North Charleston moved closer to the city's goal of bringing a grocery store to the city's south end Tuesday night, when City Council approved the sale of the 24-acre Naval Hospital property at Rivers and McMillan avenues.
The $5 million deal includes up to $1 million in incentives to attract a major grocery store to either the hospital property or the vacant site of the former Shipwatch Square shopping center across the street. The buyer, Chicora Gardens Holdings LLC, has until Sept. 30 to decide if it will buy the 18-acre shopping center site for $4.2 million.
The members of the limited liability company buying the property are Utah developer Douglas Durbano and New York developer Donald Trump Jr., according to Summey and other sources.
"These people are the two primary members of the LCC that I had on the phone today at 5:30," Summey told council members.
The Trump organization on Monday described Donald Trump Jr. as a minority investor in the project, and not the developer or general partner.
Durbano is a Utah attorney and developer who has done deals before with Mount Pleasant resident Jeremy Blackburn, the CEO of Titan Atlas Global in North Charleston, which was contracted for work on the project.
Durbano has declined to comment on the deal until the sale is completed. No representatives of the LLC attended the council meeting.
If the sale of the former hospital, the tallest building in North Charleston, goes through, the city will realize a gain of at least $1.2 million on its 2012 purchase of the property at a federal government auction. The city paid $2 million for the property, spent more than $600,000 maintaining it, agreed to spend up to $150,000 to account for water damage that happened last month, and would commit $1 million of the sale price to the grocery store incentives.
The incentive is, if a major grocery store comes to the site, and loses money during its first three years of operation, the city would cover up to $1 million of those losses. Otherwise, the city would keep the $1 million.
"We're taking a chance about whether the development will be successful, but we're not taking a financial chance," said Summey.
Some council members questioned parts of the deal, however, asking how strong the guarantees are and what could go wrong. The majority also objected to a section that said the city's proceeds from selling the Shipwatch Square site would be used to build parks, gardens and a community center on the property.
The version of the deal distributed to City Council members also said the company buying the property would build the community center.
"Am I reading that right?" said Councilman Ed Astle, who later voted against the contract changes.
Summey and lawyers for the city said the proposed government building would be competitively bid.
Summey said the city had used federal grant funds to buy and clear the shopping center site, with the requirement that the money be used on that property. He said using the sale proceeds to build public amenities would meet that requirement.
"Either that, or we have to pay that money back," said the mayor.
City Council decided to strike the language about the community center from the property sale contract Tuesday, so the revised deal would need to be approved by the buyers in order for the hospital deal to close later this week as planned. Summey said he's confident that won't be a problem. In the pending deal:
The city would sell the hospital property this week for $3 million, with another $2 million due by Sept. 30. If the additional money isn't paid, the city would keep the $3 million and get the property back.
Also by Sept. 30 they buyers will have to decide whether to purchase the Shipwatch Square site.
The buyers could decide which property to use for a grocery store location.
The plan for the Naval Hospital building isn't spelled out, but both sides have said it would likely be used for medical businesses. There was discussion about the possibility of the ground floor becoming a grocery store site, but several council members said they would oppose such a plan.
The city previously planned to sell the two properties together, in a $9.2 million deal first announced at the end of 2012, just months after the city bought the hospital property. North Charleston previously bought and cleared the shopping center site, and has spent about $7 million on both properties, some of which was federal money.
Both sides decided to move ahead with the hospital sale after a number of issues complicated the shopping center sale, including environmental questions and issues involving the proposed community center. A new Charleston County library has been discussed for the property, as well as a property swap with the county for land nearby, but no agreement with the county has been reached.
City Council voted 7-3 to approve the hospital sale, with Councilwoman Dot Williams absent, following an unusually spirited debate about the terms of the sale. Councilman Ron Brinson, who voted against the agreement along with Astle and Todd Olds, also raised questions about the developers.
"We have to care about who we are dealing with," Brinson said, making references to problems the city experienced with the Noisette Company and a plan to redevelop the former Navy Base. "We should do the highest level of due diligence."
Summey said the city needs to take some chances in order to push positive changes. He said most of the successful large developments in the city have involved out-of-town developers, an no local developers bid on the hospital property when it was up for auction in 2012.
"It's up to us as leaders of this community to give it a chance to work," he said. "Whatever we can do to make it better down there, we are the winner."
Summey said that if the developers don't follow through by Sept. 30 the city would still have the $3 million and could pursue a grocery store on its own. A grocery store has been the focus of the city's effort because the struggling south end of the city is known as a "food desert" due to the lack of grocery-shopping opportunities.