Sunday, June 23, 2024

County to ink Project Grace agreement with developer next week

County commissioners will vote on a revived proposal for Project Grace at next week’s meeting, which includes entering into a formal agreement with Cape Fear Development Partners. (Courtesy photo)

NEW HANOVER COUNTY — County commissioners will vote on a revived proposal for Project Grace at next week’s meeting, which includes entering into a formal agreement with Cape Fear Development Partners.

New Hanover County has been working on the redevelopment of a downtown block bordered by Chestnut, Grace, Second and North Third streets for the last five years. Its original public partnership plans with Zimmer Development group fell through last fall when the North Carolina Local Government Commission did not approve of the county’s financing plan.

READ MORE: ‘We are all in’: Local developer commits to Project Grace, adaptive reuse still off the table

Cape Fear Development began exploring options to restore the plans, which includes building a new state-of-the-art museum and library downtown, improving the parking deck on Second Street, and making a $3.5 million private investment to become a mixed-use project.

CFD are arranging the deal at a lower cost. Instead of covering the costs of construction for the public facility and the county repaying it as an annual lease for 20 years — as Zimmer proposed — the county will take on the debt.

In an email obtained by Port City Daily, assistant county manager Jessica Loeper wrote to library and museum staff that this finance structure “is likely to be favorable to the Local Government Commission.”

The LGC did not approve the original public partnership method, which had NHC paying $80 million over two decades. State treasurer and LGC member Dale Folwell said the county would be better off to use its favorable credit rating to get a lower interest rate.

Cape Fear Development also identified cost-savings measures compared to the prior design plans. The new costs to the county is not to exceed $60.5 million.

The estimated budget includes $54 million for construction, which is $574 per gross square foot. It also includes a $2.1 million contingency, nearly $2 million in project management fees, and $2.1 million for design and engineering.

CFD reviewed the county’s design plans and offered value-engineering recommendations to cut back on expenses. Some of those areas to be removed include first- and second-floor reading terraces, a staff terrace, using less expensive building materials, reducing lighting, and decreasing the size of the proposed equipment screen, among other items.  

Cape Fear Development CEO Brian Eckel told commissioners in March there will be no changes to programming space or aesthetics that would be noticeable to the public.

Prior to construction, CFD will request bids and enter into a guaranteed maximum price agreement with a contractor; the budget will then be submitted to the county. If final costs at completion are less than the projected budget, the county is entitled to 80% of the cost savings and CFD will be given the other 20%.

The developer will charge a fee of 3.5% of the actual project costs, excluding the $2.5 million the county already paid for design plans it purchased from Zimmer after their partnership dissolved.

Throughout construction of the civic and arts facility and upgrades to the parking deck, the developer will serve as the representative of the county, according to the agreement. CFD will be responsible for completing design details and obtaining permits.

Once the public facility is complete, the county will sell the south parcel — where the current library sits — to CFD. Waiting until the new library is done ensures there is no lapse in the public’s access to library facilities. 

The property sale will equal the higher of two options: $3.5 million or the higher of two appraisals to be obtained 12 months before the library and museum is ready to be moved into.

The developer then agrees to begin construction of a mixed-use development, a combination of commercial and residential spaces, on the site within 24 months. The investment will be $30.1 million, or 25% of the cost of construction and renovation of the entire project.

If CFD does not begin construction within two years, the county has the option to repurchase the parcel for 90% of what it sold for. The agreement also encourages the private mixed-use plans to be presented to commissioners for their input.

The existing parking deck will be shared between the county and the developer’s future use.

New Hanover County Commissioners will review and vote on the new development agreement — outlining the deliverables, timeline, partnership, and financial framework — May 15 at its 9 a.m. meeting

If commissioners approve the contract, staff will finalize design plans and give the greenlight to CFD to put the project out to bid. A revised agreement with the results of the bid process will be submitted for board approval, which is expected to happen by July.

The county would then look to receive LGC approval in September, with construction to start in October or November. According to internal emails obtained by PCD, a tentative completion date for the museum and library is March 2025.

[Ed. note: The headline was updated after press to omit “saves $20 million.” The construction costs of the new deal are $60 million rather than the original $80 million; the latter included financing the county would pay to borrow from Zimmer. Commissioners will discuss its new financial structure Monday. PCD regrets the oversight.]

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