The potential redevelopment of a New Hanover County-owned block in downtown Wilmington could now include a $2.5 million contingency plan for the developer in case state officials nix part of the emerging deal.

Project Grace could transform the 3-acre block bordered by Grace, Third, Chestnut and Second streets into a mixed-use project, requiring the demolition of the existing New Hanover County Public Library main branch.

Expecting the project to be part of a public-private partnership with Wilmington-based Zimmer Development, county officials in March last year approved a memorandum of understanding with the company. In addition to other MOU changes involving funding and the size and location of project components, the New Hanover County Board of Commissioners is set to consider a provision requiring the county to buy the plans from Zimmer “at a cost not to exceed $2.5 million in the event necessary approvals from the Local Government Commission are not received.”

The plans include drawings by LS3P of a new main branch of the public library and a new Cape Fear Museum. Project Grace could also include apartments (5% of which would have to be workforce housing), a hotel and commercial space used by retail or office tenants.

Local Government Commission (LGC) approvals, involving the lease agreements for which the county would be on the hook, aren’t guaranteed. 

"The county is committed to this project and sees the benefit in this project and hopefully, Zimmer will continue to be our partner ... but in the event that the LGC did not approve it, we wanted to have the opportunity to purchase those plans," said Jennifer Rigby, chief strategy officer for New Hanover County. "Our library team and our museum team have done a tremendous amount of work, working with LS3P on the design of the building and we really have a spectacular design, so we would definitely want to purchase those."

She said Zimmer Development "has been bearing the cost of that design process and so they were interested in receiving reimbursement for that should the LGC not approve it."

The LGC stepped in about leasing versus self-financing when New Hanover County was planning a public-private partnership with Cape Fear FD Stonewater to transform the county’s Government Complex. 

“In consultation with the Local Government Commission, the county has worked with the developer [Cape Fear FD Stonewater LLC] to update our agreement and change the deal from a lease to a debt for the county,” said Lisa Wurtzbacher, who at the time was the county’s CFO and is now assistant county manager. “Interest rates for county borrowings have continued to drop, so the county will issue its own debt and finance the construction for the new government center building, and in doing so allow for cost savings for the county and our taxpayers.”

Dale Folwell, state treasurer and chairman of the LGC, said Thursday that the revision saved the county millions of dollars.

Of the lease details in the Project Grace plan, Folwell said, “The complexity of this deal requires a tremendous amount of analysis.”

As part of the MOU changes to be considered at the commissioners’ meeting Monday, the anticipated base rent for the Cape Fear Museum and library to be paid to Zimmer was reduced from $4.5 million to a little over $4 million annually over a 20-year period. After that period, the county would own the facilities. 

The reduction comes from the removal of $7.5 million from the developer’s budget for the design and fabrication of Cape Fear Museum exhibits, which will instead be funded by the county "and ensure direct collaboration between exhibit designers and museum staff," according to a county news release.

The other proposed changes are:

• An increase of private investment on the block by the developer, from approximately $23 million to just over $30 million – which will further increase tax revenues to the city and county.
• About 4,000 additional square feet for the library and museum building (for a total of 84,905 square feet), based on the design and space usage needs, at no extra cost to the county.
• The addition of a replacement stair tower as part of the existing parking facility to create safer and easier access from the parking garage into the county building, at no extra cost to the county.

County officials are still hoping for the start of construction to take place this year. If the county ends up purchasing the plans from Zimmer, Rigby said, "then I think we would need to get going and really kind of pull together a development team or a construction team to move forward with the project ... either that or if there was a way we could work through an agreement with Zimmer on a different structure."