Gradual Development: Decades-in-the-making plan for Charlotte’s First Ward faces new delay

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CHARLOTTE – Daniel Levine was looking for a “minor modification” to a $23.7 million section of an already approved development agreement, Brad Richardson, city of Charlotte economic manager explained to the City Council last week.

But, Levine, president of Levine Properties, explained after criticisms and questions from council members that it’s a make-or-break modification for the $84 million first phase of his decades-in-the-making dream to transform 23 acres of uptown Charlotte’s First Ward.

Richardson later said he was surprised, and Levine said he is disappointed, that the modification to the public-private partnership deal caused that reaction from the City Council, which heard about the change at an information-only dinner session before the June 23 regular council meeting.

“We’ve tweaked it to death,” said Charlotte City Councilwoman Patsy Kinsey, who as the representative of District 1 – which includes First Ward – is a key vote.

“This comes back to us every six months. I’m not happy with this. I’m not happy with this.”

At-large Councilman David Howard said Kinsey was exaggerating a little; this was actually third time since the original was signed in 2009 that council has been asked to amend the agreement.

But other councilmembers also said they were confused about the changes, and why Levine needed them.

The change – concerning the city and county financing of two public parking decks – was pulled from that night’s agenda to give council members more time to look at the details of the proposed change, and Richardson said it was subsequently taken off the agenda of Tuesday’s meeting of the Mecklenburg Board of County Commissioners, which as a partner in the project with the city and Levine, must also OK the change. The modification has not yet been rescheduled for a hearing by either the council or the commissioners.

Both Richardson and Levine say they believe that once the change is fully exp

lained – Richardson called it “an oversight” by all parties when they renegotiated the original agreement in 2012 – it will be approved by City Council and the Mecklenburg commissioners.

As does Kinsey, she said in an interview after the meeting: “If we want the First Ward project to move forward, I think we should do it. And I’m going to support it.”

Levine says the latest delay is holding up a project that is finally ready to go after nearly five years of hold-ups and false-starts. The public financing involved in the project, he said, requires that he hit deadlines looming as soon as next year. That, in turn, means he needs to get going.

“We’ve been approved for the permits and we have a contractor, Rodgers Builders,” Levine said an interview about what is being called simply “the 10^th Street Apartments,” but actually involves building two parking areas with a total of nearly 1,400 spaces, a new public park, a new street and major modifications to another – as well as the 264 apartments themselves.

In the next breath, however, Levine – a scion of a family of retailers that continues to leave its mark on the city with its businesses, developments and charitable acts – blamed himself for the confusion at the meeting: “I should have spent more time with council members updating them about the project and reminding them of the details. While they have not seen dirt moving, we have been working with practically every department at the city government – and some at the county, too – to make this work.”

The modification under discussion at last week’s council dinner meeting might be minor, but it is “extremely complicated,” Richardson said.

And the development agreement is “very complex” to begin with, Levine added.

And, finally, the development agreement is only one part of Levine’s even more complicated and complex dream – which has roots going back to 1981, when his family acquired what Levine called “a little building at College and Seventh” streets – to remake First Ward.

Decades in the making

To understand the complications of the modification, the complexities of the agreement and the origins of the dream, you have to understand where Levine comes from.

Levine’s father and two uncles – who grew up working in the family-owned department store, the Hub, in Rockingham – went on a post-World War II retail rampage in Charlotte in the mid- to late 1950s.

His father, Al, started the Pic ‘n’ Pay shoe store chain. Uncle Leon began the now-ubiquitous Family Dollar discount stores. And Uncle Sherman owned what was once one of Charlotte’s premier men’s clothing stores, Sherman’s Ltd.

Daniel Levine turned instead to real estate. At age 23, he established Levine Properties with his father as his partner.

With 119 E. Seventh St. already in pocket, Levine concentrated his efforts on First Ward, where after some 70 transactions his family owns 23 acres of the easternmost quadrant of Uptown.

After collecting 11 of those acres, Levine lost a request for proposals bid from the city and county to redevelop five government-owned blocks. An out-of-town company won the redevelopment project instead. But after that effort stalled, Levine purchased the city’s part of that property, as he continued his acquisition campaign.

In 2009, Levine finally negotiated an agreement with the city and county to develop the first phase of his revitalization quest. The land that would be the site of Phase 1 is situated around UNC-Charlotte’s Center City Building – the land for which Levine sold to the university at a discount.

Richardson outlined the original agreement for Phase 1:

• The city and county would reimburse Levine for a total of 1,335 public parking spaces in a parking deck at 10th and Brevard streets, and in an underground parking garage beneath a new county park. The reimbursement amount capped at 29.7 million over 10 years in a tax-increment grant comprising 45 percent of the net new tax revenue received from the eight blocks surrounding the park, owned by Levine.
• The county would reimburse Levine approximately $11 million for the construction of the 3.2-acre county-owned park.
• The city would reimburse Levine $2.3 million for a portion of the park (north of Eighth Street and adjacent to UNCC’s uptown building.
• The city would reimburse Levine $5.085 million for improvements at Eighth and Brevard Streets.
• And UNCC agreed to pay $4.2 million to the project for the ability to use of 300 parking spaces for its Uptown building.

The first amendment to the agreement, approved in August 2012, Richardson said, allowed Levine to replace the undergro

und deck with a less expensive above-ground deck, which also reduced the reimbursement amount to $23.7 million. Levine said the underground deck proved to be costly and could not be financed in today’s commercial lending markets.

