Open Secret Disclosed
Wednesday, September 12, 2018
OPEN SECRET DISCLOSED: The purchase of the long-empty JCPenney department store building and a partnership to redevelop it into rental housing for middle incomes was an open secret in downtown Bellingham; and it was kept a secret for a good reason, that premature disclosure of the negotiation between sellers and partners might topple the most strategic, timely purchase and sale agreement in the city’s history.
Under the proposal officially presented this week to Bellingham City Council, the city will purchase the 60,000 square foot structure for $2.85 million and retain ownership of the land. The city will also enter into a long-term land lease with local private developers Jeff McClure and Jeff Kochman, who will undertake the financial risks of developing the property for affordable housing in the downtown core.
The agreement requires the partners to purchase the building, and provides an option on the land itself under favorable terms for up to 15 years; but the lease also provides for a degree of control by the city on development timetables and streetscape improvements for as many as 90 market-rate apartments above commercial retail and office space. Structural engineers estimate the existing bones of the building can support an additional two floors, bringing the total to four.
The property has been almost entirely vacant since JCPenney left the downtown in 1988 and relocated to Bellis Fair Mall—part of that era’s great reatil exodus from town centers across the country, draining those urban cores of economic vitality. The vacant shell itself—an airless, window-less department store from a bygone era—proved a challenge to adaptive reuse without significant financial outlay. While Bellingham’s downtown has almost completely recovered from the loss of its retail center, this one major vacancy remained.
“It’s located right in the middle of our downtown. But it is also a challenge in building reuse today, because it just doesn’t work as modern retail in downtown,” Tara Sundin, COB’s lead manager for Community and Economic Development, reported to City Council this week.
Council was not surprised by her report; nor is anyone who is paying attention to murmurs downtown.
Early conceptual sketches have papered the walls of architect McClure’s downtown offices for several moons; and a low-threshold buzz hummed among downtown merchants in the City of Subdued Excitement.
Mayor Kelli Linville was candid to the Gristle about the firming proposal in July, and scheduled advanced disclosures with Cascadia Weekly and the Bellingham Herald late last month under the provision that the information would be embargoed until City Council could be formally notified in their first meeting after their summer recess. Both publications agreed to keep a lid on a simmering story.
In her methodical managerial style, the mayor was even more thorough earlier in the summer—carefully floating the concept to major property owners, developers and anchor business owners downtown.
“We had meetings with three of the biggest developers and business owners downtown,” Linville confessed. “The reception from two was extremely positive. They know the building, and would never buy it or invest in it as part of their own portfolio or business plan, but they understood its economic drag on all of their properties and tenants. And they know it could be 20 years or more before private investment stepped forward to take ownership to redevelop that building on this particular site.
“Yes,” she admitted, “it is an advantage to a particular developer for the city to partner on the purchase of the land. But that developer was also ready, in a way others were not, to step up and assume the risks of that development.
“In the end, our plan is to recoup the money that the city invests,” Linville said. “We are not planning on owning the property in the long term, and the terms of the agreement encourages our partners to buy it from us.
“But for our involvement, I don’t think anything would be happening on that property for a long time,” she said. “I am a capitalist. I believe in private investment and allowing the private sector to do things they are good at. But the public sector is also good at doing certain things. We’re good at kickstarting a project that is never going to happen—or not happen soon—without our support and investment.
“I believe we have a strong position based on public benefit—not just because it is going to be housing in a form that is needed in Bellingham, but because it involves the revitalization of downtown,” Linville said. “Our financial position is strong, and whether through lease or purchase the city will recover our outlay.
“It really sets the tone for what people think is happening downtown. When they look at that block, and they believe it is dead, that sets a tone and an expectation for the entire downtown.”
“Those of us who spend time downtown know there’s not a lot of vacancy,” Sundin agreed. “But this very large vacant building creates a negative impression of the overall health of the downtown. This is going to change everything downtown. I think we’ll see more investment, more interest, for all of downtown.”
“In the 25 or 30 years since that building has been vacant, I have been sitting here and I cannot tell you how ecstatic I am that something is happening,” Council member Gene Knutson said. “To the downtown business people who hung in there, didn’t give up, didn’t pick up and walk away, it is going to pay off now. You are going to see a totally renovated downtown. We had a mall recession years ago, and that mall recession is now over.”
“It’s people that make downtowns work,” Linville agreed. “The more workforce housing we create downtown, the more people are going to be going out, eating and shopping, and using our downtown center—throngs of people, people who live there.”