ACE: Loveland Releases Another RFP

Loveland - September 2, 2011

The City of Loveland has released an RFP (request for proposals) this week that reveals a shifting strategy on the ACE Project that
appears to prohibit outright a number of directions United Properties (a company that didn't bid previously but was selected as a sole
source award to exclusively negotiate for 60 days) attempted to take the city before walking away from the deal.

The ACE Project stands roughly for "aerospace and clean energy manufacturing...." and is the creation of CAMT (Colorado Association
for Manufacturing and Technologies), a non-profit mostly government funded Colorado trade association.  The ACE Project is intended
to cluster in one location companies interested in pursing certain types of contracts with the US Government through NASA and other
agencies.  CAMT signed an agreement with NASA last year referred to by CAMT as the "Space Act," the agreement specifically states
NASA will not allocate funding to the 5 year agreement.  The agreement does promise collaboration between NASA and CAMT in
assisting member companies looking to bid on certain types of contracts with NASA to commercialize government held technologies.  
Unfortunately, the agreement is not exclusive so many other efforts to raise interest in the same patents/technologies and contracts are
going on in parallel.

The City of Loveland, after being selected by CAMT as a non-exclusive "winner," purchased the old HP/Agilent campus in Loveland in
anticipation of inking a deal with United Properties to purchase and redevelop the property in conjunction with CAMT.  A key concern
for United Properties as well as other developers looking into ACE is the expectation by CAMT to eventually own the property while also
receiving revenue from the project after investing nearly nothing.  CAMT's equity and/or revenue requirements were previously
communicated secretly by Loveland to bidders via a separate document instead of the official RFP published on the city's website.  The
city didn't release this document until LovelandPolitics published it after receiving a copy from a disillusioned bidder angry about CAMT
demands for guaranteed revenue unrelated to effort or contribution.  
see previous RFP and secret requirements here

LovelandPolitics has obtained a copy of the new RFP released August 30, 2011 by the city from another bidder.  We are publishing the
full document (see under title of this story) for your review and comment in case it is different from what is released to the public.

Lessons Learned On United Properties Negotiation Reflected In New RFP

An important sticking point for the City of Loveland during the recently failed 60 day exclusive negotiation period with United Properties,
was the reluctance by United Properties to sign a letter of intent with the City of Loveland.  The sore point is that Agilent forced or at
least intimidated the City of Loveland into closing on the property after a 6 months negotiation by threatening to argue "bad faith" should
the city continue tying-up the multi-million dollar campus in Loveland without any true intent on purchasing the property.  Once Agilent
accepted the city's price they pressured the city to follow through on a letter of intent and what Agilent privately claimed were verbal
promises by city officials to buy the property.

Such letters of intent, while legally not binding, can carry weight in court in determining motive and whether one party was dealing in
good faith to actually purchase the property especially when verbal promises are made.  Failing to get a "Letter of Intent" from United
Properties while being forced to act on its own Letter of Intent to buy the property put Loveland in the tenuous situation they now find
themselves in.  Trying to learn from their mistake with United Properties the city is looking for both a $150,000 deposit from bidders
along with a letter of intent.

Page 4 of the August 30, RFP states,

"The proposal must also contain economic terms in the form of a "Terms Sheet" of "Letter of Intent."  Without this, then the
proposer's proposal will be deemed incomplete and not considered."

The new RFP also states on page 4,

"The City will not entertain requests for broad credit enhancement of the overall property development costs."

This was added to avoid a repeat of the failed negotiations with United Properties as well.  According to one well placed source, United
Properties made a number of demands upon the City of Loveland including a $10 million per building assistance package to help United
Properties fund the estimate $40 million to $50 million redevelopment costs to cover asbestos, update utilities and lay communication
lines into the functionally obsolete and long vacant campus.  Curiously, the city's RFP states on page 1 that;

"The former Agilent Technologies/Hewlett Packard campus contains 811,000 square feet of move-in ready high-tech
manufacturing space.  All buildings are well maintained and have existing certificates of occupancy.  Additionally, the city is
prepared to guarantee expedited review on any permitting required by the City."

