<html xmlns:o="urn:schemas-microsoft-com:office:office" xmlns:w="urn:schemas-microsoft-com:office:word" xmlns:m="http://schemas.microsoft.com/office/2004/12/omml" xmlns="http://www.w3.org/TR/REC-html40"> <head> <meta http-equiv="Content-Type" content="text/html; charset=utf-8"> <meta name="Generator" content="Microsoft Word 15 (filtered medium)"> <style></style> </head> <body lang="EN-US" link="#0563C1" vlink="#954F72"> <div class="WordSection1"> I have a number of comments concerning the Community Benefits project, and I am taking the liberty of sharing them with you prior to tomorrow’s meeting. If we are to grant additional height and density to development projects, I want to be very sure that we are receiving the appropriate consideration in return. In that regard, please note the following:<o:p></o:p> <o:p> </o:p> 1) I have previously expressed my view that CB be defined narrowly, rather than expansively. This community has repeatedly defined our greatest needs as more affordable housing and affordable commercial space (and I include affordable space for non-profits and arts groups as within this category). It is not that there are not other worthy goals, but I believe we should be addressing our community’s most severe needs and focus on them, rather than diffusing the impact of what we receive over many categories. For instance, while creating a net zero building is laudable, this is a requirement we could consider independently of a Community Benefit exchange. In effect, if we desire this we could legislate it. And since it is our goal to achieve net zero commercial buildings by 2031, I do not think that this is a worthy exchange for substantial increases in residential units. Open Space has dedicated funding sources, and I believe that other priorities should take precedence for a Community Benefits exchange. There are an infinite number of needs we can identify as providing Community Benefit; I suggest we focus on our greatest – and most easily quantifiable - needs. The BVCP identifies at least 9 different categories of potential community benefit, and does so without limiting the possibility of others. This is, in my view, excessive. And attempting to establish monetary equivalents between various types of Community Benefits will be an exercise of great complexity.<o:p></o:p> <o:p> </o:p> 2) Although the 30 Pearl covenant defined affordable space as 75% of market rate, it is not clear to me what the basis is for that percentage. Depending upon the values used, that may or may not provide truly affordable space. For example, 75% of $40 per square foot is still $30, or $90,000 annually for a 3,000 square foot space. Even if the 75% is applied to a lower number, we are still looking at triple net leases, with a great deal of pass through expenses in addition to the base rent. For most arts groups, this would be out of reach. I think we need to better understand the current rent values and what it would imply for these below market rents.<o:p></o:p> <o:p> </o:p> 3) At 30 Pearl the affordable space consisted of 9,300 square feet. We should look at the percentage of the total buildable square footage that the affordable space represents, and create a standard that can be applied across developments (e.g., no less than 15% or 20% of total square footage, or whatever we deem appropriate). <o:p></o:p> <o:p> </o:p> 4) If we want to ensure that non-profits and arts groups get to participate, perhaps we should carve out a portion of the total affordable space that must be rented to those groups (1/4? 1/3?) at even larger discounts than what is offered to for-profit businesses, at perhaps 50-60% of market rate. <o:p></o:p> <o:p> </o:p> 5) It is clear that one of the problems with current leases is their limited term. With rent increases  for affordable spaces capped annually there is less need for landlords to insist upon shorter terms in the expectation that they will benefit from rising commercial lease rates. I would suggest that we consider the option for a tenant to enter into a 10-year lease with a 5-year renewal option. After this time the landlord can reset the lease to the percentage of the then prevailing market rent permitted by his/her covenant. Doing this will promote businesses that have a long life in the community. <o:p></o:p> <o:p> </o:p> 6) Speaking of which, the 30 Pearl covenant provides for annual increases at the greater of i) CPI or ii) 3%. I would make it the lesser of CPI or 3%, with the ability to catch up in years when CPI is low. In other words, maximum of 3% increase per year.<o:p></o:p> <o:p> </o:p> 7) I would require a distribution of sizes for affordable spaces, to ensure that we provide opportunity for even very small tenants (under 1,000 square feet), somewhat larger tenants (1,000-2,000 square feet) and tenants between 2,000-3,000 square feet.<o:p></o:p> <o:p> </o:p> 8) The 30 Pearl covenant provides that if the space is marketed for 60 days without locating a tenant, the developer can rent to anyone at all. I strongly disagree, particularly as we emerge from the calamity of the Coronavirus. It may take quite a while for businesses to get back on their feet and be prepared to commit to leases. If the developer cannot locate a tenant within, say, 120 days of the commencement of marketing, I suggest that they be granted an exception that permits them to enter into a short term lease for their space (perhaps 2 years rather than 10) at even lower rates of their choosing, after which time they can re-lease the space to a tenant that can pay the full affordable rent.  Under no circumstances should spaces that are intended to be affordable revert to market rates.<o:p></o:p> <o:p> </o:p> 9) One of the goals of the program is to promote local business ownership. I would not include local ownership of national franchises. Local is local. <o:p></o:p> <o:p> </o:p> 10) Restaurant leases typically provide both a base rent and a percentage rent (i.e., a percentage of net sales). How would this be treated under an affordable rent regime?<o:p></o:p> <o:p> </o:p> And, of course, all of this presupposes that this is an appropriate time to pursue this project in light of our current conditions. We do not yet understand what the post-Covid world will look like, in terms of demand for housing and commercial space, the availability of financing for these projects, and whether any of the comments I have made, or the proposals that staff will bring to us, will be commercially reasonable in that new environment. And is this the time to devote scarce staff resources to develop a program in an environment with so many unknowns?<o:p></o:p> <o:p> </o:p> Sorry for the length; this is what happens when you are cooped up at home, and the snow keeps falling. <o:p></o:p> <o:p> </o:p> </div> </body> </html>