Wednesday, April 24, 2024

City commits $750K as it considers downtown building purchase

Building assessment and appraisals are underway as city makes a $68 million offer

A refundable $500,000 deposit and an additional $250,000 also was approved for consultants and staff to begin due diligence on the property. (Port City Daily/Amy Passaretti) 

WILMINGTON — Efforts are moving forward in the city’s potential purchase of downtown’s tallest building, which could become its new headquarters.

Leaders signed off unanimously Tuesday at Wilmington’s City Council meeting on a refundable $500,000 deposit, as the city offers $68 million to River Ventures, LLC, for the former PPD building, now occupied by Thermo Scientific. An additional $250,000 was approved for consultants and staff to begin due diligence on the property, including a building assessment, appraisal and securing legal counsel. 

READ MORE: City eyes downtown’s tallest building for $68M

The money was a supplemental appropriation to the capital project building fund, which covers major facility needs.

Council had to vote to amend a resolution to allow city manager Tony Caudle to enter a deal beyond his contractual allowance of $90,000. The deposit gives the city 120 days to decide whether they want to continue with the purchase, should the offer be accepted. 

The Thermo Fisher property takes up 12.5 acres at 929, 1001 and 1021 N. Front St. It includes a 12-story building, 1,500 parking spaces (almost 300 spaces in the ground floor lot under the building, 240 surface lot spaces and a 1,000-space deck), and two vacant parcels of land.

Not even 12 hours after council passed the resolution to secure deposits, city staff released a request for proposals Wednesday afternoon, taking bids for a facility condition assessment of the building. Proposals are due Feb. 10 and it will execute the contract by Feb. 14, with the final report due by April 28.

The building assessment covers five areas — the first, an asset inventory. The purchase would be all-inclusive, meaning it comes with furnishings, fixtures and equipment.

The next step is a condition assessment to gauge the inner workings — from plumbing to electrical to air quality — followed by an operations and maintenance analysis.

“What we’d like to do is, obviously, find out what it costs to run that building on an annual basis,” deputy county manager Chad McEwen said at the meeting. “The building is highly technical, highly advanced, compared to our existing facilities. We want to know that number … so we can compare it to our existing costs related to our existing facilities.”

Finally, capital expenses will be evaluated, from the roof to the carpet and any needed repairs.

A brownfields status and compliance report also will be generated since the facility has been home to scientific research. It has been primarily used for administrative needs, not lab testing, as far as McEwen could tell. 

“We have no reason to believe that there’s any issue with the brownfields agreements that were filed when the property was redeveloped,” he clarified. “We have no reason to believe that there’s actually been any testing on the property, which could lead to contamination. But we want to make sure those components are checked and confirmed.”

The $68-million price tag is not one Thermo Fisher has formally accepted and in no way is “bound to,” Caudle told council. “Nothing has been signed, and there is no guarantee that they will take what we have submitted.” 

But he added he does think it’s a competitive offer against others that are also “on the table.” The property tax value is $141 million and according to past Wilmington Biz reporting, the campus was valued at nearly $72 million in 2021; $68 million accounting for the building itself.

The PPD building was constructed in 2007 for roughly $70 million.

City manager Tony Caudle and deputy city manager Chad McEwen presenting to city council. (Port City Daily/Screenshot of meeting)

Background

According to Caudle, the city was approached by Thermo Fisher’s real estate sales team in December to buy the property — eight months after the global scientific research company announced its desire to unload the campus

The city’s reasons to purchase the Thermo Fisher property are multifaceted. At the top of the list is consolidating its offices. City departments are spread out currently in multiple locations, many in aging buildings that need upkeep, including at 305, 340 and 414 Chestnut, 115 North Third, 1502 Wellington, 302 Willard and 1702 Burnett Blvd. 

“We are getting further and further and further behind in regards to space needs downtown,” Caudle told council.

A recent assessment — completed in late 2022 and yet to be presented to council due to the timing and “juxtaposition” of the Thermo Fisher building coming into purview — noted 305 Chestnut St. alone would be a $4.1 million renovation project.

The 2022 assessment was one of a few done in the last 30 years, according to Caudle. One was conducted in 1994 and another in 2014, both completed by John Sawyer of Sawyer Sherwood & Associate Architecture. 

Caudle read off what Sawyer wrote in the ‘90s: 

“Consolidating city offices and a group of buildings on the same site or close to each other can be accomplished … total project costs can be reduced by applying the proceeds of the sales of existing buildings. Savings also occur because of avoidance of major renovation costs, which would be required to upfit existing buildings.”

