City of Lincoln
2005 Media Releases
Mayor Coleen J. Seng announced today that she has selected Heathrow Development, LLC of Lincoln to purchase the City-owned “K” Street storage building at 440 South 8th Street. Heathrow plans to renovate the former power plant for downtown residential housing.
“This project will put the ‘K’ Street building on the property tax rolls for the first time in its 75-year history,” Seng said. “It also is the kind of private business investment that will attract more private investment to the downtown.”
Heathrow principals Matt Maude and Katie Halperin approached the City last spring with an offer to purchase the building and renovate it into urban housing as called for in the Downtown Master Plan adopted by the City Council in September. Seng made the offer from Heathrow public in April and invited anyone else to submit offers of interest.
Three other developers submitted letters of interest. Two of the three also envisioned redevelopment of the building; the third offered an alternate storage site. After reviewing all four proposals, Seng selected Heathrow’s as the highest offer at $4.2 million and most advantageous proposal for the City to consider.
“Even if this offer was not on the table, the Public Building Commission soon would be looking for additional storage that offers more space and also meets today’s requirements for records management,” Seng said. “This purchase offers the chance to expand the tax base, sell a building at market rates and generate funds to address a growing public issue of what to do when the ‘K’ Street building is full and needs to modernized.” It has been estimated that the “K” Street building will hit capacity in the next few years.
In negotiations that followed their selection, Seng said Heathrow developers agreed to pay full market value for the building. The Mayor also stipulated that Tax Increment Financing (TIF) incentives would not be used. An independent appraisal of the building completed during the summer set the market value at $5 million, $800,000 higher than the original Heathrow offer for the building last spring. Property valued at $5 million generates about $100,000 in total property taxes, and the private improvements are expected to double the valuation of the building.
Heathrow proposes to buy the property in two phases. First, the firm would pay $3.7 million for the main portion of the multi-level building, which is six stories at its tallest point. The firm would then purchase the three-story west wing of the building for $1.3 million within three to five years. The west wing now houses four City offices, which would remain until the second phase begins.
The proposed sale will be presented to the City Council later this year. If the City Council approves a sale agreement, Heathrow would begin marketing the condominiums they intend to build. The transaction would be scheduled to close at a later date. During that time the City would work with the Public Building Commission to select an alternate storage facility to house the City, County and State public records stored in the building. The sale would be contingent upon successful marketing of the condominiums and successfully locating an alternate storage site.
In announcing the purchase offer last spring, Seng also said she would seek recommendations on how to meet the long-term record storage needs of the City, County and State, each of which occupy a portion of the “K” Street building.
At the Mayor’s direction, City Finance Director Don Herz convened a group that studied whether a sale of the building and locating replacement space would be cost neutral to the public. Herz, who drew upon the expertise of City, County and State officials, reported to the Mayor that the sale would provide enough revenue to pay off the remaining debt on the building and move the public records to another site. Herz also reported to the Mayor that storage space at “K” Street would reach capacity in a few years.
The “K” Street building was built about 1930 and served for 50 years as a municipal power plant. It was decommissioned in 1984. It was declared surplus property in 1987 by the City of Lincoln and sat vacant until 1994. At that time, the building was converted into a warehouse facility when the City, Lancaster County and the State of Nebraska entered into an agreement to use the building as a storage facility for public documents.
Mayor Seng, who was serving on the City Council and Public Building Commission at the time, said she supported the conversion of the then-vacant building into a warehouse for public records as a convenient use for the building. However, she said, in light of all that has happened since the September 11, 2001, attacks and other natural disasters, it might be better to house records away from the County-City Building. A disaster severe enough to destroy the County-City Building, such as a tornado, could destroy the large windows in the “K” Street building, placing at risk most of the original public records stored in the building.