MCPB Date: 11/8/2007

Agenda Item # 10

DATE: October 26, 2007

TO: Montgomery County Planning Board

FROM: A. Daniel Hertz, SilverPlace Project Manager

VIA: Michael F. Riley, Acting Deputy Director of Parks

SUBJECT: Amendment to the FY 07-12 Capital Improvements Program and

Supplemental Appropriation to the FY 08 Capital Budget for the
SilverPlace Project, PDF No. 048701

FY 08 Supplemental Appropriation to Transfer $1,143,000 from the

Administration Fund and $3,772,000 from the Park Fund to the Capital
Improvements Fund

A) STAFF RECOMMENDATION:

Approval to transmit budget amendments and supplemental appropriation request to

County Council and County Executive.

B) EXECUTIVE SUMMARY:

SilverPlace is a public/private partnership through which the Commission seeks to

replace its outdated and overcrowded headquarters building while facilitating several
public policy objectives including provision of affordable housing, smart growth, and
green building. In response to a Request for Proposals seeking exemplary mixed-use
development of the Montgomery Regional Office site at 8787 Georgia Avenue,
development teams responded with various design concepts and financial proposals.

On January 18, 2007, the Planning Board approved the ranking of proposals from three
finalists. Staff has negotiated a Memorandum of Understanding (Attachment 1) with the
top ranked firm, SilverPlace, LLC, that sets the mutual understandings of the parties
towards the advancement of the project. The SilverPlace, LLC development entity is the
Bozzuto Development Company, Spaulding & Slye Investments, a member of the Jones
Lang LaSalle Group, and Harrison Development. The supplemental appropriation to the
capital budget funds the design of the project from its current conceptual stage through
the schematic design stage, or approximately twenty percent design completion.

C) PROJECT BACKGROUND AND JUSTIFICATION:

In 1998, the Commission acquired the surface parking lot adjacent to the Montgomery
Regional Office (MRO) from the County in a land swap for the former Silver Spring
Armory site. This transaction helped to facilitate the redevelopment of the Silver Spring
Central Business District. Various planning studies commenced shortly thereafter
looking at potential for mixed-use development of the Commission’s property. In 2003,
the Commission completed the “Consolidated Headquarters Study” which was reviewed
by the Council. This study:

Validated the need for a new Park & Planning headquarters;

Examined several locations in the County for the headquarters and recommended
Silver Spring as the preferred location;

Produced several conceptual design options to locate the headquarters with mixed-use
development at the MRO site, thereby leveraging the value of the Commission’s land
to offset the public costs of the headquarters;

Established a 30% affordable housing requirement for the residential component; and

Determined that a public/private partnership was the best method to meet the multiple
objectives of the project.

The SilverPlace project received an initial CIP appropriation in FY 04 of $250,000,

which was augmented in FY 05 with an additional $600,000 to carry the project through
the development of a program of requirements, developer selection, and conceptual
design.

A Request for Qualifications (RFQ) for SilverPlace was issued in October 2005 and was
widely advertised and distributed. A multi-agency evaluation committee determined that
three of seven development teams that responded to the RFQ were superior. A Request
for Proposals (RFP) was issued to three finalist teams in August 2006.

In January 2007, the Planning Board approved the recommendations of a multi-agency

evaluation committee and the Executive Director to commence negotiations with the top
ranked team, SilverPlace, LLC. Commission staff and SilverPlace, LLC have negotiated
a Memorandum of Understanding that sets the mutual understandings of the parties
towards the advancement of the project.

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D) PROJECT DESCRIPTION:

The Project will include public and private components. The “Public Improvements”
will consist of:
The Headquarters building;
Public open space; and
Related infrastructure.

The “Private Improvements” will consist of:

Rental apartments;
Condominiums;
Retail space;
Open space; and
Related infrastructure.

Graphical representations of the conceptual design for the mixed-use project appear in the
developer’s proposal which may be found in Exhibit B of the MOU. Please note,
however, that the design process envisioned in the MOU mandates a public participatory
process to develop a development plan for the project, and that the conceptual design
may change significantly as a result of this process.

E) THE FUNDING REQUEST:

The Commission intends to seek Council approval of the public funding for the Public
Improvements in two steps:
1) A design appropriation to take the Public Improvements through the schematic design
phase (approximately 20% design completion); and
2) Upon completion of the schematic design, a second appropriation to fund the
remaining design and construction.

The first appropriation i.e., the amount required to fund the Public Improvements through
schematic design, is the subject of this request. The second appropriation is presently
scheduled for February 2009, after the project’s scope and cost are refined well beyond
their current conceptual level.

The funding request of $4.915 million consists of two components, the funding of $2.950
million to fund the design of the Public Improvements through the schematic design stage
and an additional $1.965 million for a provision of the MOU for “Developer’s Cost
Recovery,” which is explained in the following section.

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The basis of the $2.950 million design estimate appears in the estimate attached as
Attachment 2, Commission Budget: Memorandum of Understanding Through General
Development Agreement Execution.

Developer’s Cost Recovery

Following authorization to commence negotiations with SilverPlace, LLC, staff
negotiated a provision in the MOU that will permit the Commission to fund portions of
the project that are ineligible for tax-exempt financing without seeking an additional
public funding source. Under this provision, SilverPlace, LLC will advance the project
schedule so that the Commission will receive the first installment of the proceeds from
the sale of the land under the Private Improvements at the same time construction begins
on the Public Improvements.

