The financial structure of how the Verizon Building will be redeveloped and who will own it has been altered from the deal originally proposed by Keystone Property Group. According to a report in the Times Herald:
KPG will continue as the developer and the borough will own the building. The building will be “condominiumized” into a borough unit (BU) and a non-borough unit (NBU) for the office space. A separate company would be the master tenant for the NBU under a 30-year lease. KPG would be paid a condo management fee by the borough to manage the site. The borough would grant the separate company a line of credit of about $1.5 million for tenant improvements and leasing commissions for the NBU.
A new building budget was presented by KPG that included $10,432,240 for the basic building construction and the fit out of the borough space. An additional $1,443,981 would be needed to fit out the NBU space and attract an office tenant. The $11,876,221 total was lower than a construction estimate made about two weeks ago for $13,145,000.
We spoke to a couple individuals in the commercial real estate/development business locally and both thought that this structure was probably a good idea, but there were some concerns. One commercial realtor felt that while going condo made sense, it would be better if the borough sold the non-borough used condo so it would not have to be a landlord and thus in the real estate business. Selling it would also make thousands of square feet of office and/or retail space responsible for property taxes. If the space remains borough owned it would not be.
There was also the concern that since the borough would own the building, it could lead to a situation where if a company was deciding to lease office space in the borough owned building or another office building, the borough could undercut the price since it didn’t have to factor in property taxes.
There is also the question as to whether the borough would recoup the more than $3 million dollar investment in the building as promised from the previous proposal from Keystone. We asked this question to Borough Council President Paul McConnell who didn’t return our email. A representative from Keystone did respond to our email and stated, “The deal structure is in the process of being revised, so we can’t really comment yet on this”.
The image at the top of this story is of the exterior that Borough Council recently selected. Our thoughts? This development should be all about small retail businesses at street level. Since the borough owns the building it has the opportunity to enhance the small retail sector that exists in the borough. However, it looks like a building suited for a bank and a dentist. And why is there a cafe? There are now three cafes and one coffee shop in the borough, why add another one? There were zero cafes and coffee shops when we started MoreThanTheCurve.com in the summer of 2009. There are also two restaurants across the street from the building. Couldn’t that space be better utilized for retail shops?
What are your thoughts? Are you concerned that the original proposal is now being altered? Do you like the look of the building? Do you wish it was more retail focused?