City board signs deal for 20 Fed
Lease to cover 50 years; allows Youngstown to secure tax credits
YOUNGSTOWN — The city’s board of control signed a lease agreement for 20 Federal Place needed for a company to qualify for state and federal tax credits to redevelop the downtown building.
The board agreed Monday to a 50-year lease with 20 Federal Place LLC for the building. City Law Director Jeff Limbian and Finance Director Kyle Miasek voted in favor of the lease while Mayor Jamael Tito Brown was absent.
The company was created by Desmone Architects, the Pittsburgh firm selected to redevelop the city-owned building. The company’s address listed on the lease agreement is that of National Real Estate Development, a Philadelphia business with a portfolio of more than $1 billion in development properties, that expressed “interest in pursuing an investment” in 20 Federal Place.
The request from Desmone that National Real Estate’s address be listed “is a positive sign that National Real Estate is interested in becoming the developer entity” for 20 Federal Place, Limbian said.
Limbian and Brown said they had several issues with Desmone as the tenant on the lease agreement.
But changes made to the contract eased those concerns, Limbian said.
“The most significant changes are the addition of a few benchmarks that protect the city and these benchmarks will allow the city to pull the plug on this agreement if it looks like everything isn’t falling into place for the city,” he said.
He pointed to contract language with a Dec. 31 deadline for the “tenant and such development entity (to) submit a proposed amended and restated memorandum of understanding to (the city) which further describes the terms and conditions for the pursuit of the project and such development entity shall be a party to the same.”
With a development agreement needed by Dec. 31, Limbian said, “We feel it’s a very good prenuptial agreement.”
The company also must enter into a “development agreement” with the city by Dec. 31 “consistent with the terms of the amended and restated memorandum of understanding whereby the tenant and development entity agree to undertake the project in exchange for certain assistance from city to be identified in the development agreement,” according to the lease.
The lease agreement also calls for 20 Federal Place LLC to submit construction drawings for the project by July 1, 2023, to the city; to provide evidence by Oct. 31, 2023, it has secured financing commitments to complete the project; and by Feb. 28, 2024, it must close on financing in an amount needed for the project and to start construction.
The project is estimated to cost $74 million.
“With the benchmarks and safety measures in place, the law department and the entire administration is happy,” Limbian said. “The safeguards protect the city’s assets.”
City council members have criticized the administration for stalling the lease agreement with some saying a few days ago that the deal was needed immediately despite no sense of urgency shown by Brown. City council members also said Brown wasn’t forthcoming with tenants who are about to be evicted from 20 Federal Place and likely forced a number of them out of business.
Council has sought for more than a month for the administration to sign the lease, which is needed for the building to be eligible for $7.4 million in state Transformational Mixed-Use Development Program tax credits, which Desmone applied for July 7 when it was in dispute with the city administration.
The contract approved Monday is retroactive to July 7.
The Ohio Department of Development permitted an extension for the lease agreement in order for 20 Federal Place LLC to be eligible for the mixed-use tax credits, Miasek said.
The lease agreement gives 20 Federal LLC until Sept. 30 to submit an Ohio Historic Preservation Tax Credit Program application. The project could get about $24 million to $26 million in state and federal historical preservation tax credits, Miasek said.
The deadline to apply is Aug. 29, he said.
The tax credits were in “jeopardy” without the lease agreement approved, Miasek said.
Daniel Killinger, National Real Estate’s president, wrote a letter July 6 to the Ohio Department of Development stating his firm could help “secure other public funding and the construction loan required to complete the project. Combined, the equity and construction loan would amount to an estimated $26 million.”
The city received a $6,962,250 Ohio Brownfield Remediation Program grant, announced June 18, for the proposed 20 Federal Place redevelopment project. The city is providing $2.3 million in matching dollars. Those dollars will be used to remove asbestos and other hazardous materials from the building and do partial demolition.
The work has to be completed by June 30, 2023.
The city is evicting the 19 tenants at the building at 20 W. Federal St. with about half leaving Sept. 9 and all of them having to be out by mid-October because the project is scheduled to start Nov. 7. The 332,000-square-foot building is about 20 percent occupied.
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.
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.