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Penguins Ready to Start Residential Development at Old Civic Arena Site

As the Pittsburgh Penguins chase the Stanley Cup on the ice, they finally are ready to start another big quest off it — rebuilding the former Civic Arena site.
The team and St. Louis-based developer McCormack Baron Salazar have submitted a letter of intent to the Pittsburgh-Allegheny County Sports & Exhibition Authority and the city’s Urban Redevelopment Authority to start the first phase of a 1,000-unit residential development there.

They hope to begin construction of the first 255 units, 20 percent of which will be affordable to households earning 60 percent or less of the area median income, in early 2018. They plan to buy the 5 acres, including 1 acre of open space, needed for the first phase featuring two mid-rise buildings in October.
The first units — studios, one-, two- and a few three-bedroom — will be built along Crawford Street between Centre Avenue and the newly constructed Wylie Avenue in the shadow of the Crawford Square housing development.

At the same time, the team is talking with potential partners about a “destination” retail/​entertainment development on another part of the 28-acre lower Hill site that could include such things as a movie theater and an upscale bowling alley.

Partnering with the Penguins and McCormack Baron in the residential venture will be the AFL-CIO Housing Investment Trust, which will help with financing for the project.

he trust also has pledged to advance the portion of the development-related tax revenue earmarked for the middle and upper Hill under a Local Economic Revitalization Tax Assistance Act district set up on the 28-acre site.
In the first phase, that could conservatively amount to $1.5 million, said Ted Chandler, the trust’s chief operating officer. Overall, it could generate $25 million to $30 million in potential investment in the middle and upper Hill over the life of the development.
Furthermore, the trust and McCormack Baron are looking to provide $5 million each in New Markets Tax Credits for the neighborhood, assuming they can find a qualifying project.

“This is an exciting new phase in our quest to develop the 28 acres,” said David Morehouse, the Penguins CEO.

Mr. Chandler said the trust, a mutual fund formed by the AFL-CIO and owned by its union pension fund investors, got involved in part because it sees the former arena site as “one of the best opportunities to create a new mixed-income and mixed-use development in a big city in America.”

Until now, the Penguins have struggled to get the first phase of the residential effort started as they tried to work out issues involving housing affordability and possible site contamination with the city as well as a $5 million gap in financing for the project.

Under the letter of intent, the team and McCormack Baron will do more in terms of affordable housing than they were required to do under an agreement reached with Hill community leaders and local politicians in 2014, said Travis Williams, Penguins chief operating officer.

In the original deal, the affordable units would have been reserved for households making 80 percent, 70 percent, or 60 percent of the area median income for 10 years, Mr. Williams said. Now they will be available for those making 60 percent or less of the area median for 30 years.

“It’s a win, win, win all around the table,” Mr. Williams said. “Everybody is benefiting from this approach.”

Team officials hope to cover the financing gap through the use of low-income housing tax credits, which also allow for the deeper levels of affordability.
The trade-off is that 100 units could be lost of the 1,100 originally planned as part of the redevelopment, although Vince Bennett, McCormack Baron president, said the developer will make “every effort to get back to the original goal.”

Kevin Acklin, chief of staff to Mayor Bill Peduto and URA board chairman, said he had been in Harrisburg the past two days lobbying for the allocation of the 9 percent low-income housing tax credits needed for the first phase as well as for a second phase that will be done by a minority development team led by KBK Enterprises.

Mr. Peduto and Allegheny County Executive Rich Fitzgerald have made the tax credits a “top priority,” he said.

The mayor, he added, is pleased to work with other stakeholders including Mr. Fitzgerald and state Rep. Jake Wheatley and city Councilman R. Daniel Lavelle, both of whom represent the Hill, “to help deliver an affordable housing development on the lower Hill that will empower the entire Hill District community.”

In addition to the deeper levels of housing affordability, “We are pleased that the development will pursue the highest levels of [minority and women’s business enterprise] participation in the city, and will create tangible economic development opportunities in other areas of the Hill District,” Mr. Acklin said.

Mr. Chandler said the investment trust decided to advance funding in anticipation of tax revenue because of the significance of the envisioned link between the lower, middle and upper Hill.

One project the trust has its eye on is the proposed redevelopment of New Granada Theater, a onetime jazz hot spot, that the Hill Community Development Corp. wants to turn into a mix of uses, including retail, commercial and cultural space. It also has plans for apartments in the block.

“The vision for the New Granada Theater is really exciting when you think about what it means to the rebirth of the historic community there,” Mr. Chandler said. “Its a keystone project.”

Marimba Milliones, the CDC’s president and CEO, could not be reached for comment.

For the Penguins, the start of the residential phase gets back on track a redevelopment that lost momentum when U.S. Steel, faced with financial problems, dropped plans in 2015 to build a new headquarters at the site.

Mr. Morehouse said the team is now focused on getting the housing and the retail/​entertainment components started. That, in turn, may help to generate interest in office development. The Penguins continue to talk to potential tenants.

With the first land purchase for the residential phase not expected to take place until fall, the team will pay $75,000 this month to get another six-month extension before starting work. It will be the second of four it is allowed under its agreement with the SEA and URA.