| 10% Project Kickback Problem For ACE Bidders Incomplete RFP on city website diverted press attention while actual terms discouraged and angered some bidders |
Loveland - March 24, 2011
A confidential City of Loveland supplement to the 63 page RFP (Request for Proposal) to developers to submit bids to
redevelop the Agilent campus off Taft Ave. provides summary details of terms the City of Loveland wants hidden from public
view but each bidder must comply with and accept to be considered according to one bidder interviewed by LovelandPolitics.
The City of Loveland has published only 7 pages of the 63 page RFP thus withholding from residents the amount of subsidy being
considered for the overall ACE project and other pertinent information. ACE roughly stands for Aerospace Clean Energy
Manufacturing and Innovation Park.
Loveland received proposals from Don Marostica's Loveland Commercial, McWhinney Enterprises, The Neenan
Company of Ft. Collins, Orton (a California firm) and Old Vine/Zing! of Denver to redevelop the property still owned by
Agilent. The City of Loveland eliminated Next Generation Holdings LLC of Loveland and IRG of Downing, California from
consideration after reviewing their proposals.
A four page document titled, "Minimum Requirements for Proposers" sent as a supplement to the RFP last February
summarizes the extent to which Loveland's City Council is attempting to capture the ACE project proposed by the Colorado
Association for Manufacturing and Technology (CAMT). According to one bidder, CAMT must be provided a 10% kickback
on all gross sales resulting from a successful redevelopment of the Agilent campus if Loveland is chosen for the project. That
revenue would mostly be generated from leases by the developer to companies and other project proceeds.
The City of Loveland proposes selling, financing, leasing and even subordinating its own first loan position on the property to
ensure the winning bidder makes at least 15% IRR (internal rate of return) before the city can recapture any part of its investment.
Here are the "minimum" requirements outlined in the 4 page confidential RFP supplement provided to bidders according to our
source:
1. CITY AS SELLER - The winning bidder can purchase the Agilent property relevant commercial areas for just $4 million
after the city purchases the campus for which it signed a letter of intent to buy for ~$5.5 million. This will provide a discount of
$1.5 million less the open space and possibly still contaminated areas not included in the city's resale of the campus.
2. CITY AS LENDER - No need for financing - the City of Loveland will finance the deal for only 12.5% down (normal
commercial terms today range between 25% to 50%) and finance the balance of the purchase at "City's cost of Funds" using
subsidized interest rates amortized over 25 years with a balloon payment due in 10 years. Once the loan is closed the City of
Loveland will allow the developer to subordinate the city's interest in the property (collateral) meaning any improvement loans
taken out subsequently by the new owner can take a first position secured by the property's base value moving Loveland's
interest to a subordinate second position. This creates significant risk that in case of foreclosure the $3.5 million invested by the
city will no longer be secured by the property's base value.
3. CITY'S CAMT KICKBACK REQUIREMENT - An automatic and irrevocable 10% kickback to CAMT of all Gross
Sales on commercial sales for the project if the City of Loveland is chosen for the ACE project by CAMT. This kickback must
be paid to CAMT whether or not they were involved in drawing any tenants to the project. LovelandPolitics volunteers believe
this 10% kickback was negotiated by Marostica with Elaine Thorndike but haven't confirmed this suspicion. Thorndike, as CEO
of CAMT, will also be allowed to have a hand in selecting Loveland's winning bidder. Loveland's City Council has already
agreed to provide CAMT the role in the final selection of the winning bidder for the project but failed to address any conflict of
interest for Marostica who assisted both Thorndike and now Loveland in becoming involved in the project as a bidder.
4. CITY AS TENANT - Loveland shall pay 25 cents per square foot on all vacant space, up to $150,000 per year to the new
owner of the Agilent property.
5. CITY AS BUSINESS PARTNER - The developer must pay the City 15% of profits after all expenses, including debt
service, are paid and after a 15% internal rate of return on invested capital is returned to the developer.
