Title
108 State Request for Proposals Update
Recommended Action
Committee Recommendation:
Not referred to a committee.
City Manager Recommendation:
Receive a briefing and engage in discussion about the Request for Proposals received for City owned Property at 108 State Avenue NE and provide feedback to staff on a preferred method to advance the project.
Report
Issue:
Whether to receive a briefing and engage in discussion about the Request for Proposals received for City owned Property at 108 State Avenue NE and provide feedback to staff on a preferred method to advance the project.
Staff Contact:
Mike Reid, Economic Development Director, Office of Community Vitality, 360.753.8591
Presenter(s):
Mike Reid, Economic Development Director
Background and Analysis:
On February 28, 2023, staff led Council through a discussion of their priorities and objectives for find a partner to activate the City owned building at 108 State Ave in downtown Olympia.
The presentation and discussion covered the following items:
1. Identify RFP Development and Review Team
2. Due diligence and background materials
3. Project timeline/process
4. Confirm areas of Council consensus
5. Project Vision Statement
6. Recommended review criteria and submittal requirements
Council reached consensus on the following vision statement and elements of a successful project:
Project Vision: An active historic building that increases pedestrian activity and creates a lasting and unique destination in our downtown core.
Elements of a successful project are:
• Historic building and key location are an integral part of the use of the space.
• City is able to retain ownership of the building while achieving the objective of a successful tenant that achieves the project vision.
• City would like to see an emphasis on partnerships between public, private, and nonprofits.
• The Downtown Strategy, specifically the character area designation of the “Capital to Market District” is the guide for the vision and use.
• Demonstratable financial ability to execute and sustain proposed use of building.
• Ability by tenant to accept some degree of financial obligation for tenant improvements and operating expenses.
Council articulated that it did favor scenarios that would allow for the City to retain ownership of the property, thus leading to the most likely scenario being that the City would lease the property but did allow for the opportunity to allow respondents to make their case as to why selling the property may be a necessary alternative.
September 1, 2023, staff released the Request for Proposals for the property at 108 State incorporating the feedback and guidance it received from Council. Staff developed a project website that hosted the RFP, related due diligence materials, and a video of the February 28 Council Study Session. On September 15, staff lead a site tour of the property for all interested parties and on February 18, staff hosted an online Q&A forum. On October 2, an addendum of all collected questions and their respective answers was posted to the project website. Responses to the Request for Proposals was due on October 25, 2023.
The City received two responses to the request for proposals and will provide Council with an overview of the following areas of each proposal:
1. Proposed Use
2. Proposed Transaction
3. Synopsis of Business Plan
4. Summary of Respondents Qualifications and Financial Stability
Staff will also provide a summary of the feedback that was received from both an internal review team made of city staff and an external review team consisting of downtown partners and stakeholders. Primary feedback from both parties was that the two proposals were so vastly different in nature due to transaction style, operator approach (nonprofit and private sector), and long-term financial obligation of city resources that scoring them without further Council guidance was not feasible.
Staff will not be recommending a preferred partner at this time as more input from Council is required prior to reaching a conclusion.
Staff is recommending two potential options to advance this effort and is seeking feedback from council on a preferred method.
Option 1: Host both respondents at an upcoming Council Study Session in which they present their proposals and answer questions from Council.
Option 2: Form a subcommittee of designated Council members and staff that work directly with the respondents to better understand both proposals.
Proposal Snapshot:
Proposal 1: Olympia Arts and Heritage Alliance
Proposed Use: Olympia Arts and Heritage Alliance (also known as AHA) is local nonprofit proposing a subsidized long-term lease of the building to support a history museum and other related uses.
• “The building will provide artist studio space, classroom and workshop space for K-12 and college students, a retail shop and a small café, in-person and online access to exhibits and historical documents, and meeting rooms available for community groups.”
Proposal 2: The Ladderhouse
Proposed Use: Ladderhouse is a private business enterprise and is proposing to purchase the property to redevelop into a 28-32 room boutique hotel.
“This hotel will boast a multitude of destination amenities including featuring goods from local shops, a lush walled-in outdoor heated soaking pool, an intimate event space, a covered outdoor patio, café, a cozy bar, opportunities for socialization and relaxation in the common spaces, and even a covered rooftop deck.”
Climate Analysis:
Both proposals are preliminary in nature when it comes to specific energy efficiency improvements that could or would be made to the building. It would be necessary for further evaluation of potential renovations, the expense, and how they would be funded in the instance of retained City ownership.
Both proposals are adaptive reuse of an existing building which is consistent with our climate objectives.
It may also be valuable prior to entering into long-term agreements to obtain an energy audit of the building so that we have a baseline of performance to improve from.
Equity Analysis:
Staff aimed at making response to this proposal as accessible as possible with broad distribution, multiple options for site access, online question and answer forum, and a fair distribution of all collected responses.
Analysis of “who benefits and who is burdened” from each proposal is slightly more subjective and elicits a multitude of layers and questions that may not be able to be clearly answered at this time such as:
1. What are the financial obligations and costs to the City associated with maintenance and repair of the building and what budget areas may see reduced funding to accommodate this commitment?
2. What proposal creates the greatest community and economic benefit both directly and indirectly throughout downtown activation?
3. Who is served by each proposal not only as a “customer” but as a contributor, potential employee, or partner organization?
As the city moves forward with its process we will need to ensure that these or similar questions are part of the deliberative process.
Neighborhood/Community Interests (if known):
There is a significant amount of interest in this project including parties interested in historic preservation, downtown businesses and stakeholders, and community partners. Both uses are consistent in their proposed use with the Downtown Strategy.
Financial Impact:
Both proposals have widely different financial implications. The property currently has a tax assessed value of $3,194,700 but also has noted deficiencies and maintenance requirements that were identified as totaling $1.4 million in a 2019 building condition assessment.
Proposal 1 (AHA) is requesting a $1 a year lease for 25 years with an option to extend for an additional 25 years, with the City covering utility and maintenance expenses. The proposal states: “We expect a city commitment to renovate and improve the building shell and building systems, meet ADA requirements and address seismic, sea-level rise, security, and internet needs. City maintains the building shell in good condition and repair.” It is premature to have a solid estimate of this cost but assumptively it would range between $2.5 - 4 million.
For illustrative purposes the City provides maintenance and covers the utility expenses for the downtown Timberland Library. In 2022 those expenses were as follows:
• Operation & Maint. $101,450
• City Utilities: $12,520
• PSE electricity/gas: $19,718
Proposal 2 is requesting a purchase price of $500,000. This is below the current assessed value and 2019 appraised value. Neither of those values account of identified expense associated with building repair or identified deficiencies. Acquisition is requested “due to the extensive nature of the tenant improvements to be paid for by the development team, as well as the necessities of the business plan and associated public and private financing required.”
Respondent states that the proposed purchase price was derived from workings backwards from proposed cost of improvements and respective business plan.
Options:
1. Receive a briefing and engage in discussion about the Request for Proposals received for City owned Property at 108 State Avenue NE and provide feedback to staff on a preferred method to advance the project.
2. Do not receive a briefing and engage in discussion about the Request for Proposals received for City owned Property at 108 State Avenue NE and provide feedback to staff on a preferred method to advance the project.
3. Take other action.
Attachments:
108 State Request for Proposal
Project Webpage
Olympia Arts and Heritage Alliance (AHA) Submittal
The Ladderhouse Submittal
Proposal Summary - AHA
Proposal Summary - The Ladderhouse