Property Markets Group wants to replace the St. Petersburg Municipal Services Center at Fourth Street and Central Avenue with a 1.5 million square foot mixed-use building.
While plans are still preliminary, the new building could have 100,000 square feet of office space, 100,000 square feet of retail, a 200-plus room hotel, 500 residential units and 1,000 parking spaces, according to a proposal sent to Mayor Rick Kriseman by Property Markets Group, a real estate development firm with offices in New York and Miami.
It would be one of two new structures developed by PMG downtown. PMG also has proposed a joint venture with the city to build a new office building on 1.38 acres of city-owned land on 2nd Avenue North between 4th Street and 5th Street. That building also would have 100,000 square feet of Class A office space, 220 rental housing units and parking.
“We are excited to partner with the City of St. Petersburg and create two great additions to the city’s growing skyline,” Jon Glickman of PMG wrote in the proposal, received Nov. 26 and made public Dec. 15.
The unsolicited proposal prompted the city to advertise for alternative plans from private developers. No alternatives have yet been received, said Alan DeLisle, city development administrator. Alternatives are due by 10 a.m. Jan. 31.
The offer comes amid a crunch for office space to accommodate growing and relocating businesses. “We’re losing deals because we don’t have office space,” DeLisle told the City Council last week in a discussion about EDGE Central, the $70 million mixed-use development that will replace the former police headquarters at 1300 1st Ave. N.
Housing that is affordable also is a big need, City Council member Brandi Gabbard and other city council members said during last week’s discussion.
Of the 720 total housing units in the two buildings PMG is proposing, about 33 of them specifically are identified as work force housing, for households that earn up to 120 percent of the area median income.
Joint venture details
The new structure that PMG proposes as a joint venture with the city would be on the north side of 2nd Avenue North, directly across the street from City Hall, which itself is undergoing a renovation. The land currently is a surface parking lot.
PMG wants to build a new office building and parking facility on the site. The office space would be located on top of a 500-car parking facility. There would be 220 residential rental units, 15 percent of them for work force housing.
Here’s how the funding would work, under PMG’s proposal:
• The city would sell the Municipal Services Center at 4th and Central to PMG for $12 million in cash.
• The city would contribute 1.38 acres of land on 2nd Avenue North that it owns to the joint venture to build an office building. The land is valued at about $10 million, PMG said. If additional cash is needed for office construction, the city would contribute that as well.
• PMG would borrow or raise $35 million to complete the construction of the new city office building and will act as developer and guarantor for the project. PMG would be responsible for the costs associated with developing the residential portion and the parking that goes with it.
• Once the building is occupied, the city would pay rent to PMG. The rent would have to cover the cost of the debt. For instance, if PMG has to pay 5 percent interest on $35 million, the net operating income from the office portion of the project and the parking associated with it would have to be $1.75 million, the company said.
• The city would pay below-market rent for up to five years, and could elect to buy the building from the joint venture at cost during that period. If the city doesn’t exercise its purchase option at the end of five years, the city’s rent would go to market rate and the building would be sold.
• Once the building is sold, the city would realize a return of its capital plus an additional 50 percent of the profit from the sale.
The project would be Property Markets Group’s entry into the Tampa-St. Petersburg market. The company made a similar push into South Florida in 2014, according to the Miami Herald.
PMG’s Florida portfolio currently includes the Waldorf Astoria Hotel & Residences in Miami, Echo Brickell, a boutique residential high-rise in Miami, and Muse, an oceanfront condominium in Sunny Isle. It also has properties in New York and Chicago.