Southwest Wake News

Veridea asks Apex for $27.5 million in sewer investment to jumpstart construction

The backers of what would be Apex’s largest development want the town to commit about $27.5 million to build sewer infrastructure necessary to serve the 1,000-acre Veridea project.

Veridea, a sustainable, mixed-use development proposed in 2009 for land in southern Apex, has stalled in part because of disagreements between the town and New York-based Hudson Realty Capital, which is financing the project, about how the project would roll out.

Hudson wants to first develop the more residential eastern portion of the land, which would allow it to use existing wastewater infrastructure while it awaits the installation of a permanent line to the west.

Town officials, though, have said they would be more willing to subsidize a plan that begins with the western half of the property, which is zoned for commercial development.

The sewer request, yet to be formalized, was outlined at a meeting of Apex’s planning committee Wednesday, June 1, by Joe Morningstar, Hudson’s director of asset management, and Bruce Radford. Shortly after Radford retired in December as Apex’s town manager, Hudson hired him as a consultant on the Veridea project.

They asked that the first three or four years of development be covered by a temporary agreement to pump 860,000 gallons per day of wastewater east to the Middle Creek Wastewater Treatment Plant until the town completes a $25 million, five-mile stretch of westward sewer line to the county’s new wastewater facility in New Hill.

The other $2.5 million requested would help pay for a temporary pump station north of N.C. 540, which would be permanently moved south of the highway when flow is flipped to the west.

“We would love to be able to pay for all of this, but we simply can't,” Morningstar said. “We have to do it together. It’s too expensive for either one of us to do by ourselves, but we’re spending a lot of money to make it happen.”

Hudson has offered to put $5 million in escrow and to pay about $5.8 million in acreage fees that could have been waived.

“This kind of request is not unprecedented, but the scale of it is,” Apex Town Manager Drew Havens said. “Asking for $27.5 million, that’s a big number.”

The town’s proposed spending for the upcoming fiscal year totals $102 million.

Morningstar said revenue from one-time taxes and fees is projected at nearly $68 million during Veridea’s first nine years, enough to cover the town’s investment. The new line also would open up an additional 1,200 acres of sewer-ready land for the town to develop, he said.

He and Radford repeatedly emphasized the size of the financial return for the town, which they estimated at just shy of $300 million over 20 years should Veridea be successful.

“If you look at the net benefits, I think you guys come out way ahead if this happens, even if half of it happens,” Morningstar said. “Retiring debt within 10 years? That’s tremendous.”

Morningstar and Radford said they hoped to begin construction of what will be called the East Village by the first or second quarter of 2017, something Havens said was possible, but only “if everything falls their way.”

Opposing views

Hudson’s eagerness to begin residential construction as soon as possible on the east side appears to be in conflict with the town’s desire for certainty with respect to whether Veridea can attract office tenants to its west side. The sewer proposal asks for a town response within 60 days of its presentation.

“If I put myself in the investors’ shoes, I could see myself asking – when do I get the return on my investment?” Mayor Lance Olive said. “That pressure has got to be there, I have to imagine.”

But subsidizing residential development without the assurance of office or retail tenants could raise eyebrows among Apex residents and town officials, many of whom fear more new homes, without the guarantee of commercial and office development, will cement Apex as a bedroom community.

“We’re fortunate that we’re growing, but we’ve got 12,000 people leaving every day (for work),” said Councilman Bill Jensen, a member of the town’s planning committee. “That’s what we’ve got to turn.”

Radford said Veridea is the town’s “best shot” to solve that problem. Morningstar said Wednesday that homes attract retail tenants, a point Olive and other town officials agreed with.

But Olive said he was less convinced of Morningstar’s contention that retail in turn attracts office tenants who want their workers to have easy access to food and shopping. Even if that’s true, Olive said, easy access to retail would be secondary compared to the office site’s proximity to several major highways.

He pointed to a national survey that found highway access to be the top factor executives consider when siting offices. Retail access was not among the top 12 factors listed in that survey.

“There’s a lot of boxes that can be checked if someone wanted to start developing in the west rather than in the east,” Olive said. “They seemed focused on starting in the east because it’s easier, and most likely because it has a lower spike cost to get started.”

But Radford said Hudson’s eastern focus is purely market-driven.

“Any market study will tell you – and the market study we’ve done tells us – that you have to have rooftops to support commercial,” Radford said. “Standalone office, by itself, has never proven to be successful.”

Adding to the town’s reluctance to subsidize a homes-first development model, though, has been Hudson’s deviation from the high-density plan initially presented to the town. Hudson has instead proposed more traditional homes to be constructed by Pulte, a mass-market homebuilding company.

The sewer plan’s approval later this year will hinge on Hudson’s ability to convince the council that office tenants are all but a sure bet – or a concession on the developer’s part to begin construction on the western side of the property, a move Olive said would likely lead to the council’s unanimous support for the plan.

“If they can’t put the numbers together in 2016, I’m confident that the interest and the demand is there for somebody,” Olive said. “I’ve heard from people in Apex who are willing to wait for the right thing.”

Gargan: 919-460-2604; @hgargan