Ben Schachtman: So Kelly. We’ve both been following Wilmington’s takeover of the Skyline Center since they bought the tallest building in Wilmington last year, and recently we’ve gotten an update from staff. But before we drill into all that, let’s go over the background on this story.
Kelly Kenoyer: Sure. So the city’s been spread across a lot of different office buildings for a long time — including Thalian Hall and, across the street, the massive offices at 305 Chestnut street, but the city also bought the United Bank building for $11 million dollars in 2021 to house some of its departments.
BS: That’s right — that purchase followed a needs assessment that showed they needed more room. And, although it hadn’t been publicized, city staff also knew that Chestnut Street building needed work, too.
KK: Yeah, 305 Chestnut was built in 1959, and it’s not in great shape, so they had planned to tear it down and build a new city center there – with inflation and rising construction costs, that could have run upward of $100 million.
BS: So, when the PPD building, which had been acquired by Thermo Fisher, went up for sale, $68 million seemed like a discount to city officials — especially since the city estimated it to be worth far more. Of course, the public didn’t necessarily see it that way, and were worried about taxes going up.
KK: It didn’t help that they were trying to keep it hidden from the public, either.
BS: Yeah – like a lot of real estate deals, buyers and sellers can be cagey. And, in this case, we came across a city email that should have been protected … but wasn’t. And, at that point, the cat was out of the bag. I think that, knowing a story was coming one way or another, the city tried to get in front of it by dropping the secrecy and trying to be transparent.
Related: Deep Dive — City of Wilmington considering $68-million purchase of Thermo Fisher building
KK: Initially, the city acknowledged a major purchase like this would probably mean a tax increase — but after some serious public pushback, staff promised the deal could be done without raising taxes. But… when the city manager rolled out his proposed budget earlier this spring…there was a significant hike, and many people, understandably, blamed the Thermo Fisher purchase.
BS: Right, staff’s explanation was that the tax hike was driven by other things — like the rising cost of payroll, which, it’s true, did increase. But at the end of the day, the city has expenses, and revenue, and I don’t think the fiscal shell game really won many people over. But, in any case, the building got bought, the budget was passed, so let’s get into where we are now.
KK: Right! So the city’s economic development director Aubrey Parsley told council during the last agenda briefing that most city departments have already moved into the building, 17 departments and more than 300 staff so far.
Aubrey Parsley: “They've happened at virtually no cost. And a lot of our folks did things like move their own belongings.”
KK: They’ve vacated seven buildings so far in that consolidation, but there are a few departments that haven’t moved yet. Here’s Parsley:
Aubrey Parsley: “The fact of the matter is, there are just some functions that we cannot shoehorn into the building, and council chambers is one of them.”
BS: So what will it cost to refit the building for those departments?
KK: They’re estimating $6.3 million dollars to cover that construction and retrofitting, maybe 10% more if they need to do it in multiple phases.
BS: So that takes us to about $74 million all in, to buy and move into the building. Still less than the $100 million they expected to spend on the old Chestnut building, but compared to the status quo for all the residents of Wilmington, I think there’s still some sticker shock.
KK: It’s worth noting that they did save $28 million in needed upfits for some of the buildings they left to move into Skyline Center. But their new city hall is really expensive to run. They’ve leased out part of it for $2.4 million annually, but that only covers 2/3rds of the cost to run the building.
BS: But they’re trying to lease out more of it to cover those costs, and of course, they're still trying to sell surplus properties to recoup some of that cost. Prior to buying the Thermo building, city staff estimated they could make back around $30 million from those surplus buildings and land. But, now that seems a little optimistic, at least in the short term.
KK: Yeah, as I reported earlier this week, they’ve had trouble selling some properties. The United Bank Building went up for bid last September, and didn’t get a single bid. They just signed off on a lease for the top floor of that building, though, and they’re hoping the new tenant may draw more interested buyers.
BS: Alright Kelly, thanks for this reporting.
KK: No problem.
