Council approves Hilltop properties purchase: though one development deal is stalled, interest in properties is sparked

The Tacoma City Council voted Sept. 20 to approve an ordinance that allows the city to purchase properties located at...

The Tacoma City Council voted Sept. 20 to approve an ordinance that allows the city to purchase properties located at 1110, 1120, and 1124 Martin Luther King (MLK), Jr. Way in order to spur revitalization and economic development in Tacoma’s Hilltop neighborhood.

The ordinance appropriates up to $1 million of Urban Development Action Grant (UDAG) repayment funds for the acquisition of the properties, appearance improvements, stabilization, and preservation of the buildings.

The decision last night to buy the property dates back to June 28, when the council authorized the purchase of an adjacent property located at 1114 MLK by using $600,000 in UDAG funds — displacing Browne’s Star Grill, a restaurant and bar that has received mixed support from the Hilltop community. According to the city, the building was purchased in response to public outcry that the business was a magnet for criminal activity. Others argued that it was a longtime gathering place for Hilltop’s close-knit African American community.

Last week, a group of private investors, including local real estate agent Shauna Walker with Keller Williams Realty, expressed interest in purchasing the building from the city and assuming the purchase options for the three adjacent properties. The goal? Build a four-story, mixed-use commercial and residential project on the site.

But discussion during the council’s noon study session yesterday revealed that the deal could not be completed before the purchase options expired Sept. 30. According to Rick Brush, the city’s asset manager, the group needed more time.

“The group is going to need a more typical feasibility period to conduct studies and raise capital,” said Brush. He added that the investors are still interested in the properties. “They are still enthusiastic, but not able to act as fast,” said Brush. “They are uncertain if this is a feasible project, and need six months to study it.”

That said, the city’s decision to purchase the properties clears the way for a request for proposal (RFP) that might create competition among developers who wish to buy the properties from the city. Councilmember Rick Talbert said that he was aware of another group of investors also interested in purchasing the properties.

“I’m certainly more comfortable because it’s going to lead to an RFP process,” said Talbert, who claimed that the council was often criticized for not opening similar deals to competing developers. “An RFP allows us to remove criticism from the discussion.”

Still, Councilmember Bill Evans feared that an RFP might alienate the original investors who simply need more time to study the deal. “Any investor would want that time for a feasibility study,” said Evans.

“It would be remiss of the city not to put this out for an RFP,” said Councilmember Jonathan Phillips. “I remain optimistic now that we have people talking about the properties.”

Despite the growing interest in the properties, the foot-traffic that has disappeared since Browne’s Star Grill moved out of the neighborhood is missed. According to Councilmember Mike Lonergan, who is also executive director of the Christian Brotherhood Academy located on MLK, business owners are afraid that the properties will remain empty until a development decision is made. “Business owners are saying, ‘We need some stuff to start happening here,’” said Lonergan.

One solution would be to find a short-term tenant to occupy the vacant buildings. According Brush, only one property is in “fairly good shape.” The other properties are in poor condition, and would require tenant improvements — an investment that a short-term tenant might not wish to make.

Another solution, according to Councilmember Julie Anderson, could be to turn the empty buildings into short-term public art spaces, or partner with a small business incubator to provide office space.

The concern stems from recommendations that redevelopment of the property could take up to five years.

During a study session Aug. 30, Michael Trower of Catapult Community Developers, a Seattle-based consulting firm hired to assist the city in its decision, said that development of the city-owned property (or an assemblage of properties) wasn’t feasible given the abundance of vacant leasable space in the neighborhood. Moreover, Trower said that development of a market demand in the Hilltop area would take up to five years, and require considerable effort from the city.

Trower offered four recommendations for managing these assets.

The “do-nothing” approach requires minimum outlay for expenses, and calls for the property to be minimally maintained, marginally functional, and partially or totally vacant for lack of interested tenants. This approach would not meet the city’s standard for the properties it owns, nor would it meet the expectations of the neighborhood.

The “paint-up/fix-up” approach requires that the city incur additional costs for cosmetically improving the properties. Trower cautioned that this approach might be criticized as a “Band-Aid” approach. “While some improvement will be welcomed by the community,” he said, “it may very well be regarded as not much better than maintaining the status quo.”

The “Rejuvenation” approach calls for upgrades in the areas of finishes, quality, functionality, and appearance in order to make a difference in the look and feel of each property. However, if the costs associated with rejuvenation exceeds 60 percent of the value of the building, specific code requirements would categorize these improvements as “redevelopment,” according to Trower.

The “redevelopment” approach calls for the demolition of an existing structure, and construction of a new building. This approach would also require on-site parking — which this strip of properties presently lacks.

“In our opinion, there is not a private market for purchasing the properties at this time,” said Trower. “From the perspective of a private developer, absent a reasonably immediate market for new or rejuvenated development, there would be no interest in purchasing. From the perspective of a land speculator, there might be interest at a discounted price below assessed value for tax purposes.”

Still, the recent interest from developers sheds a different light on Trower’s assessment.

Councilmember and Hilltop resident Tom Stenger was optimistic. “As we get into this, it becomes less challenging and more exciting,” he said.

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