|PRINT | CLOSE WINDOW|
The long-awaited agreement to sell Midtown Tower to private developers was reached this week, setting in motion a process that could generate nearly $10.7 million in property taxes for the city of Rochester over 20 years.
City Council signed off Tuesday on the sale of two Broad Street parcels at the city-owned site of the former Midtown Plaza to Midtown Tower LLC, an entity of Buckingham Properties LLC in Rochester and Morgan Management LLC in Perinton. The purchase price was $2.
The two parcels have been approved by the Rochester Urban Renewal Agency as 270 E. Broad St. and 280 E. Broad St. They, plus 286 E. Broad St., are home to the tower and part of the demolished Midtown mall.
The controlling members of Midtown Tower LLC are Buckingham CEO and managing partner Laurence Glazer and Morgan Management CEO Robert Morgan. They expect to close on the purchase in September and immediately begin redevelopment, Glazer said.
"We've got the renderings done," he said. "The architect and engineering work and the design of the mechanical system are probably 75 percent finished now. That will all be brand-new.
"We expect to be in to the city for plan review, perhaps even before we close on the building, so when we close we'll be ready to go."
The $54.5 million project is scheduled to commence this fall and be completed in fall 2015.
"It depends on when we actually close on the building," Glazer said. "The first thing we're going to do is finish taking apart what the city has almost completed. There still is some selective demolition that needs to be done."
That includes tearing down and re-erecting a three-story framework on the northwest side of the 17-story tower.
"The north side of the building is in three sections, with an atrium," Glazer said. "That used to be part of the mall itself. When that mall and this building were built, this area was part of a bigger structure. The design engineering for it had no lateral capacity because it was held up by the rest of the building.
"If we kept the steel the way it is and put walls on it, when the wind came it would blow over. The cost to strengthen and stabilize the steel is greater than the cost of ripping the whole (framework) down and rebuilding it from scratch."
The cover atop the framework will not be replaced, Glazer said.
"We have to stabilize, for example, that three-story section," he said of reinforcing the tower. "Then we have to start bringing new mechanicals into the building."
A new roof and siding will be applied to waterproof the building, then work will begin on the inside.
"If we can get a lot done this fall so we can enclose the building, we can work during the winter," Glazer said. "Otherwise, we're going to lose the winter, and that will set us back. Assuming we can start on time, our hope is to have tenants occupy the space by the end of next year."
The developers envision 179 residential units in the 17-story tower and 160,000 square feet of commercial space on the first three to five floors of the tower and its adjoining plaza on the north side.
"There are limiting factors to this building because it was designed and built on top of a parking garage," Glazer said. "You can't bring heavy equipment where you want it very easily because you're driving over the roof of a garage, not on solid ground."
The purchase agreement includes the reservation of as many as 423 parking spaces in the Midtown Garage for the developer to provide to tower tenants, at an annual cost of $50,000 for 25 years with the option of two five-year renewals if approved by City Council.
Another 250 parking passes will be available for the tower's commercial tenants, at full rates charged by the city at the Midtown, South Avenue, East End and Mortimer Street garages. Half of the passes will be for Midtown, with the other half divvied up among the three other parking facilities.
In addition, Midtown Tower LLC will lease space from the city at 290 E. Broad St.-on the southeast corner of Broad and Chestnut streets-for $1 and will operate it as a surface parking lot for the general public with 34 spaces for 25 years plus two five-year options.
"We are going to renovate it and fix it up," Glazer said. "They will, over time when we get revenue, pay us back our costs on it."
To ensure financing for the project, Midtown Tower LLC has been granted a purchase option by the city for 423 parking spaces in the underground garage as part of the sale agreement.
The arrangements for parking sparked the only dissent among members of City Council, with the council president, mayoral hopeful Lovely Warren, voting in favor of the project but against the parking provision.
The city will create a revolving loan fund of $3.1 million to finance three loans to the developer. The funding comes from a $3 million payment from the Harris Park Ltd. Partnership for refinancing of Harris Park Apartments on Floverton Street and $100,000 from 200 East Avenue Associates L.P. for refinancing of Chevy Place.
The $3.1 million loan is contingent upon 15 percent of the residential units being affordable for 20 years to households with incomes under 120 percent of the median family income, with half of those units available to households under 80 percent of the median family income, the agreement stipulates.
Midtown Plaza LLC also will get $2.7 million and $1 million loans from the city, for total funding of $6.8 million for construction and permanent financing.
The developer has agreed to a 20-year payment-in-lieu-of-taxes agreement, pending approval by the County of Monroe Industrial Development Agency at its Aug. 20 meeting.
The developer would pay 10 percent of shelter rent-calculated from gross rent minus utility costs-for the residential portion of the building. The developer also would pay $1 per square foot of commercial space in the first five years of the PILOT, $2 per square foot in the sixth to 15th years and $2.50 per square foot in the last five years.
The projected annual payments start at $198,788 in the first year of the PILOT, increasing to $311,532 in the second year and climbing in subsequent years.
The scheduled payment in the sixth year is $545,549. The 10th-year payment is $563,130. The 15th-year payment is $586,630. The final-year payment is $681,697.
"Obviously, we're very pleased," Mayor Thomas Richards said this week.
The tower is a critical component of the redevelopment of the 8.5-acre site, Richards said.
Midtown Tower, because of its connection to the underground garage, was left standing when most of the rest of the site was knocked down.
The city came to terms in 2009 with a Morgan Management and Christa Development Corp. partnership on a proposed $71 million redevelopment of the property, with a $2 sale contingent on the developers getting financing. That deal eventually fell apart.
Glazer, whose Buckingham Properties ranks second to Wilmorite Inc. among property management firms in the Rochester market in square footage managed locally, has a history of tackling difficult redevelopments in the city limits.
Midtown Tower LLC already is getting calls from potential tenants, Glazer said.
"We do have, I would say, a good level of interest by some prospects that are looking to relocate within the downtown area," he said. "Actually, a couple are new to the downtown area. But we haven't started marketing until we knew we were going to be closing on it. Now we will start our marketing in earnest for this project."
7/19/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email firstname.lastname@example.org.