Monday, July 22, 2024

No new tenants yet for former TF building as city transitions to new headquarters, takes top floor

As the city gears up to move into the former Thermo Fisher building, inquiries have been made as to available space but no tenants have been secured yet. (Port City Daily/Amy Passaretti Willis)

WILMINGTON — While a handful of potential tenants have toured the city’s newly purchased 12-story building downtown, there have been no signed contracts at this time.

READ MORE: City officially takes ownership of downtown Thermo Fisher campus

Based on internal emails obtained by Port City Daily, a few people have reached out to the city to tour space within the former Thermo Fisher building.

Civic Credit Union CEO Dwayne Naylor was one; however, he told PCD the credit union’s headquarters will remain in Raleigh for the time being.

“Our credit union tours many of the city/county buildings, as we contemplate serving NC local governments across the state,” he wrote in an email. “You have to admit, the city’s vision for the area is incredible.”

The city closed on the $68-million purchase of the 12.5-acre campus on North Front Street July 13. It is actively working to transition 15 departments into the building; a timeline is currently in the works, according to city spokesperson Jerod Patteron.

Spark Academy, seeking to open five more locations in the coming years, was another party interested in utilizing some square footage. Though spokesperson Margee Herring said the school would need to be on the first floor for the safety of children.

“We’re always on the lookout for other locations that make sense for working parents,” she told PCD. “So we’re looking at locations all over the city. It’s not ultimately where we’re going to locate our next schools. It didn’t really serve the purpose.”

The City of Wilmington will be taking up the first floor instead.

Despite pushback from council members Luke Waddell and Neil Anderson, the city also will occupy floors three, 10, 11, and 12, the top floor, along with portions of two where the server is located.

The decision was made by architecture firm LS3P, hired by the city for its services to determine how best to fit all the departments in the building in the most efficient way. The floors were chosen based on their turn-key ready status, meaning the ones the city can move into most quickly with the least amount of upfit.

Doug Ruhlin, principal environmental consultant, reached out to the city inquiring about utilizing space for his small businesses, Resource Management Associates.

“As a small business owner, I would strongly urge the city to consider allocating a portion of that leased space to small businesses to operate in, downtown, in a professional environment and location,” Ruhlin wrote to council member Charlie Rivenbark in January, as news first broke about the potential purchase.

CATCH UP: City eyes downtown’s tallest building for $68M

He noted it’s “almost impossible” to find any space for small businesses between 1,000 and 5,000 square feet when all available space is either less than 500 square feet or more than 5,000 square feet — and also “gets snapped up immediately,” Ruhlin wrote.

“Certainly if we can secure good office space downtown, we’ll be going to restaurants after work, shopping during lunchtime, etc., all of which is vital to the downtown and city economy,” he continued.

Ruhlin told PCD he never received a return response.

“Would I consider a move of my small business (NC location) into that building?” Ruhlin wrote in an email to PCD. “Absolutely!”

However, having not heard anything from the city about allocation for small businesses, and the perceived timeframe as to when it might be available, Ruhlin signed a lease at another location in midtown.

“I would, however, continue to monitor the situation and would ultimately really like to get into that location, should space become available,” he wrote.

City spokesperson Lauren Edwards told PCD no rental contracts have been signed. Yet Thermo Fisher has agreed to continue leasing floors five and six for about $1.7 million annually for three years, with the option to extend.

There are two vacant parcels that came with the North Front Street campus purchase, with a combined appraised value of $21.7 million. The city intends to sell off each of them to reduce debt, though they have not yet been official declared surplus.

East Carolinas Commercial Real Estate firm has inquired about the properties on behalf of several interested parties, but due to confidentiality, vice president and broker John Hinnant couldn’t provide further information to PCD at this time.

Next steps

LS3P was officially hired at the Aug. 15 meeting for upfit and architectural design services for the building. The local company was chosen out of nine submittals to a request for proposals. LS3P came out on top of three finalists based on its prior experience performing the city’s space needs assessment last year.

The company’s work will be five-pronged, with phase one resulting in schematics for department and office layouts. The estimated cost is roughly $58,000.

