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URA 'taking a haircut' on Saks Fifth Avenue site to hasten private development

Tom Fontaine
| Thursday, Aug. 13, 2015, 5:26 p.m.
Rendering of a proposed parking garage and residential tower planned at the site of the former Saks Fifth Avenue department store at Smithfield Street and Oliver Avenue.
Rendering of a proposed parking garage and residential tower planned at the site of the former Saks Fifth Avenue department store at Smithfield Street and Oliver Avenue.

Pittsburgh's Urban Redevelopment Authority Thursday sold the former Saks Fifth Avenue and neighboring Downtown properties to developers for about one-third of what the agency paid.

“We are taking a haircut,” said URA Chairman Kevin Acklin, who is Mayor Bill Peduto's chief of staff and chief development officer.

Acklin said he was comfortable doing so because the planned development project is “potentially transformational” for Downtown.

A partnership including Washington County's Millcraft Investments and Downtown-based McKnight Realty Partners plans a 576-space parking garage with street-level retail, including at least two restaurants. That work is projected to cost $35.5 million.

Later, it would build up to seven stories of condos or apartments on top of the garage.

URA invested $6.9 million in the properties, which include a former Wendy's restaurant and a vacant lot, officials said. The agency's board of directors approved selling them for $2.25 million.

URA figures to recoup more of the initial investment, including a projected $2.25 million from selling air rights to the developers so they can build the condos or apartments.

“About 99 percent of our real estate sells for less than what we paid. That's the nature of the URA, to protect the real estate … in order to have the outcome that we want to see,” said Kyra Straussman, the URA's real estate director.

The ultimate benefit from the proposed development, Straussman said, will be residential development and increased tax revenue.

The URA board approved a $7 million loan to the Millcraft-McKnight partnership that will be repaid over 21 years by diverting 75 percent of the parking-tax revenue generated by the garage. The developers would cover any shortfalls between diverted taxes and loan payments.

Using parking tax revenue to pay off the loan is contingent upon the developers completing the residential portion of the project within two years.

Brian Walker, chief financial officer for Millcraft, said the partnership plans to pick up a demolition permit Friday. Demolition would begin after the deal closes, anticipated by the end of the month.

Tom Fontaine is a Trib Total Media staff writer. Reach him at 412-320-7847 or tfontaine@tribweb.com.

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