Where can I find a copy of the draft North Mare Island Disposition and Development Agreement (DDA)?

    The DDA can be found on this webpage under documents.

    What are the differences and similarities between the original 2019 term sheet, the 2020 term sheet and the DDA?

    The matrix comparing the term sheets and the DDA can be found on this webpage under documents.

    Why are there two term sheets?

    After the first term sheet was completed, Nimitz brought Southern Land Company (SLC) on board as its land manager for Mare Island. SLC identified that importing soils necessary for the development of North Mare Island (NMI) would cost approximately $20 Million dollars based on the unit costs provided in a 2018 geotechnical report ENGEO prepared for the City. These soil costs are in addition to the $30 Million in site development costs and $3.3 Million in demolition costs identified in the 2018 draft appraisal prepared for the City. This appraisal determined that the “As Is” market value of NMI was equal to negative ($20.9 Million). The uncertainty regarding the time to import an estimated two million cubic yards of fill to raise the elevation of NMI and complete surcharging, combined with the uncertainty as to when market conditions will support vertical development, —in part due to the COVID pandemic—prompted the revision of some of the key assumptions embodied in the original 2019 term sheet.

    The 2019 term sheet contemplated a land lease to Nimitz with a term of up to 19 years with option(s) to purchase. Why do the 2020 term sheet and the DDA contemplate the City selling the land to Nimitz within 120 days after the DDA is signed?

    As noted in the answer to Question 3 above, Nimitz must make a very significant investment in site preparation work (i.e., importing clean fill estimated to cost upwards of $20 Million dollars, followed by expensive and time-consuming surcharging and compaction at added expense) before Nimitz can commence the vertical development on NMI. Nimitz has concluded it will be unable to attract investors to pay for this substantial upfront investment under a lease with a purchase option, particularly when the lease is terminable by City if vertical development milestones are not met.  The City negotiating team concurred with that assessment and supported a structure under which Nimitz would close escrow on the purchase of the land before making these very substantial upfront investments.

    What is the DDA $3 Million purchase price based on?

    The original term sheet and 4th Amended and Restated Exclusive Negotiating Agreement (ENA) anticipated a purchase price for NMI equal to the Fair Market Value (As-Is appraisal methodology) less the estimated site improvement costs, but in no event less than the outstanding principal and interest balance of the City’s U.S. Department of Housing and Urban Development (HUD) Section 108 Loan Guarantee for the City’s prior NMI Demolition Project (HUD Loan).  Based on the 2018 draft appraisal prepared for the City which identified $30 Million of site development costs and $3.3 Million of demolition costs, the “As Is” market value of NMI was anticipated to equal a negative 20.9 Million dollars (-$20,900,000.00).  As the outstanding balance of the HUD loan was estimated at the time to be $3 Million, that was the negotiated purchase price.  Although the current outstanding HUD loan balance is less, at approximately $2.3 Million plus interest, the DDA, which is based on the 2020 term sheet, retains the $3 Million purchase price.

    The original term sheet included specific vertical development milestones that Nimitz would have to meet to keep the lease with purchase option in place. What were those milestones, and why were they eliminated?

    The original term sheet, which anticipated a lease with a purchase option, required Nimitz to develop and/or rehabilitate 100,000 square feet (SF) of building space on Mare Island by year 5 of the lease, with an additional 100,000 SF of development or rehabilitation work by each of years 8 and 11, totaling 300,000 SF within 11 years.  In comparison, Nimitz has already executed new commercial leases for approximately 300,000 SF since they assumed development rights from Lennar and have rehabilitated approximately 100,000 SF (Factory OS Expansion), thereby achieving the original term sheet’s year 5 development milestone goal.  Nimitz is also in the process of rehabilitating an additional 170,000 SF.  At the end of this current rehab work, Nimitz anticipates it will have spent approximately $10 Million. With that milestone already achieved, negotiators worked to realize further redevelopment of the island during the planning process to retain that momentum. Under the proposed DDA, Nimitz is now obligated to construct and develop the Connolly Corridor Development site within 60 months after Initial Closing. This mixed-use development includes approximately 74,000 SF of retail/office space, approximately 194,000 SF of open space, up to 373 residential units, and a hotel with up to 200 rooms. In addition, the City team believes the requirements for Nimitz to prepare and submit a new proposed Specific Plan within 24 months, and the guarantee that the City and the Vallejo Unified School District will receive a minimum amount of revenue from increased property taxes by year 5 (see answer to Question 7), will more effectively incentivize timely, quality development of, and investment in, Mare Island.    

    Does the DDA include any development milestones to incentivize Nimitz to develop right away and discourage land banking?

