responses to questions from selection committeecms5.revize.com/revize/gunnisonco/planning/lazy...

1February 22, 2019 GatesCo Proposal Addendum

1. Please see the attached global comments and comments specific to your team from the open house. What changes/updates do these comments inspire in your proposal?

It was difficult to identify a consensus community position on any aspect of the proposal that would warrant a modification to the proposal. The comments demonstrated that no project can be all things to all people. There were a few comments expressing concern about the number of units, and the relative number of for-sale and rental units. However, there were also many comments supporting the number of units and the number of rental units. Many of the proposals were criticized for the plan to remove the existing cabins. However, there were other comments supporting the idea of removing these dilapidated structures and starting fresh with new structures. The modification to the site plan made at the specific request of the Selection Committee is also responsive to a couple of the comments from the public.

2. Please review and revise the project summary in the attached spreadsheet. Do we have your proposal accurately represented? Has anything changed based on community and staff feedback? Also, please complete the unit count matrix, so we can more clearly compare and contrast proposals and communicate the distinctions to the community.

Based upon feedback from the Selection Committee, the site plan was modified to place additional residential structures on the north parcel and to free-up park space on the south parcel.

A revised project summary and a unit count matrix have been provided. Gatesco remains willing to discuss modifications to specific aspects of the proposal to meet the City’s expectations. For example, a question was raised at the interview about reducing the number of units at the high and low income levels and dedicating more units to moderate income levels. This is a possibility. Also, the relative financial contributions of the parties remain subject to modification. For example, Gatesco could assume responsibility for cabin demolition in return for a reduction in the purchase price.

3. One of the City’s concerns is how the development team and project would weather an economic downturn. We would like to discuss your thoughts at our meeting prior to your re-submittal.

There is no question that the Gatesco project has superior ability to survive, and provide affordable housing throughout the duration of an economic downturn.

Recessions, and even simple slowdowns in the local real estate market, have had devastating impacts on locals and local deed

K K K KKPROPOSAL ADDENDUM

Responses to Questions from Selection CommitteeQuestions for all Respondents


restricted housing programs. In Gunnison County, from 2014 through 2018, a total of 91 foreclosure actions were commenced1. From 2008 through 2012, the number was 7872. A lot of local households lost their homes when they had adverse employment changes during the Great Recession and were unable to sell their homes when they relocated to find new employment or were simply unable to continue making mortgage payments. Anecdotally, the demand for rental property in Gunnison remained strong throughout the Great Recession, as households downsized and many were unable to purchase homes due to a tight lending environment. Many deed restricted for-sale properties have been lost over the years when the property owners complained that the properties were unmarketable as restricted (e.g. River Neighborhood in Skyland). Local government entities have been forced to expend substantial sums of money to save deed restricted properties from foreclosure that would wipe out the deed restriction, either through redemption or a deed-in-lieu process (deed restrictions are usually subordinated to the purchase money mortgage).

Gary Gates has owned and operated rental properties through many market cycles. During downturns when property values fall is actually when Mr. Gates sees a buying opportunity and adds to his portfolio. Mr. Gates has access to long-term fixed rate financing, which will mitigate interest rate risk (unlike many homeowners who have lost homes due to reliance on adjustable rate mortgages). The City has received confidential financial information that indicates that Mr. Gates has the financial wherewithal to survive an economic downturn.

Measures to address the risk of an economic downturn during construction are addressed below.

4. A specific development improvement agreement will eventually be required for the chosen team. Please confirm you are willing to enter into such agreement, including providing a performance bond.

Gatesco has no problem signing a development improvements agreement, and is certainly willing to provide security (bond, letter of credit, or other mutually agreeable collateral) for the public improvements as would be required for any City-approved project. While a performance bond for the vertical construction would be atypical, the City has expressed a desire for some assurance that, in the event of unforeseen adverse circumstances, the City will not be left with a partially developed site. One of the strongest attributes of the Gatesco proposal is its ability to provide a meaningful number of affordable units on the ground quickly, in a single phase. The premium on a performance bond for the entire scope of work would likely cost in the low to mid six figures. As an alternative, Gatesco would be willing to explore arrangements that are more cost-effective (which is critical for providing affordable housing) yet provide the City with the risk mitigation it seeks. For example, security in the form of cash, letter of credit, or equivalent, in an amount of $500,000 could be provided (in addition to the typical 125% of the cost of public improvements), which the City could draw on in the event that Gatesco fails to meet its obligations under the Development Improvements Agreement. Such an amount would be adequate to allow the City to either demolish a project that has barely begun, finish off a project that is closer to completion, or even acquire replacement property. In either scenario, the City is protected. Equally important, the prospect of losing $500,000 is a strong incentive for Gatesco to complete the project in accordance with the agreement.

1. http://204.132.78.100/foreclosuresearch/index.aspx2. Id


5. The current configuration of the two 16-plexes isn’t consistent with community expectations. Please show a new site plan respecting the Park Plan intent to have park space on the south parcel. How does this change affect the overall unit mix, size of buildings, and decision to have rental and/or ownership proposed on the site?

