To help get WestEdge's newest building under way, the city of Charleston agreed to lease 8,000 square feet for up to five years — but the deal is getting new scrutiny amid this year's mayoral race.
City Councilman Gary White, who is among several challengers running against incumbent Mayor John Tecklenburg, said the city made a mistake that could end up costing taxpayers $1.5 million.
"This was all agreed to in order to get the developer the leased space necessary in order to get financing to build," he said. "I believe that the city has no business helping developers build structures with taxpayer money that the city has no use for."
The new building under construction, known as 22 WestEdge, will include biotech research and other office space. The larger WestEdge project also has evolved to include apartments, shops, restaurant, cafes and a new Publix grocery store.
The city staff is evaluating how the city might best use the space and likely will return to City Council this summer with a plan, said Matt Frohlich, the city's deputy chief financial officer.
"We’re kind of working that out right now," he said. "Based on original approval, the city wanted to use it for incubator and accelerator space."
White and Councilman James Lewis opposed the deal when it went before City Council last year. White said even if the city is able to find a suitable tenant, that still won't make it a smart move.
"Even if they come up with a solution, that means they're just coming up with something to justify the ends, and that doesn't sit well with me," he said. "I argued hard against it, and unfortunately my colleagues saw the situation differently than I did."
Tecklenburg defended the deal Monday, saying, "I think the most important thing was to fulfill the original mission of WestEdge to make Charleston a center for science, life science and business development. This is the first building of the whole concept to accomplish the mission, and that’s why I felt it was so important.”
Frohlich said the city could lease all or part of the space to the Charleston Digital Corridor, which is seeking additional space until the Charleston Tech Center on Morrison Drive is completed.
Michael Maher, CEO of WestEdge, presented the deal to the city last year, and he noted the city's decision was key to allowing construction to start on 22 WestEdge, an eight-story, 155,000-square-foot office building.
He said, when that deal closed, the city received $1.3 million from selling the land for it, plus the building will provide the area with quality office space near its downtown medical district — space that ultimately could house 25 to 40 businesses.
"For that $1.5 million, the city stands to gain significant benefits both economically and economic development-wise," Maher said. "It's already a good deal for the city, if you will."
The city may sublease the space and may opt out of the lease if the building surpasses the 70 percent occupancy mark. Maher said that hasn't happened yet.
Until the 70 percent mark is surpassed, the city has committed to renting 8,000 square feet at $36 per square foot for five years, and the per square foot cost rises by 2.5 percent a year. That's about $288,000 for the first year and climbing slightly in later years for about $1.5 million total.
If that doesn't occur, the city's first monthly rent payment is expected to be due for the month of December, Frohlich said.
City Councilman Mike Seekings, who also is running for mayor, said the WestEdge project has evolved from its original vision. He voted for the lease, though he expressed concern at the time about the cost, calling it "a fairly expensive endeavor."
Of the city's pledge to rent space, he said Monday, "Did it help get WestEdge moving? Maybe. But if you look at it on paper now relative to the market, it probably isn't the best deal the city ever made."
The city also has worked with WestEdge's developers to advance money for infrastructure work, such as road and drainage lines, but Frolich said it expects to recoup that investment and more because the project sits in a special tax district that will funnel property tax payments into a special city account.
"The property eventually will increase the property tax benefit to the city,” he said. "Not only do you have the land being taxed now, but you have these multi-million dollar structures that are being taxed.”
Tecklenburg said 22 WestEdge is expected to generate $1.7 million for the city through the district's life, then more in later years.
"The best jobs for the future are the ones that are involved with higher technology and skill sets, and that’s what this is all about," he said. "This isn’t just some little real estate deal. It’s about our economic future.”
Other candidates in the mayoral race include City Councilman Harry Griffin, former City Councilman Maurice Washington, as well as residents Will Freeman and Sheri Irwin. The filing period is Aug. 5-19, and the election will be Nov. 5.