Bidders Indicate They Want To Redevelop The Agilent Campus Even Without the ACE Project
Curiously, all seven bidders checked a box in the form questionnaire portion of the RFP submitted with their proposals that asked
if their bid would still be valid without participation by CAMT. LovelandPolitics has learned the Agilent redevelopment deal
absent CAMT and their NASA agreement is preferred by some who don't have the same access and facility to CAMT
leadership as Loveland Commercial's Don Marostica who appears to be an architect of the above terms with CAMT as well as
the most favored bidder. Curiously, Loveland's daily newspaper the Loveland Reporter-Herald published a story regarding this
common response but failed to probe as to real motives behind their responses.
LovelandPolitics has learned the 10% kickback to CAMT on all Gross Sales has caused considerable consternation by bidders
who believe the city's redevelopment of the Agilent campus could be more successful without the ACE partnership by CAMT
and their unfunded NASA 5-year collaboration agreement. As one bidder told LovelandPolitics,
"We would need to lease 75% of all the renovated space before becoming profitable but without CAMT we would
only need to lease 25% before seeing some return on our investment."
Old Vine/Zing! of Ft. Denver proposed in their offer letter;
"If the Agilent Campus is chosen for ACE, we would be happy to negotiate an agreement with CAMT that includes
profit sharing with them, commensurate with the economic value that they bring to the project and risk they are
willing to take."
While LovelandPolitics has learned at least one company was allegedly dismissed for failing to comply with the 10% requirement,
Old Vine/Zing! is officially still in the running pending a capitulation of the request made in their offer letter above. One city
source told LovelandPolitics the bidders were being contacted to see whether they will reconsider this objection if selected but
none of the bidders we spoke with directly would confirm or deny the veracity of this information. Adding 10% cost to all tenant
leases without adding value, in the opinion of some, will discourage any companies looking to grow manufacturing jobs given the
increased cost of leasing space at the Agilent campus.
One commercial real estate investor in Northern California told LovelandPolitics, "It appears to be a wired deal so a number of
credible firms did not bid or were removed early by co opted city staff." Industry experts say the requirement to flow 10% of
real estate gross sales to CAMT constitutes an "unnatural" agreement as CAMT doesn't appear to be investing any significant
capital into the ACE Project nor are the payments contingent on any performance or effort by CAMT to help bring-in
commercial tenants. One source stated, "Without that 10% off the top for CAMT I know at least a dozen great companies that
would have happily bid on renovating the Agilent campus under such great terms."
The 10% kickback was also referred to as unnecessary "grease payments" meant to entice CAMT executives who will likely
profit personally by the increased cash-flow for the Colorado based industry association they manage today on modest salaries.
Real Loveland RFP Requirements Kept Confidential
The City of Loveland has not released to the public the actual RFP given to bidders, the 4 page supplement summarizing the
terms described above, or their reasons for removing two companies from the competition for the bid. LovelandPolitics has
confirmed with city staff (off-the-record) that the companies dismissed were sent letters citing the reasons for being removed from
the competition but those letters are not being released to the public.
It is unusual for a city to run a competitive procurement process absent any announced standards or criteria for selection of the
winning bid. It appears the city may have dismissed one bidder for proposing conditions on the 10% kickback for CAMT that
another bidder also proposed but oddly wasn't dismissed. Given the secret nature of the process and lack of clear selection
criteria provided to the public it is likely the city's final choice will be suspect.
One special paragraph in the RFP does appear to qualify uniquely McWhinney to bid on a related clean-up redevelopment of the
property not to be transferred to the successful ACE bidder according to one person familiar with the document. One city
source claimed the special clause was placed in the RFP uniquely to qualify McWhinney for that special separate project while
precluding other similarly qualified companies. The same source claims McWhinney is not a contender for the ACE
redevelopment project.
LovelandPolitics has been told the city would have received many more bids had the CAMT 10% kickback not been included in
the RFP requirements. This begs the question of why the city will not open the bidding again to new interested companies should
CAMT not select Loveland as the location for their proposed ACE project.
Join the online conversation on this story - LovelandPolitics Blog
A confidential City of Loveland supplement to the 63 page RFP (Request for Proposal) to developers to submit bids to
redevelop the Agilent campus off Taft Ave. provides summary details of terms the City of Loveland wants hidden from public
view but each bidder must comply with and accept to be considered according to one bidder interviewed by LovelandPolitics.
The City of Loveland has published only 7 pages of the 63 page RFP thus withholding from residents the amount of subsidy being
considered for the overall ACE project and other pertinent information. ACE roughly stands for Aerospace Clean Energy
Manufacturing and Innovation Park.