There are two important advantages to advancing the first phase of the Private
Improvements to proceed in lockstep with the new headquarters building:

1) Both the public and private portions of the project will be subject to the public
approval process at the same time, thereby allowing the community and the Planning
Board to view the project as a unified whole, rather than piece by piece; and

2) Receiving private sector funds at the start of construction of the Public Improvements
will enable the public sector to minimize its outlay of public funds for the new
headquarters.

In order to have money available to pay the first installment of the sales proceeds,
SilverPlace, LLC must secure financing for the Private Improvements eight months
earlier than anticipated in the schedule submitted as part of its proposal. Since the
developer's lender will require “entitlements” (Project Plan, Preliminary Plan of
Subdivision, and Site Plan approvals) to be in place as a condition of providing financing,
the developer must pursue entitlements for the Private Improvements before construction
commences on the Public Improvements, currently scheduled for September 2010.

The developer has agreed to bear the cost of seeking entitlements for the Private
Improvements realizing that: (1) if funding for the Public Improvements is appropriated
and the project goes forward, these costs will become ordinary project costs funded
privately by a combination of debt and equity but; (2) if Public Improvement funds are
not appropriated, or the project does not go forward, SilverPlace, LLC will have lost its
investment through no fault of its own, and without any source of remedy.

The negotiated agreement on the part of the developer to advance funds which would pay
for costs ineligible for tax-exempt financing places the Commission in the highly
advantageous position of having money available to fund these portions of the project
without seeking an additional public funding source. The developer contends, and staff
agrees, that this arrangement compels the developer to put money at risk in a manner
unforeseen by either party at the time the developer responded to the RFP.

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The cost recovery provision is intended to bridge the gap between reasonable developer
“at-risk” expenditures and those expenditures necessary to meet the Commission
schedule objectives prior to reaching construction appropriation for the public project.
In a private transaction, the developer would have contractual remedies to force the
property owner to convey the property so that the pre-construction expenditures are not at
risk. By contrast, in this transaction, the Commission’s ability to convey the property for
the private portion of the project is subject to the Council’s appropriation of construction
funding; the developer does not have the contractual remedy that would be available in a
private transaction.

If the Commission chooses not to proceed with the project, then the Commission will
make limited compensatory/restoration payments to the developer. These payments are
limited to certain eligible third-party expenses actually incurred to advance the private
portion of the project up to a cap of $1.965 million. A list of eligible expenses for cost
recovery appears as Exhibit C of the MOU. The cap of $1.965 million for cost recovery
is based on the Commission’s review and negotiation of estimated and allowable
expenditures. These costs are subject to audit to assure that they have in fact been
incurred, are reasonable, and are for necessary and appropriate activities.

If the construction appropriation is approved and the Commission and the developer enter
into a General Development Agreement, then no part of the cost recovery will be payable
to the developer, and the $1.965 million included in the requested supplemental
appropriation will become available for this project or for other Commission needs.

Funding Sources for the Schematic Design Appropriation

Attachment 3 is a memo from the Commission’s Secretary-Treasurer to the Board
presenting the recommendation for funding this supplemental appropriation with
$1,143,000 of fund balance from the Administration Fund Balance and $3,772,000 of
fund balance from the Park Fund. Ms. Barney also recommends that the Board direct
staff to present the SilverPlace project to the Revenue Authority for their consideration of
financing with lease revenue bonds. If this approach is approved by the Revenue
Authority Board and the County, we would subsequently substitute $2,950,000 of
funding for this supplemental appropriation with Revenue Authority funding. This
process would enable the County to advance those funds to the Revenue Authority, as
permitted in Chapter 42 of the County Code, until issuance of the bonds thereby freeing
up fund balance to assist with the FY 09 Budget. Financing the project with lease
revenue bonds has the added benefit of providing flexibility as those bonds can be used
for broader purposes than Commission issued debt creating greater opportunities when
further defining and ultimately financing this mixed use project.

F) RELATED ISSUES:

Headquarters Program of Requirements

The adopted PDF for SilverPlace cites a headquarters space need of 120,000 gross square
feet (GSF) based on preliminary programming work performed between 2000 and 2003.
The Commission has retained the architectural firm of RTKL to prepare a detailed
Program of Requirements (POR) including a detailed space program. Based on the
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current draft of the detailed program, our space need has been calculated as 170,000 GSF,
which includes provisions for growth beyond initial occupancy.

The new headquarters is planned to house staff presently working at 6 locations:

1) The Montgomery Regional Office at 8787 Georgia Avenue, Silver Spring
2) Parkside Headquarters at 9500 Brunett Avenue, Silver Spring
3) Leased space at the “Spring Street Annex” at 1109 Spring Street, Silver Spring
4) Leased space at the “Dedrick Annex” at 1400 Spring Street, Silver Spring
5) The Needwood Mansion at 6700 Needwood Road, Rockville, Maryland
6) The Wheaton Regional Park Office, 2000 Shorefield Road, Wheaton, Maryland

The combined space in these facilities is on the order of 100,000 GSF and houses a staff
of approximately 370 individuals. A total of approximately 400 staff members is
projected to occupy the new headquarters at occupancy.

The POR emphasizes customer service for the general public and stakeholders that
interact with the Planning Board, Planning Department, and Parks Department. The
Planning Board hearing room, public information counters, and visitor reception areas
will be planned and designed with customer service as the priority. The POR also
provides adequately sized and optimally configured employee workspaces.

