ST. PETERSBURG — A key block on Central Avenue with two vacant, deteriorating buildings that have long been a blockade to progress may finally have a future as a prime development site.
A lucrative 99-year lease that doesn't expire until 2058 between the property owners and a real estate investment trust has given the owners little incentive to sell. They stand to collect about $700,000 a year for 43 more years or $30 million. And the REIT locked into the lease has little incentive to renovate a building on land it doesn't own.
But the owners — members of the Pheil family, who are descendants of a 1912 St. Petersburg mayor — and the REIT, California-based First States Investors, seem to have worked out a plan to unfreeze the property at 424 Central Ave.
"You are talking about basically a city block right in the heart of where everything is happening. This is just an incredible opportunity," Mayor Rick Kriseman said.
The city expects to soon receive an application for permission to demolish the buildings, and then the Pheil family is expected to sell the raw land.
"I don't think its going to be on (the market) very long," Kriseman said.
In July 2014, the Kolter Group paid $17.3 million for a city block at Central Avenue and First Street N four months after developer Bill Edwards paid $12 million for it. But even in a hot market, the Pheil property won't sell for nearly as much as it would have earned from the lease.
"I had several conversations with the family and their lawyers and lawyers from the other group and really encouraged both sides to do what was best for the residents of the city," Kriseman said. "The (Pheil) family has a long history in St. Petersburg. I appealed to their sense of civic duty. They are good people."
He wasn't sure of the particulars of who is paying for the demolition once it is permitted.
Peter Belmont, vice president of St. Petersburg Preservation, bristled at the possibility of razing a building without outside experts determining its potential or a set plan for what will replace it. He said his group might seek to get a historic designation on the property to protect it from demolition.
"Maybe there is somebody else out there who would like to rescue the building. It would seem too early to make a decision to tear it down," Belmont said.
The building that once housed the Pheil Hotel and a movie theater was built in the 1920s. An adjoining building went up in the 1960s. That's also when a metallic mesh shroud was added to both, giving them what many call a "cheese grater" look.
"The historical references have been really kind of destroyed and covered over," Kriseman said. "I love historical preservation, but it has to make sense. To keep a building … when all that's going to happen to it is it will continue to deteriorate and just sit there is not what historic preservation is all about."
The city could have tried to force the owners to sell the property through eminent domain if it were deemed necessary for public use.
First States found itself locked into the 99-year lease on the buildings in 2004 when it acquired a package deal of about a thousand properties. It has never missed a rent payment but has tried several times to get out of the lease or restructure it. It owns the rest of the block outright.
There hasn't been a tenant since the former Wachovia Bank moved out almost 10 years ago. The building is locked, but frequent trespassers leave telltale calling cards, such as drug paraphernalia, condoms and human waste.
The scene was quite the opposite in the 1920s and beyond when the Pheil Hotel was the city's first skyscraper, housing an elegant theater and upscale dining. It was created by former Mayor A.C. Pheil who also flew with Tony Jannus on his famous flight across Tampa Bay in 1914. His granddaughter and spokeswoman for the family, Betsy Pheil, could not be reached for comment.
Contact Katherine Snow Smith at email@example.com. Follow @snowsmith.