The would-be developer of the former Civic Auditorium site wanted more incentives from the city than Mayor Jean Stothert was willing to give.
Project 19 LLC, the partnership led by the Tetrad Property Group, pulled out of the deal Tuesday, four years after launching the effort and without ever announcing a major tenant.
The developers had proposed in late February that the city provide free parking for 20 years in the existing city parking garage on the site, pay for and build an additional parking garage and give the land for free, according to documents obtained by The World-Herald. The developers also wanted the city to drop a requirement that the developer pay back the city for demolition costs, Mayor Jean Stothert said.
That’s in addition to a request for about $50 million in tax-increment financing. The city incentives would have added up to about $90 million, the mayor estimated.
“Their ask was far beyond what we have offered other developers,” Stothert said.
The city made a compromise counteroffer. It offered to build a parking garage and lease it to the developer if the project included an office tenant with 400,000 square feet of leased space and at least 1,500 employees, according to the documents. The city also offered to give the developer first rights to lease spaces in the existing garage at $50 a space, for five years, and to acquire additional parking lots.
The city offered to sell the land to the developer for $20 a square foot, or about $8 million, according to Stothert. It would have waived that cost if a major office tenant committed to the project. And the city offered to waive the demolition cost, as well as providing the tax-increment financing.
The city sent that offer to the developers March 14. Six days later, Zach Wiegert of Project 19 sent Stothert a letter saying it was out of the deal.
“Obviously, that was not enough,” Stothert said.
The announcement came as a surprise. In February, Stothert had said Tetrad was working to bring Hy-Vee to the site but said she couldn’t say whether Hy-Vee had committed. She also said Tetrad was looking to bring a major tenant, probably a company already in Omaha.
“I think if they had secured a major tenant, we wouldn’t be here today,” Stothert said.
Wiegert’s letter cited the City of Omaha’s recent focus on redeveloping properties including Lot B near the CenturyLink Center, the riverfront and Gene Leahy Mall as an obstacle that led it to withdraw its plan to transform the Civic site.
Wiegert wrote that the developer had encountered other obstacles that caused great concern. He said those were a delay in demolition and preparation of the Civic site by the city, and the “inability to reach an agreement with the city on business terms.”
The letter also cited Conagra Brands’ relocation of its headquarters to Chicago and the company’s subsequent announcement that it wants to redevelop the remainder of its campus into retail, housing and recreational uses.
“Some of the obstacles we could overcome,” Wiegert’s letter said. “Others, however, severely impacted the practicality of moving forward with the redevelopment of this site.”
Company officials declined interview requests Tuesday. A spokeswoman issued a prepared statement from Project 19 members.
“As we continued to evaluate the City’s offer it became evident that the terms presented were not aligned for what the market is demanding,” the statement said. “Our primary responsibility is to look out for our client’s best interest. We are hired to deliver a project that is successful for the client as well as the community.”
Stothert called the news unfortunate. But she said the city will move ahead and will offer the site for redevelopment again. She noted that this time, the land is cleared and “shovel-ready.”
Stothert noted that there have been many developments since Tetrad was awarded the contract in 2014, including proposed developments on the riverfront, at the Gene Leahy Mall and Conagra site. But she said “that’s progress, that’s not obstacles.”
She pushed back against the idea that the downtown area is oversaturated with new developments.
“If the original design that they wanted to do down there doesn’t work, that’s their opinion,” Stothert said, “but a lot of other developers feel differently.”
City Council President Ben Gray said he was disappointed that Tetrad backed out.
“But I’m confident that we can get something going on that site,” Gray said. “That property will work for someone. We just have to be patient.”
Council Vice President Chris Jerram said he was also disappointed, and surprised.
He said the site — and its proximity to the Interstate — should be attractive. But he said it could be challenging with other development in the area.
“The market can only absorb so much,” Jerram said.
The city will put out a new request for proposals for the site quickly, Stothert said, and plans to find a new developer “as quick as we can.” The city, however, is interested only in a mixed-use development with a major tenant, she said.
“I already had a developer call me this morning after we got this news from Tetrad,” Stothert said.
She said the city’s relationship was still good with Tetrad and its principals, including W. David Scott.
Tetrad had proposed to erect four buildings: a 14-story office tower; two residential buildings with 200 units above retail office space, and a four-story “civic building,” such as a library or museum.
Stothert and Tetrad originally expected demolition to occur in 2015 and construction to begin in 2018. The city issued redevelopment bonds to pay for the $3.1 million demolition. But the demolition was delayed.
The city put the job out for bid in June 2015, but received no acceptable bids. The city put the demolition out for bids again in November 2015. Then the company that won the bid went under financially. A new contractor finally began tearing it down in April 2016.
It’s not unusual for major real estate redevelopment plans to change or be delayed. But Tetrad never did identify major tenants, and its plans had not firmed up, at least publicly, as the process inched forward.
World-Herald staff writers Cindy Gonzalez, Emily Nohr and Dan Golden contributed to this report.
Read more about the redevelopment of the Civic Auditorium site: