A communication transmitted from Louis A. DePasquale, City Manager, relative to Awaiting Report Item Number 18-82, regarding purchasing buildings being sold by the Episcopal Divinity School

C I T Y O F C A M B R I D G E Community Development Department Page 1 of 3 IRAM FAROOQ Assistant City Manager for Community Development SANDRA CLARKE Deputy Director Chief of Administration KHALIL MOGASSABI Deputy Director Chief of Planning MEMORANDUM To: Louis A. DePasquale, City Manager From: Iram Farooq, Assistant City Manager for Community Development Date: September 10, 2018 Re: Policy Order O-8 dated July 30, 2018 regarding purchasing buildings being sold by the Episcopal Divinity School After announcing plans to move its operations out of Cambridge, the Episcopal Divinity School (EDS) has offered its properties for sale. Through separate offerings, EDS offered the following properties. 1. Institutional Campus at 99 Brattle Street: EDS’ 33% share in the 99 Brattle Condominium, a mixed campus of buildings owned and used by EDS and Lesley University; the offering included buildings used by EDS predominantly for administrative and academic uses 2. Deanery at 4 Berkeley Street: a single-family home, built for Richard Henry Dana, Jr. in 1851, on a 20,926 square foot parcel which for many years has been used as the residence of EDS president 3. Residential Campus at 8-15 St. John’s Road: a 55,275 square foot parcel with six historic buildings used by EDS for faculty and student housing Through prior agreements with EDS, Lesley University had a right of first offer on both the Institutional Campus and the Deanery. Lesley recently purchased both of these properties for a total of $25,000,000. When the properties were first offered for sale last year, staff reviewed them all and identified that the Residential Campus had the greatest potential for affordable housing. Staff met with EDS officials and their sales team several times to tour the properties and discuss our interest in assessing how affordable housing might be created there. We discussed the unique opportunity of a site of this size in an area with fewer affordable opportunities and the challenges to creating affordable housing here. EDS officials were very interested and supportive of our interest in analyzing whether the property might be redeveloped as affordable housing. However, they also indicated that in order to support their continuing mission, they would have to demonstrate that any sale of the property was at the full market value.

Page 2 of 2 Challenges to creating affordable housing at this site are similar to those we see in other lower density areas. Property acquisition costs are prohibitively expensive for affordable housing at the densities allowed by existing zoning. Further, the Residential Campus includes six historic buildings, all of which would likely be determined to be historically significant. We worked with the Assessing Department to estimate the market value of the property. The six historic buildings on the property range in size from around 2,500 square feet to more than 4,100 square feet, with total built square footage of approximately 19,000 square feet. Renovation and sale of the six existing buildings as single-family homes would likely allow for the highest sales price, and market-rate developers would likely determine their bid amounts with this intent. For affordable housing, we determined the following: • Accommodating affordable housing units within the existing, or expanded structures was not close to supporting the property acquisition price; • More than 40 affordable units would be required to make the acquisition financially feasible. While a small number of units could be accommodated in the existing structures, creating 40 units would require significant new construction and zoning relief, and would require demolition of some of the historically significant structures. In addition to staff analysis, we asked Just-A-Start Corporation to independently assess the feasibility of the site as an affordable housing development, assuming that zoning relief could be sought through a comprehensive permit. JAS staff met with EDS, toured the property several times, discussed the property with City departments including the Historical Commission to develop an approach they thought most likely to yield a feasible development. JAS received guidance from the broker on the expected sales price. After examining how a mixed-income homeownership project would allow them to achieve that sales price, JAS determined that there would be a significant funding gap given the high land cost, a need for more than $15 million in subsidy from the City, a need to potentially demolish at least two of the historic buildings on the site, and significant risk associated with what would likely be a difficult permitting process given the density needed to make the project feasible. Given these factors, JAS determined that it would not be prudent to submit an offer on the site. Our understanding is that the Residential Campus is under contract, although the sale is not yet complete. If it were to become available again with greater price flexibility, we remain open to reassessing how it might be redeveloped as

Page 2 of 2 affordable housing. The size and scale of development needed to support the value of the property would likely require significant zoning relief, demolition of historically significant structures, and an inordinate amount of City funds when compared to other opportunities to create affordable housing.