City Manager Letter

In response to Awaiting Report Item Number 14-18 regarding report on determining the legal and regulatory process to collaborate with the Cambridge Redevelopment Authority, companies in the private sector and/or donors that are willing to partner with the City to achieve the desired development objectives at the Foundry Buidling, I am please to provide you the following update:

Currently, the City is continuing to identify principles regarding programming, financing and operations for the Foundry building redevelopment through community input, discussions among city staff, and other engaged parties, as well as work with the Cambridge Redevelopment Authority (CRA) to explore strategies for collaboration.  A community meeting regarding the Foundry building is tentatively scheduled for June 24

2014.  The City has committed to using $6 million to proceed with initial capital improvements to the building to address code and accessibility requirements, sprinkler and plumbing system updates, and walls and insulation updates.

Based on similar examples, the complete redevelopment process for the Foundry building will likely include five basic phases:

1. Acquisition and Due Diligence (2012-2013)

2. Predevelopment Phase (current, 2014)

3. Transaction Phase (Fall 2014 - Spring 2015)

4. Redevelopment Phase (2015 - 2016)

5. Operational Phase (2016 forward)

1.  Acquisition and Due Diligence Phase (2012-2013)

The City acquired the Foundry building in connection with a zoning amendment sought by Alexandria Real Estate in 2009.  The zoning amendment included a provision that at least 10,000 square feet of the building's Gross Floor Area will be dedicated to educational, cultural, or institutional uses as listed in Article 4, Section 4.33 Table of Use Regulations of the Cambridge Zoning Ordinance.

Since that time, there have been several public forums including multiple discussions regarding the potential redevelopment of the property into a multi-purpose community center with a particular focus on science, technology, engineering, arts, and math (STEAM) activities, visual and performing arts space, workforce development opportunities, and incubator space for emerging companies.

The March 3, 2014 report on the Foundry Building, submitted by the City Manager to City Council, summarizes due diligence activities that have occurred since the acquisition of the building, including a Reuse Study conducted HMFH (2013), community outreach, initial legal review and fiscal impact analyses.   Five different implementation approaches were discussed along with relative advantages and disadvantages.  Based on this analysis and discussion, it is the intention of the City to retain ownership of the building.  Per the March 3

report, there are also notable advantages to approach #2 (City works with the CRA to redevelop the property) including a two-step negotiated transaction and more flexibility with procurement processes, as further described below.

The Cambridge City Council Policy Order adopted on March 17, 2014 requested that the City Manager appropriate up to $6 million to facilitate necessary capital improvements to the Foundry building as well as to determine the legal and regulatory process necessary to collaborate with the Cambridge Redevelopment Authority (CRA).   The City and the CRA signed a Letter of Agreement on April 14, 2014 (attached) stating that the two parties will continue to explore scenarios for collaboration.

The City Manager's office is also working with staff from the Law Department, Finance Department, Assessing Department, Community Development Department, and the Cambridge Redevelopment Authority to develop a community engagement process, and explore governance and development models to implement the project.

There will be several opportunities over the next few months for additional community input and discussion regarding the Foundry building, including a planned community meeting on Tuesday June 24

, 2014, as well as other public forums:

June 24, 2014 - community meeting, Multicultural Arts Center

July 23, 2014 - CRA monthly meeting, 6

Neighborhood association monthly meeting(s), to be scheduled (East Cambridge Planning Team and/or Neighborhood Association of East Cambridge)

September 2014 - community meeting, to be scheduled

These meetings will help refine the development framework, guiding principles, and overall building mission and goals that will become the basis for a redevelopment Request for Proposals (RFP) and building lease.

Development Objectives and Building Programming

In determining the development objectives and building programming for the Foundry, the City will also identify nearby STEAM related programs and projects, including workforce development, teen programs, performing and visual arts, and entrepreneurial development;  and also research comparable projects, both locally and nationally, for additional guidance on planning for the Foundry redevelopment and operation.

Governance and Management Strategies

During this phase, the City will also research using the possibility of using a CRA Demonstration Project which may allow the CRA to utilize the tools available to urban redevelopment agencies as set forth in M.G.L. Chapter 121B Section 46(f).  An informational meeting with the State Department of Housing and Community Development is being scheduled for mid-June.

Options are being explored to set up the necessary governing body(s) and transactional structure, in order to consider and protect the long term financial interests of both the City and the CRA, as well as provide oversight that ensures the mission and criteria set forth in any lease agreements continue to be realized.

Development and Finance Strategies

The City and CRA are exploring and testing the implications of different development options which look comprehensively at the interrelationship of program (tenant types), the development entity, the operating entity, and the sources and uses of funds in both the development and operational phases.

CRA has engaged HR&A, a real estate advisory firm, to test different financial implications of the development models, which will help inform a potential RFP for redeveloping and leasing the building and the criteria for evaluating proposals.

Community Engagement (September 2014)

It is anticipated that the City and the CRA will continue to engage the community at this phase in order to review the draft Demonstration Plan and draft Request for Information/Request for Proposal materials, especially regarding the building mission, principles, program parameters, and evaluation criteria.

Demonstration Plan (September - November 2014)

If it is decided to move forward with a Demonstration Plan, the CRA will prepare and submit a Demonstration Plan, which incorporates community and City input, for City Council approval.

Based on the research and discussions in the Predevelopment Phase, the City and the CRA would enter into a more formal agreement to advance the project into development.

Building Lease and Redevelopment Request for Information/Request for Proposal (RFI/RFP) (November 2014 - March 2015)

The CRA would then initiate a two-step process to solicit information from interested private and non-profit organizations, and would then manage a process with the City to narrow the list before issuing a more detailed request for proposals.  Based on the evaluation criteria, including program concept and financial abilities, an entity would be selected to sub-lease and redevelop the building.

While no final decisions have been made as to how the building will ultimately be redeveloped, it is anticipated that during this phase, the entity that is selected to redevelop the Foundry building will begin finalizing the design, incorporating and refining the program concept and secure the project financing and move the project construction forward.

This entity would continue to engage and inform the CRA, the City, the community, and any oversight bodies to ensure that the project remains consistent with the project mission and principles and the tenets of the Demonstration Plan.

No final decisions have been made regarding the future operation of the building however, it's assumed that the redeveloping entity of the Foundry building would be expected to manage all aspects of building operations including maintenance and repairs, debt repayment if any, and sub-leasing and/or the designation of operators to manage programs within the building.  An oversight body would likely continue to be involved in ensuring that the building and its operation stay true to the mission and principles.   Financing the operational phase may involve a wide variety of sources such as market and below-market rents, memberships, event sales, usage fees, fund-raising, and/or other grants that could subsidize operations.