City prolongs talks on Third Lake agreement to build new Municipal Services Center

Hung up on details of building a new Municipal Services Center and plans on converting the old MSC site have caused the St. Petersburg City Council to move the discussion on entering an agreement with Third Lake Partners LLC.

During its meeting Thursday, the council debated for nearly three hours on details pertaining to the city approving the first phase of entering a master agreement for the sale of the existing MSC. The council ultimately voted 6-2 to defer the resolution to a committee in the new year. 

A rendering of the planned new MSC and residential/retail tower on 2nd Avenue North, just north of City Hall.

Under the Tampa-based Third Lake Partners agreement, the firm would purchase the current 11-story MSC building at 14th St. North for $12.5 million and construct a new MSC at 429 Second Ave. North, across from City Hall. Additionally, Third Lake Partners would build a new 280-unit apartment building adjacent to the site that would include 31% of units for workforce housing along with retail and shared parking.

City Development Administrator Alan DeLisle said approval would have essentially provided a nod for the first phase of the $500,000 conceptual planning process to begin, which would have let the city “spend the time going through the process and see what price it can get for the [existing] MSC.” 

DeLisle pointed out the $12.5 million offer from Third Lake Partners was the highest bid received, and a sale is critical as the city will use the proceeds from the sale to lower the cost of the new MSC building. The sale would allow the city to avoid roughly $37 million in deferred maintenance costs on the existing MSC, according to a 2018 estimate.

A new MSC building would also bring the city administration closer to City Hall. 

The city would lease the existing MSC from Third Lake Partners until the completion of the new MSC.  Third Lake Partners would also purchase city-owned property at 461 Second Ave. N. to build an apartment complex. The apartment site was appraised at $5.85 million. 

“We’re potentially leaving $20 million or more on the table,” Councilmember Robert Blackmon said, explaining the influx of the market and the need for fair-market value.

Blackmon said he has the utmost respect for Darryl LeClair, president and CEO of Echelon, the development group that is working with Third Lake Partners, calling LeClair one of the best builders he knows. 

However, Blackmon asserted the deal needs more scrutiny. 

Mayor Rick Kriseman’s administration is coming to a close and the council wants to maximize the potential of the sale of the MSC. 

“It’s like we are spiking the ball,” Councilmember Darden Rice said. 

City council members also discussed the affordable housing component for the planned apartment complex. Third Lake Partners originally had slated 20% of the units to be affordable housing, but it increased to 31%. 

As for taking over the existing MSC site, Third Lake Partners would lease it to the city while the new 120,000-square-foot-plus MSC would be constructed. Third Lake Partners would then either keep the existing, deteriorating MSC building and renovate it to create Class B office space or demolish it and build an entirely new development. 

“In order to do this and take efficiencies into consideration, we are building all of this in one shot,” said LeClair, explaining how the build of a new MSC and apartments would happen simultaneously. 

Prior to the council’s decision to move the discussion, St. Pete Mayor Kriseman tweeted, “Today is our chance to move forward on a much-needed new Municipal Services Center for our employees and the public …This is a chance for more housing affordability, and updated office and ground retail at the current MSC.” 

The process of creating a new MSC started in 2019 when the city received an unsolicited offer from New York-based Property Markets Group for construction of a new MSC and apartment complex on the city-owned parcels on 2nd Avenue North, and purchase of the existing MSC.

In response to the offer, the city solicited alternative proposals and received multiple qualified alternative proposals. After review and consideration, Kriseman selected Third Lake Partners. 

The city has been working on a term sheet and development agreement with a joint venture between Third Lake Partners and Echelon. 

RELATED: New Municipal Services Center would be a financial win for the city, administrator tells committee

The existing MSC was constructed in 1925 and houses city offices such as billing and collections administration, code compliance assistance, construction services, economic and development services, finance, and real estate and property management.