Saturday, July 13, 2024

Wilmington changed its mind on eminent domain deal. It could cost the city $350,000

City Council recently approved the amendment - although the vote wasn't unanimous. The results could cost the city 10 times as much as expected or more.

Behind the new Waffle House downtown, developers and the city are at odds over an eminent domain deal. (Port City Daily /CONTRIBUTED PHOTO)
Behind the new Waffle House downtown, a developer and the city are at odds over an eminent domain deal. (Port City Daily/CONTRIBUTED PHOTO)

WILMINGTON – The developer of the downtown building that houses the Waffle House on Front Street is apparently asking the city for $350,000 after the city’s recent decision to condemn some of their property.

The eminent domain case started in 2016, but took an abrupt turn last month.

Eminent domain for River Place project

Two years ago, as the city prepared to demolish the Water Street parking deck to build the River Place project, City Council approved taking eminent domain control over an area behind several properties on Front Street.

See more: One year in, Wilmington’s Water Street project sees cost jump $7.6 million

That included a utility easement behind the property at 255 North Front street being developed by North Front, LCC – a mixed-use building that is home to the Waffle House at street level, and allows apartments on upper floors.

The easement gave the city permission to build a subterranean utility duct located behind the building; those plans didn’t directly affect the actual area or access to the building’s rear entrance.

According to city emails, in January the city fenced off part of the easement; North Front LLC felt this overstepped the utility easement. On Jan. 22, Michael Davenport, attorney for North Front LLC, sent an email to the Assistant City Attorney Amy Schaefer, presenting a draft of an injunction.

“The only reason we are talking about $350,000 right now is because my client wants to find solutions – right now …”

In the same email, Davenport responded to Schaefer’s request for an “ask” — an alternative to a lawsuit. Davenport suggested $350,000.

Wilmington ‘takes’ the land

Shortly afterward, on Feb. 6, City Council considered a resolution replacing the utility easement with what is known as a fee simple acquisition: instead of a utility easement, the city would take the land outright, and pay the owner a value decided by the city’s appraiser.

During his presentation of the resolution, Deputy City Manager Tony Caudle told City Council that further analysis of the project required more construction on the land, including water and sewer. (You can watch the meeting here, Caudle speaks during resolution two).

Caudle told the council that, since it had already voted on the eminent domain use of the land, taking the land constituted an amendment, and wouldn’t require 30-days notice. Caudle added that compensation for the area taken by the city had yet to be determined, though appraisals were underway.

The resolution was listed as having no budget impact.

Approved, but not unanimous

City Council approved the measure without knowing how much it would cost and without notifying landowners, though the vote was not unanimous.

Councilman Kevin O’Grady asked to be recused due to “conflict of interest.” Mayor Pro-tem Margaret Haynes also asked to be recused but did not cite a reason. Both had voted for the original easement.

Council members Neil Anderson and Clifford Barnett and Mayor Bill Saffo approved the resolution. Councilman Paul Lawler, who voted against the initial easement, also voted against the amended “take.”

There was no discussion of the issue.

The rear area of the 255 North Front Building. (Port City Daily photo | COURTESY CITY OF WILMINGTON)
The rear area of the 255 North Front Building, showing the current rear entrance and ongoing construction on the Water Street Parking Lot demolition. (Port City Daily photo / COURTESY CITY OF WILMINGTON)

Construction work apparently began shortly afterward.

North Front, LLC objects

On Feb. 13,  Davenport wrote to City Attorneys John Joye and Amy Schaefer, telling the city to “immediately cease and desist from any further demo walkway and/or bridgeway activity within or involving my client’s property as my clients have not consented to (any such) access or use pending our completion of negotiations and conditions associated with the discussed construction easement.”

The following week, on Feb. 22, the city had the land appraised by Jack Morgan of the JC Morgan Company. The appraisal found the value of the land to be about $32,000.

The city's appraiser valued the land taken by the February 6 resolution at about $32,000. Developers did not agree. (Port City Daily photo | COURTESY CITY OF WILMINGTON)
The city’s appraiser valued the land taken by the February 6 resolution at about $32,000. The developer did not agree. (Port City Daily photo / COURTESY CITY OF WILMINGTON)

However, that appraisal included two caveats.

First, it included an “extraordinary assumption,” that Wilmington would grant a perpetual easement – that is, allow the permanent future use – of the land to North Front LLC.

Second, it included a “hypothetical situation.” This hypothetical meant that the land’s original value was established without taking the city’s impending purchase into account.

However,  the city’s plans for the area behind the building would render that easement significantly less viable, according to North Front LCC.

According to emails from Davenport to Joye and Schaefer, the city’s acquisition of the area behind the building posed serious concerns for North Front LLC, including loss of access to utilities and entrance at the rear of the building.

According to the building’s current layout, the building’s elevator – which makes it compliant with the Americans with Disabilities Act – is only accessible through the building’s back door or by going through the kitchen area of Waffle House. The rear entrance also makes the moving future tenants much easier.

$32,000 offer, $350,000 counteroffer

In his email, Davenport holds to the $350,000 amount, describing it as a compromise.

“The only reason we are talking about $350,000 right now is because my client wants to find solutions – right now – and get on with its own project at 255 North Front Street, instead of leaving its project languishing idle in costly uncertainty, pending the completion of the City’s project and this litigation,” Davenport wrote.

Davenport also suggested that if the city wanted to go to a jury trial, that he expected the amount could be considerably larger.

Recent emails between Davenport and Joye suggest North Front LLC and the City of Wilmington are still in the process of negotiating. However, the city has apparently only increased its offer to just under $41,000.

North Front LLC has declined to accept the city of Wilmington's latest offer. (Port City Daily photo | BENJAMIN SCHACHTMAN)
North Front LLC has declined to accept the city of Wilmington’s latest offer. (Port City Daily photo / BENJAMIN SCHACHTMAN)

On March 6, Davenport filed a response to the Wilmington in New Hanover County District Court. That response to Wilmington’s offer, made in mid-February, indicates there is still considerable daylight between the two parties.

Davenport’s response states that his client “earnestly and ardently denies that $40,990.00 is the ‘correct amount’ of deposit with the court as just compensation.”

Davenport’s response goes on to request a jury trial.

Davenport said he could not comment on the current civil proceedings or any negotiations. City Manager Sterling Cheatham did not answer questions about the city’s decision to pursue a more aggressive eminent domain acquisition at 255 Front Street.

Schaefer responded only to say the city would not comment on pending litigation.

255 North Front – Eminent Domain, August 16, 2016 by Ben Schachtman on Scribd

255 North Front Easement Becomes Acquisition by Ben Schachtman on Scribd

Send comments and tips to Benjamin Schachtman at, @pcdben on Twitter, and (910) 538-2001.

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