Durham County

Durham picks developer for old police headquarters deal. Why it chose the lower offer

The plan for 505 W. Chapel Hill St. calls for 300 apartments (some of which can be seen on the right in this illustration) and a new commercial office building behind the old police headquarters.
The plan for 505 W. Chapel Hill St. calls for 300 apartments (some of which can be seen on the right in this illustration) and a new commercial office building behind the old police headquarters.

Durham city officials will begin negotiating with a Boston company to transform the block that houses the old police headquarters into a development with 300 apartments, commercial and retail space.

The City Council voted unanimously Monday night to authorize City Manager Tom Bonfield to begin negotiating with The Fallon Co. to redevelop the 4.5 acre block at 505 W. Chapel Hill St.

If a deal is reached, the company would pay the city $9.25 million and develop the property according to its proposed plan that preserves the former police headquarters, but adds apartment buildings and a tower with 276,000 square feet of commercial space.

The proposal includes 80 units for households at 60 percent of the area’s median income. In Durham, that’s about $40,425 for a four-person household, The News & Observer has reported.

The plan has a total of 350,000 square feet of office and commercial space, which includes 73,500 square feet in the old headquarters building, the ground floor of which would have retail spaces.

Nine firms expressed interest and four were invited to submit full proposals. Of the three proposals submitted, two — Fallon and Washington, D.C.-based Akridge — were selected for further evaluation.

Akridge proposal

The Akridge proposal included a partnership with with New South Ventures development firm. New South Ventures was founded by Michael Lemanski and includes Dewayne Washington, a partner, and Carl Webb, a principal, according to the company’s website. The Durham company’s projects include the renovation of the 14-story historic N.C. Mutual Life building next to the old police headquarters.

Lemanski, Webb and others associated with New South Ventures were also members of the Greenfire Development team, which struggled to deliver promised downtown projects that were eventually unloaded during the Great Recession, The News & Observer has reported.

Lemanski moved on to UNC-Chapel Hill’s School of Government as the director of a new university program helping local communities find developers to rebuild rundown areas. He stepped down from the UNC position shortly after a 2017 audit revealed conflict of interest concerns between Lemanski’s role at the university and related private development interests, The News & Observer reported.

None of this came up during the more than two-hour discussion on the downtown project Monday night. Afterward Mayor Steve Schewel said he didn’t have concerns about New South Ventures.

Proponents of the Akridge proposal included Durham Public Schools board member Minnie Forte-Brown and former County Commissioner Michael Page. They emphasized New South Ventures’ African-American ownership, which includes Webb and Washington, and the need to support such partnerships in a gentrifying downtown with few minority-owned businesses left in an area known for its Black Wall Street.

Akridge offered an up to $11.25 million payment for the property and proposed 420 apartments, including 90 affordable units. An Oct. 18 update to the proposal reversed the company’s initial plan to demolish the former police headquarters building and added a tower with 170,000 square feet of commercial space.

The headquarters building was built in 1957 as offices for the Home Security Life Insurance Co. The city had occupied it since 1991 and vacated the dilapidated structure to move into a new headquarters building on East Main Street.

Bell backs Fallon

Proponents of the Fallon team included former Mayor Bill Bell, an adviser for the team who stressed its successful track record.

“I found them to be honorable, to have integrity with their proposal; as a company I trust that they would do and deliver what they promise,” Bell said.

City Council members said the two proposals were very competitive but they ultimately followed staff’s recommendation of The Fallon Co.

City staffers based their recommendation on the company’s affordable housing partner’s experience, the proposed financing model, the flow of the project and the larger amount of office space that could attract a company’s headquarters, among other factors.

The two strongest factors of the Fallon proposal include that the city will receive a majority of the payment for the property at the beginning of the project and Fallon’s project partner, WinnCompanies, the largest manager of affordable housing in the U.S., doing business in Durham, said City Councilman Charlie Reece.

“And to begin what I hope will be a long fruitful relationship,” Reece said.

Staff negotiations are expected to take at least six months with the development agreement likely returning to the council in spring 2020.

After the meeting, Webb said in a statement that he and his team appreciate the council’s “care with which it deliberated,” the project.

“While the process was far from perfect, we congratulate the Fallon team and look forward to seeing this important development unfold,” the statement said.

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