THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, July 2, 1995 TAG: 9507020061
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY MYLENE MANGALINDAN, STAFF WRITER
LENGTH: Long : 276 lines
A deep-pocketed group of investors has quietly amassed hundreds of millions of dollars worth of downtown Norfolk property.
They've snapped up high-rises, and razed decrepit office buildings, turning them into parking lots. They've acquired vacant lots at bargain prices and sat on them, waiting for the economic winds to improve. They've borrowed heavily to finance gleaming new waterfront buildings even poured tens of millions into major downtown tourist destinations.
Some 40 years of real estate accumulation has made this group the city's biggest downtown landlord.
So who is this investment mogul, which now owns more than a third of the Norfolk downtown?
It's the city's taxpayers.
Property records shows that the city owns $250 million worth of land, parking lots and buildings from just north of Brambleton Avenue to Waterside Drive. That's far more than other Hampton Roads cities, and reflects Norfolk's activist stance toward reviving its downtown.
Even as the city is in the midst of its biggest investments downtown - from Nauticus to the proposed MacArthur Center mall - a debate simmers over whether the city ought to own so much.
City officials argue that the investment will pay off handsomely if development takes off in Norfolk. But some urban development experts caution that Norfolk risks much if investment stagnates.
Not all city officials seem comfortable with the gamble. Some even argue that the city should divest its holdings.
``The idea is get rid of all of it,'' says David H. Rice, executive director of the Norfolk Redevelopment and Housing Authority. ``We would've done that 20 years ago if there were people ready to invest in the right things.''
Among the staunchest advocates for Norfolk's downtown plan is the man responsible for much of it, Robert B. Smithwick, the city's director of development.
``We have a need to solidify the economic base of the city,'' he said. ``We need to continue to develop the product until the value increases.
``The intelligent aggressiveness of the city's planning process has enabled us to springboard into what we are today and has laid the foundation to take us into the future,'' Smithwick continued. ``All of that makes this city the core of the region.'' A SIGN OF ILL HEALTH?
Downtown is traditionally described as the area roughly bound by the Elizabeth River, St. Paul's Boulevard and Brambleton Avenue.
Last year, the city collected $5.76 million from all the taxable property downtown. If all of downtown were taxable, the city would have collected $9.79 million in 1994.
Currently, Norfolk and the NRHA collectively own 142 parcels of downtown land with an assessed value of $252 million, according to city records. That represents more than 35 percent of downtown.
Several urban experts say extensive public ownership of downtown property, particularly vacant property, signals municipal ill health.
``Norfolk has been a distressed center city for quite a while,'' said Michael Beyard, director of commercial development for the Urban Land Institute in Washington D.C. ``In that environment, public land will be a lot higher percent of the total.''
``If you look at Newark, New Jersey, you probably will find a vast percentage of the land is publicly owned. Look at New York City, at least in Manhattan, and it's probably the opposite.''
Cities, say Beyard and others, usually end up with significant amounts of vacant or under-utilized property through either failed urban renewal projects or abandonment by private business owners. Either way, a city is stuck with property and then the task of transforming it into a tax-revenue producer, instead of a drain. That can be difficult.
``Most cities are not in the business of being landlords,'' Beyard said. ``It's not what they are set up to do. Public agencies are not very adept at managing real estate. Any land sitting there fallow is just a wasted resource.'' THE 17 ACRES
The ``17 acres'' to be used for the proposed MacArthur Center mall exemplifies the city's redevelopment strategy. It acquired the land and has held onto to it three decades in hopes of one day attracting private investment.
Cleared from 1959 to 1961 by the NRHA, the land was acquired by the city as part of a redevelopment project. It is valued at $479,370, according to the city assessor's office, but city-owned property is not assessed every year so that figure could change when the land is developed.
For 30 years, Norfolk entertained several different plans for the 17-acre site, including a 32-story, $100 million office, retail and hotel complex proposed by NCNB National Bank Corp. of Charlotte and Chesapeake-based Armada/Hoffler Enterprises.
