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The Dive: Wilmington's Gateway Project falls apart due to affordable housing costs

An empty field with buildings in the background. This where the city had hoped to build the Gateway Project.
Johanna F. Still / The Assembly
The site in downtown Wilmington where the city planned to locate the Gateway Project

WHQR's Ben Schachtman sat down with The Assembly's Johanna Still to talk about the latest edition of The Dive, our joint newsletter. This week, we cover the collapse of plans for The Gateway project, a proposal for a massive mixed-use development at the entrance to Wilmington’s northern downtown area.

Just as construction timelines were about to formalize, Wilmington’s Gateway Project deal has fallen apart.

The city’s memorandum of understanding with the developer, East West Partners, expired Wednesday. And despite spending four years and six figures preparing for the massive project, the firm won’t seek to renew it.

When the city council declined to apply for millions in grant funding to subsidize the inclusion of workforce housing in the mixed-use proposal last month, members didn’t appear to realize that doing so would effectively kill the deal.

The vote to apply for the grant failed 4-2. In a statement Thursday morning, the city billed the decision to not pursue a development agreement as mutual.

For The Assembly, Johanna Still reports on what went wrong, and what lessons it has for future lofty public-private partnerships: Public-Private Pitfall

Read this week's edition of The Dive from The Assembly and WHQR here.

Benjamin Schachtman: Alright, Johanna Still, thanks for being here.

Johanna Still: Thank you, Ben.

BS: Okay, so this week, you broke some news in The Dive, our joint newsletter, about the end, at least for now, of Wilmington’s long-proposed Gateway Project — what's going on here.

JS: So the Gateway project is the City of Wilmington's dream for revitalizing the entrance to town on the north end. So when you come off of the Isabel Holmes bridge, there's this entrance into Wilmington, and the city has over the years and decades collected some parcels and they basically just sat dormant for a long time. And they hope to build something large, a landmark mixed-use, something that, including a public component, so maybe a visitor center, a grocery store, hotel, hundreds of apartment units, they had really lofty vision for what could happen in this area. They had a partnership with this development firm, East West Partners. And what we reported this week is that they had a memorandum of understanding with the developer — so this is something that you would do before you actually set some construction timelines, you kind of etched those in stone. They said it was a mutual decision, they allowed this memorandum of understanding to expire.

BS: So, we've been hearing about this project since 2019. I mean, this was going to be as you said, a major landmark project that would change the skyline of Wilmington’s riverfront development. And obviously, the project got slowed down like so many others during the Covid pandemic, but it was still kind of churning along in the background. And one of the conversations that the city had been having with the developers was about affordable housing, because initially there have been some conversations about 10, 20, even more, percent of the residential part of this being affordable housing. But you know, that's digging into the developer’s bottom line. And developers have to be able to make some money in order to take on a project. But there was sort of, you know, one final straw that broke the camel's back here, what happened there?

JS: So the city, last month, was considering applying for a grant to help offset the cost of building these affordable units. And so what the city was hoping for was 20%, that equals out to 60 units to be available for affordable housing, and they were going to apply on behalf of the development to the New Hanover Community Endowment for $4.5 million. And that seems to be just too much to bear for council, a majority of council voted against applying for the grant. And there were lots of comments during that meeting last month about basically this deal is just way too sweet for the developer, we can't be giving away the land, which is valued at, you know, at least $8.5 million, and give them through the endowment, a $4.5 million grant, it just felt like way too much. For the majority of council, they were just uncomfortable with the idea of giving away all of that, that really led to the dismantling, because from the developer's point of view, now the finances really don't make as much sense. And they're involved in, you know, this is a public-private partnership. And so if the developer was doing something on their own, they'd be calling all the shots. And so now there's all these strings attached, but the deal was lots of legal barriers they have to meet. And so that really led to things being not tenable, especially in this economic environment.

BS: So, four years, hundreds of thousands of dollars of planning, but for now, the project to develop the gateway to Wilmington is dead.

JS: The city didn't, you know, say specifically if they're going to immediately issue a new RFP, maybe they'll take a breather, you, we'll see how they handle it moving forward. But certainly they're going to be weighing these different economic times and how they're going to address affordable housing. And I mean, I think that it brings up an important question, is it even possible in this environment, I mean, I'm sure to some degree it is, but the difficulties seemingly are much higher now.

BS: Well, I encourage people to check out the newsletter for coverage of that breaking story. We've also got some coverage of one of the wildest public meetings I've seen in a long time as the local government commission finally approved New Hanover County's Project Grace, another project that has been long, long in the making, but for now, Johanna Still thanks for being here.

BS: Thank you, Ben.

Ben Schachtman is a journalist and editor with a focus on local government accountability. He began reporting for Port City Daily in the Wilmington area in 2016 and took over as managing editor there in 2018. He’s a graduate of Rutgers College and later received his MA from NYU and his PhD from SUNY-Stony Brook, both in English Literature. He loves spending time with his wife and playing rock'n'roll very loudly. You can reach him at BSchachtman@whqr.org and find him on Twitter @Ben_Schachtman.