Loveland received proposals from Don Marostica's Loveland Commercial, McWhinney Enterprises, The Neenan
Company of Ft. Collins, Orton (a California firm) and Old Vine/Zing! of Denver to redevelop the property still owned by
Agilent. The City of Loveland eliminated Next Generation Holdings LLC of Loveland and IRG of Downing, California from
consideration after reviewing their proposals.
A four page document titled, "Minimum Requirements for Proposers" sent as a supplement to the RFP last February
summarizes the extent to which Loveland's City Council is attempting to capture the ACE project proposed by the Colorado
Association for Manufacturing and Technology (CAMT). According to one bidder, CAMT must be provided a 10% kickback
on all gross sales resulting from a successful redevelopment of the Agilent campus if Loveland is chosen for the project. That
revenue would mostly be generated from leases by the developer to companies and other project proceeds.
The City of Loveland proposes selling, financing, leasing and even subordinating its own first loan position on the property to
ensure the winning bidder makes at least 15% IRR (internal rate of return) before the city can recapture any part of its investment.
Here are the "minimum" requirements outlined in the 4 page confidential RFP supplement provided to bidders according to our
source:
1. CITY AS SELLER - The winning bidder can purchase the Agilent property relevant commercial areas for just $4 million
after the city purchases the campus for which it signed a letter of intent to buy for ~$5.5 million. This will provide a discount of
$1.5 million less the open space and possibly still contaminated areas not included in the city's resale of the campus.
2. CITY AS LENDER - No need for financing - the City of Loveland will finance the deal for only 12.5% down (normal
commercial terms today range between 25% to 50%) and finance the balance of the purchase at "City's cost of Funds" using
subsidized interest rates amortized over 25 years with a balloon payment due in 10 years. Once the loan is closed the City of
Loveland will allow the developer to subordinate the city's interest in the property (collateral) meaning any improvement loans
taken out subsequently by the new owner can take a first position secured by the property's base value moving Loveland's
interest to a subordinate second position. This creates significant risk that in case of foreclosure the $3.5 million invested by the
city will no longer be secured by the property's base value.
3. CITY'S CAMT KICKBACK REQUIREMENT - An automatic and irrevocable 10% kickback to CAMT of all Gross
Sales on commercial sales for the project if the City of Loveland is chosen for the ACE project by CAMT. This kickback must
be paid to CAMT whether or not they were involved in drawing any tenants to the project. LovelandPolitics volunteers believe
this 10% kickback was negotiated by Marostica with Elaine Thorndike but haven't confirmed this suspicion. Thorndike, as CEO
of CAMT, will also be allowed to have a hand in selecting Loveland's winning bidder. Loveland's City Council has already
agreed to provide CAMT the role in the final selection of the winning bidder for the project but failed to address any conflict of
interest for Marostica who assisted both Thorndike and now Loveland in becoming involved in the project as a bidder.
4. CITY AS TENANT - Loveland shall pay 25 cents per square foot on all vacant space, up to $150,000 per year to the new
owner of the Agilent property.
5. CITY AS BUSINESS PARTNER - The developer must pay the City 15% of profits after all expenses, including debt
service, are paid and after a 15% internal rate of return on invested capital is returned to the developer.
Bidders Indicate They Want To Redevelop The Agilent Campus Even Without the ACE Project
Curiously, all seven bidders checked a box in the form questionnaire portion of the RFP submitted with their proposals that asked
if their bid would still be valid without participation by CAMT. LovelandPolitics has learned the Agilent redevelopment deal
absent CAMT and their NASA agreement is preferred by some who don't have the same access and facility to CAMT
leadership as Loveland Commercial's Don Marostica who appears to be an architect of the above terms with CAMT as well as
the most favored bidder. Curiously, Loveland's daily newspaper the Loveland Reporter-Herald published a story regarding this
common response but failed to probe as to real motives behind their responses.
LovelandPolitics has learned the 10% kickback to CAMT on all Gross Sales has caused considerable consternation by bidders
who believe the city's redevelopment of the Agilent campus could be more successful without the ACE partnership by CAMT
and their unfunded NASA 5-year collaboration agreement. As one bidder told LovelandPolitics,
"We would need to lease 75% of all the renovated space before becoming profitable but without CAMT we would
only need to lease 25% before seeing some return on our investment."
