as an expansion of Pellier Park

("Pellier Park Expansion Site"). Developer will prepare a final map conforming to the

Approved Tentative Map ("Final Map"). Within the time periods set forth in the

Schedule of Performance, Developer will file Final Maps for each Phase with the City

for approval. Upon approval by the City, the Final Maps will be recorded in the Office of

the Santa Clara County Recorder. Notwithstanding anything to the contrary contained

herein, the Final Map for each Phase will be recorded in the Office of the Santa Clara

County Recorder prior to the Close of Escrow for the sale of such Phase. The Agency

will cooperate with Developer in connection with the preparation of the Tentative Map

Applications and the preparation and recording of the Final Maps, including, if

necessary, executing the Tentative Map Applications and the Final Maps, provided that

the preparation of the Tentative Map Applications and the preparation and recording of

the Final Maps will be at the Developer's sole cost and expense.



9. The Developer and the Agency, in cooperation with ISF Acquisitions, will enter into an

agreement with the City of San Jose through its Department of Parks, Recreation &

Neighborhood Sewices (PRNS) for the design, construction, and maintenance of the

New Park Improvements (New Park Parkland Agreement) and for the design,

construction, and maintenance of the Pellier Park Improvements (Pellier Park Parkland

Agreement). The intent is for the Developer and ISF Acquisitions to design and

construct the parks for the Project and be responsible for park maintenance of the new







Keyser Marston Associates, Inc. Page 9

\\Sf-kI\wp\l9\19080\19080.109\136\136-004.doc; 1011412008

parks for three years after completion to assure that landscaping is well established.

The Developer and ISF Acquisitions will design and construct the New Park

lmprovements concurrently with their first phases. After the street grid is restored,

Pellier Park will be expanded and squared off to reflect the grid pattern and the Pellier

Park lmprovements will be constructed.



10. The cost of the New Park Parkland Agreement and the Pellier Park Parkland

Agreement will be collectively referred to as the Parkland Agreements, and the costs of

the New Park lmprovements and the Pellier Park lmprovements will be collectively

referred to as the Park lmprovement Costs. The Agency will be responsible for Park

Improvement Costs that would be applicable to ISF Acquisitions if ISF Acquisitions fails

to enter in either of the Parkland Agreements or if ISF Acquisitions enters into a

Parkland Agreement but defaults on its obligation to pay its share of Park lmprovement

Costs under either such agreement



11. Developer acknowledges that if park maintenance costs are to be allocated and paid

by the homeowners associations of the buildings to be developed on the Development

Site, then a memorandum of Cost Sharing Agreement (Cost Sharing Agreement) will

be recorded against each of the Developer's Sites and the sites to be developed by

ISF Acquisitions. Prior to recordation of the Cost Sharing Agreement, the Cost Sharing

Agreement will be approved by the Agency.



12. The Agency, Developer and ISF Acquisitions will coordinate the design, permitting and

construction of the Off-Site Im~rovements.



13. Developer will submit to the Agency for its approval covenants, conditions, and

restrictions (CC&R's) for each phase of the Project. If applicable, the CC&R3swill provide

that the homeowner's of such Phase will pay their allocable share of costs under the

applicable Park Maintenance Agreement (Cost Sharing Agreement).



14. Developer will pay one-half of the escrow fee, one-half of any state, county, or city

documentary transfer tax, and pay the portion of the CLTA title insurance policy as

detailed in the Amended and Restated Agreement. The Developer will pay all ad

valorem taxes and assessments due after closing.



15. Developer agrees that prior to the issuance of a Certificate of Compliance for

completion of the Project, Developer will not assign all or any part of this Amended and

Restated Agreement without the prior wr~tten consent of the Agency, provided that the

Developer may assign its rights under this Amended and Restated Agreement to a

limited liability company under the management and control of Green Valley

Corporation andlor Barry Swenson without further approval of the Agency.









Keyser Marston Associates, Inc. Page 10

\\Sf-fsl\wp\19\19080\19080.109\136\136-004.doc; 10114/2008

16. The Developer will comply with the lnclusionary Policy unless the Project is exempt

from the requirements thereof.



