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City seeks progress at South Elm redevelopment site

South Elm redevelopment site in Greensboro recently.

A new marketing sign went up at the South Elm redevelopment site in Greensboro recently.

Significant changes could be on the horizon for the brownfield redevelopment project on South Elm Street, now commonly referred to as Union Square.

City officials plan to put pressure on the project’s master developer to show progress at the site and will also petition for the land, currently owned by the city’s Redevelopment Commission, to be annexed into the city’s Downtown Business Improvement District overseen by DGI.

City planners have since 2006 attempted to bring sizeable redevelopment to the six-acre site just south of Gate City Boulevard at the edge of Downtown Greensboro. The site required extensive environmental remediation after it was declared a brownfield project and qualified for federal cleanup funds.

A master development agreement in place since 2013 with South Elm Development Group (SEDG) has served as a guide for the site in recent years, but city officials have remained displeased with the pace of the project. One component, the combined nurse training facility known as Union Square Campus, came to fruition after local economic boosters stepped in under the leadership of Opportunity Greensboro to create a partnership between several area colleges and Cone Health.

The nurse training facility opened in August 2016 and just completed its first semester of operation. Construction of the facility is financed by rent payments from Cone Health and local colleges participating in the project.

Discussion in 2015 and 2016 centered on the next component developer SEDG was expected to bring to the site. One potential project came to the table in July 2016 when Weaver-Kirkland Development signed a letter of intent to pursue a 236-unit apartment complex on the west side of South Elm Street.

But little progress came from the letter of intent. At the Redevelopment Commission meeting in September, SEDG partner Bob Chapman said he intended to ask Weaver-Kirkland Development to “bow out” since their letter of intent has expired. Hurdles to the deal included negotiations with the City of Greensboro regarding construction of a parking deck.

The city rebuffed an initial request for “a substantial amount of money,” Chapman told the Redevelopment Commission in September and Weaver-Kirkland scaled back their concept from 200-plus apartments to 120 units of student or low-income housing, 96 surface parking spots and a $2 million gift from city taxpayers.

With no further substantial communication between the parties, Chapman told the commission that SEDG contracted with a Raleigh real estate firm to market the site.

Maggie Quan told commissioners that her firm, Trademark Properties, would use their marketing channels to promote the site and “create a bidding war among developers for a vision of a young professional multifamily development.”

Trademark Properties would receive a commission from any land sales and would function as the seller’s agent to market the land.

With no progress visible since Weaver-Kirkland’s 2015 notice of intent, city officials pushed back against SEDG’s view that specific timelines in its contract with the city had been met.

The master development agreement requires that SEDG bring a Phase II development to the table within six months of Phase I being completed. Disagreement on this timetable could come to a head by mid-February.

Chapman told the commission that in SEDG’s view the six-month requirement was met when the city signed a five-year option with the boosters behind the Union Square Campus for a potential second project. The option does not bind USC to actually develop a second property but it does tie up the land and give USC the right to outbid any future suitors that may come to the table. Chapman believes that Weaver-Kirkland’s 2015 letter of intent actually qualifies as a third phase of development.

But City Attorney Tom Carruthers, filling in for the commissions long-time lawyer Jim Blackwood who was disbarred in Dec. 2015, told Chapman that might not suffice.

Carruthers said the city was “very interested in SEDG’s plan for the near term” and would be seeking legal opinions regarding “when Phase II can be demanded by the Commission.” The city’s position is that Weaver-Kirkland’s letter is not a qualifier and that mere options to purchase are not sufficient to show acceptable progress. Carruthers noted that the city wants to see “real working interest in an apartment development.”

Chapman countered that USC’s option does meet the definition because it ties up the property. He also noted that the west side of South Elm Street has been undevelopable until recent months because no one knew if right-of-way conflicts with Norfolk Southern could be resolved. Lack of clarity on this point was another hurdle for Weaver-Kirkland, Chapman said, and was not resolved until SEDG secured a quit-claim deed from the railroad in Aug. 2016.

Chapman expressed surprise at the city’s position in September, noting the technicalities of the original Request for Proposals from the city. He told commissioners that a “less desirable outcome” could arise if the project is rushed. SEDG has some $677,000 in real money and sweat equity invested in the project to date, Chapman said.

In a follow-up email in September, Chapman asked city staffers if it might be possible for SEDG to use some of the city’s recent $25 million housing bond to build “affordable housing at Union Square.”

Chapman said he had looked at the city’s promotional website for the bond package and noted that his partner in SEDG, Bob Isner, had built all the housing shown.

“We could build condominiums or townhouses … for worker housing,” Chapman noted.

Chapman also followed up with Carruthers regarding the quit-claim deed secured from Norfolk Southern. The city’s original RFP issued in 2010 claimed that the railroad owned an easement some 20-25 feet off the centerline into the project’s west edge. With no plans to develop along the edge, Chapman said this was of little concern.

That view changed months after SEDG won the right to serve as master developer for the project when a surveyor discovered an earlier claim that gave the railroad a claim some 112 feet into the property. Chapman expressed concern that this was not disclosed to SEDG. This claim undermined the path to a clear title to the land when it came to light that the commission’s own title insurance policy noted the 112-foot exemption.

“As you no doubt know, we would have to resolve this if we or any sub-developer was ever to interest a commercial lender in financing a project on the parcel,” Chapman wrote in an email to Carruthers.

SEDG resolved the issue in August, after two years of research and negotiations.

“Clearly, any expectations of how long it will take to develop the west side of South Elm need to be recalibrated to acknowledge that the true extent of title issues with the railroad was an undisclosed material fact, and that clear title to the property was not obtained until August 1, 2016,” Chapman concluded.

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