Silver Spring Parking District Land

Commission staff and Montgomery County Department of Public Works and
Transportation representatives have continued to advance negotiations for the acquisition
of a 0.75-acre site owned by the Silver Spring Parking District adjacent to the
Commission’s property (PLD Land). The Commission and the County have each
ordered and received an appraisal. Although as of the date this memorandum was
written, the County had not completed reviewing its appraisal, the County has committed
to continue negotiations once the appraisal has been reviewed. Staff awaits the County’s
response and notes that the project schedule calls for a design charette process to begin in
January 2008 and that the Commission must know prior to that date whether or not to
include the PLD Land in the charette process. If the County does not respond in a timely
manner, either the PLD Land must be excluded from further consideration or the
schedule must be extended to accommodate the County’s response time.

Community Outreach
Community outreach was a significant component of the Consolidated Headquarters
Study conducted in 2002-2003 that formed the goals for the SilverPlace project. Staff
has met with residents of the adjacent Woodside Community on several occasions since
the proposals were ranked. A “SilverPlace Bulletin” has been mailed to residents and
stakeholders with information on the status and next steps in the process. A project
website has been developed to keep stakeholders and interested parties informed. This
information may be accessed at
http://www.mc-mncppc.org/planning/silverplace/index.shtm.

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In order to increase the level of community involvement in the design of SilverPlace, the
Board mandated that the MOU be revised to incorporate a design charette process that
would seek input from a wide cross-section of stakeholders. The development process,
schedule, and budget have been modified accordingly.

Project Schedule
The project schedule in the form of a Gantt chart appears as Exhibit D of the attached
MOU. The major milestones in the project schedule are as follows:
November 2007 – execute MOU
December 2007 – obtain CIP amendment & supplemental appropriation for
headquarters schematic design
January 2008 – execute Development Service Agreement; begin development plan
design process; & begin due diligence
May 2008 – conclude development plan process; begin headquarters & Private
Improvements schematic design
October 2008 – complete headquarters & Private Improvements schematic design
November 2008 – execute General Development Agreement
February 2009 – obtain CIP amendment & supplemental appropriation for
headquarters construction; begin design development for headquarters & Private
Improvements
July 2009 – complete design development for headquarters & Private Improvements;
begin construction documents for headquarters & Phase I of Private Improvements
May 2010 – obtain entitlements for headquarters & Private Improvements
October 2010 – begin headquarters & Private Improvements Phase I construction
January 2012 – headquarters & Private Improvements Phase I initial occupancy
February 2012 – begin Private Improvements Phase II construction
July 2013 – Private Improvements Phase II initial occupancy

G) CONCLUSION:

Staff recommends that the Planning Board approve the transmission of budget
amendments and a supplemental appropriation for the SilverPlace project to the County
Council and County Executive.

Attachment 1 – Memorandum of Understanding

Attachment 2 – Commission Budget: Memorandum of Understanding Through
General Development Agreement Execution
Attachment 3 – Memorandum dated October 25, 2007 from Patricia Colihan Barney to
the Montgomery County Planning Board

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 MEMORANDUM OF UNDERSTANDING

THIS MEMORANDUM OF UNDERSTANDING (the “MOU”) is made and

entered into as of this ___ day of ____________, 2007, by and among THE
MARYLAND-NATIONAL CAPITAL PARK AND PLANNING COMMISSION
(the “Commission”), and BOZZUTO DEVELOPMENT COMPANY, SPAULDING
& SLYE INVESTMENTS, a member of the Jones Lang LaSalle Group, and
HARRISON DEVELOPMENT (collectively, the “Developer”). Developer shall assign
its rights under this MOU to a development entity to be formed whereupon all references
herein to Developer shall be deemed to refer to such assignee.

BACKGROUND

A. In 1998, the Commission acquired the surface parking lot adjacent to the
Montgomery Regional Office at 8787 Georgia Avenue from the County (together with
the adjacent property already owned by the Commission, the “MRO Site”) and as
generally shown on Exhibit A-1 attached hereto. Since then, the Commission has
studied the concept of utilizing the value of the MRO Site as a catalyst for replacing its
aged, obsolete and overcrowded headquarters building while also promoting other
important public policy objectives of Montgomery County government (the “County”),
including affordable and workforce housing, smart growth and sustainability, as well as
extending the urban revitalization of downtown Silver Spring. In 2003, the Commission
reviewed a study entitled “Consolidated Headquarters Study” which study:

 justified the need for a new headquarters building for the Commission;
 established the Silver Spring Central Business district as the location of
the new headquarters;
 established 120,000 square feet as the preliminary headquarters space
need;
 determined that a public/private partnership allowing mixed-used
development of the MRO Site was the optimal method to meet the
Commissions’ objectives;
 determined that a minimum 30% affordable/workforce housing would be a
requirement for the residential development;
 framed the Commission’s planning principles to help guide development
of the proposed project; and
 included a community outreach effort to keep the greater Silver Spring
civic and business communities abreast of the emerging project and
solicited ideas for mixed-use development on the MRO Site.
B. A Request for Qualifications (“RFQ”) was widely advertised by the
Commission and a subsequent Request for Proposals (“RFP”) for development of the
Commission’s headquarters and the redevelopment of the MRO Site (collectively, the
“Project”), was issued to selected developers. Developer, among others, submitted a
proposal response to the RFQ and RFP (the Developer’s proposal, as amended and
supplemented, is hereinafter referred to as the “Developer’s Proposal”). In January 2007,
the Commission approved the recommendations of a multi-agency evaluation committee
to commence negotiations with the Developer as the top ranked team in accordance with
the terms of the RFQ, the RFP and the Developer’s Proposal, as the Developer’s Proposal
best met the Commission’s and the County’s public policy goals as hereinafter set forth
(the “Public Policy Goals”). A true, complete and correct copy of the RFQ, the RFP and
Developer’s Proposal are attached hereto as Exhibit B. Developer is a development
entity comprised of the Bozzuto Development Company, Spaulding & Slye Investments,
a member of the Jones Lang LaSalle Group, and Harrison Development (collectively the
“Original Members”). Further, it is the intent of the Commission and the Developer for
all members of the development team proffered in the Developer’s Proposal
(individually, “Member” and collectively, the “Development Team”) to remain with the
Project, subject to replacement of a Member as set forth herein.

