By Pam Hemminger
Over the past 10 months, the Chapel Hill Town Council has been discussing proposed redevelopment along East Rosemary Street that would include construction of a parking deck by the town and development of a new 200,000+ square foot office/research building by Grubb Properties.
This project represents a rare opportunity for Chapel Hill to increase our commercial tax base, consolidate parking to free up underused parcels to redevelop, and to anchor an innovation hub that brings hundreds of year-round jobs downtown.
A public hearing on the proposal was held on Sept. 9 and the Town Council will be voting on whether to move forward on Sept. 30. Before we vote, I wanted to share information about the project with the community.
What is being proposed?
Under the terms of an Economic Development Agreement (EDA) between the town and Grubb Properties:
The town would exchange our aging Wallace Parking Deck for two parcels across the street — the 125 East Rosemary Street parking deck and the surface parking lot at 135 East Rosemary Street.
The Town will build a new parking deck on the 135 East Rosemary Street parcel consisting of +/-1,100 parking spaces (consolidating existing parking spaces and adding approximately 250 more).
Grubb Properties will construct a new 200,000+ square foot office building – with at least two floors of wet lab space (projected value $80 million) and create a new green space near Varsity Alley.
If approved, construction of the deck would begin in March/April 2021 and a process for entitlement of the office building would begin this fall.
What will the project cost and how will it be paid for?
The cost of building the parking deck is estimated to be $32.9 million, which would be self-financed through the town’s Parking Enterprise Fund at an interest rate of 1.5–2 percent over 20 years.
According to our analysis, the project will not have to draw money from the town’s main debt fund or general fund and will not affect our ability to undertake future town projects.
Modeling by our business office and project consultants shows parking fund revenues will be sufficient to cover payments on the debt, producing positive cash flow in five or so years. To cover shortfalls before the new deck reaches capacity, we will receive an upfront payment through a financial arrangement with UNC that will allow them to acquire the rights to 100 dedicated spaces for its new Admissions Office on Franklin Street.
What are the benefits to the Town?
- Consolidates existing parking and adds 250 more parking spaces, which will unlock economic development opportunities by making it easier for other underused East Rosemary parcels to redevelop.
- Creates an opportunity for job creation and talent retention in our downtown by meeting growing demand for wet lab and research space in a well-connected, walkable environment near the UNC campus
- Supports UNC’s plans to relocate its Admissions Office to Franklin Street near Porthole Alley, which will bring more year-round employees and visitors to downtown, increasing customers for our local businesses.
- Improves the town-owned green space on the corner of Henderson and East Rosemary streets and creates a pocket park that connects Varsity Alley to Rosemary Street, giving us new public spaces and better access between East Rosemary Street, East Franklin Street and campus.
- Activates East Rosemary Street and improves pedestrian access by providing a retail porch for food trucks and other vendors, wider sidewalks and better crosswalks.
- Provides an easy-to-find, easy-to-use amenity for downtown shoppers, diners and employees and for the thousands of visitors the town and university receive each year.
- Increases the town’s commercial tax base, which will also benefit Orange County and Chapel Hill–Carrboro City Schools.
Why is the Town Council considering this project now?
Over the past several years, the town has been working hard to add to year-round vibrancy in our downtown and to increase our commercial tax base. During that time, we have had success in growing and retaining companies through the Launch Startup Accelerator, which is headquartered on Franklin Street; however, since the 2013 approval of Carolina Square, very few commercial developers have come forward with projects that would give our entrepreneurs room to grow in downtown or allow other companies to locate here.
In 2018, part of Chapel Hill — including properties along East Franklin and East Rosemary streets — was designated a Federal Opportunity Zone, which opened a limited window of time for investors to move forward with redevelopment here in exchange for tax deferments. This is the main reason we are seeing this project come forward now.
Fortunately for the town, other factors such as historically-low interest rates also make this a favorable time for the town to take on a project like this.
Is this project risky?
Like any new infrastructure investment, this project carries some risk.
Most towns invest in infrastructure as a way to stimulate economic growth. The East Rosemary Redevelopment Project will bring jobs and people downtown to spend money — not just through creation of the 200,000 square foot commercial office building but by opening up other parcels to commercial redevelopment and by supporting UNC’s relocation of its Admissions Office to Franklin Street.
Additionally, because it is located adjacent to the newly renovated office spaces at 136 East Franklin Street and 137 East Rosemary Street, this project will help anchor a new Innovation Hub in our downtown.
These are exciting benefits, but we know that the numbers have to work. Therefore, over the past several months, the council and town staff have engaged experts to help us evaluate various aspects of this project, including better parking management strategies and commercial real estate negotiation.
Additionally, we have done extensive modeling to evaluate the financial risks and had those projections reviewed by a third-party real estate professional. Data provided through both our conservative and mid-range models shows that a well-managed parking fund can cover the costs of the $32 million new deck and create excess revenue after five years. As a result, our staff and our consultants feel that the risks are reasonable for a project that promises such significant benefits for our downtown, our entrepreneurs and workers, and our tax base.
How does this fit into the town’s vision for Chapel Hill?
As we work to help our businesses recover from COVID-19 and plan ahead, now is the time to invest in our future.
By creating new commercial opportunities and bringing more jobs and people to Chapel Hill, this project can create an important turning point in the downtown’s trajectory, helping it continue to evolve into an innovative, creative and fun place for the whole community.
Furthermore, this project will help support a more sustainable economic and environmental future for our entire town.
As always, your questions and comments are welcome: email@example.com
To learn more about the project, please visit the town’s East Rosemary Redevelopment Project webpage.
Pam Hemminger is mayor of Chapel Hill.