17. Upon obtaining Regulatoty Approval of the Legacy Parcel, the Agency will deliver a

copy of such approval to Developer and Developer will have 30 days after receipt of

such approval to approve the condition of the Phase Four Site. If, upon expiration of

such 30 day period, Developer does not approve the Legacy Parcel, then this

Amended and Restated Agreement solely as it relates to Phase Four will terminate and

neither Developer nor the Agency will have any further rights andlor obligations

hereunder with respect to Phase Four.



18. Developer will comply with the Parkland Dedication Ordinance set forth in the City of

San Jose Municipal Code. Developer acknowledges that pursuant to the Final Map the

Agency dedicated the New Park Site and the Pellier Park Expansion Site to the City for

public park purposes. The Developer will not seek any credit under the Parkland

Dedication Ordinance for the ded~cation the New Park S ~ t e the Pellier Park

of or

Expansion Site. The Developer will not be responsible for any park improvements or

park fees in excess of the requirements of the Parkland Dedication Ordinance for each

phase of the Project developed by the Developer.









Keyser Marston Associates, Inc. Page 11

\\Sf-fsl\wp\l9\19080\19080 109\136\136-004.doc; 1011412008

Ill. COST OF THE AMENDED AND RESTATED AGREEMENT TO THE AGENCY



This section presents the total cost of the Amended and Restated Agreement to the Agency, as

well as the "net cost" of the project after consideration of the project revenues. The net cost can be

either an actual cost, when expenditures exceed receipts, or a net gain, when revenues created by

implementation of the Amended and Restated Agreement exceed expenditures.



A. Estimated Cost to the Agency



The Agency has incurred approximately $19.3 million in costs to-date associated with land

acquisition, relocation expenses, demolition, and remediation of the overall North San Pedro

Development Site. For this Amended and Restated Agreement, the Agency anticipates that it will

incur approximately $10,732,000 of additional expenditures to fund the costs for acquisition of

the Caltrans (now Legacy) Parcel, the construction of the Julian Street Realignment

Improvements, and for miscellaneous consultant costs. Overall Agency costs are estimated at

$30.02 million. The Agency will receive a $700,000 grant from the U.S. Environmental

Protection Agency (EPA) for infrastructure costs. Deducting this amount, total adjusted Agency

costs are $29,322,000 (rounded).



As stated earlier in this report, the Project is part of a coordinated development of the North San

Pedro Development Site by the Developer and Green Valley Corporation dba Barly Swenson

Builder (Swenson). For purposes of this analysis, the total costs can be allocated to the

Developer (44.2%) and Swenson (55.8%) based on their respective land areas as a percentage

of total site size, as follows:



Aqencv Costs Allocated bv Land Area

Total Swenson Allocation ISF Awu~sitions

Allocation



Land Area 333,823 sq.R. 184,258 sq.R. 149,565 sq.R.

Allocated by % of LandArea 55.2% 44 8%



Total Expenditurestodate $19,289,668 $10,647,186 $8,642,482



Anticipated Costs:

Legacy Parcel acquisition



Miscellaneous consultants 667,000 368,159 298.841

Julian Street realignment

Total Anticipated Costs



Total Agency Costs $30,021,668 $16,570,854 $13,450,814

Less: EPA Grant (700,000) (386,374) (313,626)

.- *. ..

Adjusted Total Agency Costs $?mi%%-@

."

F..y....

. .

. ..

:$E@.:Bqqb

li

:...--,S-C.,AL,.~- "Q

.-7-,e..

@3A:$3&&@

. . ., .

. .. .. . ..

,





(Rounded) 1.._2i!iL?i2 &,;$;<,.aTuc#j

-.JL -..~s., :.

.. i B3 : 8

BE ; 7@







Keyser MarstonAssociates, Inc Page 12

\\Sf-fsl\wp\l9\19080\19080 109\136\136-004doc, 1011412008

The Agency also has a contingent liability to fund Swenson's obligations for park improvement

costs in the event that the Swenson Project is delayed.



As shown above, after deducting the EPA grant, the estimated Agency Costs under the Amended

and Restated Agreement are $29,322,000 (rounded). Of these Agency costs, $16,184,000 is

allocated to Swenson.



The estimated Agency Costs under the Original DDA were estimated to be $29,610,000 (rounded).

Of these Agency costs, $14,421,000 (48.7%) was allocated to the Olson Company and

$15,189,000 (51.3%) was allocated to Swenson, based on their respective land areas.