    Yes. The DDA obligates Nimitz to pay to the City of Vallejo and to the Vallejo Unified School District (VUSD) beginning in year 5, and continuing each year thereafter, a “payment in lieu of property taxes” (PILOT) if it has not developed the island.   The PILOT obligates Nimitz to pay an amount equal to the difference between property taxes actually paid and the taxes the City and VUSD would have received if Nimitz development resulted in an increase in assessed valuation of $26 Million dollars. So, for example, if no new development occurs by year 5 following the execution of the DDA, then Nimitz would pay approximately $49,400 to the City and approximately $62,400 to the VUSD annually (i.e. $26 Million x .01 = $260,000, or the estimated amount of foregone property taxes). The City’s share of foregone property taxes is 19% and the Vallejo Unified School District (VUSD) share is 24%.  The payments in lieu of taxes would decrease as Nimitz undertakes activities that increase the assessed valuation of its Mare Island property and would cease entirely at such time as Nimitz completes development with an assessed value of at least $26 Million (in 2020/21 dollars).  The DDA imposes additional milestones on Nimitz to complete the demolition of unused buildings on NMI (within 24 months following closing), prepare and submit a new comprehensive Specific Plan (within 24 months following closing), and develop Connolly Corridor (within 60 months following closing).

    The DDA requires Nimitz to prepare and submit to the City for consideration a new proposed Specific Plan and an Island-wide Infrastructure Plan to replace the existing Specific Plan, the original version of which was prepared ...

    The DDA requires Nimitz to prepare and submit to the City for consideration a new proposed Specific Plan and an Island-wide Infrastructure Plan to replace the existing Specific Plan, the original version of which was prepared more than 21 years ago.   Will the City have to commit to approve a new Specific Plan for Mare Island?

    No.  

    While Nimitz would have to prepare and submit a new comprehensive Specific Plan to City for consideration, the City Council will retain full and complete discretion as to whether to approve or disapprove or recommend changes to any proposed specific plan.  Further, an appropriate California Environmental Quality Act (CEQA) document will be prepared in connection with City’s consideration of the new proposed Specific Plan and Infrastructure Plan to identify environmental impacts, and City Council will retain full and complete discretion as to any CEQA findings.


    Will the Mare Island Golf Course be included in the future Specific Plan process?

    Yes. 


    Per the DDA, the new Specific Plan to be submitted by Nimitz within 24 months after the initial Closing will encompass the entire Island, including the Golf Course.  

    How will the public infrastructure (utilities and roadways) be impacted with Nimitz taking ownership of NMI?

    After the initial transfer, Nimitz will own the roadways within the City’s 125 acres and will lease the roadways within the Navy-owned parcel on NMI. The City will have the option, but not the obligation, to accept an irrevocable offer to dedicate the roadways, however, prior to any acceptance, Nimitz will be obligated to maintain all roadways on NMI in a safe and usable condition and ensure that the NMI roadways remain open and accessible for use by the general public.   Nimitz will also bear all costs and liabilities related to the operation and maintenance of the NMI roadways until such time as the City accepts the offer to dedicate, or after Nimitz develops NMI, performs the necessary upgrades to the Property, and the City accepts such improvements. The City would then accept formal dedication and ownership.

     

    The transfer of NMI will initially exclude the water, sewer, and storm systems as the City and Vallejo Flood and Wastewater (VFWD), respectively, must maintain ownership of these systems.  However, Nimitz has agreed to reimburse both the City for NMI water operations and maintenance costs and VFWD for NMI sewer and storm operations and maintenance costs until such time as Nimitz has upgraded and/or replaced the existing systems and the City and VFWD have accepted the improved systems.

     

    As Nimitz is obligated to maintain the existing NMI roadways and reimburse the City and VFWD their costs to maintain the existing water and sewer and storm systems, Nimitz is further incentivized to develop new public infrastructure as soon as possible.

    What is Nimitz’s focus in the first phase of development?

    Nimitz has identified the Connolly Corridor Development, discussed in the answer to Question 6 above, as its Phase 1 development project.  Nimitz has already begun development of the planning concepts and descriptions to facilitate the CEQA review for this project, which would be the first major mixed-use commercial development on South Island under the current Specific Plan. Concurrently, Nimitz will focus on developing the Beautification Plan and a new Specific Plan for the entire Island that will include phased installation and construction of a new Backbone Infrastructure Plan.

    Why does the City need another extension on the Exclusive Negotiation Agreement (ENA)?

    As the Sixth Amended and Restated ENA for NMI expires on March 31, 2022, a short-term extension is required to ensure sufficient time to finalize and execute the DDA and ancillary documents.  

    If City /Council approves the DDA what happens next?

    If the DDA is approved by the City Council, the City and Nimitz/Southern Land Company (SLC) will execute the DDA after which both parties will begin the pre-closing process and Nimitz will commence its 90-day Feasibility Period.  The initial transfer of the City-owned 125 acres is anticipated to occur within approximately 120 days following the execution of the DDA, allowing Nimitz and SLC to move forward quickly on the next phase of land and infrastructure planning and development of the Connolly Corridor.