Friday, April 12, 2024

‘Gateway Project’ proposal gets graded: Wilmington happy with ‘public purpose,’ concerned with workforce housing

The project was graded on five major points and could get a maximum of 15 points, it scored an 11.

The City of Wilmington's City Council is being asked to approve the initial proposal for a new public-private development that will allow staff to move forward with the next steps of the process (Port City Daily/File)
The City of Wilmington’s City Council is being asked to approve the initial proposal for a new public-private development that will allow staff to move forward with the next steps of the process (Port City Daily/File).

WILMINGTON — Last month the City of Wilmington received its sole proposal for the possible redevelopment of city-owned property at the northern end of downtown — informally known as the Gateway Project — from River Place developers East-West Partners.

Now, City Council is tasked with answering the question, what’s next?

At Tuesday’s City Council meeting, elected officials will be presented with a resolution accepting the proposal from East-West, and giving City Manager Sterling Cheatham the authority to move forward with creating a memorandum of understanding (MOU).

It’s important to note that approving the resolution and giving city staff the go-ahead to work on an MOU is not the same as approving the construction of the project. Staff and the developer could go through the MOU process only to have their plans rejected by City Council.

The plans for the development have not changed since first reported and City Council’s agenda does give the project a grade from city staff who reviewed the project — it scored an 11 out of 15.

Getting the grade

City staff used five different points to judge the project on: financial capacity; plan proposal; public purpose; qualifications and experience; and workforce housing.

Finances

The first of the five points, financial capacity, scored a two.

“The Development Team shows the financial capacity to construct the project. They have experience developing projects of this size. The City is currently working with East West Partners on the River Place project. The proposal included a list of reputable financial partners. The Staff recommends obtaining additional details from the Developer relative to the expected participation from the City,” the staff report states.

Staff did acknowledge there were two ‘pros’ to the plan’s financial capacity; however, there were many more cons.

The loan aspect of financing presented is not a concern and the city agrees the company has identified several reputable financial partners — but there are concerns.

The cons of the finances presented include:

  • 3% contingency seems low as a beginning number
  • Sale of hotel property could be problematic. Control of hotel site beyond the initial sale – future transfers could require further modification of any PDA (purchase and development agreement)
  • Concern for the 35% equity – could be challenging to obtain. Would need more significant confirmation before project commencement
  • Profit margin unknown
  • No clarity for what City’s expected financial participation – especially parking
  • Grocer rent – they usually are anchor tenants with a lower rate for attraction. Rate quoted here is high
  • No firm commitment from financial partners noted

Plan Proposal

When the city issued the RFP, it listed several items that leaders would like to see included in the project including a visitor center and some affordable housing.

East-West’s plan included both — and more. City Staff gave this aspect of the project a two as well.

“The proposal includes a hotel, a visitor’s center, office space, retail space, residential units, a grocery store, and parking. The proposed site plan incorporates the two City-owned sites plus the privately owned lot at the corner of N. Front and 3rd Streets, according to the staff analysis.

“The private lot combined with the City gateway lot, 1020 N. Front St., will be the location of a 124 key hotel, 9,000 sf visitor’s R1-93 center, 100,000 sf Class A office space, plus on-site at grade and sub-grade parking. The combination of 901 N. 3rd Street, 908, and 922 N. Front Street will be the site of 194 residential units, 31,000sf grocery store and 713 space parking facility,” the summary concluded.

Some of the things that staff liked included the incorporation of a visitor center and a grocery store, a much-needed store in a food desert. It would also be a ‘strong gateway’ to downtown and have accommodations for the visitor center.

But again, there was a long list of cons.

One of the more striking omissions of East-West’s proposal to the City of Wilmington was the lack of information regarding what would be expected of the city.

The list of cons includes:

  • Proposal is vague on specific vital components, not the least of which is City participation
  • Is the development too high scale (value)?
  • Is there a market for this amount of office space?
  • Community most needing grocery store (Northside) has no pedestrian access to project
  • High market rates for housing
  • The development is disconnected from the east side of 3rd Street and is totally focused toward the Cape Fear River
  • Lack of property control for adjacent/middle parcel affects continuity
  • Subgrade parking is problematic and costly
  • The development is over parked – peak demand is too high – especially in the future when there should be fewer vehicles
  • Density is not as high as preferred, but the assembly of property is recognized as a limiting factor.
  • Load-in/out for grocer could be problematic on short, busy streets

Public Purpose

The project would include a visitor center, grocery store, and potentially some workforce housing (Port City Daily/Courtesy City of Wilmington)
The project would include a visitor center, grocery store, and potentially some workforce housing (Port City Daily/Courtesy City of Wilmington)

The first of the five topics to get a perfect score of three, the public purpose of the project is highly regarded by the reviewers.

The project would incorporate plenty of public space, some workforce housing, a grocery store in a food desert, parking, public art, and pedestrian circulation.

The only cons were a lack of integration to the east side of 3rd Street, a lack of tour bus accommodations, and an apparently confusing statement.

According to the cons list, “Blurring lines between pedestrian and vehicular traffic is not a clear statement. Is this to be interpreted literally or figuratively?”

Qualifications

Once again a score of three for this subsection, the city has already worked on a multi-million dollar project with East-West so there is already trust in that aspect of the plan.

The development team also has plenty of experience with multiple projects across the state.

Surprisingly, the previous relationship with city staff was listed as both a pro and a con in the report.

Other concerns include the fact that code amendments might be needed in order to complete the project — but that was also the case with River Place. In fact, City Council loosened its own flood requirements and changed a sign ordinance to accommodate River Place.

Related: Wilmington’s River Place project once again requesting change to city’s ordinances

There was also a question as to the experience with East-West’s experience with affordable housing, which brings the report to its final point of interest.

Workforce Housing

The need for affordable housing has been discussed ad nauseam and City Council actually passed a resolution in 2017 stating it would require any public-private partnership to include it.

The plan got the lowest score possible, a one, for this aspect of the plan. The pros were that the developer did include affordable housing and that they have experience with the ‘provisions of workforce housing.’

The cons included the fact that the developer only agreed to provide 5%, or about 10 units as affordable.

According to the report, the city would like to see a minimum of 10% of the units affordable.

It was also noted that while the RFP asked to include affordable housing, city staff is hesitant because “Using the new construction is the most expensive way to accommodate affordable housing.”

Instead, the report suggests, “Would like to see, as an option, the use of funding for workforce housing preservation on the Northside as opposed to construction within the proposed development. This potentially could result in more ‘bang for the buck.'”

So, even though one of the requirements is to include affordable housing in any public-private development, staff is concerned with including affordable housing in this public-private development.


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