CLEARWATER — The City Council on Thursday took the first step required to give developers more time to build apartments on the downtown bluff and allow them to deliver fewer units than what they originally promised.
The council voted unanimously to revise the sale agreement first reached in summer 2022 with Gotham Organization of New York and The DeNunzio Group of Pinellas County after the city’s outside consultants affirmed the developers’ financial rationale for the changes. Under the new deal, the city will sell the waterfront parcel for $11.95 million less than its initial asking price with new timelines and terms for the incentives it will pay out.
The developers originally proposed at least 500 apartments in two 27-story towers with retail on the former City Hall site on Osceola Avenue. The plan included a 158-room hotel on the vacant Harborview site a half-block north bordering the city’s newly revitalized Coachman Park.
In fall of 2022, voters passed a referendum that enabled the sale of the city land to build “approximately 600 apartments.” But by then, skyrocketing insurance and interest rates, coupled with decreased revenue projections from the rental market, made the residential plans financially unworkable by $80 million, the developers said.
The revised deal maintains the hotel but decreases the apartment units to 400 in a single tower with retail. At $300 million for the hotel and apartments combined, they still represent the largest private investment in Clearwater to date, according to Katie Cole, an attorney representing the developers.
The original deal included the developers paying $15.4 million for the City Hall site, the appraisal price of the land for its highest and best use, which would be condominiums. The new sale price is $3.45 million, with the appraisal based on the 400-unit apartment plan.
The council had the option of walking away from the deal, but said the project was too important for the redevelopment of downtown to lose. Officials have said the hotel and apartment projects are the needed catalysts to bring full-time residents and visitors to the area and follow the city’s investment of $84 million last summer to reopen Coachman Park with an outdoor amphitheater.
“I’m excited that we’re actually getting this done,” council member Mark Bunker said. “I think it’s an important next step to taking back the downtown.”
Earlier this week, Mayor Brian Aungst Sr. said other projects across the region are facing similar impacts from inflation, so waiting for another developer with a new plan may not result in a better alternative.
The original deal required the developers to buy the land by the end of 2024. Now they will have until March 1, 2026, but can purchase up to six two-month extensions for $200,000 each.
If the developers do not complete the project by the end of 2028, they must pay the city $1 million in damages.
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The Community Redevelopment Agency, a taxing district encompassing downtown, was originally going to pay $1.5 million in impact and utility fees. The new terms include an additional $2.25 million to be paid at “substantial completion” by the end of 2028. But if the developers buy the land by March 1, 2026, that grant will increase to $3.25 million and be paid when construction begins.
The city will also pay $17 million to construct parking, the same amount as the original deal. The council previously required all underground parking, but the new terms allow 50% of the 440 spaces to be above ground.
With the new sale agreement approved on Thursday, the revised development agreement must now go back to the city’s Community Redevelopment Board and the council for approval.
City attorney David Margolis said the new agreement commits the developers to no further changes to the funding, concepts or timelines.
The development team told the council they were prepared to get the apartments done.
“We’re going to move forward in a steadfast manner in the next 12 to 16 months with the goal in the next year to have a shovel in the ground,” said Gotham president of development Bryan Kelly.
Dustin DeNunzio, president of The DeNunzio Group, told the council he expects construction on the hotel to begin at the end of this year or early 2025.