Town of Chapel Hill Receives Design Updates, Financial Projections for East Rosemary Street Development

A major development project for East Rosemary Street in downtown Chapel Hill continues to progress, as the town council recently heard updates on the latest details for a new parking deck.

Town officials hope the 125 East Rosemary Street site, where one parking deck owned by Grubb Properties currently stands, will be where a newer and bigger parking deck will soon be located as part of significant redevelopment proposed by the development company.

The deck’s creation would be the result of a land swap between the two parties and could potentially lead to Grubb building 200,000 square feet of new office space where the Wallace Parking Deck currently sits. A deal between Chapel Hill and the developers must be struck by June 30 in order for the project to fit a designated timeline utilizing the space within the federally-designated Opportunity Zone, which would provide Grubb Properties with special tax benefits.

At its latest virtual work session, the council received updated concept designs for the new parking deck it would control, as well as detailed financial projections. Developers and staff estimate the six-story deck would have 1,143 parking spots, a 156-spot increase from the existing two parking decks combined. New details to the concept plan include two entrances to the deck off Rosemary Street, as well as two potential access points off Columbia Street and North Street. The potential for a police substation located in the deck was also added, which would co-exist with the parking management offices proposed for the space. Artwork on the western façade of the deck also was discussed by the developers, with vegetation added to other exterior areas for more visual appeal.

Base cost estimates for the project are more than $27 million for its construction and the land swap. But the final cost of the project’s construction may ultimately be higher, with the council to decide what additional amenities to include with the deck. Staff estimated the relocation of a sewer line, changes to the surrounding land for entrances and exits, solar panels on the roof, public toilets, car-charging stations and streetscape improvements could raise the costs past $30 million.

Despite the initial costs, however, town staff estimates the development will ultimately pay for itself when factoring in Grubb Properties’ additional developments and parking revenues. While the net cash flow for the parking deck might be negative in the first few years due to debt payments, revenue from the deck being at 65-100 percent occupancy would lead to more than $24 million in revenue by the 20-year mark. UNC, which is currently reserved 100 spots in the parking deck, is also considering paying Chapel Hill approximately $2.4 million up front for the construction of its designated spots. Town staff estimated those funds could be used to cover any negative cash flow in the deck’s first years of operation.

In addition to Grubb Properties receiving tax breaks, the staff presentation to the town council showed how the redevelopment would be beneficial for Chapel Hill’s tax base as well. Town staff said during the session Grubb’s proposed office space at 150 East Rosemary Street would add around $217,000 annually for the town in taxes, in addition to potentially $136,000 annually from the developer’s 137 East Rosemary Street property which is also to be renovated. They also estimated the long-term impact of the 150 East Rosemary development could lead to more than $3 million spent annually at the nearby downtown businesses.

One of the next steps for the project is the town council’s approval of an economic development agreement to send to Grubb Properties. After passing a Memorandum of Understanding in March, this document would work like a contract to ensure the developers will strive to construct the proposed office space and green space. Council reviewed a draft of an agreement on Wednesday, but did not take any action as it was a work session.

Chapel Hill’s Community Design Commission also reviewed the latest concept plans on Monday. The project will return to the town council in the coming weeks as it works to finalize an economic development agreement with Grubb Properties, with a concept plan for the office building at 150 East Rosemary Street slated for submission in July.

To learn more about the East Rosemary Street Development, visit the Town of Chapel Hill’s web page for the project.

Photo via Perkins + Will.

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