After that plan was abandoned in the mid-80s, Norfolk city leaders wanted to carve up the tract, only to change their minds again. A group of Urban Land Institute consultants advised the city to instead preserve the 17 acres for a single development, an idea that development director Smithwick strongly advocates.
``Well, they tried for years to get private developers to do things,'' said Richard Emanuel, a 72-year-old Norfolk native who owns The Spot on Granby Street. ``I don't know how many people the city talked to for the 17-acre site.
``They talked to hotels, they had a plan one time to try to locate a couple of national firms there, to build a headquarters for them and so forth,'' Emanuel says. ``They tried everything that they could. They couldn't get anybody from private industry to step in and say `We'll take a step at developing it.' ''
Others like Lucian Montagna, who owns Montagna's Shoes on Granby Street, think the city needs to encourage private investment more effectively.
``The city should try to upscale the whole downtown area if they can,'' he said the 68-year-old merchant. ``They should make it fairly easy for people to come in and invest in downtown and make it their own.'' A GROWING INVESTMENT
Even though it longs for private development to develop its land, the city remains the driving financial force in revitalizing downtown. It has either partnered with private investors, subsidized projects or built them solo.
Main Street Tower was the last privately-built building downtown, which Rowe Development Co. began building in 1988.
The Norfolk Waterside Marriott and Convention Center, a $52 million project built in November 1991, is a joint private-public venture as the city owns the conference center.
Norfolk joined private sector developer James Rouse to built The Waterside marketplace. Neighboring Nauticus was built entirely by the city, which issued bonds to pay for the tourist destination.
While being hailed as a private venture, the city plans to chip in a hefty $100 million for the MacArthur Center. Nordstrom, the anchor store for the proposed mall, has been promised a large incentive package paid for by the city.
City officials herald the city's involvement downtown as a great success because the value of the waterfront and the entire business district has risen.
Assessment records show that the total value of the central business district increased tenfold beginning in 1979 from $44 million to a peak of $462 million in 1992-93 despite a real estate slump that hit the region around 1989.
Some people who live and work in Norfolk have asked why the city has become so immersed in downtown development. They worry that the city continues to pour money in projects like Nauticus, the National Maritime Museum, to protect its investment.
In fact, the city has borrowed heavily to invest in downtown projects from the Waterside Marketplace, which is still unprofitable, to MacArthur Center, which will use Housing and Urban Development money to fund part of the city's investment in the mall.
Neighborhood leaders have complained that resources have been concentrated downtown to a greater degree and higher priority than other communities.
``What is the purpose of the city?'' asked James Janata, former president of the Norfolk Federation of Civic Leagues. ``Is it to be an entrepreneur? Or to provide more traditional city services? They're saying in the name of competition they have to become entrepreneurs. ``I don't know if that's in the best interest of cities but that seems to be their impression. They have to offer inducements, economic development to get economic development. But again they haven't discussed that issue with us. I think we've been left out of this discussion.''
If the city does not develop downtown, no one else will, said Hunter Hogan, a commercial real estate consultant who has been heavily involved downtown for decades.
For instance, no one would've built Nauticus unless the city did, he suggested.
``They're not keeping people from building,'' Hogan said. ``The city's doing it because no one else is doing it.'' MEMO: Staff writers Lise Olsen and Alex Marshall contributed to this story.
ILLUSTRATION: Graphics
Color photos
WHO OWNS DOWNTOWN NORFOLK?
Lucian Montagna, 68, who owns Montagna's Shoes on Granby Street
has been waiting a long time for the promise of downtown
redevelopmetn to come true:
``The city should try to upscale the whole downtown area if they
can. They should make it fairly easy for people to come in and
invest in downtown and make it their own.''
David H. Rice, executive director of the Norfolk Redevelopment
and Housing Authority, agrees Norfolk shouldn't be its own biggest
downtown landlord:
``The idea is get rid of all of it... We would've done that 20
years ago if there were people ready to invest in the right
things.''