C. Developer’s proposed project as described in the Developer’s Proposal,

was intended as a concept for the MRO Site layout and development, and it included two
(2) Phases. Phase 2 of Developer’s Proposal is separate and apart from the negotiations
of the parties as contemplated under the terms of this MOU. The MRO Site layout and
development as proposed by the Developer were for the purpose of demonstrating the
Developer’s ability and intention to meet the Public Policy Goals, and as such is subject
to revision in accordance with the terms of this MOU; provided however, the underlying
concepts embodied in the Developer’s Proposal will be the basis of further negotiations
between the Commission and the Developer as contemplated in this MOU.

D. The Project is presently anticipated to be comprised of (i) public

improvements (the “Public Improvements”) to be located on a portion of the Project Land
as hereinafter defined, and (ii) private improvements (the “Private Improvements”) to be
located on a portion of the Project Land and to be conveyed in fee simple to Developer or
its affiliates, (the “Private Land”). Pursuant to the terms of the Development Services
Agreement (the “DSA”) and the General Development Agreement (the “GDA”) (each to
be defined in more detail herein), Developer shall act as a third party development
services provider and fee developer of the Public Improvements for and on behalf of the
Commission and the relationship of the Developer and the Commission with respect to
the Public Improvements shall be that of owner and contractor with the respective rights
and obligations of the parties to be set forth more specifically in the DSA and the GDA.
With respect to the Private Improvements and the sale of the Private Land, the
Commission shall act in the capacity of owner/seller and Developer shall act in the
capacity of purchaser/developer of the Private Land, with the respective rights and
obligations of the parties to be set forth more specifically in the GDA. The Project Land
as such term is used herein shall mean the MRO Site or if the Commission shall be
successful in acquiring the PLD Land (as defined in Section 8 hereof) then the Project
Land shall be deemed to include the PLD Land.
 E. The Project achieves important Public Policy Goals of the Commission
and the County which include, among others:

 Develop for the Commission a headquarters facility to be owned

by the Commission to house the Parks Department and the
Planning Department.
 Through quality and appearance design a facility that supports,
facilitates, projects, and enhances the Commission’s function and
image as a Countywide planning agency committed to
environmental protection and quality-of-life enhancements for the
residents of the County.
 Develop a headquarters facility that meets or exceeds LEED Silver
Certification standards.
 Develop the residential component on the MRO Site to contain a
minimum of 30 percent affordable units as defined in the RFP.
 Develop the residential component to incorporate “Green” design
initiatives as exemplified in the LEED standards.
 Develop a Project that is physically and functionally compatible
and integrated with the immediate neighborhood and the Silver
Spring Central Business District.
 Leverage the MRO Site and the Headquarters to be advantageous
to the Commission’s financial position.
 Address functional issues related to the space program,
transportation management, vehicular and pedestrian circulation,
safety, and parking.
 Satisfy open space requirements by designing and developing a
public space(s) that incorporates current urban design best
practices and provides an environment that satisfies employees’,
residents’ and visitors’ needs.
F. The parties desire to enter into this non-binding MOU for the purpose of
setting forth the respective commitments of the parties to advancing the prompt design,
development and construction of the Project and with the intent of entering into a binding
DSA, GDA and Guaranteed Maximum Price Contract (the “GMP”) consistent with the
spirit and intent of this MOU. The parties acknowledge and agree that although this
MOU is non-binding, it reflects the express commitments of the parties to work diligently
and in good faith to meet the spirit and intent of the RFP, the RFQ, and the Developer’s
Proposal (as they may be amended from time to time by this MOU, the DSA and the
GDA), all in accordance with the Project Schedule (as defined below), and in furtherance
thereof, the parties hereto make the following general commitments:
1. Commission Commitments

The Commission enters into this MOU in its capacity as owner of the MRO Site
and not in its regulatory capacity. The parties hereto acknowledge and agree that
approvals and consents required from the Commission in connection with the Project and
in accordance with this MOU, the DSA and the GDA do not substitute for regulatory
approvals required under applicable law. Subject to the foregoing, the Commission
hereby commits to:

