Thursday, September 20, 2018
Business

New York developer to buy entire downtown St. Petersburg block for major project

ST. PETERSBURG — A New York company headed by a Greek-American billionaire who owns Manhattan's largest grocery story chain is under contract to buy and redevelop an entire block in downtown St. Petersburg.

Mayor Rick Kriseman said late Friday that he is having lunch next week with John Catsimatidis of the Red Apple Group to discuss plans for the 400 block of Central Avenue, now the site of a crumbling garage and the infamous "cheese grater'' building. Caught in limbo for a decade, it is arguably the most valuable parcel available for development downtown.

"I'm obviously thrilled,'' Kriseman said. "It was a priority of mine from the time I got elected to try and make something happen on that site because it was kind of the missing tooth in the smile on that block.''

Red Apple Group, a real estate and aviation company with $700 million to $800 million in holdings in New York, Florida and the U.S. Virgin Islands, was founded by Catsimatidis in the 1970s. Ranked No. 182 on Forbes list of the 400 richest Americans, the Greek-born Catsimatidis also owns Gristedes supermarkets, a Manhattan staple, and unsuccessfully ran for mayor of New York in 2013.

Catsimatidis' son, John Jr., who has a business degree, works in Red Apple, and it was not clear Friday whether father, son or both would be meeting with Kriseman on Wednesday.

Broker Mark Stroud said that interest in the site drew more than a dozen prospective buyers. Stroud did not disclose the contract amount, but said it exceeded the $15 million initial asking price.

Demolition is scheduled to start July 18 on the three existing structures on the block — the historic Pheil Hotel, an adjoining building and a three-story garage, whose tenants were notified Friday that July 15 will be their final day to park there. Any new construction would not occur until next year.

Stroud said Red Apple is considering a "substantial'' mixed use development that would include stores and "more than likely,'' residences. Among other ideas on the table is a hotel.

Kriseman said he did not know any details but said the city's two greatest needs currently are a new office building and a hotel with conference space.

"A higher-end hotel would be nice,'' he said. "We turn business away when the Vinoy gets filled and I'd rather folks have a choice in St. Pete rather than looking at the beaches. We obviously have a lot of new apartments and condos going in an around downtown right now, so I don't think that's a great need.''

The 400 Central block has been in limbo for years because of a dispute over a long-term land lease. But the once-warring owners of the block resolved their differences last year, and preservationists recently dropped their opposition to razing the 1920s-era Phiel Hotel, dubbed the "cheese grater'' after its facade was covered with aluminium grillwork in the 1960s in an ill-conceived attempt at modernization.

Stroud said the block went on the market with what he called a "whisper price'' of $15 million — the minimum it would take for an offer to be considered.

"We had over 14 written offers from qualified buyers,'' he said. "We narrowed that down to four for a second round, and actually during that, two more very qualified people came in very late and submitted offers. So we had six in the second round and narrowed that down to three. We were very excited that the three potential buyers looking at it all were extremely qualified, fantastic buyers.

Two years ago, Stroud was involved in the $17.25 million sale of the Tropicana block three blocks farther east on Central to the Kolter Group, a South Florida developer. Construction is currently under way there for ONE St. Petersburg, a 41-story, 253-unit condo tower that will be among the tallest buildings on Florida's west coast, and an adjacent 174-room Hyatt hotel.

"When we did that deal, although it was a very nice, popular block, I did not have them lined up to buy that block,'' Stroud said. "Since then things have change dramatically. I get calls every day from people horribly disappointed that the property (on Central) is under agreement. It's amazing the interest from all over the country.''

The 400 block of Central has long been a black hole as new apartment and condo projects gobbled up most of the remaining developable parcels in the city's booming downtown. After the Phiel Hotel closed decades ago, the buildings were used by two banks until they were finally abandoned in 2006.

Descendants of A.C. Pheil, an early mayor of St. Petersburg, had little incentive to sell their part of the block because they were assured of substantial income from land leases that don't expire until 2058. First States Investors, a real estate investment trust, wound up with the leases in 2004 when it acquired hundreds of properties, including those in St. Petersburg, after foreclosing on a loan.

But as downtown St. Petersburg flourished and prices skyrocketed, both sides realized it made sense to settle. Last year, they reached a deal whereby First States would demolish the buildings and pay the Pheils an undisclosed amount to get out of the leases. The family also would also get First States' share of the property, which the family could then sell.

St. Petersburg Preservation initially opposed demolition, arguing that the Pheil Hotel was worth saving because of its history and its striking original facade beneath the grillwork. Last month, though, the group dropped a lawsuit, allowing demolition to proceed.

Finding a developer is only the first of many steps toward redeveloping the parcel.

Demolition of the buildings is expected to take three or four months. Stroud said the closing on the sale probably will not take place until late this year, after First States' share of the property is transferred to the Phiel family.

Even after the deal is sealed, "there won't be a shovel going in the ground immediately,'' he said.

Contact Susan Taylor Martin at [email protected] or (727) 893-8642. Follow @susanskate

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