A view from above of the former Madison Plaza retail site.
A view from above of the former Madison Plaza retail site.
The City of Madison has taken the next step toward seeing that a long-vacant commercial property on Madison’s hilltop is once again an asset to the community and no longer an eyesore.
The city’s Redevelopment Commission approved a resolution Tuesday to amend the city’s development plan allowing Madison to enter into negotiations with a Lexington, Kentucky, commercial real estate group to purchase the former Madison Plaza, at the intersection of Michigan Road and Clifty Drive, for redevelopment as both commercial property and multi-family housing.
Mayor Bob Courtney said the city hopes to achieve what Madison Plaza Group LLC (MPG) has been unable to do over the past five years — and for almost two decades before that — by agreeing to buy the property and recruiting its own developers for both the western strip of the parcel with frontage on Michigan Road as commercial/retail business and the previously unused and landlocked eastern wooded strip of the property for housing.
“This is pretty exciting. We have some work to do but the former retail center there has been vacant for far too many years,” Courtney said. “We want to develop that property so that it is not sitting vacant any longer. It’s become a bit of an eyesore over the last few years and we want to make sure we are bringing our economic development efforts to not only downtown but on the hilltop, too. It’s going to be a nice complement to the hilltop community, particularly as an addition to the major sidewalk project that we are in the design stages on for Clifty Drive.”
The resolution would give Courtney authority to negotiate with the seller to acquire the property by Feb. 21 and then close on the 22-acre parcel in six months if conditions of the purchase agreement are met — conditions that allow the city to back out if it has not secured a developer for at least the commercial portion of the site by that closing.
Courtney said if the proposal goes as planned — and the city has studied the site for years but began its latest efforts under the previous administration of Mayor Damon Welch with Courtney taking over in November — development should far exceed that which was stipulated in the terms of the previous deal.
“We need to basically lead the economic development activity there in order to insure that it happens,” Courtney said. “We are projecting that the steps we are taking now will lead to almost $40 million of capital investment in that property. So if this works the way we are designing it, we will far and away exceed the original agreement we had with the current owners of the property to where they would put $10 million of development into that site.”
Hoping that a cleared site ready for construction would expedite development, the previous agreement saw the city reach a deal with the owner to help finance demolition of the structure in 2015 with stipulations for $10 million in new development within five years.
With the deadline for that $10 million investment fast approaching — and MPG apparently failing to gain any traction at the site — the city saw an opportunity to once again step in and become facilitator. That new deal includes Madison buying the property for about $2.75 million — well under MPG’s $3.4 million asking price — and then using the city’s economic development resources to find buyers who will use the property to once again become an asset to the community.
“The seller has been good to work with and we’ve negotiated a substantial price reduction,” Courtney said.
He said with the city taking over marketing the site to potential developers, a more selective approach can be followed in the type and scope of development that goes into one of the busiest corners on the hilltop. He also noted that Madison’s ability to help provide infrastructure — such as access to Clifty Drive for the eastern portion of the property — could help fuel development of the landlocked and unused wooded portion of the property for multi-family housing.
Madison Plaza got its start as a strip mall and included department stores, a furniture store, pharmacy and various other retail shops and restaurants in its heyday, but as new development came to the hilltop and some of the tenants went out of business or relocated, the site began a steady decline.
Courtney said the risk to the city will be minimal in that the deal with MPG will stipulate that Madison does not have to go through with the purchase unless the city has found a commercial investor for at least the western portion of the parcel. He said Matt Wirth, director of the city’s new Department of Economic Development, will head up the effort to land that investor along with his office, the Redevelopment Commission and city attorney.
Meanwhile, Courtney said the city must move forward with adopting the amendment to the redevelopment plan — which requires both Plan Commission and City Council approval — to establish the financing mechanism through the Tax Incremented Finance (TIF) District to make all the rest happen. Courtney said the money spent on the property will be recouped through sale of the property to future developers and through the added value to the property from that development.
“Right now in its current state the contribution to the TIF District from a property tax perspective is nothing effectively,” Courtney noted. “Through the traction of this capital investment, we will be increasing the assessed value of that property which will actually create the revenue to the TIF District that will repay the investment into the property that we are making to begin with. So from our perspective the return on the investment will be quick and significant.
“Our approch to economic development is to support capital attraction that will happen immediately,” Courtney added. “We won’t enter into agreements where the city’s return on its investment is speculated to occur in a distant future.”
And unlike property being marketed and developed in the private sector, the city gets a say in the type of growth that will take place on a high profile hilltop corner.
Courtney, City Attorney Joe Jenner, Special Projects Manager Bob Cooke and Wirth have been in conversation with new development teams that are willing to commit significant investment at the site immediately.
“What we really like about it is when we control this property we control what goes there instead of being at the mercy of the current owner of the property to do whatever they want — which is pretty broad from a zoning perspective,” Courtney said. “Because we control the real estate, we can work with specific developers to bring specific development to both of those sites. It will be a mix of commercial and retail and housing. We think that’s the highest and best use for that real estate.”
“This project is the culmination of nine months of discussion and negotiations with the current owner and the potential new development teams,” said Wirth. “We are very excited to see this important reinvestment at the site, which is one of our best retail spaces in the city.”
“If we don’t do this, it could easily sit there for another decade,” Courtney added. “It’s literally been a blighted property I think for probably the past 20 years. If you remember what was there before the demolition it was a partially occupied, unmaintained, outdated retail shopping center. What we will bring in is a modern construction that will fill the needs of the community better.”