A. Seek a supplemental appropriation (the “Design Appropriation”) from the

County for sufficient funding, to be disbursed in accordance with the applicable
provisions of the DSA, to pay Developer, (i) on a monthly draw basis, to achieve at a
minimum, the level of the design of the Public Improvements, consistent with the
Development Plan, necessary to complete the schematic design (design drawings to
approximately 20% completion) so as to enable the Commission to seek the Construction
Appropriation, and which such payments shall include, (1) actual, out of pocket, third
party expenses and related costs attributable to the Public Improvements and incurred to
develop the schematic design from the Development Plan (as hereinafter defined),
working together with the community and other stakeholders with interest in the Project,
through a public participatory process which shall include a project design charette as
more specifically outlined in Section 3 herein, (2) that portion of certain due diligence
costs expended by the Developer with respect to the Project Land that are attributable to
the Public Improvements and which were incurred to generate certain efficiencies in the
Project, including, without limitation, survey, title search and review, preliminary
environmental and geotechnical studies, and such other requirements as may be agreed
between the parties and set forth in the DSA (“Commission’s Pro Rata Share”), and (3)
the Development Management Fee (as hereinafter defined) and (ii) the Developer’s Cost
Recovery (as defined below), if applicable. The Commission shall use good faith efforts
to obtain the Design Appropriation on or before the date set forth in the Project Schedule,
(which date is currently anticipated to be December, 2007), as the same may be amended
from time to time, in accordance with the terms of this MOU.

B. Developer has expressed its willingness to commit to accelerate the

purchase of the Private Land and the development of the Private Improvements in
accordance with the Project Schedule such that the Private Improvements shall proceed
contemporaneously with the development of the Public Improvements. In order to meet
such accelerated schedule, Developer will incur significant “soft costs” well in advance
of the approval of the Construction Appropriation (as defined below) in connection with
the design of the Private Improvements. For the foregoing reasons, it is in the best
interest of the Commission that the Developer proceed with the planning, design and
other pre-construction aspects of the Private Improvements concurrently with the
planning, design and other pre-construction aspects of the Public Improvements.
Therefore, if the Commission chooses not to proceed with the Project then the
Commission will make limited compensatory/restoration payment to the Developer of
certain eligible costs, as more particularly described below (the “Developer’s Cost
Recovery”). The balance of the Developer’s costs shall be borne by the Developer
without recourse to the Commission.
The Commission will reimburse the Developer for a portion of the design and pre-
construction costs for the Private Improvements, limited to actual, out of pocket, third
party expenses, architectural, engineering and related costs necessary to maintain the
Private Improvements in parity with the Public Improvements and the Project Schedule
(“Eligible Costs”). Eligible Costs and the proposed budget therefore are described in
more specific detail on Exhibit C attached hereto.

The Developer’s Cost Recovery will not include:

1) Any costs incurred for any reason prior to January 18, 2007;

2) Any subsequent litigation expenses arising as a result of any contest

related to the MOU.

The Developer’s Cost Recovery will not exceed a total of One Million Nine Hundred
Sixty-five Thousand Dollars ($1,965,000.00) (See Exhibit C attached) (the “Cost
Recovery Cap”). The parties hereto acknowledge and agree that Developer shall be under
no obligation to expend any funds in excess of the Cost Recovery Cap until the later to
occur of the execution of a binding GDA and final approval of the Construction
Appropriation.

Subject to appropriation, and upon receipt of paid invoices and appropriate backup, the
Commission will pay the Developer’s Cost Recovery to the Developer in the event that
the DSA is terminated in accordance with the applicable provisions of the DSA. In the
event the Developer’s Cost Recovery is paid to Developer, Developer shall deliver to the
Commission, at no cost, copies of all non proprietary third party reports, studies,
architectural and engineering work, plans and related materials obtained by Developer
with respect to the Project Land. Upon the last to occur of (i) full execution of the GDA,
and (ii) the final approval of the Construction Appropriation, the obligation to pay the
Developer’s Cost Recovery shall lapse and be of no further force or effect.

C. Seek an additional appropriation (the “Construction Appropriation”) for

the remaining unappropriated costs under the DSA plus 100% of the estimated capital
costs of development and construction of the Public Improvements. The Commission
shall use good faith efforts to obtain the Construction Appropriation on or before the date
set forth in the Project Schedule, (which date is currently anticipated to be February,
2009), as the same may be amended from time to time, in accordance with the terms of
this MOU.

D. In consideration of the payment of the purchase price for the Private Land
as may be agreed between the Commission and Developer consistent with the terms of
the Developer’s Proposal (the “Commission Purchase Price”), convey the Private Land to
Developer in fee simple and in accordance with the terms of the GDA. The parties
acknowledge that the Commission Purchase Price shall be based on the fair market value
of the Private Land impacted by the uses, densities and other factors as set forth in the
RFQ, the RFP, and other requirements of the Commission for the Project and shall be
expressed as the product of an agreed upon “per unit” price, multiplied by the number of
units approved for development in accordance with the finally approved Site Plan for the
Private Improvements. The Commission Purchase Price, or the portion thereof
attributable to that portion of the Private Land conveyed to the Developer, will be paid
upon conveyance of all or portions of the Private Land to the Developer.

E. Designate Developer as exclusive developer of the Project and, subject to

the applicable provisions of the DSA and the GDA, grant an agency authorization to
authorize Developer to act as applicant for the entitlements for the Project.

F. Negotiate in good faith with the Developer to reach final agreements for
the DSA, GDA and GMP in accordance with the terms of Sections 4, 5 and 6 hereof for
design and construction of the Project in accordance with the Project Schedule and in
keeping with the spirit and intent of this MOU.

2. Developer Commitments

The Developer shall:

A. As applicant, diligently pursue obtaining the entitlements for the Project in

accordance with the Project Schedule, DSA and GDA.

B. Negotiate in good faith with the Commission to reach final agreements for
the DSA, GDA and GMP in accordance with the terms of Sections 4, 5 and 6 hereof for
design and construction of the Project in accordance with the Project Schedule and in
keeping with the spirit and intent of this MOU.

