Orange Station on the Edge, a sprawling mixed-use development under construction on the site of the former St. Petersburg Police headquarters, is receiving $3 million from Pinellas County to create office space.
While Orange Station lies within St. Petersburg city limits at 1301 Central Ave., and Pinellas often invests in affordable housing projects through land leases that ensure an affordability period of 99 years, Pinellas commissioners approved the funding during the June 21 board meeting under the Penny for Pinellas Employment Sites Program.
The $3 million in Penny tax dollars will go to Edge Central Development Partners, LLC, to assist with infrastructure and development costs for 50,000 square feet of Class A office space. The county lists the total cost for the expansive office building at approximately $20 million.
According to county documents, the Orange Station project “is the first speculative office space to be delivered in downtown St. Petersburg in 25 years in a market with currently only a 5% vacancy rate in Class A office space.”
Commissioner Karen Seel said that while it is “extremely rare for government,” it would be nice for the developers to repay the county or allow it to invest in other companies if the project is successful.
“So, almost like a ‘clawback,’” added Seel. “I’m sure that’s probably not possible, but it was just an idea.”
Teresa Braydon, business development manager for Pinellas County Economic Development, noted that in addition to the 50,000 square-foot building during the project’s first phase, the second phase calls for the creation of additional office space.
She said that is “very, very beneficial – especially for our team,” as it is in “desperate need” of office space.
“That’s the other part, I guess, that puzzles me,” replied Seel. “There’s no Class A office space. You would think that this would be extremely attractive to the market.
“Why should we be investing in it since it would be extremely attractive to the market.”
County Administrator Barry Burton replied that he repeatedly hears that phrase, but income from renting office space is not enough to encourage developers to build in the first place. “That’s the reason for that gap,” he added.
A key aspect of the funding, said Burton, is that if the first phase of the project is successful, future buildings would then require fewer subsidies or no additional money at all.
“This is not a continual subsidy that will be available forever,” said Commission Chair Charlie Justice.
In addition to the $3 million in Penny money for the office building, the City of St. Petersburg has contributed $8 million for a parking garage, $550,000 for land acquisition and $450,000 for demolition. According to county documents, the total project cost is $101 million, with $12 million allocated from government funding.
According to a statement from Cushman & Wakefield of Florida, the project cost was increased from $338 per square foot of rentable space to $399 over the last year. Including other increases and annual operation costs, the required full-service rental rate to generate industry-standard returns is now $47.25 per square foot.
The office leasing and marketing group wrote that forecasted achievable market rental rates for the project upon its completion in late 2023 or early 2024 are $39.50-$40 per square foot, resulting in a gap of $5-$7.
“The requested funding will reduce the overall project cost to a level that will generate industry-standard returns at market rental rates,” concluded the statement.
The funding program for commercial uses stems from an interlocal agreement between Pinellas and its 24 municipalities. Approved on Aug. 1, 2017, the agreement states that the county would allocate 8.3% from the 2020-2029 infrastructure surtax to countywide investments in Economic Development Capital Projects and land acquisition to support affordable residential housing as authorized in Florida statutes.
The county provides Penny IV Funds through an extension of the Infrastructure Sales Surtax, a 1% sales tax approved by 83% of voters on Nov. 7, 2107. The ballot initiative included the language that “capital projects to support economic development” was a permissible use of funding.
The Orange Station at the Edge development will consist of five separate buildings. In addition to much-needed office space, the project calls for 61 condominium units, 10,000 square feet of retail space, a 600-space parking garage that adds 4,000 square feet of retail on the ground floor and 42 workforce rental apartments.
According to county documents, the 42 workforce units will adhere to affordability standards at or below 120% of the area median income (AMI). Phase two of the project calls for an additional 60,000 square feet of office space – or a boutique hotel.
The county administration recommended the funding approval due to the project aligning with the overarching goals of the Employment Sites Program. County documents state that the development will exist in an Urban Activity Center and within a Target Employment Center overlay.
“It provides the county with new office space that is expected to be quickly absorbed due to the low vacancy rates within office structures at this time,” concluded the staff recommendation.
County Commissioners unanimously approved the $3 million in Penny funding for Orange Station, which is currently under construction and expected to open by 2024.
Here are some of the latest restaurants (and more) to open in St. Petersburg, and…
A weekly roundup of local real estate deals. The Bullards buy Sundial garage Local…
Supreme Court rulings and bipartisan breakthroughs will do little to diffuse the heated arguments about…