Old Vine/Zing! of Ft. Denver proposed in their offer letter;
"If the Agilent Campus is chosen for ACE, we would be happy to negotiate an agreement with CAMT that includes
profit sharing with them, commensurate with the economic value that they bring to the project and risk they are
willing to take."
While LovelandPolitics has learned at least one company was allegedly dismissed for failing to comply with the 10% requirement,
Old Vine/Zing! is officially still in the running pending a capitulation of the request made in their offer letter above. One city
source told LovelandPolitics the bidders were being contacted to see whether they will reconsider this objection if selected but
none of the bidders we spoke with directly would confirm or deny the veracity of this information. Adding 10% cost to all tenant
leases without adding value, in the opinion of some, will discourage any companies looking to grow manufacturing jobs given the
increased cost of leasing space at the Agilent campus.
One commercial real estate investor in Northern California told LovelandPolitics, "It appears to be a wired deal so a number of
credible firms did not bid or were removed early by co opted city staff." Industry experts say the requirement to flow 10% of
real estate gross sales to CAMT constitutes an "unnatural" agreement as CAMT doesn't appear to be investing any significant
capital into the ACE Project nor are the payments contingent on any performance or effort by CAMT to help bring-in
commercial tenants. One source stated, "Without that 10% off the top for CAMT I know at least a dozen great companies that
would have happily bid on renovating the Agilent campus under such great terms."
The 10% kickback was also referred to as unnecessary "grease payments" meant to entice CAMT executives who will likely
profit personally by the increased cash-flow for the Colorado based industry association they manage today on modest salaries.
Real Loveland RFP Requirements Kept Confidential
The City of Loveland has not released to the public the actual RFP given to bidders, the 4 page supplement summarizing the
terms described above, or their reasons for removing two companies from the competition for the bid. LovelandPolitics has
confirmed with city staff (off-the-record) that the companies dismissed were sent letters citing the reasons for being removed from
the competition but those letters are not being released to the public.
It is unusual for a city to run a competitive procurement process absent any announced standards or criteria for selection of the
winning bid. It appears the city may have dismissed one bidder for proposing conditions on the 10% kickback for CAMT that
another bidder also proposed but oddly wasn't dismissed. Given the secret nature of the process and lack of clear selection
criteria provided to the public it is likely the city's final choice will be suspect.
One special paragraph in the RFP does appear to qualify uniquely McWhinney to bid on a related clean-up redevelopment of the
property not to be transferred to the successful ACE bidder according to one person familiar with the document. One city
source claimed the special clause was placed in the RFP uniquely to qualify McWhinney for that special separate project while
precluding other similarly qualified companies. The same source claims McWhinney is not a contender for the ACE
redevelopment project.
LovelandPolitics has been told the city would have received many more bids had the CAMT 10% kickback not been included in
the RFP requirements. This begs the question of why the city will not open the bidding again to new interested companies should
CAMT not select Loveland as the location for their proposed ACE project.
Join the online conversation on this story - LovelandPolitics Blog
| CAMT CEO Elaine Thorndike, seated left, and NASA Deputy Administrator Lori Garver, seated right, sign an agreement at the Colorado State Capitol in Denver on Monday, Dec. 13, 2010, that created a Technology Acceleration Program and Regional Innovation Cluster for Aerospace and Clean Energy Project. Don Marostica, then Gov. Ritter's head of business development for the State of Colorado (in the shadow far left behind Thorndike) is now bidding through his Loveland development company, Loveland Commercial, to redevelop the Agilent campus. Loveland officials have said Thorndike's CAMT will be involved in selecting Loveland's winning bid should Loveland be selected as the location for her ACE project. One bidder expressed concern to LovelandPolitics over Marostica's inside track and the city's failure to preclude bidders who worked in state government to help form the project. |
| MARCH 29 Update: LovelandPolitics obtained the following city documents: 1. Minimum Requirements for Proposers (docx) 2. Full City of Loveland ACE / Agilent Request For Proposal (RFP) 3. Rejection letters sent to two bidders already disqualified |
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