For this Amended and Restated Agreement, the $29.32 million in Agency costs will be funded by

bond proceeds. Interest on Agency financing of approximately $29.32 million is estimated to be

approximately $27.9 million over 30 years at an assumed interest rate of 5%. Principal and interest

will be repaid over a 30-year period. On a present value basis, the interest cost is nominal.



B. Revenues t o the Agency



to

In the Amended and Restated Agreement, the agreed upon land payments are l~nked land area

instead of the unit count per phase. The land areas taken down in each phase are as follows:



Amended and Restated Agreement -

Phase Schedule for Take Down Land Area

Phase One January 20,2010 52,272 sq.ft.

Phase Two March 15,2012

Phase Three June 15,2014

Phase Four June 15.2014



Based on the proposed development program, the estimated land payment is:



Amended ani~estated Agreement -

Phase Schedule for Take Down Land Payment

Phase One January 20,2010 $5,840,000

Phase Two March 15,2012 5,500,000

Phase Three June 15,2014 6,000.000

Phase Four June 15,2014 1,260,000

Total $18,600.000

Per Sq.Ft. of Land Area - 184,258 sq.ft. $101



Present Value $15,112,000

Per Sq.Ft. of Land Area - 184,258 sq.ft. $82









Keyser Marston Associates. Inc. Page 13

\\Sf-fsl\wp\l9\19080\19080.109\136\136-004.doc; 10114/2008

The payment will occur over time. Presently, the land payments are expected in 2010,2012, and

2014. Discounting these payments at 6%, the present value of the land payments is estimated to

be $15,112,000. Therefore total Agency revenues are $15,112,000.



C. Net Cost to the Agency



Total Agency costs are estimated to be $16,184,000. Agency revenues are estimated to be

$15,112,000. As a result, the net cost to the Agency is $1,072,000, as summarized below:



Estimate

Agency's Gross Cost $16,184,000

(Less) Agency Revenue 1 15.112.000~



Net Cost to Agency









Keyser Marston Assoc~ates, Inc Page 14

\\Sf-fsl\wp\19\19080\19080 109\136\136-004 doc, 10114/2008

IV. VALUE OF THE INTEREST TO BE CONVEYED



Fair Reuse Value



In December 2003, the Agency authorized the release of a Request for Proposals (RFP)

seeking developers to redevelop the Agency Parcel for high-density residential development.

Barry Swenson Builder was one of two development teams selected as being the most

consistent with the goals and evaluat~on

criteria outlined in the RFP. The Agency entered a

Disposition and Development Agreement in 2007.



The Swenson proposal is now revises the land payment. The development program is now

revised to approximately 475 units in three towers and 17 stacked townhouses. The average

density is approximately 116 units per acre. Barry Swenson Builder will pay the Agency

$18,600,000 (averages $101 per gross sq.R. of each Site), pursuant to the Amended and Restated

Agreement (see Section 111.B). The payment will occur over time. Presently, the land payments are

expected in 2010, 2012, and 2014. The present value of the land payments is estimated to be

$15,112,000 (averages $82 per gross sq.ft. of each Site).



is a

The fair reuse value for the S ~ t e d~rectly function of a very specific development program as

specified in the terms and conditions of the Agreement and the development economics of the

specific use. The Agency is requiring the Developer to: ( I ) develop a high density residential

project with no Agency funds other than the Agency financ~ng cost of off site public

the

infrastructure, (2) pay prevailing wages for construction of the Project and (3) meet the

inclusionary housrng requirement.



For the conveyance of the first Agency Parcel for a tower in 2010 and the condition that

construction must commencement shortly thereafter as stated in the Agreement and land

speculation is not allowed, the payment offered by Swenson is greater than the fair reuse value

that can be supported by a residential tower in the real estate market today.



Value at Highest and Best Use



KMA has also estimated the value of the interest being conveyed to the Developer if sold by the

Agency at its highest and best use allowed under the Redevelopment Plan. The highest and best

use must satisfy zoning, building codes, affordable housing requirements, market conditions, and

the Agency requirement that new investment occur within a set timeframe, e.g., speculation is not

allowed.



The Developer is offering to pay $18,600,000 ($101 per sq.ft.) for the Sites. The proposed payment

is considered to represent the fair market value for the Sites based on current market conditions,

given the requirement to build residential and that speculation is not allowed.