Robert B. Smithwick, the city's director of development, says
owning a lot of real estate has given the city the leverage to make
development happen:
``The intelligent aggressiveness of the city's planning process
has enabled us to springboard into what we are today ''
HOW DID NORFOLK GET ALL THIS LAND?
The City of Norfolk never planned on acquiring a third of its
downtown.
The city gained so much property because that area has been part
of a redevelopment project for 45 years now, said the Norfolk
Redevelopment and Housing Authority's David Rice.
Downtown Norfolk in the '40s was a morass of dilapidated
bulkheads, decayed industrial buildings and vacant lots where
warehouses once stood. That all changed with the 1949 Housing Act,
which enabled Norfolk to use former slum property for commercial and
public development such as offices, parks, streets and new housing.
The next three decades witnessed a mass land clearing of downtown
buildings for redevelopment. Signature buildings like Scope arose
and streets like Waterside Drive and Brambleton Avenue were
developed.
``I continue to think the downtown wouldn't have ever become
something if the redevelopment hadn't happened,'' said Rice, who has
steered the redevelopment as NRHA executive director since 1977. He
called the redevelopment the ``saving grace of Norfolk.''
The city's current holdings include the obvious: City Hall and
other municipal buildings, Town Point Park and other public open
spaces, and cultural centers such as Nauticus and Chrysler Hall.
But city assessment records reveal some less obvious assets in
the city's real estate portfolio: old retail buildings on Granby
Street, vacant land parcels all over the city, and a virtual
monopoly on parking lots and garages downtown.
The city owns and operates all downtown parking garages except
for the five privately-owned facilities for the First Virginia, the
Royster, NationsBank, Dominion Tower and Crestar buildings.
OTHER HAMPTON ROADS CITIES
HAMPTON ROADS CITIES AS LANDHOLDERS:
NORFOLK:
Owns $1.4 billion citywide, 2,611 parcels
More than $251 million in property downtown
Downtown: Large investments in Waterside and Nauticus; large
amounts of vacant or underused city-owned land.
VIRGINIA BEACH
Owns more than $528 million citywide, some 1,282 parcels
Small amount of city land in Pembroke-area land; much is in
Princess Anne and Lynnhaven borroughs. School Board accounts for
about half of total.
Economic Development/Tourism: Large investment in Lake Ridge land
(site of proposed amphitheatre), ownership of empty office park in
Corporate Landing, redevelopment of Burton Station (traditionally
black neighborhood near airport) and of small but expensive
Oceanfront site (at Laskin Road).
CHESAPEAKE:
Owns $396 milllion citywide -- 463 sites.
Schools and city hall: The city schools account for about half of
total assessed value. Chesapeake spent $18 million on its city hall
building; it also recently invested in an expansion of an industrial
development park.
PORTSMOUTH:
Owns $290 million citywide, 1,140 parcels, more than $50 million
in property downtown
Downtown/property near shipyard: Includes recent investments in
Portside, Children's Museum. Beautiful waterfront site used for
city jail is a sore spot; some downtown redevelopment efforts have
left empty businesses.
SUFFOLK
Owns $145.5 million citywide, 234 parcels. At least 65 parcels
are in downtown Suffolk.
Downtown: Suffolk is trying to consolidate its city offices in
downtown and is purchasing land for that purpose through
condemnation. Suffolk, like Norfolk and Portsmouth, is interested in
trying to help revive its downtown.
Figures are based on assessed value of city properties and
include school boards, economic development authorities, parking
authorities and local port authorities -- all of which work closely
with city governments. All are estimates based on analysis of
assessment databases from 1994 done by the city assessor's office or
by The Virginian-Pilot. Compiled by staff writer Lise Olsen.
CITY-OWNED PROPERTY DOWNTOWN
Analysis by Lise Olsen
Graphic by Robert D. Voros and John Corbitt
Color photo
[For complete graphic, please see microfilm]
Photos
WATERSIDE
GRANBY STREET
by CNB