Thursday, October 6, 2022

Project Grace revised: reduced rent, contingency plan, possible 2022 groundbreaking

Downtown Wilmington, overlooking the library where Project Grace will be erected. (Port City Daily/Alexandria Sands)

NEW HANOVER COUNTY — It’s been over a year since county commissioners signed an agreement with Zimmer Development Company for Project Grace. Since then, designs have been fine-tuned, layouts adjusted and finances restructured. Now, the development is one step closer to a reality.

To solidify those changes, an amended memorandum of understanding will come before the commissioners Monday for approval. 

READ MORE: Design team presents first look at Project Grace façade and proposed building

A public-private investment in the works since 2018 — with initial discussions dating back even further — Project Grace consists of the redevelopment of a 3-acre block of county-owned property in downtown Wilmington. Encompassing Grace, Third, Chestnut and Second streets, the plan combines the Cape Fear Museum and the downtown library with mixed-use property. 

Roughly $7.5 million — assigned for the creation of museum exhibit space — has been removed from the developer’s original projected cost of $90 million. Now, displays will be built using county funds, borrowed via a loan in the fiscal year 2023-2024 budget.

County chief strategy officer Jennifer Rigby said the finances were restructured to allow museum staff to work directly with a designer and streamline the process.

Developer Zimmer will front the cost of construction for the new library and museum building. It will lease the property to the county for repayment over 20 years, now estimated to total $80 million. The revised MOU decreases the county’s annual rent from $4.5 million to $4 million. 

After two decades of leasing the building, the county will own the library and museum facilities outright. Any necessary exterior maintenance or repairs would also fall on the developer during this time, but interior work would be the county’s responsibility.

Construction, pending final bid approval, is expected to be $66.8 million. When the county approved the MOU last year, construction costs for the library and museum were estimated at $56.7 million. Port City Daily reached out to Zimmer about the rise in construction costs and did not hear back as of press. 

The remaining $13 million makes up interest, profit and other factors in the lease-to-land deal.

County spokesperson Alex Riley confirmed once the agreement between the county and Zimmer is finalized, the county’s cost will be capped at the price outlined in the contract. Changes in costs for material and labor would be the responsibility of Zimmer.

The street corner of the proposed Project Grace building. (Courtesy New Hanover County)

Originally adopted by commissioners in March 2021, an MOU outlined the developer’s role in the project and included some assurances for the county.

“In the original MOU from the start of this project, all numbers were considered rough estimates with an understanding that they would be refined and focused during the design phase,” Riley explained. 

The changes proposed in the new MOU include adding 4,000 square feet to the library and museum space for a total of 84,905 square feet, at no extra cost to the county. Library and museum staff requested the additional space after further review of the plans. 

“We anticipated that some spaces could end up being slightly bigger and some slightly smaller [once finalized],” Riley said. 

The library portion will now be 36,827 square feet, down about 1,000 square feet from the original layout. Museum space went up about 7,000 square feet to 42,086. The total shared space, which includes a multipurpose auditorium, also decreased from 8,000 square feet to 5,992 square feet.

The library will have a new teen room, high-density shelving to maximize archival collections and two outdoor reading terraces. The museum design doubles the amount of exhibit space it currently offers at its 814 Market St. location, to be used for research once the staff moves into the new building. 

For added safety and ease of access between the parking and new civic and arts center, the developer has agreed to replace the parking deck staircase for $1.1 million, also at no added expense to the county.

The project requires tearing down the Borst Building, constructed in 1926 as a Chrysler Corporation dealership. The Historic Wilmington Foundation fought to save it but to no avail. It’s scheduled to be removed during the first phase of the project, Riley said.

The current public library will also be razed once the private side of development begins, according to county officials. The building was once a Belk-Beery Department Store, which underwent $3 million in renovations in 1981 before opening as a library.

Originally, the new civic and arts center was plotted for the southern portion of the block and the mixed-use offerings for the northern; amended plans have swapped the land layout. The private development will now occur south of the parking deck.

After discussions between the county and developer, the switch was decided on to avoid relocating the library twice, as it would need to vacate the current facility to allow for construction. To ensure the library can remain open during the build, the new structure will be completed before the current one is demolished.

“Second, natural lighting on the northern side of the property is more conducive to climate and lighting control for the library and museum,” Riley said, “something the county felt was important when protecting the assets being kept in these facilities.”

The private investment side also increased from $23 million to a little over $30 million in the updated MOU. Zimmer plans to incorporate multi-family units, with no less than 5% available for workforce housing for at least 10 years, as well as retail.

Rigby said there has been a lot of interest on the private development side and the developers have also been in talks with hotels.

The private element will generate tax revenue for the county, from the retail and housing portions. Had the county just built a new library, there would be no added economic tax benefit. Therefore, having the public-private partnership was essential to the project, according to Rigby. 

“By going through a P3 partnership, we are able to guarantee these private investments align with county strategy and occur in a timely way,” Riley said. “If the county were to simply sell the land to a developer, they would have the rights to construct anything on that portion of the block within the current zoning or with a rezoning by the city, and the county would not have control over the uses or the timeframe.”  

A provision has been added to the MOU allowing the county to purchase Zimmer’s development plans for no more than $2.5 million, if the Local Government Commission — the state entity that approves debt for local governments — does not give its stamp of approval.

Rigby explained this clause will protect both the county and the developer if things don’t go as planned.

“The library and museum staff have done a tremendous amount of work with LS3P on the design and we have a spectacular design, so we would want to purchase those plans,” Rigby said. “Certainly, Zimmer has been bearing the cost of the design process, so they were interested in receiving reimbursement for that should the LGC not approve.”

A public hearing will be held at Monday’s meeting at 9 a.m. at the New Hanover County Courthouse, 24 North Third St., for the community to comment on the financial structure of the project. Commissioners will vote on whether to move forward with applying to the LGC for approval of the project.

If the LGC OKs the plan, construction could start in late August and will take up to two years to complete.


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