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The Island interviews: SunCal’s Pat Keliher

Submitted by on 1, February 5, 2009 – 8:30 amNo Comment

In Alameda, we’ve got issues. And one of the big ones is the future of Alameda Point.

The former Naval base, which takes up about a third of the Island, has seen development plans come and go over the course of the last two decades. But Pat Keliher thinks he’s got the solution to our base boondoggle: An ambitious plan that includes 4,500 homes, a new corporate campus, retail, a 55-acre sports complex and about $250 million in public amenities.

“That’s been our mission from day one, to actually come up with a plan that we can actually build and deliver,” Keliher told us during a wide-ranging interview Tuesday.

Of course, some folks aren’t so sure. They want to know how SunCal will deal with the traffic, the contamination, flood concerns and more. They want to know where the money is going to come from in this time of economic crisis. And some just don’t want to see changes to Measure A, which would prohibit a lot of the apartments and other housing types included in the plan.

We asked Keliher about all of this, and here are his responses.

How did you come up with the mix of housing, retail and office that you did, and why does this make sense for the Point?
In understanding the constraints at Alameda Point – the land will only allow you to do certain things. You have flood constraints, you have geological constraints, and you have environmental constraints. In the areas where you have environmental constraints, you really don’t want to have any housing, so you’re better off having low (floor area ratio) commercial. Secondly, where you have geotechnical constraints, you don’t want to have single-family homes. You want buildings of four or five stories you can put on piles. Third, you have to bring in fill to mitigate for floods. It makes it very challenging to save historic structures.
To address your specific question about the diversity of housing – This is a 10- to 15-year project. And we will probably go through two or three cycles of real estate throughout the development of this project. If you don’t have a true, mixed-use, transit-oriented development, you will never be able to react to the marketplace. We’re very confident that we have the right jobs-housing balance.

In order to make this plan happen, you’ll have to get an amendment to Measure A on the ballot and passed. What are your next steps in making that happen?
Right now we are drafting the initiative language that will go on the ballot. If we decide to move forward with that language, we would probably start collecting signatures in the April-May time frame.
We’re not just going to be seeking a broad-based Measure A exemption. The whole plan the community has seen is going to be on the ballot.

A lot of folks are looking at the ballot measure to change Measure A for the Point plan as a referendum on the plan. But I see it as a referendum on our city’s leadership. How will you overcome that? And if you don’t, what happens next?
I don’t know why people would think that. I think the City Council has shown a lot of leadership. I know that the council members are very committed to the city. And I think they all believe that something needs to change out there (at the Point). This project, because of the Measure A issue, I think becomes fairly controversial. And I think it has to play its course. So until the voters decide that they want it or they don’t want it, I think it’s very challenging for the leadership to take a position.
There is no Plan B. I think we’ll have to address that when the time comes.

One of the biggest concerns people have raised is about financing for the project. Can you tell us more about D.E. Shaw and the company’s willingness and ability to pay for this?
We have a very strong relationship with D.E. Shaw. We’re lucky to have a capital partner like them at the Point. They continue to be in a relatively strong financial position and have held up very well in this economic downturn. They’re 100 percent committed to this. On January 19, we wrote a check for over $700,000 (to the city). From D.E. Shaw’s standpoint, their holdings have remained relatively flat, which places them, from what I heard, 30 to 40 percent above other firms.

The City Council is pretty adamant about wanting SunCal to remain on the project, but D.E. Shaw, as partner, has some rights of removal. What guarantees, if any, do we have that you’ll remain?
There’s been absolutely no evidence that we wouldn’t be here. D.E. Shaw is not a master developer, they’re a capital partner. And SunCal has a tremendous amount of expertise in master planning with communities.

Your plans to ask for tax increment financing (the city has said it will bond up to $184 million) to help fund the project infrastructure have caused some controversy. Why should the city give you the money?
This is not taxing existing residents. As you start creating value into the project with new infrastructure and the mitigations that we’re talking about, you start creating value in the land. As you start bringing in new residents, they start paying taxes, and the taxes go toward the bond payments to help fund the project. The bondholders take all of the risk. So it’s really a win-win for everybody.

Traffic is one of the biggest concerns raised about your plan. Can you address your plans to handle additional traffic and how those plans will be funded?
Extra bus service and (bus rapid transit), which would serve the entire Island, are subsidized by the project and the new homeowners. There’ll be mitigations in place and monitoring in place. We feel people who want to live in an environment like Alameda Point will be very transit-conscious. They’ll want to be on the Point for work, or they’re going to San Francisco (via ferry). Or people will take the bus directly to downtown Oakland or to the Fruitvale BART.

As you said, you’ve got a lot of physical hurdles to jump in developing the Point. Could you briefly address how you’ll be dealing with those?
Once we get through this process and have a plan that the community is happy with and we negotiate our deal with the Navy, the Navy will be really motivated. They have to clean the land in order to convey it. One of the things I think the public is very concerned about is the environmental cleanup. There are dollars in our business plan to clean up the site for residential standards. It’s tens of millions of dollars.
With the young Bay mud, you typically have a lot of settlement issues. We’re really not talking about a lot of new development (there). If there were development in the future, it would all be on pile foundations. The Navy was very smart in how they developed the site. The BEQ, BOQ, hangars, City Hall West, all that stuff is on pile foundations. It’s an expensive foundation, but it deals with the mud issue. Near the Seaplane Lagoon, you have loosely consolidated sands. Those require pile foundations and a lot of geotechnical work. You would need to bring in a lot of fill. Our plan deals with all these constraints.

Some folks have questioned whether your sea level rise projections are correct, and also, whether plans are being made to elevate historic buildings out of the flood zone.
It’s not practical to lift any of them out. Based on the data and the research we had, along with discussion with staff in Alameda, we all felt 18 inches was reasonable. People will be monitoring it. We’re talking about a two-phase mitigation. We can mitigate to 18 inches by bringing in fill. If it goes above that, we can bring in a levee system.

What’s happening with the Point’s existing tenants?
A classic example of that is the Bladium. The Bladium is an incredible example of an existing reuse that serves the needs of the community. We’re fully committed to figuring out a relocation package for them at the Point. There are a lot of other uses out there that we think are compatible with the environment we’re trying to create. Hangar One Vodka. At some point we’ll sit down with each of the owners and see whether we can relocate them. Allen Michaan, he uses the theater. We’re saving the theater. They’re doing their antique fair out there. Certainly there’s an opportunity to continue that use. Probably the big relocation besides the Bladium is the (Alameda Point) Collaborative. We’re meeting with them regularly to figure out all the logistics.

Is there anything you’d like to add?
One of the great things about this project is that the City Council has a policy of fiscal neutrality, which means the project has to pay for itself. There’s a $4 million upgrade to the existing firehouse out there. The fire mitigation and all the costs associated – all the staffing and equipment for the firehouse – are all in line for the business plan. All the parks, the park maintenance, the police, the fire. And at buildout (in 2025), there’s $5 million in excess that goes into the general fund for the rest of the Island. (That comes from) the money the project is bringing in – from transfer taxes, hotel, commercial. We’re talking about a potential of two hotels. The other thing is, we’re talking about an $11 million library that the project is funding. And the sports complex.

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