C. Design the Project substantially in conformance with the Development

Plan and in accordance with the Project Schedule, the DSA, GDA, GMP and applicable
law.

D. Construct the Public Improvements in accordance with the Project

Schedule, the DSA, GDA, GMP and applicable law.

E. Purchase the Private Land in consideration of the payment of the

Commission Purchase Price and diligently proceed with the development and
construction of the Private Improvements in accordance with the Project Schedule, the
GDA, and applicable law.

F. Until completion of the Project and the issuance of certificates of use and
occupancy for the Public Improvements and the Private Improvements, none of the
Original Members shall be removed from the Developer entity without the prior written
approval of the Commission, not to be unreasonably withheld, conditioned or delayed.

G. Developer shall be obligated to increase the proposed level of minority

participation in the Private Improvements (the “Minority Equity”) to 20% of the total
equity ownership in the Private Improvements. Developer shall maintain or exceed its
commitment to 25% subcontractor MFD participation in the development and
construction of the Project in accordance with the Commission’s MFD goals.
 H. Although the Developer intends to retain all Members of the Development
Team, limited substitution of a Member or Members may be warranted. In the event that
fees proposed by a Member for services to be rendered in connection with the Project are
substantially greater than usual, normal or customary fees in the market for similar
services, the Developer may request approval from the Commission’s project manager (i)
to replace the Member, and (ii) of the proposed replacement, provided that such
replacement has equivalent qualifications, education level and experience level of the
Member proposed for replacement. Upon such approval, which shall not be unreasonably
withheld, conditioned or delayed, the Developer may replace such Member as approved.

3. Mutual Commitments of the Parties

A. The parties acknowledge and agree that the timely completion of the
Project is in the best interests of all parties hereto and that the parties shall diligently
negotiate in good faith to facilitate the design, development and construction of the
Project in accordance with the preliminary Project Schedule attached hereto as Exhibit D
(the “Project Schedule”). The Project Schedule represents the parties’ presently
contemplated critical path schedule for the completion of the Project. The parties
understand and acknowledge that failure to meet the Project Schedule will have adverse
financial impacts to the Project and the parties. The foregoing notwithstanding, the
parties acknowledge and agree that the Project Schedule shall be amended by agreement
of the parties from time to time during the course of obtaining the entitlements for the
Project and achieving various Project milestones. The Project Schedule supersedes any
project schedule proposed by the Developer in the Developer Proposal.

B. Preparation of urban design plans shall be programmed by the Developer

and its consultants in coordination with the Commission through, a public participatory
process commonly referred to as a “project design charrette” involving community,
business, and other stakeholders, to develop an acceptable concept plan for the Project
and a development of the Private Improvements that is financially and economically
feasible from a market perspective, and that meets the Public Policy Goals (the
“Development Plans”) in accordance with the Project Schedule. The Development Plans
shall consist of illustrative drawings of two-dimensional building and project land uses,
cross-sectional drawings, three-dimensional elevations, and demonstrative graphics.

C. The parties hereto shall reasonably cooperate to facilitate the design,

development and construction of the Project. Subject to the terms of Section 7A hereof,
and in accordance with a process to be more particularly described in the DSA and the
GDA, the Commission shall execute applications, plans, plats and other like documents
required in connection with obtaining the entitlements for the Project.

D. Upon request, and to the extent within its power and legal authority, each
party shall grant to the other or its designee and to any utility company or governmental
authority, such utility rights-of-way and other easements (including grading, drainage,
stormwater management, slope and access easements) on, under, over, or across the
adjoining property owned by such party as may be required in connection with the
development or use of the Project. The location of all such rights-of-way and easements
shall be subject to the approval of the burdened party, such approval not to be
unreasonably withheld or delayed. All such rights-of-way and easements shall be granted
without charge.

4. Development Services Agreement

A. The Commission and Developer currently anticipate that the DSA will be
entered into contemporaneously with the Montgomery County Council’s approval of the
Design Appropriation and in accordance with the Project Schedule, (which date is
currently anticipated to be January, 2008), as the same may be amended from time to
time, in accordance with the terms of this MOU. The parties further agree that in the
event, despite the good faith efforts of the parties, the parties cannot agree upon a
mutually acceptable Development Plan then in such event the DSA shall be terminable
by either party upon written notice to the other, subject however to the payment and
reimbursement obligations thereunder, including without limitation payment of the
Developer’s Cost Recovery.

B. The DSA shall include, among other matters, (1) the agreements of the
Commission and the Developer with respect to the (i) scope of services and
compensation for the Development Management Fee (as hereinafter defined), including a
monthly draw schedule and draw requirements, (ii) design of the Public Improvements;
(iii) pursuit of Project entitlements; (iv) terms and calculation of, and payment for the
Commission’s Pro Rata Share; (v) proposed allocation of costs of shared infrastructure
between the Public Improvements and the Private Improvements, (vi) terms of payment
of the Developer’s Cost Recovery; and (2) the commitment of the Developer to the
design of such elements of the Private Improvements as Developer deems reasonable and
necessary to advance the Private Improvements so as not to delay completion of the
Public Improvements (and which shall be at Developer’s sole cost and expense). Any
and all payments to the Developer will be subject to submission to the Commission of
invoices and supporting documentation in sufficient detail to meet the Commission’s
audit requirements.