The amendment also required the Developer to provide 305 spaces adjacent to UNC-Charlotte’s uptown campus by Dec. 31, 2015 and a 1,030 space parking deck at 10th and Brevard at a later, unspecified date.

Richardson said the second amendment, approved in September 2013, allowed Levine to provide all 1,335 public parking spaces in the Brevard-10th street parking deck by Dec. 31, 2015; and stipulated that by the end of 2019, Levine would have relocated 400 of these public parking spaces into a new parking deck adjacent to the park.

The third amendment, the one that caused the delay at City Council last week, splits up the way the city would release the $23.7 million in tax-increment reimbursement it had promised Levine for the 1,335 total public parking spaces.

Originally, the $16.6 million reimbursement was to be held by the city and county until Levine had completed the relocation of 400 public parking spaces to a new deck beside the park. Levine said that this provision was complicating the private financing.

With the approval of the third amendment, Levine’s financers would have assurance that he would be reimbursed $16.6 million for the parking deck at as long as he had relocated 400 of the spaces adjacent to the county park in temporary surface parking by the end of 2019.

Levine must also provide evidence that “reasonable good faith efforts” were made to develop a second parking deck near the park.

To demonstrate those efforts, Richardson said, Levine would have to provide documentation, such as written summaries of meetings with developers, tenants, hotel operators, and other real estate professionals, showing that he had sought, in Richardson’s words, “development opportunities that would include the provision of the 400 spaces as structured parking” as part of a development deal.

But, Richardson emphasized, even if Levine demonstrated a good-faith effort, and even if he winds up building the 400-space surface lot, he would not receive the $7 million in tax-increment reimbursement unless and until he provides the 400 public spaces in a parking deck.

If Levine fails to meet the timelines for delivery of the public parking spaces, the city or county could terminate the agreement, and Levine would risk losing all or a portion of the total $23.7 million reimbursement, Richardson said.

The third amendment would also extend the completion date for the 10th-Brevard streets deck and 400 spaces near the park from Dec. 31, 20

15, to July 1, 2016.

That extension, Richard said, was necessary because of delays caused by negotiations between the city and local utilities about the temporary and permanent relocation of electric and telecommunications lines that serve Uptown, work that must occur before construction begins.

Those discussions just concluded and the temporary relocation of the utility lines began two weeks ago, Richardson said, setting the stage for construction of the project to begin in summer.

Levine said he had to ask the city and county to break the tax increment money in two parts because the bank providing the private financing for Phase 1 has required it before giving him the loan he needs to start realizing his dream.

“They want to see part of that money will be coming in before 2019,” Levine said.

Levine said he blamed himself for the last-minute difficulty with the finances.

“In retrospect, this was an important detail,” Levine said. “I didn’t think about it, and I should have, and now we have a problem.”

But Kinsey and several other councilmembers balked at hearing “surface parking.”

“Do we really want 400 more surfaces spaces?” asked at-large Councilwoman Vi Lyles.

Overall, however, Phase 1 of Levine’s development would erase about 800 surface parking spots, according to maps and aerial photographs of the area.

Taking the risk

Levine said the benefits outweigh the costs for the city and county, and that he is taking all the risk, noting that the two local governments will get 55 percent of the taxes generated by the new development.

“And they’re paying me the 45 percent over 10 years, incenting me to develop fast enough to get all of the $23.7 million (before the 10 years is up).

“If I don’t develop the area, there won’t be enough taxes collected to pay me all of it. That’s how it works. It’s up to me to produce. I’m taking a gamble. I’m taking the risk. I’ve already spent $6 million just on the planning and all the drawings and site plans.”

He noted that, among other improvements that will come with Phase 1, a section of Brevard Street will be completely made over, including leveling a nine-foot dip, and 10^th Street will be extended.

To sweeten the deal, Levine is including all 50 of the workforce housing units he has agreed to build in the entire project in the first 264 apartments.

Kinsey said she believes it’s an opportunity the city can’t afford to give up lightly.

“This is a very good project,” Kinsey said. “It’s great, really. I might not be on council for the ribbon-cutting, but I’d like to be there anyway.”

For Levine’s part, he said he’s not overjoyed about all the delays that have been encountered in getting the project off the ground, noting that the whole project was nearly scrapped by the recession before it got off the ground.

“We believe as a family that this is in the long-term best interest of the city, and we appreciate everyone’s patience,” Levine said.

But then the word “complicated” came up again.

Levine said that meshing his plans with the city and county’s, working with the Charlotte-Mecklenburg Utilities Department, the Charlotte Department of Transportation and Duke Power to make sure that all the infrastructure lines up right.

And he is working closely with the Charlotte Area Transit Authority on the extension of the Blue Line, which will run for four blocks along his project.

“I don’t know of any other project that has four blocks along the Blue Line,” Levine said.

“And I don’t know of any other small developer that has done a project in the center city of this magnitude. This is the largest development project in the center city undertaken by a small, privately owned development company.”

Despite all the headaches involved – and especially that he’s finally ready to get the project going after all the delays – Levine said he’s grateful that the city and county have been as flexible as they have been in helping to realize his First Ward ambitions.

“I’m not complaining,” Levine said. “This is the way public-private partnerships work.”