Clock winding down on University Marketplace incentives

Jun. 24, 2013 @ 12:42 PM

There was some hope last year that local government incentives would help jump-start a delayed proposal to redevelop a vacant, partially demolished shopping center in the South Square area into a mix of apartments, shops and restaurants.

But county officials didn’t approve an incentive for the project, which has been proposed for a 15-acre site at the corner of University Drive and Shannon Road. And now it appears the clock is ticking for the $1 million incentive that the Durham City Council approved for the project in September.

“We’re still working on the project, and are hopeful that it will get developed, but we, again, we need the stars to align, and they haven’t aligned yet,” said Shoff Allison, a principal at Charlotte-based Hawthorne Retail Partners, the firm looking to transform the former strip shopping center into a new development called University Marketplace.

Last year, the developer approached the city and county for incentives to help fill what Kevin Dick, director of the City of Durham Office of Economic Development, said was an approximately $2 million gap in the financing for the project. In an interview last fall, he said the project cost was estimated at $64 million.

The Durham City Council voted to approve a $1 million incentive for the project, with two members dissenting. The developer also approached the county for an incentive. But Marqueta Welton, deputy county manager, said the project wasn’t one that county officials were prepared to support.

“It was a mixed-use development; not the type that the county typically participates in,” Welton said. County officials usually look to participate in more industrial job-creation proposals, she said.

Michael Page, a member of the Durham County Board of Commissioners, said he was in support of the incentive for University Marketplace, but there was concern from some board members there wasn’t enough low-cost housing included. There was interest in affordable housing in the area as it’s targeted for a stop on the proposed rail project.

“There were some who felt it wasn’t acceptable since it did not clearly provide a suitable amount of affordable housing in that particular area,” Page said.

From an analysis of the project last year, Dick said incentives from both the city and county would have moved the project forward.

“I don’t want to speak for the developer, but it seems as if had the county committed to an incentive, based upon all the information we received from the developer and our analysis with the third-party consultant, it did appear as if a commitment from the county would have driven the development forward,” he said. “That doesn’t speak to whether any circumstances may have changed between then and now.”

Now, Dick said in an email that if Hawthorne Retail Partners does not start construction by July 31, the developer will not be eligible for the approved city incentives anymore.

Attempts to reach Allison for additional comment in reaction to the incentive timeline were unsuccessful. However, he had said in a previous interview that the developers are still hopeful that the project will happen, but there wasn’t a timeline in place for the project.

“We like the area, we like the (viability) of the project, but unfortunately, it’s been in the same condition since 2007,” he said.

Dick said he believes that while there are signs the area is in need of revitalization, he does believe the South Square area has potential.

“Right now, from a commercial perspective, the area seems to have so much potential given its traffic patterns and so forth,” he said. “But right now, for whatever reason, new businesses are not recognizing that and businesses are just having a tough time of doing business there.”

Businesses have closed in the area recently including a Payless ShoeSource location near Sam’s Club and SuperTarget off Durham-Chapel Hill Boulevard, a Taco Bell closed on Shannon Road, and the Kmart on University Drive.

Page said he believes the South Square area has “continued to fall by the wayside” since the demolition of South Square Mall.

“It’s not a lot of reason for people to go there now as they would have when the mall was there,” he said. “I just … think much of our attention now has been diverted to the Southpoint area.”

However, Brian Reece, managing partner at the market research firm Karnes, said that while the Southpoint area sparked interest for housing, apartments and additional retail, he believes the South Square area has seen some rejuvenation.

“With the new Target and Sam’s Club, that area has been on the radar for smaller retailers,” he said, adding that he believes retail business continues to pop up along the U.S. 15-501 and Martin Luther King Jr. Parkway corridor.

City Councilman Steve Schewel voted against the city incentive last year. He said he wants to see that area, as a location close to one of the planned future transit stops, developed at a high level of density and including more affordable housing.

Schewel said it was his understanding that the county incentive was necessary for the project. He said he wouldn’t be sorry to see the council’s incentive die July 31.

“I didn’t vote for it in the first place,” he said.

As it stands now, he believes  the future location of the proposed transit stop will make the area desirable.

“I think in general, I think eventually there will be transit, there will be a stop there, and it will make it a very desirable area,” he said. “I think the real estate has considerable value. There are two quick key questions: Will (development there) have density, and will there be affordable housing?”