County approved big uptown redevelopment 3 years ago. Now some leaders want out.

County approved big uptown redevelopment 3 years ago. Now some leaders want out.

CHARLOTTE, N.C. (The Charlotte Observer) - When Mecklenburg County commissioners agreed to sell 17 acres in uptown Charlotte, county leaders made a bold promise.

They said they would transform a vacant building, a little-used park, an aging office tower and parking lots in the former Brooklyn neighborhood into a bustling business district with offices, hotels, big-box stores and more than 1,000 apartments and condos. At the same time, officials said, the project in Second Ward would help house the poor.

But three years later, newly-elected commissioners are questioning the deal and exploring if the county can renegotiate.

They’re upset by the prospect of giving up public land to developers likely to build upscale housing.

In recent weeks, the commissioners said they challenged the plan during private meetings with developers. They said they long opposed the redevelopment proposal or were elected by voters to protect green space.

The plan commissioners selected in 2016 calls for about 1,200 new homes, but only about 114 would be affordable to families making up to 80% of area median income. That’s about $56,000 a year for a family of four in Charlotte.

Some commissioners are miffed the agreement shrinks a 5.5-acre park by more than half in a county ranked among the worst in the country for its amount park land.

Some commissioners said they are reviewing the agreement and would like to look into whether the county could renegotiate at least parts of the deal.

“The previous deal was done at a different time with different priorities,” said commissioner Susan Rodriguez-McDowell, who met with developers on May 1. “If (the developers) don’t make as much as money that doesn’t bother me.”

The opposition is significant because the current plan was passed on a 5-3 vote, according to an Observer report from June 2016. Two commissioners who voted against the proposal — Pat Cotham and Ella Scarborough — remain in office, meaning the majority of the board has indicated it does not support the deal as it exists.

Rodriguez-McDowell and fellow commissioners Susan Harden, Elaine Powell and Mark Jerrell said they all share concerns about the project.

But it is unclear how commissioners could change the agreement now. They said they don’t know if they can renegotiate the master redevelopment agreement signed last year.

Mecklenburg County refused to make administrators available for interviews. In response to questions from the Observer, the county provided written answers from Mark Hahn, director of Asset and Facility Management.

Hahn’s statement said the county has a signed agreement with developers from BK Partners and any changes would require cooperation from the business.

BK Partners is led by New York-based developer Don Peebles, one of the richest and most prominent African-American businessmen in the nation.

Peebles said he met with commissioners to hear their concerns, but said he told them the session was not meant to renegotiate the contract.

He said one commissioner suggested developers look into including micro-apartments, which are smaller and usually cheaper than standard apartments. Peebles said it was a good idea and that he would study it.

Still, Peebles told the Observer that he is dismayed that some commissioners would be so critical of a potentially $1 billion project that would provide work for minority- and women-owned businesses in an attempt to preserve roughly three acres of an underused park. His plan says 35% of the construction, engineering, other professional services or other work would to go to minority and women-owned firms, far exceeding the numbers offered by other developers who competed for the project, officials said.

Mecklenburg’s Minority, Women and Small Business Enterprise program sets more modest goals. That would include 21% participation for construction, 16% for architecture and engineering and 23% for professional services.

“This will be some of the first buildings in uptown that mean something for black Charlotte,” Peebles said.

Peebles said African-Americans and other minorities have been largely locked out of Charlotte’s real-estate boom, reflecting the city’s stark racial and economic disparities.

He said some commissioners mistakenly view the affordable housing included in the plan as racial justice.

“That’s a paternalistic way of looking at it,” Peebles said. “Give us economic opportunity and we will take care of our own.”

A GOOD DEAL?

For the last five years, Mecklenburg County leaders have made plans to take advantage of Charlotte’s booming real estate market by selling public land on the edges of uptown.

The idea is to take swaths of aging, sterile government buildings and parking lots and convert them into vibrant business districts filled with shops, restaurants, hotels and offices.

Commissioners agree that government land sales can drive development and generate revenue that can be used to build affordable housing and new green space.

But four commissioners elected to the nine-person board in November have questioned whether taxpayers got a good deal when commissioners decided to sell land that includes the former Charlotte-Mecklenburg Schools Board of Education building, Marshall Park and Bob Walton Plaza.

The county chose the offer from BK Partners over proposals from two other firms selected to submit plans, Crescent Communities and Citisculpt.

Citisculpt offered to pay as much as $40 million for the land, more than BK, which agreed to pay $33.7 million.

But the BK plan provided the most residential units, including affordable housing, office space and retail. And unlike the other plans, it did not require public money to complete.

The proposal from BK “fulfills or exceeds County objectives to create a mixed-used community,” a consultant’s report said.

PAYING LESS THAN MARKET VALUE

Under the agreement, BK Partners doesn’t have to pay the county for the land anytime soon.

BK Partners plans to complete the project in three phases.

After site plans and other details are finalized, the developers will have 18 months to close on the land involved in the first phase.

