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Pittsburgh's megaprojects progress ever so slowly

Tom Fontaine
| Saturday, Nov. 7, 2015, 12:02 a.m.
In this file photo, ground is broken for the Almono site in Hazelwood on Friday, Oct. 30, 2015.
James Knox | Trib Total Media
In this file photo, ground is broken for the Almono site in Hazelwood on Friday, Oct. 30, 2015.

Sluggish progress on Pittsburgh's largest mixed-use development sites — including a project on the former Civic Arena site that suffered a setback this week — is the norm, not a sign of cooling interest, observers say.

“Development takes a long time. You have to have a lot of patience and understand that you're going to hit roadblocks and have setbacks along the way,” said Gregg Perelman, CEO of Walnut Capital Partners, a key player in the revitalization of East Liberty and the surrounding area.

There, more than $1 billion in development has occurred, including Walnut's Bakery Square projects with hundreds of apartments and hundreds of thousands of square feet in office and retail space.

“Keep in mind, East Liberty has been in the building phase for about 15 years, and prior to that it was in the planning stage for about 10,” said Ernie Hogan, a former city planning commissioner who heads the nonprofit Pittsburgh Community Reinvestment Group.

The Great Recession complicated matters. Perelman said some retailers that were lined up for Bakery Square went out of business, forcing Walnut to find new ones.

Three of Pittsburgh's next megaprojects — $1.1 billion in planned development on a former Hazelwood mill site, more than $500 million on the former Civic Arena site, and more than $450 million on a 55-acre riverfront site in the Strip District — are years in the making, but buildings have yet to spring up.

Challenges range from extensive environmental cleanup to friction with community groups and political leaders. Struggling U.S. Steel said Thursday it was dropping plans to move its headquarters to the former Civic Arena site after announcing a year ago that it would.

“Typically, your anchor tenant doesn't back out, but typically your anchor tenant isn't a multinational steel company beset by a number of market pressures,” said Frank Gamrat, senior research associate at the Allegheny Institute for Public Policy, a Bethel Park group.

The Pittsburgh Penguins, which have exclusive rights to develop the arena site under an option agreement to buy the publicly owned land, insists the project will be a success. Chief Operating Officer Travis Williams said the project likely will start with residential development, possibly as soon as June. The team is in talks with potential office tenants to replace U.S. Steel.

Beyond U.S. Steel, the project has been met with criticism from neighborhood groups that pushed for more affordable housing and opportunities to benefit minorities.

Gamrat agrees the project has the makings for success, noting, “That's probably the most prime piece of real estate in this region — 28 acres just staring at that Downtown skyline.”

A partnership known as Almono LP, which includes Downtown's Regional Industrial Development Corp. and four local foundations, bought Hazelwood's former LTV coke works site in 2002 for $10 million. It spent another $20 million on environmental cleanup, grading and other site work, with help from $3.5 million in public money, said RIDC President Donald F. Smith Jr.

Smith said a now-ditched proposal to run a leg of the Mon-Fayette Expressway through a portion of the Hazelwood site caused delays. The highway project would have eaten up 45 acres of the 178-acre Hazelwood site. Almono recently started its own $27 million road project on the site, with support from $10 million in public money.

Grant Oliphant, president of The Heinz Endowments, one of the Hazelwood project's foundation partners, said the delay might have helped. The project calls for 2,700 housing units and 2 million square feet of office and light-industrial space, including room for research and development.

“That (delay) has actually worked in the favor of Pittsburgh. Had that site been developed early on, the standards would not have been as good and the uses might not have been as appropriate as they might turn out to be,” Oliphant said. “Developers will often tell you that they are as proud of the deals they didn't make as they are of the ones they did make.”

The Buncher Co.'s project originally included the Strip's historic Produce Terminal, but developing plans for the crumbling, 1,500-foot-long landmark proved costly and time-consuming and ultimately met fierce resistance from preservationists and some in city government.

Buncher originally sought up to $50 million through a public tax-increment financing deal to build infrastructure, but it withdrew the request because of city council objections and later walked away from a $1.8 million option on the Produce Terminal after Mayor Bill Peduto sought alternatives from other developers. The city's Urban Redevelopment Authority paid $640,000 to reimburse Buncher for its Produce Terminal-related expenses.

Buncher officials, who could not be reached Friday, are not seeking public money. The project's $60 million first phase could begin as soon as spring with construction of 365 luxury apartments. Plans for the Produce Terminal remain up in the air.

Oliphant predicts there is “enough distinctiveness between each of these projects that they will attract their own tenants and residents.”

“It used to be that we in Pittsburgh and the surrounding region were always struggling to find a silver lining in whatever was happening,” said Jerry Paytas, vice president of research and analytics at Fourth River Consulting. “There's always a risk, but this is the best our economy has been in a generation, so I think there is reason for optimism.”

Tom Fontaine is a staff writer for Trib Total Media. He can be reached at 412-320-7847 or tfontaine@tribweb.com.

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