Citing a lagging demand for commercial space, an increase in inventory and falling lease rates, a Wheeling-based real estate firm has backed out of a purchase agreement with the Charleston Urban Renewal Authority to redevelop a piece of downtown property.
McKinley Properties, headed by David McKinley, originally planned to buy the former B&B Loans Building at 170-178 Summers St. from the urban renewal authority for $650,000.
But that changed when the firm had the property newly appraised and found that the cost to purchase and renovate the building would far exceed its appraised value once that work is complete.
In November, Stan Thomas provided the board with an appraisal of $820,000, Executive Director Jim Edwards said Wednesday.
McKinley said he wasn’t allowed to specify what the new appraisals reported to him, but noted that the property’s estimated post-renovation appraisal was a game changer.
“We weren’t concerned about the appraisal as is — we were concerned about the appraisal as developed,” he said. “Based on reasonable expectations of what we can charge for rent, the value of the property would be $1.1 million less than what we would have invested to get it to that point.”
McKinley said the total cost of construction and renovation would have been about $3.2 million, which doesn’t include the $650,000 purchase price.
“There’s virtually nothing inside the building other than the frame that would remain in place,” McKinley said. “It’s not as if we learned something new that’s bad about the building. It’s just the cost versus what’s likely to be realized through rental agreements [that] we can’t justify at this moment in time.”
McKinley said he hopes that within the next 12 to 18 months, West Virginia’s energy sector, particularly in natural gas extraction, will recover enough to see an uptick in the commercial real estate industry.
“I think this is a short term phenomenon — it’s just going to take a little while,” McKinley said. “I’m a little less optimistic about coal.”
The urban renewal authority voted to issue a new request for proposals on the property during its meeting Wednesday.
“There were several parties interested previously that did not submit proposals,” Edwards told the board. “They may be interested in doing that now.”
Board members also noted a project that’s under way to revamp Brawley Walkway is slated to begin work on the Fife Street portion of the walkway in a few weeks. That section runs directly next to the Summers Street building.
Also on Wednesday, the board voted to proceed with demolition of the Ott Building, located behind Quarrier Diner at the end of Dunbar Street.
“It’s pretty rough,” Edwards said of the building’s condition.
The long-vacant building was purchased by Hurt Realty Co. in 1946, according to previous news reports.
The urban renewal authority now owns the building and already had planned its demolition before developer Charlie Wendell approached the authority with a proposal to redevelop the adjacent former Holley Hotel site.
Wendell asked the board to postpone demolition in case another use could be found for the building.
But since Wendell backed out of plans to develop that site, “it only makes sense to go ahead and remove [the Ott building],” Edwards said.
He added that the building’s awkward location on Dunbar Street also contributed to the decision to raze it.
“If it were out on the street, I’d be the first one advocating that we renovate, but it’s crazy where it sits,” he said.
Edwards said the demolition should be completed in the next six to eight weeks and estimated the cost will be between $40,000 and $50,000.
CURA also heard updates on two projects it’s helping to finance.
Rachel Thaxton, program coordinator with Recovery Point, reported the progress of its new women’s facility at 501 Stockton St. Thaxton said the center would like to purchase the vacant lot across the street from the center at some point to make into a green space.
Alissa Novoselick, executive director of the Tamarack Foundation for the Arts, also updated the board on the organization’s fund raising efforts for the build out of its “creative business incubator” in the former Staats Hospital on Washington Street West.
Novoselick said the buildout, which was originally estimated to cost $100,000, will actually be $150,000. The foundation so far has raised $83,000, she said.
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