×

City official has numerous problems with 20 Federal deal

YOUNGSTOWN — The city’s law director sharply criticized the company working to redevelop 20 Federal Place less than three weeks after the firm helped secure a $6.96 million state grant for remediation and demolition work at the downtown building.

In a Thursday letter to Mayor Jamael Tito Brown, Law Director Jeff Limbian wrote he had numerous problems with Desmone Architects, the Pittsburgh firm working on the redevelopment, particularly with plans to give it a 40- to 50-year lease agreement on the city-owned building.

“The proposed lease agreement is inadequate in that it does nothing to protect the assets of the city of Youngstown,” Limbian wrote in the letter to Brown requested by the mayor. “In fact, the proposed lease agreement actually puts the assets of the citizens of Youngstown at incredible risk.”

That letter came the same day as Desmone submitted an application to the state for a $7.4 million Transformational Mixed-Use Development Program tax credit.

In his letter, Limbian wrote regarding the mixed-use grant application, the law department “cannot and will not provide a green light, from a legal standpoint, to move this lease agreement to council for consideration nor to the board of control for approval unless and until the city’s assets are protected.”

Desmone, a Pittsburgh architectural firm, was instrumental in writing the application that got the city a $6,962,250 Ohio Brownfield Remediation Program grant.

That grant was announced June 18 by state officials and hailed at the time by Brown as playing “a critical role to activate the redevelopment” of the city-owned 20 Federal Place.

The project’s estimate is $74 million.

Jim Ambrose, Desmone’s director of business development, said Thursday of the Limbian letter: “I don’t know why this was the decision made. It’s doing the opposite of what the (memorandum of understanding) stated. We’ve enjoyed our collaboration with the city of Youngstown and our regional partners. We have tremendous momentum.”

In order to be eligible for that tax credit, a “special purpose entity” had to be created with Desmone as the master lease holder under an entity called 20 Federal Place LLC. That agreement to have 20 Federal Place be the master lease holder / owner of the building is spelled out in a memorandum of understanding first approved Nov. 29 by the board of control, which consists of Brown, Limbian and city Finance Director Kyle Miasek.

Limbian expressed concerns to Brown about giving up control of the building as well as what Desmone was doing to find private equity for 20 Federal Place.

He listed numerous “problems” he had with the lease agreement such as it being “contrary to public policy,” “gives the tenant the complete control (of) the property,” “the tenant can walk away at any time without a single dollar of their own money having every been expended,” the lease expires at the end of 2072, rent is $100 a year and Desmone and the LLC can terminate the agreement early but the city doesn’t have that option.

Ambrose said Desmone has spent about $500,000 in time and resources on this project.

Limbian also wrote that Desmone is only “an architectural firm” and there “is a distinct lack of benchmarks in the proposed lease agreement.”

While Limbian didn’t call for an end to working with Desmone, he wrote its MOU with the city has expired.

“The late receipt of this proposed lease does not allow enough time to vet the foregoing issues,” he wrote. “The city of Youngstown and Desmone will continue to attempt to negotiate a lease term favorable to the interests of the city of Youngstown. However, the city will be moving forward with the demolition and remediation of 20 Federal Place. There remains great interest in the project and the city of Youngstown is in close contact with all interested parties.”

While the Desmone MOU expired June 30, the initial agreement approved Nov. 29 by the board of control states Desmone and 20 Federal Place LLC has “the exclusive right for 365 days to pursue commitments from tenants, private capital providers, lenders and other public funding resources.”

Ambrose said he’s been trying to reach Brown and Limbian since June 29 when he provided them with a draft of the master lease and hasn’t received any response from either.

The Vindicator obtained a copy of a letter from Daniel Killinger, president of National Real Estate Development, a firm with portfolio of more than $1 billion in development properties, expressing its “interest in pursuing an investment” in 20 Federal Place.

“Subject to receipt of all necessary internal approvals, (the company) is sincerely interested in making the financial commitment necessary to make this project a reality,” Killinger wrote.

If the project received the mixed-used tax credit, he wrote, “National Development will use our relationships to secure other public funding and the construction loan required to complete this project. Combined, the equity and construction loan would amount to an estimated $26 million.”

In an effort to get the mixed-use grant, a number of organizations — including the Western Reserve Building Trades, Youngstown Business Incubator, Western Reserve Port Authority, Mahoning County commissioners and four city council members — wrote letters of support for the project.

The city administration didn’t write a letter.

The redevelopment project could create 679 full-time construction jobs in the first two years and have a direct economic impact of $91 million, Ambrose said.

The city would receive about $821,000 in annual tax dollars once the project was finished, he said.

Desmone also plans to apply for tax credits through the Ohio Historic Preservation Tax Credit Program. Projects that get state historical tax credits are eligible for federal tax credits.

Desmone’s plan included demolishing the three-story mezzanine on the Commerce Street side of the building, where the food court is located; building a skylight in the roof that would create natural light all the way down to the ground floor; a parking lot in the basement; and a place to buy baked goods, produce and other foods on the ground floor.

The firm’s proposal also calls for the restoration of the archways on the Federal Street entrance and remove the canopy; improving the Phelps Street entrance; a rooftop restaurant as well as an observation deck on the roof; one-bed, one-bathroom apartments; and space for innovative businesses.

The city purchased the building in November 2004 after Phar-Mor, a national retail store company, went out of business. The property was the Phar-Mor Centre, the company’s corporate headquarters. Before that, it was the flagship location of Strouss’ department store for decades, closing in 1986.

The city has unsuccessfully tried to sell the 332,000-square-foot building in the past.

The remediation work at 20 Federal Place will take at least 12 months.

The city will work with tenants at the building to find other locations for their businesses during the work. The building is less than 40 percent occupied.

The city has to spend more than $1 million annually to operate the building, Limbian said.

Downtown Development Group of Warren was the only company to submit a formal proposal to redevelop 20 Federal Place by the June 1, 2021, deadline. Desmone provided a proposal June 16 after the city gave it additional time.

Downtown Development withdrew from consideration last July after Mark Marvin, its president and owner, said he was concerned about the building’s maintenance management and the lack of market-rate rent paid by several tenants.

That left Desmone as the only interested party.

dskolnick@vindy.com

NEWSLETTER

Today's breaking news and more in your inbox

I'm interested in (please check all that apply)
Are you a paying subscriber to the newspaper? *
   

COMMENTS

Starting at $4.62/week.

Subscribe Today