January 3, 2012 – (RealEstateRama) — Governments shouldn’t get involved in property deals that can be handled by the private sector. But sometimes when the interests of developers and the interests of the community conflict, a City has the responsibility to step in to ensure progress toward vital community goals. Fully developed cities with little vacant land, especially, must look to redevelopment opportunities in order to grow their tax base.
Ongoing criticisms of Hampton’s purchase of Harbor Square Apartments miss that crucial point and have contained many inaccuracies. Let me explain how the purchase happened, and, more importantly, why.
In March, The Richmond Group, a Florida-based development company with a strong track record, came before City Council seeking support for a VHDA loan to rehabilitate the apartments. Their plans to invest in the project were sound – if the desired outcome was rehabilitation.
However, the Downtown Master Plan, developed and supported by more than 300 community stakeholders, had different guidance. That plan specifically referenced the need to break up the 18-acre site of outdated garden-style apartments. The plan sought through streets and a traditional neighborhood with a mix of housing types and values.
Council weighed the options and, on a 6-0 vote (with Mayor Molly Ward abstaining), decided not to pursue rehabilitation but rather to pursue alternatives that would honor the intent of the Downtown Master Plan.
Several months later, The Richmond Group canceled their contract, and the City began earnest conversations with agents for the owner, Old Town Associates.
The day before the Council was to consider the purchase, representatives from another developer, the Merrimac Group, called to say they were interested in buying the property. At no time did those representatives state that they had a contract, or had entered into an agreement – only that they felt they had been close to making a deal.
During its deliberations, Council noted that The Richmond Group had demonstrated a similar ability to rehabilitate apartments and that the Council had turned down their request. It was further noted that the apartments had high crime rates and less-than-desirable living conditions. In her public statements, then-Councilwoman Angela Leary likened the need to pursue demolition of these apartments to the effort undertaken with Sinclair Gardens about a decade ago. Council authorized me to offer up to $16.25 million. I negotiated the sale for $14.5 million and later reduced that amount, after due diligence, to $12.7 million, plus closing costs and some expenses, for a total of about $13.4 million.
The Merrimac Group went public with their efforts to stop the City and Hampton Redevelopment and Housing Authority’s efforts to acquire the property, but at no time did they produce evidence of a contract or sales agreement. The City did not “swoop in” or “steal” the property from the Merrimac Group.
Despite offers to partner with The Merrimac Group – which were made both privately and during televised Council sessions – the City/HRHA has never received such an offer. Recently, it has been alleged that The Merrimac Group was interested in donating land to the City for a courthouse should they get the property. However, to this date, no such offer has been made directly to the City or HRHA.
Even if it was, this purchase was never about the courthouse; it was about removing an 18-acre apartment complex ridden with challenges and not in compliance with the Downtown Master Plan.
The comparison to Sinclair Gardens is a good one. In that case, the City purchased the outdated, dilapidated apartments; demolished them; and then worked with the surrounding neighborhoods to find an appropriate redevelopment plan. By all accounts, that effort, which produced the Bailey Park development, worked beautifully. Prior to that redevelopment, the City/HRHA had purchased the rundown and crime-ridden Southampton Apartments off Kecoughtan Road and developed the Crowne Pointe neighborhood, with homes worth $250,000-$300,000.
A similar positive result can, and will, occur with the Harbor Square property.
The Harbor Square property is being largely purchased with funds already on hand for economic development projects. Existing funds in support of downtown, and strategic property acquisition, have been reallocated to this project. Planned funds for a courthouse garage are also being reallocated.
In short, the City/HRHA have secured a property that has significant impact on the image and viability of Downtown in a responsible manner. We will achieve the Downtown Master Plan goals, and – in a manner similar to Sinclair Gardens – turn a negative situation into a positive one in short order.
(Note: Late Wednesday, after this article had been submitted, city officials received an email from an agent of The Merrimac Group that outlined a proposal to purchase the complex. The email said the proposal would include giving the city two acres for a courthouse. However, it did not offer to follow the Master Plan guidelines with streets through the 18 acres.)
Media Contacts
City Manager’s Office
22 Lincoln Street
Hampton, VA 23669
Mary Bunting,
Hampton City Manager
