City wants to invest $3.5 million more into former DES building project

  • The former Department of Employment Security building on S. Main Street in Concord is shown. Monitor file

Monitor staff
Published: 6/20/2019 10:37:09 AM

A developer looking to build apartments at the former Department of Employment Security building says the price tag for the project has grown by $7 million, and city leaders want to pay for half that increase.

City administrators will ask the Concord City Council to approve spending $3.5 million to help Dol-Soul Properties LLC build its market-rate apartment project on S. Main Street.

According to a June report by Matt Walsh, assistant city manager of development, Dol-Soul originally estimated that bringing 109 market-rate apartments and some mixed-use commercial space to Main Street would cost $23.4 million.

But after completing market studies, financial analyses, preliminary designs and soliciting price estimates, Dol-Soul is now saying its project will include around 125 apartments, commercial space and a 125-space parking garage located within the building at a cost of $30 million.

How that $3.5 million would be spent won’t be determined until February 2020. Walsh writes in his report that it could be spent in on- or off-site improvements, reducing the $1 million sale price, or covering other costs like building permits or impact fees.

The city has already discounted the sale price of the former Employment Security building, which it purchased for $1.575 million almost five years ago, and promised to cover the cost of the building’s demolition, valued at $300,000. It’s also promised to cap the project’s impact fees – money developers pay to offset the infrastructure costs associated with the development of their project – at $150,000.

If the council approves the expenditure, it will mean the city has promised $4.6 million for a project that hasn’t started yet. But Walsh says in the report the city has numerous safeguards in place.

Those protections include increasing Dol-Soul’s deposit from $100,000 to $300,000, to be paid out in four installments starting on Nov. 8 through Aug. 4, 2020; a “performance mortgage,” which the city says will ensure the project will be completed even if the building suffers foreclosure during construction; an agreement that Dol-Soul will purchase the building as soon as the city completes its on-site improvements; and a “claw-back” provision, meaning the developer will reimburse the city 50% of the difference between the actual final cost of the project and $23.4 million, should the project come in under $23.4 million after all.

The city is banking big on the project, but officials say it will pay off: Walsh said in the report that the building will have an assessed value of $20.7 million and generate $625,000 in new property tax revenues.

Wash said the apartment complex will be the biggest real estate project in Concord to date at 180,000 square feet. In addition, the developer will pay $378,000 in permitting revenues, possibly $43,680 in parking space lease revenue, and a new restaurant to town.

Walsh also writes that the targeted demographic will be “singles, childless young couples and empty-nesters” – a noticeable comment on concerns residents in Penacook have had about the former tannery apartment complex proposal.

“Therefore, the project will have negligible impacts on student enrollment for the Concord School District,” Walsh wrote.

The proposal requires the city council to alter the purchase and sales agreement with Dol-Soul for the eighth time, along with the finance plans for the specially created tax district. Those changes will have a public hearing in July with a vote in August.

(Caitlin Andrews can be reached at 369-3309, or on Twitter at @ActualCAndrews.)

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