C. The Commission acknowledges and agrees to negotiate in good faith with

Developer for compensation to the Developer for certain services under the DSA
including fees for Developer’s overhead, costs and profit for development services
rendered in connection with the Public Improvements (such fees to be agreed upon in the
DSA and to be consistent with the formula included in the Developer’s Proposal) (the
“Development Management Fee”) and to reimburse the Developer the Commission’s Pro
Rata Share, provided that:

(i) Such agreement includes sufficient detail of the activities for

which compensation is being paid; and

(ii) Payment of such compensation is subject to obtaining the Design

Appropriation.
 D. The Commission acknowledges and agrees that (i) Developer shall not be
obligated to undertake any design activities until the DSA is fully executed and the
Design Appropriation is approved, and (ii) Developer shall not be obligated to advance
the design beyond the Schematic Design stage until the GDA is fully executed and the
Construction Appropriation is approved.

E. Developer shall use good faith efforts to cause any applicable third party
consultants agreements to expressly provide that in the event the DSA shall be
terminated, Developer shall have the right to assign (and the Developer hereby agrees to
assign) to the Commission all of its right and interest in, plans, materials or data
developed under the DSA. The foregoing notwithstanding, Developer shall not be
obligated to assign to the Commission any of its financial projections, proformas and
similar proprietary financial information.

5. General Development Agreement

The Commission and Developer currently anticipate that the GDA will be entered
into contemporaneously with the Commission’s submission to the Montgomery County
Council for approval of the Construction Appropriation, and in accordance with the
Project Schedule, (which date is currently anticipated to be December, 2008), as the same
may be amended from time to time, in accordance with the terms of this MOU. The
terms of the GDA shall include, among other matters the rights and obligations of the
parties with respect to (i) acquisition of the PLD Land, if required for the Project, (ii) the
Commission Purchase Price, (iii) incorporation of the terms of the DSA, as applicable,
(iv) the estimated hard cost guaranteed maximum price for the Public Improvements as of
the date of the GDA, (v) terms of the proposed GMP; (vi) terms and conditions of
settlement on the Private Land, which shall occur within sixty (60) days after issuance of
final non-appealable project entitlements for the Private Improvements, including,
without limitation, Site Plan, Record Plat, issuance of a demolition permit for the existing
improvements (if necessary) and a building permit and, if required to construct the
Private Improvements, vacation of the existing Commission headquarters building by the
Commission such that the existing Commission headquarters shall be vacant free of
leases or other rights of occupancy or possession and all Commission personal property is
removed or abandoned by the Commission; (vi) agreement of the parties with respect to
any required environmental remediation of all or any portion of the Project Land; and
(vii) requirements for guarantees, bonds, insurance and other security instruments that
will be required for the development and construction of the Public Improvements.

6. Guaranteed Maximum Price Contract

The GMP shall be in the form of an AIA guaranteed maximum price contract (as
the same may be amended through negotiation of the parties) for the hard costs of
construction of the Public Improvements. The parties presently anticipate establishing
the guaranteed maximum price and entering into the GMP upon receipt of bids based
upon completion of 80% drawings for the Public Improvements.
7. Consent And Appropriation

A. Approvals and consents required from the Commission in connection with

the Project shall not substitute for regulatory approvals required under applicable law.
Regulatory approvals by the Commission required by law or regulation do not substitute
for approvals and consents required from the Commission under this MOU, the DSA or
the GDA.

B. Any time any parties approval or permission is required, such approval

must be in writing.

C. The parties further acknowledge that any payment from the Commission is
expressly subject to the appropriation of funds by the Montgomery County Council for
such payment and failure to make such appropriation is not a breach or default by the
Commission, although the same may give rise to payment of the Developer’s Cost
Recovery.

8. PLD Land

In the event that those portions of County Garage 2 and Lot 2, as generally shown
on Exhibit A-2 attached hereto for the inclusion into the Project, together with such cross
easements and rights as may otherwise be reasonably required in connection with the
development and operation of the Project (collectively the “PLD Land”) can be acquired
by the Commission under reasonable terms and conditions acceptable to the Commission
and consistent with the Project Schedule, and the Commission determines, in its sole and
absolute discretion, that the PLD Land should be included in the Project, the Commission
will enter into such agreements with the County as are necessary to acquire such rights as
may be legally required to incorporate the PLD Land into the Project, and acquire the
PLD Land in accordance with such agreements.

9. Confidentiality

The parties hereto shall maintain the terms of negotiations of this MOU, the DSA,
the GDA, and any other Project documents in strictest confidence and will not disclose
any of its terms to any person or entity except for its Representatives (as hereinafter
defined) on a need-to-know basis without the express consent of the other party, until
such document has been fully executed by all parties. As used herein, the term
“Representatives” means, as to any person, its and their directors, officers, employees,
agents, partners, members, prospective or existing investors with respect to the Property
and advisors (including, without limitation, financial advisors, counsel, consultants and
accountants).
10. Non-Binding and Rights of Termination

This MOU, is non-binding and imposes no obligations upon or grants any rights,
preferential interests or value in and to the parties hereto. No such obligations, rights,
interests or value shall accrue to any party until the execution of binding agreements,
including the DSA, GDA and GMP, and upon appropriations being made from time to
time by the Montgomery County Council in support thereof. The purpose of this MOU is
to set forth the respective commitments of the parties to advance the prompt design,
development and construction of the Project. The parties shall diligently and in good
faith negotiate the terms of the DSA, GDA and GMP. However, if in accordance with
the Project Schedule (or within a reasonable time thereafter), the parties fail to reach
agreement as to the terms of the DSA, GDA and GMP, including the scope and amount
of payment for the development services to be provided by Developer under the DSA,
and the amount of the Commission Purchase Price, either party my terminate this MOU
without recourse by and to the other, unless otherwise expressly stated herein. The
foregoing notwithstanding, once any or all of the DSA, GDA and GMP are fully executed
by the parties thereto, the terms of such agreements shall supercede and control over any
contrary provisions of this MOU.

