City would cover cost of real estate in $65M deal-WEB ONLY

A local developer, Tadd M. Miller, plans to invest as
much as $65 million to redevelop the long-vacant Bank One operations center and
a surface parking lot to the west into a mid-rise project with 600 apartments
and retail space.

His company, TM Miller Enterprises Inc., has a contract to purchase the former
bank property and an adjacent 1,600-space parking garage for about $18.5
million, and plans to finance the purchase with a bank loan, Miller said.

The deal calls for the city to make all of the
payments on the loan over a term of at least 20 years as part of a so-called “installment”
purchase of the parking garage. The city would pay interest only on the first
two years of the loan.

The developer also would get a 10-year tax abatement
worth an estimated $6.6 million. But, if Miller fails to land financing and develop
the property as promised within 18 months, all of the parcels would revert to
city ownership at no additional cost to taxpayers.

The proposal is scheduled for a hearing tomorrow by
the Metropolitan Development Commission.

The former bank building and an adjacent surface
parking lot occupy a full city block between New Jersey,
East, Washington
and Market streets. The city would retain an option for 18 months to buy the
western half of the property for a public use, likely as a transit center. It
would pay market price for the land.

If the city lets the option expire, the developer
likely would build a second phase with a retail anchor, possibly a grocery
store, said Miller, who is a principal in locally based Kosene & Kosene
Residential.

The deal also calls for Miller to buy back 600 of the
garage spaces from the city for $100,000 per year, plus the taxes abated for that
year. Spaces not used by city employees would be available for public use at
market rates so the city can repay the bank loan without leaning on other
funding sources.

Miller, who lives in the neighborhood, said he’s been
trying for about eight years to find a way to redevelop the blighted building,
which would be stripped down to its structural columns if the plan wins
approval.

He’s developing the project as his first solo
project, but said he may eventually bring Kosene onboard as an equity partner.
A project timetable estimates the city and developer will close on the garage
deal and the loan by July 31.

The deal does not include the city-owned gravel
parking lots that previously housed Market Square Arena, but city officials
hope the development will help spur more ambitious development interest in the
MSA site. The city’s control of the parking garage – seen as key to the MSA
redevelopment – would remove a major hurdle.

Yet the city’s abatements and investment in the
former bank properties suggest a deal to redevelop the 4-acre MSA site still could
be quite pricy for taxpayers. And if the current project doesn’t materialize,
the city would be left holding even more downtown real estate and paying down
an $18.5 million loan.