Time lapse: Watch two years of (in)activity on CentrePointe block
If the developers of the CentrePointe property fail to fill in the site or start construction of a three-story underground parking garage by March 30, the citycould fill in the holeor even foreclose on the property, a lawyer for Lexington said Thursday.
In an email to the Urban County Council, attorney Mason Miller said a previous order issued to The Webb Companies, the project’s developers, to fill in the site was still in effect. The city gave The Webb Companies and potential new developers several extensions on the April 2015 order. The last of the 30-day extensions was issued Feb. 5.
“As a result, CentrePointe must either complete the garage or restore the property to pre-construction condition by March 30, 2016,” Miller wrote in the email to council members. “If CentrePointe fails to do so, the city has the right, but not the obligation, to enter into the property on March 31, 2016, or any time thereafter and restore the property itself, seek reimbursement of up to $4.4 million from CentrePointe and foreclose on the property if CentrePointe doesn’t reimburse the city.”
The city and CentrePointe developers agreed to a conditional restoration agreement in December 2013. According to that agreement, the developers would restore the surface of the site to pre-disturbance condition if no work was done toward completion of the garage for 60 consecutive days. They also agreed to reimburse the city any cost it incurred, up to $4.4 million, to fill in the hole. The city was granted what’s called a “first priority” mortgage on the property as security “should CentrePointe fail to reimburse the city and also the right to foreclose the property to be repaid those amounts,” Miller wrote.
The city sent The Webb Companies an order in April after the city said no work had occurred on the site, a charge the developers vehemently denied.
In August, a group of investors that included Matt Collins of Lexington and Bridgeton Holdings of New York announced it was interested in taking over the long-stalled development. The city then gave the group a series of extensions on the fill-in order to allow them time to explore taking over the development.
Collins and Bridgeton announced Wednesday they were backing out of the project after they and the city could not come to an agreement about including a new government center in the project. The Collins group had not purchased the property, which is still owned by a company connected with The Webb Companies and Joe Rosenberg, who owns much of the land in the block that is bound by Main, Vine, Upper and Limestone streets.
Developer Dudley Webb did not immediately return phone calls Thursday. Prior to the Collins group involvement in the project, the downtown block had been excavated for a three-story underground parking garage. Tower cranes sit on the site unused. The Webb Companies was in the process of trying to issue bonds or borrow money for the parking garage at the time the Collins group got involved.
CentrePointe must either complete the garage or restore the property to pre-construction condition by March 30, 2016. If CentrePointe fails to do so, the city has the right, but not the obligation, to enter into the property on March 31, 2016, or any time thereafter and restore the property itself, seek reimbursement of up to $4.4 million from CentrePointe and foreclose on the property if CentrePointe doesn’t reimburse the city.
Attorney Mason Miller, in email to Urban County Council
Miller and city officials did not immediately return phone calls Thursday about the future of the CentrePointe site. In his email, Miller cautioned the council that there were a “number of risks and “potential liabilities” involved in enforcing the fill-in order.
Some in the business community urged the city Thursday to allow the dust to settle before making a decision about the site.
Mike Scanlon, a former vice mayor who owns many downtown properties, said The Webb Companies’ original proposal — which included an office tower, a hotel, apartment building, and restaurant and retail spaces — is still viable.
“There is a sentiment among the businessmen in town that we all think that if everyone can get along, we can make this happen,” Scanlon said. “Let’s all take a deep breath, keep an open mind and have a can-do attitude.”
Scanlon said the economy has improved dramatically since the project was proposed and the buildings in that block were razed in 2008. Interest rates are still low. The CentrePointe site is in the heart of downtown. It would draw a lot of pedestrian traffic, which would be great for first-floor retail. If an office tower is built, businesses will want to lease that space, he said.
It’s difficult to find renters for mediocre office space downtown, Scanlon said, but “interesting space is never difficult to rent.”
Phil Holoubek has developed several downtown properties. He said the cost of parking is always an issue downtown. Underground parking can cost as much as $30,000 per parking space to build. That’s where public financing might be needed to offset costs, Holoubek said.
“Lexington has the same cost of construction as bigger cities,” he said. “But in bigger cities, developers can charge more for rent. So the profit margins in Lexington are much lower than in bigger cities. I think sometimes people look at these projects and think developers are making a lot of money off of them; they are not.”
Holoubek and Scanlon said available property to develop in Lexington is scarce. The block is too valuable to sit empty for long.
“I think it needs to be developed,” Holoubek said. “I think it will be developed, whether it happens in one phase or in multiple phases. One way to reduce the risk is to build it in phases. Once that garage is done, then you have a platform to build the rest of the development.”