CATS to anchor office deal
J. Lee Howard, Charlotte Business Journal
The city hopes to put the Charlotte Area Transit System in a mid-scale office building uptown on property it wants to sell to help defray the cost of the new arena.
The dimensions of the building are still a work in progress, but city officials describe it as being at least six-stories tall and about 87,000 square feet.
Though no development price has been determined, industry experts estimate such a building could cost about $10 million, plus the $1.7 million it will take to buy the 1/3-acre site at North Caldwell and East Trade streets.
The city's designs for the building would have CATS own up to four floors at the top of the building, taking at least 58,000 square feet. An additional floor of office space would be available for lease, and the ground floor would house a restaurant or entertainment-oriented venue, says Curt Walton, an assistant city manager.
"Eventually, what we are doing here is siting a new arena and, for economic-stimulus purposes, the primary tract will be the arena," Walton says. "But to have a couple of acres in each direction not being productive was not our goal. We want this land back on the tax rolls."
The Caldwell and Trade land sale is part of a larger scenario to dispose of seven city-owned parcels to help offset the cost of the $265 million arena.
CATS employs 208 full-time and 23 part-time employees in almost 18,000 square feet of offices scattered throughout town, including the Government Center, the Transit Center, Hedgemore Drive and Spratt Street. In September, it hopes to expand to almost 25,000 square feet with a new lease at a building at Brevard and Trade streets, says Jean Leier, CATS public relations specialist.
But even though that expansion space is helpful, having a building where all CATS employees can be concentrated under one roof would be a much better remedy, she says. "There is no space to expand at the Government Center, and we've had to lease all this other space all over town." It also would put CATS' administration in a location more central to the services it provides, including the Transit Center, the light-rail line and CATS' bus garage on Davidson Street.
City Council is expected to review proposals for four of the property sales Monday.
The city's offering an anchor for a proposed building is an excellent strategy, especially in the soft uptown office environment, says Terry Orell, Charlotte Chamber senior vice president for business growth. "I would think a developer would jump at that," he says. "They've seeded the deal."
At a time when most uptown development is at a standstill, having an anchor tenant would be a requirement for getting a lender to commit to a new building, industry experts say. With CATS as an anchor, the building's prospects improve significantly, says local real estate consultant Frank Warren. "That's how they're going to make it work. The building has to support the value they've placed on the land. With CATS as an anchor, that makes it much more viable."
At Monday's council meeting, the city manager's office plans to ask that the property be declared surplus and fix a minimum bidding floor of $1.7 million, Walton says.
The city will then ask developers to submit their qualifications for a project meeting specific design goals.
Those specifications include constructing a building that will complement the arena. The city would retain the first right of refusal, in the event the property is sold in the future. The developer must be prepared to close on the site by February.
"It's just not the highest and best use to have the land linger too long," Walton says.
"The city is doing absolutely the right thing," says Daniel Levine, vice president of Levine Properties. The Charlotte-based development company is working with Atlanta-based Cousins Properties on a large-scale redevelopment in First Ward.
He praises the city for providing a prospective tenant for the new office proposal. "I think somebody is going to chase that pretty hard. It's brilliant."
But he also questions the decision not to include a parking component. Levine is trying to get the city and county to pay part of the cost of a parking garage for his project.
An office building supported by a government entity such as CATS helps the whole uptown mix, says Jim Dulin, Spectrum Properties chairman and chief executive officer. "Without CATS, someone might buy the land, but it would sit for a while," he says.
That the city is asking to own the space doesn't give him pause. Such an arrangement may be a harder deal than a straight lease, but it's acceptable under current market conditions, Dulin says. "It's a tougher way to go, but it's doable. It's a neat concept. I hope it works."
Other properties scheduled for consideration at Monday's council meeting:
Two parcels being regarded as one property at the corner of East Sixth and Brevard streets, bounded on the west by the trolley line. The 2-acre tract, valued at $7 million to $8.6 million, will be used as a staging area for arena construction, but the city plans to begin marketing the property for sale in early 2005.
A half-acre tract at Fifth and Caldwell streets, which the city values at $1.3 million. The city plans to make the property available for purchase by early 2004.
Fifteen acres the city owns at Tyvola Road and Billy Graham Parkway. The land is the property under Crescent Resources' Coliseum Centre development and is leased to project owner J. P. Morgan Chase & Co. The city, which has owned the land since the 1920s, places its total investment value in the property between $3.3 million and $3.7 million.
That sale is separate from the prospective sale of 153 acres that now constitutes the Charlotte Coliseum. Crescent Resources is in negotiations for that property, which the city wants developed as a mixed-use project.
In addition, the city recently agreed to sell the old convention center site to a partnership called Arena Holdings, a pairing of Bank of America Corp. and Wachovia Corp. The banks have agreed to buy the property, on 4 acres at College and Fourth streets, for $14 million. Arena Holdings, formed to help fund the arena project, is expected to sell the site to Spectrum.
The final 4.2-acre parcel is a former municipal bus garage at North Brevard and East Eleventh streets, across from First Ward Elementary School. That property could include an additional 0.65-acre piece of railroad right-of-way.
Arena Holdings has placed an $8 million bidding floor on the site, but the price drops by $1.2 million if the railway section doesn't wind up as part of the sale, Walton says.
Upset bidding has already been advertised. Any competing bids will be opened Sept. 24.
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