One developer told LovelandPolitics this paragraph is misleading.  Clearly the rub with United Properties was the total investment
required to bring existing buildings up to current safety and OSHA codes so companies could begin leasing space is estimated to exceed
$40,000,000.  According to one source, the United Properties President told her his primary interest in the property was the open
property facing Taft Ave. where new buildings can be constructed and return profitable margins regardless of who leases the space.  
Regarding the older buildings and CAMT, he feared the renovation may equal or even exceed the cost of new construction which yields
better revenue.  The same source said United Properties feared CAMT's cut was too big therefore they proposed only taking ownership
of each building after the tenants were signed and occupying the space.  This was problematic due to different state regulations for
asbestos in government owned buildings which means the city wants the property in private hands before anyone begins working on the
campus to remain in compliance with state regulations.

Price and Project Control

The City of Loveland raised the asking price to $5 million in the new RFP and promises to raise it again should any bidder fail to reach
agreement by February 1, 2012.  Page 5 of the RFP states,
"$5,000,000 if closed on or before February 1, 2012 with escalation past
February 1, 2012 for the City's holding costs.  The price includes both the campus with the existing buildings and the adjacent. "

This approach would appear counter to conventional marketing of property when a seller decreases the asking price the longer the
property is on the market without finding an interested and qualified buyer.  Instead, the City of Loveland proposes continually raising
the asking price of the property commensurate with the city's increasing holding costs.  City of Loveland staffers have acknowledged
confidentially to LovelandPolitics this may be a self-defeating objective in the commercial marketplace but claim it is really driven by
tough political realities instead of economic or business objectives.  

Mayor Cecil Gutierrez along with others running for reelection are reluctant to acknowledge in public they have "lost" any taxpayer
money yet on the acquisition of the former Agilent property.  Instead, the candidates can claim the sales price for the property will
recapture the unanticipated holding costs as a result of city's ownership exceeding the 6 months maximum they budgeted for in the
beginning.  Staff also informed LovelandPolitics that the escalating price requirement will likely "drop-off a cliff" November 2, 2011
immediately following the city's municipal elections.

CAMT, for its part, is now playing a cat and mouse game with potential developers regarding CAMT's expected revenues from the
project.  The RFP reads more like a marketing brochure than serious request for proposal.  Any bidder looking to see what they will
need to pay CAMT to be selected may have a difficult time finding such guidance in the brief 6 page RFP chalked full of undefined

What bidders will find are general references to a "partnership" but little guidance as to what CAMT is expecting.  One source told
LovelandPolitics that CAMT agreed to a new concept being shared verbally only with favored bidders by CAMT and city officials.  In
this new scenario, CAMT will become a tenant of the project and lease space intended to provide general testing equipment or other
benefits to companies as a way of raising revenue for CAMT.  Below is the vague language Loveland placed in the RFP to address that
specific topic;

"CAMT is interested in a partnership with the selected developer.  The developer must propose how a partnership may be structured.  
To date, CAMT has invested money to design the ACE RIC initiative and ACE Park concept and will continue to provide oversight
and program development and management."

By the language above, it is clear only the developers, "in the know" will have enough information provided informally by the city to
know exactly what CAMT is willing to concede before placing such expectations in their RFP response.  As mentioned above, CAMT is
willing to explore an alternative business model for their participation in the project and have authorized Loveland's staff to share the
specifics only with certain bidders.  Whether less favored bidders will have the benefit of the same information by a subsequent
communication from the city revealing or defining the minimum expectations by CAMT remains to be seen.  

Due Date

While the city says their intent is to invite back all previous bidders along with any new ones in an equitable manner, the fact complete
proposals are due by
September 12, 2011 infers the city is favoring only the bidders already familiar with the proposed project.  Any
new bidder is unlikely to get up to speed in less that two weeks especially with a three-day holiday right in the middle of those two
weeks when CAMT and city officials are unavailable to answer questions.   Added to this is the fact specific minimum "partnering"
requirements agreed to by CAMT with the city are not available to all the bidders implies a fairly narrow process.
City Staff View
NO / insufficient
funds to invest
Recently acquired
Greeley Mall thus
tapped out limited
available credit.
Unlikely but still
Lost Promenade to
foreclosure plus
problems in Calif.
Favored -  "best
Balance sheet too
small for job but staff
would like to help
Ole' Vine/Zing!
Most knowledgeable
of project.  Est. $40
million to redevelop
"too small for job"
Looking for longer
timeline than city
willing to consider
Dislike -
removed by staff
Staff calls IRG,
"bottom feeders"
Council didn't like
them either
Links to previous
ACE Project stories
Loveland developer Don Marostica watches
intently as CAMT presents to Loveland's
Council.  Marostica's Loveland Commercial
LLC is expected to bid again on the ACE
Read the current RFP sent to interested developers by the city