[SIGNATURE PAGE FOLLOWS]

 IN WITNESS WHEREOF, the parties have caused this Memorandum of
Understanding to be signed, sealed, and delivered by their duly authorized representatives
the day and year first above written.

WITNESS: THE MARYLAND NATIONAL

CAPITAL PARK AND PLANNING
COMMISSION

By:
Name: ___________________________
Title: ___________________________

BOZZUTO DEVELOPMENT
COMPANY

________________________________ By:
Name: ___________________________
Title: ___________________________

SPAULDING & SLYE INVESTMENTS,

a member of the Jones Lang LaSalle Group

________________________________ By:
Name: ___________________________
Title: ___________________________

HARRISON DEVELOPMENT

________________________________ By:
Name: ___________________________
Title: ___________________________
 ATTACHMENT 2

Commission Budget: Memorandum of Understanding

Through
General Development Agreement Execution

Budget Item Amount

Due Diligence $127,000
Development Plan (Master Planning, Headquarters Architecture) $304,000
Architecture & Engineering (Development Plan Through Schematics) $1,387,000
Preliminary Interior Design $242,000
Development Management Fee $600,000
Commission Consultants $290,000
Total Commission Budget $2,950,000
 ATTACHMENT 3

Memorandum Dated October 25, 2007

From Patricia Colihan Barney, Secretary-Treasurer
To Montgomery County Planning Board
 MEMO
THE MARYLAND-NATIONAL CAPITAL PARK & PLANNING COMMISSION
Department of Finance, Office of Secretary-Treasurer

PCB07-053
October 25, 2007

TO: Montgomery County Planning Board

FROM: Patricia Colihan Barney, Secretary-Treasurer

SUBJECT: Funding Source for SilverPlace Supplemental Appropriation

RECOMMENDATION:

Support the funding sources as shown on the capital and operating budget amendments
using fund balance of $1,143,000 from the Administration Fund and $3,772,000 from the
Park Fund. Direct staff to present the SilverPlace project to the Revenue Authority for
their consideration of financing it with lease revenue bonds. If this approach is approved
by the Revenue Authority Board and the County, we would subsequently substitute
$2,950,000 of funding for this supplemental appropriation with Revenue Authority
funding. This process would enable the County to advance those funds to the Revenue
Authority, as permitted in Chapter 42 of the County Code, until issuance of the bonds
thereby freeing up fund balance to assist in funding the FY 09 Budget.

BACKGROUND:

The SilverPlace project costs are anticipated to be funded through two supplemental
appropriations. The first is the design supplemental appropriation for $4,915,000. This
appropriation is to cover $2,950,000 for design costs and $1,965,000 for developer cost
recovery which would only be paid in the event that we do not move forward with the
current development team. The second supplemental appropriation will follow at a later
date to fund the balance of the design and the development costs with a combination of
debt and land sale proceeds.

1
DISCUSSION:

Proposed Financing Method -

The current PDF anticipated funding the SilverPlace project through the Commission’s
issuance of debt in the form of certificates of participation (COPs). This method has been
used to finance two other Commission office buildings.

Due to the difficult fiscal situation at the State level and anticipating its impact on the
County, the County OMB Director suggested that we consider Revenue Authority lease
revenue bonds to finance this project. Using that financing source would enable the
County to advance the design cost portion of this supplemental appropriation ($2.9
million) and free up those funds to assist with the FY 09 budget. The County Finance
Director was asked to consider including the developer cost recovery portion as eligible
for a County advance since any plan or work product funded by such a payment would
become Commission property. She indicated that the County does not provide advances
for those costs.

An added benefit of financing with lease revenue bonds is flexibility. Those bonds can be
issued for broader purposes than Commission issued debt which may create greater
opportunities when further defining and ultimately financing this mixed-use project.

The Board should be aware that if we use lease revenue bond financing, the Revenue
Authority would hold title to the building. The Commission would hold a leasehold
interest in the building, and our rental payments would cover the debt service on the lease
revenue bonds. When the bonds are fully paid off, ownership would transfer to the
Commission.

Proposed Supplemental Appropriation Funding Approach –

The funding source for the $4,915,000 supplemental appropriation is shown on the
proposed PDF as Park and Planning consisting of $1,143,000 of Administration Fund
Balance and $3,772,000 of Park Fund Balance. Based on prior estimates of usage of
space in the building, the Administration Fund should contribute significantly more to the
appropriation, but the Administration Fund was limited to the fund balance currently
available. If we are able to use the revenue bonds and the temporary County advance for
the $2,950,000 of design costs, substantially all of those funds will become available to
the Park Fund. If the Commission is not required to make a Developer Cost Recovery
Payment, the $1,965,000 would become available for this project or for another
Commission funding need in the Administration and Park Funds.

2
SUMMARY:

As it is critical to obtain additional funding for this project now, I recommend that the
funding source on the proposed amendment to the PDF be shown as Park and Planning
representing Commission Fund Balance. If we are successful in obtaining approval to
use Revenue Authority financing, we will switch the funding source for the $2,950,000 of
design costs at a later date.