Tuesday, February 27, 2024

City considers adding restrictions to northern downtown properties before selling

City-owned properties in green in northern downtown already have restrictions attached to land use; Wilmington City Council is considering extending the same conditions to city-owned properties in yellow, surrounding the new city headquarters, Skyline Center, at 929 N. Front. St. (Courtesy City of Wilmington)

WILMINGTON — To exert control over what is built near the city’s new headquarters in northern downtown, the Wilmington City Council is considering extending land restrictions from an already established agreement to nearby properties slated to go on the market.

READ MORE: ‘Ain’t gonna give them away’: Council questions staff on surplus sales after Thermo Fisher buy

At Monday’s city council agenda briefing, staff posed the option to sell 12 acres as surplus, but first adding associated covenants — meaning limitations on noise, architectural design and uses, construction specifications and landscaping — or to pursue a vision plan first. City manager Tony Caudle said it could take staff eight to 12 months to create a plan and recommended council sell the surplus properties with restrictions instead.

“Also, if you recall, when we purchased Skyline Center and the properties associated, the last direction left from council was to dispose of [them] and quickly,” he said.

In addition to the 6 acres of surrounding properties that were part of the 929 N. Front St. sale in July 2023, also being considered are 4 acres acquired in 2005 and 1.8 acres sold by Salvation Army to the city in January 2023.

PPD, original owner of 929 N. Front St., established restrictions to control future development surrounding its company in 2005 when it purchased 30-plus acres of the former Almont Shipping Company downtown.

The purpose of PPD’s declaration of easements, covenants, conditions and restrictions was to ensure aesthetic consistency in the area, enhance the value of nearby properties and establish development free from “toxic and noxious matter and other hazards, and from offensive noises and odors and other objectionable influences.”

It includes building construction requirements and landscaping design, restriction activities for parking lots, and utility connection mandates, while not permitting oil and gas drilling as well as anything creating smoke, obnoxious odors, dust, dirt or ash.

When the city purchased 12.5 acres from River Ventures, owner of the PPD property, in July 2023, those restrictions were transferred with the land. The established agreement allows the owner of the covenants to apply the same conditions to additional nearby properties. It also requires future site plans to be submitted for approval.

The covenants enable additional enforcement beyond its typical ordinances and more control than what the city is granted through the technical review process, economic director Aubrey Parsley told council.

He likened the covenants — which transfer with the land in perpetuity — to a homeowners’ association controlling certain elements of a neighborhood. 

For example, city attorney Meredith Everhart told council sound checks at Live Oak Bank Pavilion, originally proposed to be done at 2 p.m. on the night of concerts, had to be pushed later in the afternoon. PPD said the noise interfered with afternoon meetings; its building is immediately adjacent to the concert venue.

The 12 acres being considered by the city are undeveloped properties located in the Municipal Services District and zoned in the central business district. 

Council member Charlie Rivenbark was the only one to express some concerns about restrictions. He said he feared “cookie cutter” buildings if the city enacted too much control over architectural design.

“A buyer that lays down this money should have the freedom to design its building,” he said. “I don’t have a problem with covenants in regard to landscaping, but I would hate to see the whole end look like housing in Bronx, New York.”

Parsley confirmed a third-party appraiser told the city retaining the covenants on associated properties would not detract from their value in any way. He also said the city should engage in environmental studies to ensure the land is prepared for development by maximizing the property value before its sold. 

Caudle told council moving ahead with selling the properties, with covenants attached, is a good move since the city’s debt is currently maxed out. He also said it’s staff recommendation to do so, unless council opposes.

When the city purchased 929 N. Front St., now called the Skyline Center and the city’s headquarters, it did so with $68-million worth of debt and a plan to pay back money owed by selling off nine surplus properties.

“Anything you want to do over and above, would require raising tax rates to do that,” Caudle said. “In theory, we sell these properties down, it will create debt capacity for future projects.”

The combined properties were appraised by Colliers International in late 2023 at $35 million, which Rivenbark said sounded low. 

Council member Luke Waddell said the properties were “phenomenal” based on their location and the city should be marketing them on a local, regional and national level to as many people as possible. He also inquired about brokerage fees associated with selling the properties. Parsley said there has been no active marketing on the properties yet since most have been tied up in the Gateway agreement.

CATCH UP: Gateway Project to exceed $110M, plans altered after city’s Thermo Fisher purchase

The Gateway Project was formed between the city and East West Partners in 2019 as a $90-million mixed-use development with residential units, retail and office space, as well as a hotel. The city encouraged the developer to include up to 20% of the apartments as affordable at 60% average median income; yet council also rejected a proposal to apply for a New Hanover Community Endowment grant to cover $4.5 million toward the workforce housing component.

In the end, East West said the deal was not sustainable and the agreement was mutually dissolved in October 2023.

Everhart explained her legal team is currently exploring how a broker might play into the selling surplus properties since the city has specific methods for disposing of assets.

“We can’t do direct sales. We can do upset bid, sealed bid,” she recommended. “The question is: How would a broker fit into one of those sales?”

Everhart also explained, while future site plans subject to the covenants must be presented to the city for review, the procedure of how that works is not spelled out in the land’s declaration of conditions. With direction from council, the city would have to create its own procedures for approving plans, as well as establish a standardization on how to interpret the covenants.

While consensus was to move forward adding the covenants to surplus properties, Parsley said the trade-off of retaining more control likely will lead to slower development time.

Caudle reminded council the public-private partnership with East West for the Gateway development “took a good deal of time and resulted in very little progress.” 

However, the city still wants to retain some ownership over the development in the northern downtown area. Based on its Vision 2020 plan, established in 2004, a lot has been accomplished, such as building a park (Riverfront Park), more office space (with the PPD building) and residential units (Pier 33, Riverview, River Place). Gaps still exist that the city hopes to bring fruition, including a hotel mixed-use development and retail — something planned with Gateway.

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