Tax records suggest that the $33.7 million that BK Partners agreed to pay for 17 acres is far less than others recently paid for uptown real estate.

In 2016, the same year BK Partners was selected, local developer Lincoln Harris and Goldman Sachs paid about $37.5 million for 10 acres near Stonewall and South Tryon streets, where The Charlotte Observer was once located.

On Stonewall Street, the 4.2-acre retail portion of the Stonewall Station development sold last year for $34 million.

Dennis LaCaria, who led negotiations for Mecklenburg County until he left the government earlier this year, said the county had to sell at a price below market value because officials wanted developers to include affordable housing and preserve park space.

He noted that the city of Charlotte did not require affordable housing when it sold the land that became Stonewall Station.

“When you’re talking about fair market value, it’s gonna be market driven,” said Lacaria, who was a senior executive in the county manager’s office. “If you want (affordable housing and green space), there has to be a way to subsidize that.”

INHERENT RISKS

Mecklenburg officials and developers originally said the redevelopment would take 10 years to complete. They said they would mostly finish phase one within five years.

The county now says the project might be finished in 12 years.

Since commissioners picked BK Partners in 2016, the developers and county staff have been working on due diligence, testing soil, developing a master plan and design, negotiating and agreeing to contracts and designing the project.

Monte Ritchey, president of local development firm Conformity Corp., part of BK Partners, said developers are now gauging interest of local and national retailers. They’ll also have to submit a site plan to the county, which Ritchey suggests will occur in the third or fourth quarter of this year.

They also may need to convince city of Charlotte officials to rezone the property, a process that often takes months.

The statement sent by Fair, the county spokesman, said the immense size of the project — more than 2 million square feet of retail, office and homes and other features — means it will take longer to complete than the typical project.

Tom Murphy, former mayor of Pittsburgh and senior fellow at the Urban Land Institute, said there are inherent risks in major redevelopments, especially since they can take years to complete.

“The political climate of Charlotte could change,” Murphy said. “The economics in the world could change dramatically. There’s all kinds of things that can happen between now ... and then when you get under construction.”

He and others said that a developer is unlikely to start construction if there is a downturn in the economy, which can cause further delays and uncertainty.

ABANDONED PROJECTS

In 2013, Peebles planned to build apartments, shops and a hotel in Miami, but walked away from the deal three years later, according to a 2016 report from the Miami Herald.

In March, Peebles’ company abandoned a hotel and condo project in Washington, D.C., amid legal squabbles, according to a report in the Washington Business Journal.

Peebles said he turned away the Miami development after determining it was not financially viable.

In the Washington project, he said his company plans an agreement to build affordable housing at another site even though the deal fell through.

Peebles acknowledged real estate is a cyclical business, but said he is confident the uptown Charlotte redevelopment will be successful.

He noted Charlotte’s growing population, a need for more hotel rooms and a business-friendly environment.

The county statement from Fair acknowledged that a previous deal with a local developer for part of the Second Ward property failed at least in part because of the Great Recession.

The statement said there is less concern about the current deal because Peebles as a national developer has more financial resources to weather a recession than a lone local developer.

“With a sound agreement in place and continued growth in Charlotte, this development opportunity should remain attractive to the developer,” the statement said.

REPUTATION ON THE LINE?

The Second Ward redevelopment carries historical significance.

Once called the Brooklyn neighborhood, it was an African-American enclave bulldozed and replaced with bland government buildings in the name of urban renewal during the 1960s and ’70s.

The Government Center, county courthouse, jail and other municipal buildings now occupy land bordered by McDowell, Stonewall, Third and South Tryon streets.

Some commissioners say that’s why it is important to ensure the redevelopment includes affordable housing that will allow for more diversity.

A city report says Charlotte needs about 34,000 units of affordable housing to meet demand, mostly among people making less than $25,000 a year. That means 114 units built over a decade is insufficient, some commissioners said.

“I’m concerned with how this could become just another luxury space for rich people uptown,” said Rodriguez-McDowell, the county commissioner. “It’s just more luxury-style apartments and condos. I asked about doing something with lower prices and they said ‘That’s not how it is done.’”

Commissioners Chairman George Dunlap and others have continued to support the project.

At a board meeting in March, Dunlap defended the selection of BK Partners. He noted that developers had promised significant participation from minority- and women-owned businesses.

Dunlap and others said people who once lived in the Brooklyn neighborhood should have their legacy honored in the new development. They are not worried about the size of the park, he said.

“Persons that lived in Brooklyn Village and relatives of those that lived there questioned the concern about a five-acre park; because they said there was never a park in Brooklyn,” Dunlap said, according to meeting minutes kept by the county.

Commissioner Pat Cotham voted against the BK Partners proposal in 2016, saying that it did not include enough affordable housing or preserve enough green space.

However, Cotham said, trying to renegotiate now risks the county’s reputation with the business community.

“We can’t get years down the road and then say ‘Let’s change it,’” Cotham said. “No one would want to do business with us again.”

Copyright 2019 The Charlotte Observer. All rights reserved.