Not sure why the report to the City Council says the partnership, WBDC and Winn, purchase price is 800,000? If the City is only going to get $400,000 wouldn't the purchase price be $400,000 not 800,000.
Acorn on the other hand purchase price of 675,000 results in the City of Worcester getting 275,000 more dollars then the offer from the partnership between WBDC and Winn. Not couple that with 28 units versus 17 with no affordable housing component?
Is there any reason why the council should not vote 11 to 0 to grant the RFP to Acorn?
WRRB/Telegram District City Council Forum 10/18
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This forum is for all district council candidates; all candidates are here
today. Format: 14 total questions, 4 questions across districts (for all
candida...
6 months ago
3 comments:
I've got one for all to consider....
1) Council awards it to developer A which had the highest bid
2) Developer A fails to close the transaction (e.g., can't get financing, etc.) and City gets $0
3) City has to return to the beginning a year later and start over
The developer's capacity to close the transaction (actually deliver the promised $ to the City) has to be weighed in making the selection.
As an example, let's say Developer A bids $750,000 and has a 50% chance of closing the deal and developer B bids $500,000 but has an 80% chance of closing the deal. So, from the City's POV, they can expect to realize $375,000($750,000 x 50%) from Developer A while Developer B's expected payout to the City is $400,000 ($500,000 x 80%). Statistically speaking, the City can expect to realize more $ by going with the lower bid!
In your analysis, you are assuming each party has the same odds of closing the deal and putting the money in the city's hands.
I don't know what odds to give either of the firms, but I am pretty sure that they are not equal.
Eric K.
Worc., MA
Eric:
Any RFP that I have ever seen is that if you are awarded the bid, you had 30 to 90 days to come up with the cash. If you don't come up with the cash you lose the deposit.
I say award the bid to the developer who bid 675,000. GIve him the 30 or 90 days to come up with the rest of the cash. If they do not, keep the deposit and rebid.
By the way Pharmasphere was awarded the South Worcester parcel based on this same logic that you site. Even though there bid was $1 versus $50,000 the City felt that they had their financing in place and could start right away--Spring of 2008. Two years later, we have nothing.
Bill
To be clear, I am not advocating for either Acorn or WINN's bid (as an underemployed real estate development professional I have an obligation to me and my family to keep my employment options open), just offering up one possible reason why the City might not choose the high bidder.
Regarding Pharmasphere, I think the analysis offered here would favor the abbuter's bid. Let's say Pharmasphere has a 100% chance of paying a buck. Then let's say the abutter has just a 20% chance of coming up with the $50k. Even then, his expected payment to the City is $10,000, which is still significantly larger than the $1 from Pharmasphere.
Indeed, setting the bid amounts aside for a minute, I would suggest that the City's choice of Pharmasphere has a lot of similarities to your advocacy for Acorn as follows:
Pharmasphere - Let's go with the riskier (and in this case, lower) bidder that has some tremendous long term upside for the City in terms of urban redevelopment, job creation, etc.
Boys Club - Let's go with the developer who has never built in Worc. (at least not that I am aware) and wants to build something in downtown that has not been done in recent history (downtown market rate housing) in a questionable area for residential (honestly, how many of us would want to have Lincoln Square as our residential address?) as a long term investment to revitalize downtown, create demand for retail, etc.
I wish both WINN and Acorn the best of luck in their bid. And if you win the bid, please give me a call, I've got some time to work on the deal and could use the $.
Eric K.
Worc., MA
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