Caudle added that in 2008, the CP building fund had $1 million in it to cover the costs of an addition to be built alongside 305 Chestnut St., the city’s administrative offices. But he said staff at the time knew it wasn’t enough money.

“Sterling [Cheatham, the former city manager], guarded it like a hawk,” Caudle said. “Everybody tried to put the money towards another project and he kept saying, ‘no,’ and they kept saying we’d never get another building. And he kept saying, ‘We’ll never get one if money is not in the CP.’” 

The second space needs assessment in 2014 suggested building a tower beside the 305 Chestnut location, which also didn’t happen.

The latest study, according to Caudle, suggests razing the administrative offices and rebuilding. Another consultant was hired to determine what those costs would entail and came up with $90 to $96 million for a 102,000-square-foot building and a parking deck with 237 spaces.

The Thermo Fisher building is triple the space — 370,000 square feet — and quadruple the parking from the proposed 305 Chestnut St. replacement.

“Can we make sure council has a full understanding of the square footage that’s currently occupied in our various facilities?” council member Luke Waddell asked.

Caudle said the team is researching it currently.

“It’s important to know that the Local Government Commission will have a strong say in how much of the building we occupy,” Caudle added. “And the reason being is because we cannot be seen as buying that property with taxpayer money to be able to make money off of leases. So there will be a stipulation about how much floor space needs to be occupied by the city and how much can be occupied by others.”

The city would not take up all 12 floors of the building — perhaps half. Three floors would be rented to Thermo Fisher in a three-year lease that could bring in $2 million annually. The remaining space likely would be listed at market value for other businesses to rent. 

“We have had interest,” McEwen confirmed to council, referencing potential tenants who have been in contact already with the city. No names were revealed at the meeting. 

Other options to offset the $68 million price include selling six of the city’s seven properties where general services departments are located, McEwen said.

Caudle suggested doing a closed-bid process before closing on the PPD property.

“It would take a Herculean effort to be able to do that,” he added.

It could help reduce city debt and perhaps be favorable with the LGC, which provides fiscal management oversight to local governments and municipalities.

“I know that they always want the bird in the hand instead of a couple in the bush,” Mayor Saffo said of the state commission, which will have to approve the city’s purchase.

Caudle said the city also has received inquiries about properties its staff would vacate. The Harrelson Building, for instance, was purchased for more than $10 million, according to county property records. Last April the city acquired the 115 N. Third St. five-story building, which it already was renting two floors in to accommodate growing staff numbers.

“Theoretically, [selling] it could be accomplished prior to closing on the financing for the PPD building — that is an incredible rush of time, but it theoretically could be done,” Caudle said.

However, Caudle said “at worst” the city could sell properties within six months or a year of closing on the 12.5 acres.

“We wouldn’t be ready to move into it that day anyway, simply because there would be so much preparation,” he said. “I’ve used the word ‘transformational’ and transformational is used too frequently today. But this is going to be a transformational type of project for the city.”

The vacant parcels next to the building present opportunities for development. The north end of downtown has experienced booming growth in the last five years with added apartments, restaurants and the addition of Riverfront Park. The north parcel — located near the city’s recently purchased Salvation Army building at 820 N. 2nd St. — particularly, stood out to Caudle.

“Frankly, I’ve been wanting to get my hands on it for years to be able to do a public-private partnership,” he said. 

The south parcel includes a surface parking lot and the 1,000-space parking deck. Caudle said the city attempted to negotiate with PPD years ago to manage and appropriate more spaces for the area. If the city owned it, the potential of its public use opens — including Riverfront Park’s two-year-old concert venue, Live Oak Bank Pavilion, which lacks parking.

Between rental opportunities, selling former buildings, and development opportunities, council agreed they could counterbalance some of the $68 million purchase price but by how much remains unknown. That’s part of staff’s research in coming months as well. 

McEwen told council, once the deposit was approved, staff expect to have an appraisal in hand for the property in 30 days.

Council voted unanimously in favor. Per protocol, it will need to hold a public hearing on financing the purchase.

“No matter what course we choose to pursue,” Caudle said, “the provision of suitable office space for the folks in the downtown campus is of vital importance to the city.”


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Shea Carver
Shea Carver
Shea Carver is the editor in chief at Port City Daily. A UNCW alumna, Shea worked in the print media business in Wilmington for 22 years before joining the PCD team in October 2020. She specializes in arts coverage — music, film, literature, theatre — the dining scene, and can often be tapped on where to go, what to do and who to see in Wilmington. When she isn’t hanging with her pup, Shadow Wolf, tending the garden or spinning vinyl, she’s attending concerts and live theater.

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