• Block 10 is a vacant City-owned block located north of W. 8th Street and east of Columbia Street which has been held for redevelopment.
• In May of 2019 City Council, in response to a private development proposal, directed staff to enter into negotiations with Holland Partner Group (Holland) for the disposition and development of the property.
• Holland proposes to build a full-block mixed use building consisting of 105-110 residential units, 80,000 square feet of office space, 12,500 square feet of ground floor retail space, and an internal two-level parking garage, with construction to commence no later than the first quarter of 2020.
• City staff and Holland have tentatively agreed to the terms of a long-term ground lease with an option to purchase, with such lease to take effect no later than December 31, 2019, in order for Holland to make full use of the available Opportunity Zone incentive.
• Key considerations requested by Holland include: 1) use of the City's Multi-Family Tax Exemption program (8-year option with 20% of the units to be rented at no more than 100% of Area Median Income); 2) that Holland's Option to Purchase the Vancouvercenter parking garage be extended by three (3) years under a separate agreement; 3) that Council favorably consider an ordinance amendment to VMC 20.630.020 "Building Lines" to allow the building to encroach 5 feet into the public right-of-way for its entire height; and 4) that the City will work with Holland to provide them with management oversight of the garage subject to separate agreement.
• The City Center Redevelopment Authority (CCRA) reviewed the proposal at its September 19, 2019, meeting and unanimously recommended that Council approved the Disposition and Development Agreement (DDA) (discussion on page 2 of attached CCRA draft minutes).

Goal 8, Objective 8.1: Make downtown Vancouver a vibrant destination for the community and the region.

Action 8.1.1: Surplus Block 10 and issue an RFP to solicit a use that will contribute to the downtown vitality

Block 10 is a 41,681 square foot vacant City-owned block located east of Columbia Street and north of 8th Street in downtown Vancouver, zoned CX, City Center.

In the early 1990s, the City of Vancouver purchased five full city blocks on the north, northeast, and east sides of Esther Short Park from the Lucky Lager Brewery Company, which had vacated the property several years before. This purchase and subsequent planning efforts through the Esther Short Redevelopment Plan of 1998 spurred the dramatic improvements to the park itself and redevelopment of a number of properties in the vicinity of Esther Short Park, the oldest known public park in the Pacific Northwest. Block 10, which refers to its designation among the original thirty blocks included in the Esther Short Plan, is the last remaining vacant block of the former brewery blocks. The block was vacant and without any structures when the City purchased it in the early 1990s.

For years the City has held the block "in reserve" so as to not compete with other redevelopment efforts such as the Waterfront. An analysis from The Leland Group, consultants to the City, in 2015 indicated that with the Waterfront construction underway, the City should not try and "time the market," but instead should advertise the property for redevelopment.

In May of 2016, the City issued a Request for Proposals (RFP) and received three responses. Gramor Development was selected based on their proposed mixed use project including a grocery store, and negotiations between City staff and Gramor ensued. However, after more than two years of discussions of a possible disposition and development agreement (DDA) without reaching agreement on the terms, the City Council terminated negotiations with Gramor in May of 2019.

In May of 2019, City Council, in response to a proposal from The Holland Partner Group for a large mixed use project on Block 10 which would utilize the newly created Opportunity Zone incentives, provided direction to staff to commence negotiations with The Holland Partner Group with the intent to construct a large mixed-use project on Block 10. 

The proposed development is described as follows:

• 80,000 square foot, four-story office building above a two-story parking deck, with 40,000 square feet to be occupied by Holland for their corporate headquarters
• 105-110 apartments in a five-story building over the same two-story parking deck
• 110 parking stalls on portions of two floors with driveway access from 8th Street on the south and 9th Street on the north.
• 12,500 square feet of active retail uses are proposed along portions of Columbia, 8th, and Washington Streets, with particular emphasis on the corners.
• A courtyard above the second floor would be usable by tenants (floors above the parking deck are in the shape of a "U" with the opening to the south). See attached architectural renderings at Exhibit 4.

Substantive elements negotiated by City staff included in the draft DDA are as follows:

• Holland commits to relocating its headquarters to the new building once completed.
• Construction is anticipated to commence no later than March 2020, but in no case later than May 2020.
• Disposition of the property will be through a ground lease of 60 years with a single extension of 39 years, with an option to purchase at the end of the 60th and 80th  years, or at the end of the extension term if exercised.
• Target for execution of the ground lease is no later than December 31, 2019, in order to maximize the benefit to the project from the City's Opportunity Zone incentives.
• Building will encroach 5 feet over the sidewalk above the first floor up to the full height of the building (approximately 80 feet) on all four sides of the property, if City Council approves an amendment to VMC 20.630.020 "Building Lines" through a separate ordinance. This amendment was considered and deliberated by the Planning Commission on October 8, 2019. The six commission members in attendance on were equally divided on whether to recommend approval of the proposed amendment and could not obtain a majority vote for or against. (The full transcript and meeting minutes will be available for Council's review and consideration.)  .
• 20% of the residential units would be rented at no greater than 100% of Area Median Income (AMI) to utilize the City's 8-Year Multi-Family Tax Exemption program, through a separate agreement to be considered by Council in the coming weeks.
• Holland requests an extension of their Option to Purchase the City's Vancouvercenter Parking Garage (located on the block to the south of the project) by three years (to December 2022), by separately amending the Vancouvercenter Disposition and Development Agreement.
• Holland is also requesting that they be allowed to operate the garage during the three-year period to maximize its use to the greatest extent through shared use by residential and office tenants, which have different peak periods of demand, in order to accommodate approximately 200 additional vehicles for tenants of Block 10, and through a separate agreement.

Substantive elements negotiated by City staff which will be in a forthcoming lease agreement (to be approved separately by City Council) are as follows:

• Ground lease will be an absolute triple net lease as follows:
  • $2,500 per month until completion of the project or 36 months after execution of the lease, whichever is first;
  • $5,500 per month from 37 months to 48 months;
  • $11,100 per month from 49 months to the start of the 11th lease year (based on 4% cap rate applied to $3.33 million appraised value;
  • In the 11th lease year, rent shall increase to $13,875 per month;
  • An annual adjustment based on the Consumer Price Index for all Urban Consumers (CPI-U) will apply beyond year 10 subject to an annual ceiling of 3%.

Separate approvals that will be needed in order for the project to move forward include:

1. approval of the ground lease (City Council);
2. approval of an amendment to the Vancouvercenter DDA to extend Holland's Option to Purchase the parking garage by three years (City Council);
3. approval of an amendment to VMC 20.630.020 (City Council);
4. approval of an agreement regarding the application of the 8-Year Multi-Family Tax Exemption option to the project (City Council);
5. approval of a master operating agreement for the Vancouvercenter garage (City Council), or license of approximately 200 unreserved parking spaces in said garage (Parking Manager); and
6. approval of the land use/design review, engineering and building permits (City staff).

1. Facilitates the construction of the largest mixed use project in downtown - including the most space devoted to office use (80,000 square feet) - since the Recession;
2. Retains and grows employment in the downtown;
3. Activates the last remaining block from the City's acquisition of the former Lucky Lager Brewery nearly 30 years ago;
4. Active retail uses along Columbia, 8th, and Washington Streets will strengthen connections between Main Street and more recent development around Esther Short Park;
5. The project will provide 105 -110 units of housing, of which 20% will be workforce units rented at no more than 100% of Area Median Income for a period of 8 years;
6. One of the first projects to utilize the Opportunity Zone incentive; and
7. The proposed lease will provide an ongoing source of revenue to the City for further downtown redevelopment efforts.