Chicago developer will lease historic produce terminal
March 12, 2017 12:00 AM
The Produce Terminal stretches along Smallman Street in the Strip District.
By Mark Belko / Pittsburgh Post-Gazette
Nearly three years in the making, a Chicago developer finally has reached a deal to redevelop the Strip District’s historic produce terminal, a project that will start with the creation of a new “food centric” public market at the building’s western end.
McCaffery Interests and the city signed a memorandum of understanding Friday under which the developer has pledged to lease at least 40,000 square feet of the terminal to local or regional businesses focused on artisan food, crafts, produce, meats and creative arts.
That’s in addition to any space to be given to local or regional merchants in the proposed public market, which will total at least 20,000 square feet and will kick off the start of the redevelopment, one that could be spread over as many as four phases.
Kevin Acklin, chief of staff for Mayor Bill Peduto, said the agreement sets the stage for a $62.6 million development designed to turn a dilapidated and nearly vacant warehouse into a “public jewel for the city.”
“We’re very pleased to move forward with what we believe to be a transformational development for the Strip District and for the city,” he said.
Dan McCaffery, CEO of McCaffery Interests, said he’s ready to get going on the long-delayed project.
“I’m determined that if this thing can work, I’m going to make it work. That’s what I’m determined to do. We have to get all of this other stuff behind us and make the darn thing work,” he said.
In a change of heart, McCaffery agreed to lease the Strip landmark from the city’s Urban Redevelopment Authority for 99 years. In the past, Mr. McCaffery had opposed a lease, an idea pitched by city Councilwoman Deborah Gross, even to the point of suggesting it could be a deal breaker.
Under the memorandum of understanding, McCaffery does have the right to buy the building 15 years after the project’s first phase has been completed. Likewise, the URA has the right of first refusal should McCaffery seek to give up its interests in the property.
“You have to find a way to make a deal. I’ve agreed to a lease and the city has agreed to allow me the right ... to potentially buy it after 15 years,” Mr. McCaffery said. “It’s the best world for the city and the best world for me that we could each agree upon.”
The developer will pay the URA $2.5 million to lease the building — the same amount the authority set as the minimum asking price for the terminal in 2014 when McCaffery first got involved.
Since the long-term lease is being used for commercial purposes, McCaffery will pay real estate taxes on the building, which currently does not generate any tax revenue.
In addition to keeping the building in public hands, the city, Mr. Acklin said, was able to negotiate seven other conditions that it considered to be priorities, including the public market, commitments to using local or regional vendors, the first-refusal rights, and keeping long-time tenant Society for Contemporary Craft in the terminal.
“We have a deal that achieves all of the conditions that we thought were important to the public,” Mr. Acklin said.
Under the memorandum of understanding, the Society for Contemporary Craft will be able to stay in its current space at the terminal’s east end until that section is redeveloped, subject to a mutually acceptable rent increase. Ms. Gross had been pushing for rent breaks for the group.
Janet McCall, the nonprofit’s executive director, said she was thrilled with the outcome. The society has been in the space for 30 years.
“I’m very grateful to Kevin and the mayor and McCaffery. I know they have worked long and hard to come up with a deal to allow us to stay in our current location,” she said.
As for a possible rent increase, “I feel that is something that can be worked out,” she said.
Agreement on the memorandum of understanding brings Mr. McCaffery a step closer in his quest to redevelop the terminal, a journey that has been filled with delays, failed partnerships, and frustration.
The project also has preoccupied Mr. Peduto since the first day he took office. He reached a deal with the Buncher Co. to give up its rights to the property because he did not like its plans to demolish the western third of the structure.
Mr. McCaffery envisions converting the 1,533-foot warehouse — a one-time hub for produce wholesalers — into offices, services like spas or fitness space, crafts, and perhaps even music venues or nightclubs.
Under the deal with the city, redevelopment would start with the public market at the 16st Street end. The goal, according to a mission statement attached to the memorandum of understanding, is to create a public space “which appeals to all Pittsburghers.”
Mr. McCaffery said he is hoping to attract a variety of vendors, from local chefs to Penn Avenue merchants, to participate.
“Public markets have taken on a pretty significant role in a lot of cities. They want one in Pittsburgh and I think Pittsburgh is a great candidate for a public market,” he said. “I personally think a market has a strong chance of attracting people if you do it right and do it with flair.”
Likewise, Mr. McCaffery saw the commitment to using local vendors in other parts of the development as a no brainer. “That’s what I always wanted. You’re not going to be able to have a market place in Pittsburgh by appealing to a guy in Anaheim, California,” he said.
As part of the project, the developer is proposing to create pedestrian pathways through the building at 17th, 18th and 20th streets to allow for easier access to the Allegheny River.
A key related element involves $18.5 million in proposed improvements to Smallman Street running the length of the terminal to St. Stanislaus Kostka Church. Mr. Acklin is hoping to get at least $4 million in support from local foundations to fill funding gaps in that initiative.
While the memorandum of understanding sets the stage for the terminal work, there are still hurdles to clear.
McCaffery must secure financing. City Council still must approve a zoning change related to the redevelopment and the proposed lease. It, the county, and the city school board also must approve $7.5 million in tax increment financing for the Smallman Street improvements.
While some school board members have balked at approving the TIF, Mr. Acklin believes the concessions that the city won from the developer on the terminal will help to generate support.
Mr. McCaffery sees the redevelopment as a way to make the Strip even more vibrant. He also has an option to buy a four-story warehouse across the street at 1600 Smallman that could factor into his plans.
“I really believe that my plan will bring the energy to the Strip District that allows the Strip District to move one or two blocks closer to the riverfront and to connect the city from Penn down to the river,” he said.
Mark Belko: firstname.lastname@example.org or 412-263-1262.
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