Phases two through five are estimated at just under $200,000, contingent on the designs that result from the first step, deputy city manager Chad McEwen explained to council Aug. 15.

Thereafter, it will develop plans suitable for bidding and work on construction and upfit needed for any of the facility’s space.

Departments will engage with the firm to discuss needs and tour the space suggested for each to use.

Patterson told PCD the company was given the following criteria: prioritize public access, minimize costs to the city for upfit and to locate departments to maximize collaboration.

LS3P president Charles Boney said the top floors require minimal upfit cost, a reason why they were selected. Those areas have the most individual offices already in place as opposed to more open space on the lower ones.

Mayor Bill Saffo told PCD repurposing the campus represents $55 million in savings to taxpayers over constructing a new facility to meet its need, with the added benefit of extra parking as well.

“The city will continue to show that same commitment to fiscal discipline as it transitions operations into the building,” he said. “Architectural consultants were asked to develop a plan to occupy the building with the lowest price tag to taxpayers and the most efficient use of building space, and the majority of Council agrees with that approach.”

Council members Charlie Rivenbark, Margaret Haynes and Kevin Spears did not oppose occupying the top floors.

“I’m not going to apologize to anyone for going first-class,” Rivenbark said at the August meeting. “We deserve it.”

Council member Anderson inquired about the cost discrepancy to renovate the bottom floors, noting it’s a “one-time” expense and would be worth it. Boney said it would be in the hundreds of thousands. 

Standing firm on his desire to occupy the bottom floors, Anderson also shared his vision to recruit a larger corporation to occupy the top.

“If it’s chopped up, I don’t see that as very attractive,” he said.

Waddell has been adamant about securing the bottom floors for city use and is not alone in his thought process.

However, at least two dozen realtors have reached out to council with mimicked verbiage asking them to reconsider the selection of floors the city will occupy.

“As a local city resident and realtor, I urge you to consider the best use of the former PPD building, recently acquired by the city,” Don Harris, with Intracoastal Realty, wrote to council Aug. 22 according to internal emails. “Using floors 1-4 will benefit the city over the long-term and allows the city to gain higher rental income.”

“This should be an easy decision to make for those of you in real estate and business, you know the income and valuation difference over the long term,” Michael Rokoski, with Rokoski Realtor Group, wrote. “I know each of you and as you know I don’t usually reach out on things like this, but this is truly a no-brainer for the people you are supposed to be serving.”

Ellen Jo Kraemer warned council that “voters are watching” how decisions are made, with municipal elections coming up in 2023. Mayor Saffo isn’t being challenged and Margaret Haynes is stepping down from the dais. However, Anderson and Spears are running to keep their positions on council, facing five other candidates.

Another factor brought up by resident Bill Walsh in an email to council Aug. 16 was security.

“If the city is dispersed among non-contiguous floors, there becomes the challenge of controlling access,” he wrote. “Will guards be positioned at every elevator entrance?”

To most of the sent emails, Waddell responded he agreed with their concerns.

“This is a decision I’ve been passionate about since we first talked about purchasing this and how to occupy it,” Waddell said at the Aug. 15 council meeting. “My opinion is the criteria itself was not objective and made to produce a specific outcome.”

He read aloud an email he had sent to his fellow board members April 10 as a last-ditch effort urging the city to consider occupying floors one through four instead.

Waddell pointed to three main reasons: It still solves the space-needs issues. The 15 departments consolidated into the building, based on a space needs assessment, would require 101,000 square feet. Occupying the lower floors exceeds this amount by 30%, he said.

He also suggested having the city’s departments in four consecutive floors encourages “synergies and consistent culture.” And, finally, he said it increases accessibility to the public, a goal outlined in the space needs study.

Though his main impetus to make these suggestions was the money it could potentially bring the city by renting out the “more valuable” upper floors. Based on calculations, Waddell said the city could earn an additional $1.4 million in rental income to rent out the top floors.

Anderson agreed.

“Over the long-term, those upper floors are worth more to lease,” he said at the August meeting. “In my mind, the city, the public, government, should be on the lower floors at a lower cost and have those to lease and cover our operating expense.”

The city has determined at least $3 million worth of expenses are needed for maintenance and operating costs at the building annually.

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