Clearwater is open to accepting scaled-down waterfront development as market shifts
By Breanne Williams
Tampa Bay Business Journal
Published: Apr 21, 2023

Clearwater will explore whether to accept a scaled-down version of a $400 million mixed-use project planned for two city-owned waterfront parcels next to Coachman Park — and has agreed to extend the developers’ due diligence until August.

New York-based Gotham Property Acquisitions and Palm Harbor-based The DeNunzio Group were selected by the city to redevelop the sites. However, the developers said the market has changed so drastically since being selected that the original plans are no longer viable.

After a lengthy conversation Thursday evening, Clearwater City Council gave staff the go-ahead to extend the due diligence period for the project until Aug. 31 and determine what an altered plan would mean for the city.

“We were pleased to have an open discussion with the city and the public about our proposed changes,” Dustin DeNunzio of The DeNunzio Group said following Thursday’s decision. “We look forward to working diligently with the city to bring the projects to fruition and deliver the most impactful developments in downtown Clearwater.”

At the former city hall site — the portion no longer financially viable — the group intended to build two residential towers with a total of 600 apartments and 40,000 square feet of commercial space. Voters approved the development via a referendum in November.

The development team told the city that skyrocketing interest rates, along with rapidly increasing insurance costs and flatlining rents, led to the team having to adjust their plans to make the project feasible. The new proposal includes:

Changing the residential project to one tower instead of two and reducing the footprint from 600 to 400 units, and reducing the retail space to 15,000 square feet

The parking garage will be only one level below grade rather than three levels below grade. The developers would also add above-ground parking and would have a total of 440 parking spaces. The parking ratio would increase by 10%.

Deferring the purchase or reducing the price of the city hall site. The two proposed options are: reduce the purchase price to $7.6 million, which will be paid no later than five years after closing, or retain the original purchase price of $15.4 million but defer the payment for 10 years at no interest.

The new proposal would also lead to the overall project timeline being moved up by two and a half years. Plans for the former Harborview Center — a 13-story, 158-key hotel with retail and restaurant space, a 1,000-person conference center and a 4,000-square-foot rooftop bar — remain unchanged.

City attorney David Margolis said he “absolutely believed” Gotham had been transparent in their conversations with the city but said that city officials were given a lot of information in a short period of time.

While many council members accepted the cause of the higher costs, others voiced concerns on how the public would respond to an altered plan since the original vision had been approved via referendum. Councilmember Kathleen Beckman also expressed concerns about the message it might send to other developers and partners, including the Philadelphia Phillies and the Church of Scientology.

“What signal are we sending to other partners that we are or may be in discussions with for public-private partnerships?” Beckman said. “We can be cornered and manipulated in the last minute? Are we OK with that?”

Mayor Brian Aungst Sr. pointed to several projects that have gone before council that were altered, including deals that also had a referendum. He said continuing negotiations is not committing to the deal but does allow the city to verify the information they’ve been given.

“I’m very confident our attorney and [Jennifer Poirrier, city manager] or whoever else is going to work with him in the negotiations will get to a point that we’re comfortable with,” Aungst said. “If by Aug. 31 — which I believe is the recommendation — we’re not, then we’ll shake hands and go our separate ways. No one here, especially me, is saying, ‘We want these guys so bad we’re going to give them whatever they want.’ That’s not the case.”

The adjusted project would still be activating an underutilized site, and Councilmember Mark Bunker said he believed it was better to go along with a project that would bring “some much-needed life downtown” and encourage other developers to bring their projects downtown “rather than completely abandon it.”

“This is the first step in seizing control of our downtown back from Scientology, and I think this is important,” Bunker said. “We spent a fortune on the park and the amphitheater; we want to have more people living downtown. And we’ve already heard from other developers that they want to bring projects in just a couple of blocks away from this. As disappointing as it is to see those changes, we are getting something worthwhile from it.”

With the shifting market, there is also a real chance the city won’t get a better offer, according to Councilmember David Allbright. He said the adjusted plan “was still a great project” and added that being able to successfully get 400 apartments in downtown would prove they could “actually do something in Clearwater instead of just talking about it.”

Council asked for milestones along the way to keep them updated on the conversations. If council decides to move forward with the changes, it will still need two public hearings to be approved.

Dustin DeNunzio of The DeNunzio Group is taking the lead on the hotel portion of the development, which does not have proposed changes. DeNunzio previously told the Tampa Bay Business Journal they are moving forward “quickly and diligently” and that everything is on track. However, he said the two projects are “really synergistic together.”