STAFF REPORT
TO:
City Center Redevelopment Authority
DATE: May 19, 2016
FROM:
Chad Eiken, Director, Community and Economic Development Director
Subject:
Approval of a Seventh Amendment to the Disposition and Development
Agreement (DDA) for the Vancouvercenter development, Phase 2, located northwest of the
intersection of 6th and Washington Streets
Objective:
Amend the existing development agreement to extend the construction start and
completion dates by approximately 10 months, replace the existing penalty for missing the
construction start date with an extension fee and other developer guarantees, clarify city
commitment regarding lease by developer of city-owned Block 10 for construction staging, and
establish a termination date if the agreement terms are not met by December 31, 2017.
Present Situation: Vancouvercenter is a two-and-a-half block mixed use phased development
located immediately east of Esther Short Park. As the second major project in the Esther Short
Redevelopment Area, Vancouvercenter has already played a significant role in the revitalization
of the downtown core. The first of two phases, completed in 2004, is currently occupied and
consists of: three towers, two of which are residential (6 stories and 7 stories, respectively, with a
total of 224 units) and one tower which is occupied by office, retail and restaurant uses (11
stories, 106,000 square feet); a public plaza; and an underground 809-stall parking garage which
is mostly owned by the City of Vancouver and used for tenant and public parking, including
events at the Hilton Conference Center, located to the southwest of the project site.
The proposal is to develop the second phase (Unit 1D in the original agreement) tower as a sixstory building which will consist of 110 apartment units (20% affordable; 80% market rate) with
a minimum of 2,200 square feet of ground floor retail space. The building would be constructed
on the deck above the parking garage.
The existing DDA as amended in December of 2014 has a performance requirement that
construction of the building must start no later than December 31, 2015, or the Developer would
be required to pay a penalty of $800,000, and this deadline was not met. The penalty originated
as an “extension fee” in the original DDA in 1999 to offset loss of anticipated tax revenues and
net parking revenues during the extension period between phases. This extension fee was
subsequently amended in 2000 (Amendment #1) to become an annual payment from the
Developer to the City. Three amendments later, in 2006, the annual payments were eliminated
and a deadline for commencement of the fourth tower (Unit 1D) was set for June 30, 2010, and a
“penalty” for non-performance of $800,000 was added to the agreement (Amendment #4). In
2010, the date for commencement of the fourth tower was extended by five years to June, 2015
(Amendment #5). In January of 2015, the date for commencement of the fourth tower was
extended by one year, to December 31, 2015 (Amendment #6). To date, the City has not
attempted to collect any of the $800,000 penalty.
In November of 2015, the Developer indicated that substantial progress had been made in
preparing the architectural plans and studies as of December 2015, but due to personnel changes
in the design and development team, was not able submit the construction plans in time to obtain
building permits and start construction by the deadline. Additionally, the Developer stated that it
had been challenging to obtain financing for the project and, consequently, additional time would
be needed to meet their obligations.
An application for a building permit and a complete set of architectural and structural plans were
submitted for the fourth tower on April 11, 2016 and are currently being reviewed by City
planners and building plans examiners. The Developer is still working to secure project financing
and indicates that this should be in place by August but no later than October 2016.
The CCRA Development Committee met to discuss the proposed amendment on three occasions:
March 3, April 14 and May 5, 2016. The Committee also sought the advice of Steve Janik,
attorney with Ball Janik LLP, who has provided advice on other downtown development
agreements. Four key themes came out of the discussions with the Subcommittee: 1) a
willingness to accommodate the developer’s request to move the construction start and end dates
if certain conditions are met; 2) a strong desire for there to be substantial yet enforceable
consequences if the project does not meet certain timelines; 3) in lieu of the existing penalty for
non-performance, the developer should pay a meaningful extension fee; and 4) if the project does
not proceed as proposed, then the entire agreement should terminate and the developer should
landscape the building footprint to mitigate for visual impacts until a building can be
constructed.
The proposed Amendment #7 would not modify the scope, size, uses, or density of the project
established by Amendment #6. Key aspects of the proposed amendment to the DDA are as
follows:
Section 2.1 Developer Guaranty and Extension
 Developer commits that building construction will commence no later than
October 31, 2016
 Developer commits that building construction will be substantially complete no
later than October 31, 2017
 Developer agrees to place funds in an escrow account to be controlled by City in
an amount sufficient to cover estimated permit fees, impact fees, and system
development charges pertaining to the project (approximately $430,000) no later
than June 30, 2016. Any fees already paid by Developer may be deducted from
the amount to be placed in the escrow account.



City agrees to release funds to Developer when said fees are due for purposes of
paying required fees and charges
Any funds remaining in the account as of October 31, 2017 will be retained by the
City of Vancouver
Developer agrees to pay an extension fee to the City of $25,000 immediately
following Council approval of Amendment #7
Section 2.3 Construction Staging
 Adds a deadline for execution of a lease of the south half of Block 10 for
construction staging of no later than July 31, 2016
 Lease will extend to March 1, 2017 (original completion date from Amendment
#6) and may be extended on a month-to-month basis at the sole discretion of the
City
Section 2.4 Non-Performance (Previously “Penalty”)
 City agrees to eliminate the existing lump sum penalty of $800,000 for nonperformance to be replaced by a daily penalty
 If construction is not substantially complete by October 31, 2017, the Developer
will pay the City $3,000 per day for every day that construction is found not to be
substantially complete (defined later in the amendment)
 If Unit 1D does not proceed to construction by October 31, 2017, Developer
commits to install landscaping within the footprint of Unit 1D to mitigate for
visual impacts to the surrounding area until such time as building construction
commences. A minimum of 8 deciduous trees are to be provided
Section 2.5 Term (New Section)
 If the terms of Amendment #7 are not satisfied by December 31, 2017, the entire
Disposition and Development Agreement and its seven amendments shall expire
Section 3.3 Definitions
 A definition of “substantially complete” which leaves little room for interpretation
has been added. This definition is in the Original DDA, but is included in this
amendment since several commitments depend on a clear understanding of what
is meant by substantially complete.
Advantages:
 Additional time is given to Developer to obtain permits and begin construction, while
ensuring that construction is complete by October 31, 2017
 Developer agrees to pay an extension fee to the City of $25,000
 Developer agrees to pay a daily penalty for non-performance of $3,000 per day if the
deadline for substantial completion of construction is not met
 City maintains option to not renew a lease of Block 10 to Developer for construction
staging after March 1, 2017 as needed, for example if an interested party were to
purchase Block 10 for redevelopment

If the terms of the amendment are not met by December 31, 2017, the DDA and all of its
amendments would terminate, which provides a substantial incentive to the Developer to
complete the project
Disadvantages:
 Reference to a lump sum penalty of $800,000 for non-performance would be deleted and
replaced with other assurances and penalties; however, the City’s primary goal is for the
tower to be built soon, and imposing this penalty would put the project at risk of not
being completed as proposed
Budget Impact:
 No impacts anticipated. The $800,000 penalty, which will be eliminated, has never been
included as anticipated revenue in any city budget.
Action Requested:
 Subject to public testimony received, recommend approval of the Disposition and
Development Agreement, Amendment #7, to City Council.
Exhibits:
1. Aerial Photo of Project Site
2. Chart Summarizing Initial DDA and Amendment Provisions
3. Draft 7th Amendment to Vancouvercenter DDA
4. Existing 6th Amendment to Vancouvercenter DDA