Penguins skating uphill over arena site plans?
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If the history of development around Heinz Field and PNC Park is any guide, the Penguins organization is facing a daunting task in its bid to replace the Civic Arena and the surrounding land with offices, housing and shops.
On the North Shore, the Steelers, the Pirates and their partner, Continental Real Estate Cos., failed to reach targets that required them to develop -- on average -- less than one acre a year over the course of a decade.
By the time the teams negotiated amendments to the agreement with the city's Stadium Authority last month, they had developed only four of nine parcels that should have been done by then. That's despite the construction of two office buildings, a hotel and a concert venue.
The trouble that those two professional sports teams have had developing land on the North Shore seems to call into question the ambitious timetable facing the Penguins in redeveloping the Civic Arena property, Uptown, that is owned by the city-Allegheny County Sports & Exhibition Authority and adjacent land owned by the city Urban Redevelopment Authority.
Under the 2007 deal worked out with state and local leaders, the Penguins have 10 years to develop the 28 acres. That's 2.8 acres a year, nearly three times that required of the Pirates and Steelers.
The arena demolition should be completed this spring, and the Penguins are required to start developing a year after that.
If the hockey team fails to develop 2.8 acres in any given year, it must forfeit the rights to a parcel of equal size. In such cases, the SEA or URA has the right to offer the land to another developer.
While the team insists the timetable is realistic, not everyone is as sure, given the economy and tight money supplies.
"I talk with a lot of developers in the East End, which is a pretty hot market, and right now there is a lot of trouble in getting banks to offer financing [for projects]," city Councilman William Peduto said. "Getting the type of financing to do that much development is going to be difficult."
Mr. Peduto also questioned whether the Penguins will have any incentive to develop the land, virtually all of which will be used -- at least temporarily -- for parking once the arena is demolished. The team has the rights to the parking revenue for 10 years.
Even if the team is forced to forfeit a 2.8-acre parcel, it is still able to use that land for parking -- and collect the revenue -- until another developer takes the land.
"It's like an ATM for the next 10 years, guaranteed," said Mr. Peduto, a former stadium authority board member who was removed by Mayor Luke Ravenstahl after he questioned parts of the North Shore deal.
The Penguins also get $15 million in credits to help offset the purchase of the land from the SEA or URA. The team will pay fair market value for the land, as determined by appraisals.
However, if the team doesn't use all of the credits in 10 years, it can continue to keep the parking and the revenue until it has collected the difference, plus 7 percent interest.
While the terms smack of a "sweetheart deal" to Mr. Peduto, Travis Williams, the Penguins' chief operating officer, said the team has no plans to leave the land undeveloped to collect parking revenue.
"One could make that argument, that it's better to leave it as a parking lot financially. But we're looking at it as what's best for the city and the region. We believe development is not only in the best interest of the Penguins organization, but the city and the region and the Hill District as well," Mr. Williams said.
Despite a seemingly aggressive schedule, he said, the team is confident. "We think this site is uniquely positioned to attract the developers and the type of development that we're trying to do," he said.
The Penguins believe the land will generate interest because of its location near Downtown. The team is in the process of hiring an owner's representative to help select a developer. It also is working with the city to put together a special planning district that would govern redevelopment of the site.
Mr. Williams said the team already is spending "significant resources" to lay the groundwork for development. "We wouldn't be doing that if we thought the best thing to do is to sit on [the land] and take the parking revenue," he said.
The Penguins are planning 1,200 units of housing, 600,000 square feet of offices and 200,000 square feet of commercial space at the site. Mr. Williams said the team probably will start with housing, most likely as an extension of Crawford Square in the lower Hill.
One factor that could slow potential development is the lack of infrastructure, said Mark Schneider, a former stadium authority board chairman. A key to starting the North Shore work was securing federal funds for streets and other infrastructure, he said.
"That's the money that's going to be harder to raise right now," he said.
The city and SEA hope to establish a tax-increment financing district to raise money for roads, utilities and other infrastructure. The SEA wants to be ready to begin the first phase in 2013. The city planning commission today is scheduled to consider a blight designation for the 28 acres as a first step toward establishing a TIF district.
Mr. Williams said not much can take place without infrastructure. But SEA executive director Mary Conturo said the team is required to start development a year after the arena is cleared even if no infrastructure is in place.
Several real estate experts believe the Penguins have a good shot at hitting the deadlines. With most Downtown prime office space filled, they think the arena site will be a perfect spot for such development.
"There are very limited options Downtown right now. We're starting to see development push into the Strip and the North Shore. It's only natural that development would push up the Hill," said Dan Adamski, managing director of Jones Lang LaSalle.
Peter Sukernek, vice president and general manager of Howard Hanna Commercial Real Estate Services, sees the potential for a "signature" office building at some point, but believes housing will drive the early development.
"The residential development, I think, has the greatest opportunity at this time," he said. "The housing that has been built in the lower Hill area has been very successful."
First Published December 13, 2011 12:00 am