Keyser Marston Associates, Inc. Page 15

\\Sf-fsl\wp\l9\19080\19080.109\136\136-004.doc; 10/14/2008

V. CONSIDERATION RECEIVED AND REASONS THEREFORE



The consideration being paid to the Agency is not less than the fair reuse value at the use and

with the covenants and conditions imposed under the DDA. The consideration being paid to the

Agency is also not less than the fair market value that the Agency could expect to receive for

the Site at its highest and best use with the conditions that a major high density residential

development must occur.



The Agency has determined that this specific Project as provided in the Agreement offers the

best complementary uses for other land uses in the Julian Stockton Redevelopment Proiect

Area. The Project will enhance the area by increasing the supply of housing downtown and

stimulate other private investments. Therefore, the Project will further the overall goals of the

Agency's Downtown Strategy Plan 2010 adopted by the San Jose City Council.



VI. ELIMINATION OF BLIGHT



The Site in which the Project will be constructed is located in the Julian Stockton

Redevelopment Project Area on the blocks bounded by Highway 87 to the west, West St.

James Street to the south, North Market Street to the east, and a Union Pacific right-of-way to

the north. The neighborhood of the Site is an emerging residential area on the northern edge of

downtown San Jose. To the north and east are both new housing developments and traditional

neighborhoods around Ryland Park and North First Street. South of the Site lies a mixture of

commerc~al,public, and residential properties, lncludlng the new residential high-rise

development City Heights under construction by the Developer. The Guadalupe Freeway

(Highway 87) borders the Site to the west.



To reinforce and enhance the vitality of the downtown as a public and commercial center for San

Jose, the Agency made a substantial investment in the revitalization effort to create a downtown

core that serves as both a daytime and nighttime activity center. The revitalization effort includes

the development of cultural, art, entertainment, commercial, and residential components.



The Agency has determined that the Site is ideal for a high quality, high density residential

development. The Site, located at the edge of the downtown core just north of the active restaurant

row along North San Pedro Street, is a significant land assembly site for housing to support the

downtown core. The realignment of Julian Street to re-establish the street grid pattern is an integral

part of the proposed Project as it will create an attractive pedestrian oriented neighborhood

adjacent to the Downtown Core area. After the street grid is restored through the Julian Street

realignment project, the existing Pellier Park will be expanded and squared off to reflect the grid

pattern.



The Project will assist in the removal of blight by increasing the supply of housing downtown on

an underutilized Site; creating public spaces, including a new one-acre park and the expansion of







Keyser Marston Associates. Inc. Page 16

\\Sf-fsl\wp\19\19080\19080.109\136\136-004.doc: 10/14/2008

Pellier Park; strengthening the Julian Stockton Redevelopment Project Area as a first-class

residential location in San Jose; and providing a catalystlcreate momentum for additional private

investment in the Downtown Area. The Project will increase employment, both during the

construction phase and thereafter. In addition, the City's general fund will show increased property

taxes and utility user fees.



Thus, the Agency is entering into this Amended and Restated Agreement in order to achieve its

objectives to stimulate further residential development in the downtown area and remove blight in

the downtown area.



VII. CONFORMANCE WITH FIVE-YEAR IMPLEMENTATION PLAN



The primary Five-Year Implementation Plan program objective for the Julian Stockton

Redevelopment Project Area is to eliminate conditions that negatively impact economic

development of the community. To that end, the Agency is selling the Site for reuse as a high-

rise and stacked townhouse residential condominium project.



Furthermore, the lmplementation Plan also establishes a priority objective of increasing the

community's economic base by encouraging investment in the redevelopment project area. The

Project will further encourage the Julian Stockton Redevelopment Project Area as a mid- to

high-density residential neighborhood consistent with the goals of the Agency's Downtown

Strategy Plan to attract residential uses to downtown San Jose. The Project will be developed in

the near-term and it will maximize the Site's ability to draw additional uses to the downtown. As

such, the Project will increase the real property tax base and provide utility user tax within the

Julian Stockton Redevelopment Project Area. The Project conforms to the lmplementation Plan

and will achieve the goals specifically defined in the implementation plan.









Keyser Marston Associates, Inc. Page 17

\\Sf-fsl\wp\l9\19080\19080.109\136\136-004.doc. 1011412008