A revised site plan is being submitted with these comments. The revised site plan relocated 24 units from the south parcel to the northern parcel. The remaining 32 units on the south parcel are configured in two 16-plexes located along the southern border of the property. This layout is efficient, promotes solar energy opportunity, provides a large contiguous park space on the south parcel, and enhances compatibility with the surrounding area. The building mass is screened from the north by existing vegetation on the Lazy K parcel and from the south by vegetation along West Gunnison Ave. The perceived mass from the east (the only adjacent residential use) is greatly reduced.

This change resulted in a slight change in building mix (three 16-plex and one 8-plex versus three 8-plex and two 16-plex), but did not result in a change in the size of buildings, rental/ownership mix, or overall unit mix.

6. In your proposal you mention the desire to discuss “mitigating land use risk.” Please explain some of the options you envision if your team is selected.

Continuing to gather public input and refine the proposals prior to selecting a developer and project is an important first step. Entering into a disposition and development agreement prior to commencing a land use review process will also minimize the risk of the land use process getting derailed. Conceivably, the City could also bear responsibility for a portion of the land use review process, such as a zoning map amendment to vacate the existing PUD and re-zone the property as necessary to accommodate the selected proposal.

7. The ability for community organizations to lease space in the renovated restaurant building is of strong interest to the City. Please provide elaboration on that aspect of your proposal, if more details are available.

Gatesco anticipates developing the details around this aspect of the proposal if selected as the preferred developer for the project. Gatesco has met with a couple of local entities interested in the space, and is cognizant of the need for quality space, especially for a daycare facility. As part of a development agreement, Gatesco would be willing to commit to make a certain portion of the space available, with a preference for local non-profit or governmental entities.

Responses to Questions from Selection CommitteeQuestions for the GatesCo Team


LAZY K - Housing Developer RFP

Key Metrics

Gatesco

Project Team

Principal Gary Gates

Project Manager Peter Patten

Architect Ben White

Landscape Architect Margaret Loperfido

Contractor Chris Klein

Lender TBD

Legal Law of Rockies

Housing Proposed

Number of units 71

For Sale 15 (5 3BR and 10 2BR)

For rent 56

Housing Types SF, duplexes, 16-plexes, 8-plexes

Deed Restrictions yes

Income to be served 47 units below 120% AMI including 26 below 80% AMI

garages 15

Proposal SummaryGatesCo


Other Deal Points

Existing Structures Rennovate, use 1,000 for operations, 4,000 to be leased

Construction type Site Built / Off site fabrication

Proposed land use process Subdivision and PUD

Timing Not phased - two years

Land Purchase price $150,000

Confidential Financials provided? Yes

GVRHA Role qualify buyers/renters

Foundation Role mentioned as potential

Requirements of City City to do partial site prep on east parcel (demo cabins)

City complete public streets

Ability to rent for sale units if no qualified buyers

“discuss mitigating land use risk”

Tap fees negotiable - waiver not assumed

Proposal Summary (cont’d)GatesCo


Unit Type (SF, TH, duplex, condo, cabin,

apartment, etc)

# of Units

# of bed-rooms/

unit

# of bath-rooms /

unit

Total Bed-

rooms

Total Bath-rooms

For Sale or Rent?

Proposed Sale/Rent price Deed Re-stricted?

Anticipated year ready for

occupancy

Single Family 2 2 2 4 4 For Sale $207,360 Yes 2020

Single Family 3 3 2 9 6 For Sale $258,048 Yes 2020

2-Unit Townhome 8 2 2 16 16 For Sale $207,360 Yes 2020

2-Unit Townhome 2 3 2 6 4 For Sale $258,048 Yes 2020

Apartment 14 Efficiency 1 14 14 Rent See Estimated Rental Rates, below Yes 2020

Apartment 21 1 1 21 21 Rent See Estimated Rental Rates, below Yes 2020




Total 71 119 100

Estimated Rental Rates1

AMIEffi-

ciency 1/1 2/1 2/2 3/2

50% $606 $606 $779 $779 $865

80% $800 $950 $1,247 $1,247 $1,383

120% $800 $950 $1,300 $1,375 $1,800

200% $800 $950 $1,300 $1,375 $1,800

No Income Restriction2 $800 $950 $1,300 $1,375 $1,800

1: Rental rates are the lesser of (i) estimated market rate; and (ii) the maximum rate based on household income.

2: Units without income restrictions will still be subject to other deed restrictions, including prohibition on short term rentals and priority for local residents

Unit Count & Rental / Sale RatesGatesCo

Lazy K Housing Project

Gunnison, Colorado

NORTH

Proposed Concept Plan - Revised

00 100'

SCALE IN FEET

50'25' 200''

50

PARKING

38

PARKING

PARK

PARKING

(BY CITY)

DR

OP

-O

FF

8- PLEX

16- PLEX

100 YEARFLOODPLAIN

DUPLEXES AND SINGLE

FAMILY HOMES

PARK AREAS

CONSTRUCTED BY

CITY

COMMUNITY GATHERING

AND GARDEN AREA

RENOVATE EXISTING BUILDING

February 22, 2019

PARK AREAS

CONSTRUCTED BY

CITY

16- PLEX16- PLEX

COMMUNITY GATHERING

AND GARDEN AREA

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