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Teaming Up: Are Public-private Partnerships In Area's Future?

By Cece Nunn, posted Jan 17, 2020
Chris Coudriet, New Hanover County manager, shown inside the County Government Center, said the county might benefit from a potential public-private partnership that could lead to redevelopment of the center and the site. (Photo by Michael Cline Spencer)
About 30 years ago, a Brendle’s department store welcomed shoppers at Marketplace Mall off South College Road.
 
But few things, especially in the world of retail, remain the same forever, and Brendle’s ceased to exist around 1996.
 
In 2002, New Hanover County government officials began the process of buying and renovating more than 136,000 square feet of the mall for county offices. The structure, originally built in 1989, became the County Government Center, 230 Government Center Drive, and was applauded by some as a good example of adaptive reuse.
 
But these days, the center holds 30,000 square feet of unused space and needs millions of dollars in basic maintenance costs.
 
“We know it’s about $20 million over the next 10 or 15 years that we’re going to spend,” said New Hanover County Manager Chris Coudriet. “If we [the county by itself] spend it on this site, there’s really no chance through private investment to generate any of the revenue via incremental gain in the tax base to pay for that $20 million of investments.”
 
A public-private partnership could offer that chance, Coudriet said. He’s one of numerous officials in the region and beyond who have brought public-private partnerships (also referred to as P3s) to the table as potential solutions to public needs that could also help meet the market’s demands. P3s have advantages and disadvantages, but one of the benefits, Coudriet said, is the potential to end up with a better facility for fewer county dollars.
 
In New Hanover County’s case, the structure housing its offices and emergency operations center (EOC) needs to be able to withstand the destructive rain and wind a hurricane can bring.
 
“When you think about the resiliency piece … I don’t know that we could build a modern purpose-designed and built facility, with the level of resiliency, emergency operations center capability that we have, for the same number of dollars that likely a private developer would deliver it,” Coudriet said.
 

Picking a Partner

 
Last year, the county sent out a request for qualifications (RFQ) for a public-private partnership to design and build a new government center on the site, along with private development that could include commercial, business and residential uses.
 
Two separate development teams responded – Vermilion Campbell Development, a team out of Chicago with some local and state members, and Cape Fear FD Stonewater, which includes Wilmington-based Cape Fear Commercial’s development arm, GHK Cape Fear Development. After their qualifications were reviewed, county staff members have recommended that the New Hanover County Board of Commissioners choose Cape Fear FD Stonewater to work with as the planning process continues.
 
“I would say both were very, very strong, no identifiable weaknesses. And so all things being equal, our review team felt like the right decision would be to recommend a local group who was as equally capable but also understands hands-on the environment that we work in,” Coudriet said. “I would say they [Cape Fear FD Stonewater] had a little more refinement and clarity around our need to have a resilient facility . . . they brought in pieces of a design team that had done specific design and build on EOCs, 911 centers and the like.”
 

City Project on the Rise

 
As the potential county government center redevelopment moves forward, a city P3 is nearing completion.
 
The path to River Place, a P3 project under construction in downtown Wilmington, was as twisty as a river on its journey from defunct parking deck built in the 1960s to 13-story mixed-use development with condos, apartments and commercial space that’s expected to be completed this year.
 
Developer East West Partners of Chapel Hill is investing more than $60 million in River Place, while the city of Wilmington has kicked in $25 million, about $23 million for a new parking deck and $2 million for the public improvements on Grace and Chestnut streets.
 
As of mid-December 2019, 82 of the 92 condominiums in River Place were under contract and 65 percent of its commercial space had been leased.
 
It’s been a long road to 2020 for the project, which physically started with the demolition of the parking deck in the fall of 2017, but was on the negotiating table for many months before that.
 
“I would say that for the most part it’s been a very positive experience. Our development partner with River Place, city of Wilmington, has been great to work with,” said Lucien Ellison, senior managing partner for East West Partners, who is based in Wilmington. “They’ve got a lot of very professional and competent folks, the staff members that I work with on a daily basis. And that’s made it a lot easier to work through all the difficulties and issues that have arisen throughout the project. … This has been an extremely complex project from start to finish.”
 
Timing and costs are risks private companies take when embarking on a P3.
 
“We figured out that construction costs and labor costs in the Southeast, or maybe it was regionally speaking, went up 20% while we were trying to figure out how to come up with an agreement and design to do it. And then they continue to rise throughout construction,” Ellison said. “You can try to account for it, but I don’t think anybody across the nation expected labor and material prices to continue their steady climb like they have” with the implementation of tariffs playing a big part.
 

Next Step for East West

 
But with River Place on its way to completion, East West Partners is now looking at another P3 with the city.
 
The northern gateway project, which could include residential units, retail space, a hotel, a visitors center and parking, would greet visitors coming in from Interstate 74, Interstate 140 and U.S. 421 over the Isabel Holmes Bridge or from Martin Luther King Jr. Parkway.
 
East West Partners submitted a proposal for a $90 million project that would cover city-owned properties at 1020, 908 and 922 N. Front St. and 901 N. Third St. The Wilmington City Council unanimously gave the go-ahead in October to take the next steps with the proposal, including allowing the city manager to work on a memorandum of understanding between the city and the developer.
 
“I’d actually been looking at that piece of property before the city of Wilmington decided to do an RFP and always thought that this … would be a great development for the north end of downtown,” Ellison said this month. “And I explored it a little bit, and then it turns out that the city decided to go through the RFP process. … East West partners felt that we certainly had a leg up because we already had a great working relationship with the city of Wilmington and experience with public-private partnerships that many other developers that might be looking at this project didn’t have.”
 
Any proposal hammered out between the city and East West would be subject to public hearings.
 
“Obviously, one of the things that is very important to the city is affordable housing,” said Wilmington Mayor Bill Saffo, referring to the northern gateway project and others.
 

Project Grace Not Off the Table

 
Affordable housing considerations could also tie into another potential P3 in the works, Project Grace, a redevelopment that would involve New Hanover County-owned property in downtown Wilmington. The city block includes the main branch of the county’s public library, a parking deck and more.
 
County officials last year chose to proceed with a proposal, by Wilmington- based Zimmer Development Co. (ZDC) in association with Little Architecture and Vines Architecture, that would have created apartments, retail and office space and a shared library/Cape Fear Museum space on the property. The museum would relocate from its building on Market Street to the block bounded by Grace, Chestnut, Second and Third streets.
 
But some in the community opposed the potential library change and over the summer, the state started studying the possibility of the local museum becoming state-owned.
 
“The call that we made was for about 90,000 square feet [for the library and museum], and they [the Zimmer team] put a deal together that met our space need,” Coudriet said. But if the museum part of the equation is taken out, “that’s half of the square footage gone that Zimmer went into this proposal thinking was necessary on that site,” he said.
 
That doesn’t mean the Zimmer proposal is off the table, Coudriet said.
 
“We’re still examining how to proceed,” he said.
 
Officials and developers, including Coudriet, see the potential for more P3s in the area’s future.
 
“What I hope is that we demonstrate the capacity to do this work,” he said, “and that the board continues to direct and encourage us to look at other public-private partnerships that are out there.”
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