A redevelopment deal for downtown Durham fell apart. Why and what happens next.

·6 min read

Durham residents will have to wait a while longer to see a transformation of the old police headquarters downtown.

The Fallon Company has terminated its contract to buy the 505 W. Chapel Hill St. property for $9.25 million, abandoning plans to turn the property into a place to live, work, and shop.

The Boston-based company counter-offered to purchase the site for over $2 million less, with fewer of the features the city wanted, citing unexpected issues with the original proposal.

The City Council rejected the counter-offer last week and agreed to start a new bidding process.

“It’s very disappointing to be where we are,” Schewel said.

Negotiation and Fallon’s counter-offers

City officials began negotiating with Fallon in late 2019 to build retail and office space with 300 apartments on the 4.5 acre site. Eighty of the apartments would be permanently designated as affordable housing for residents making under 60% of the area median income.

The city also wanted to make money off the deal, through selling the land and local taxes.

Fallon’s agreement would have generated an estimated $1.8 million in property tax revenue over 10 years. It would have preserved the old police headquarters and created office space in the building, originally constructed for an insurance company in the late 1950s.

Zac Vuncannon, the company’s managing director for the Triangle region, said unexpected circumstances made it unfeasible for Fallon to move forward.

The existing building is more distressed than Fallon anticipated, Vuncannon said. And the COVID-19 pandemic “dramatically affected the outlook for office space,” adding even more uncertainty to the plan’s market value, he said.

As an alternative, the company offered to buy the site for $7 million and to turn the existing building into a residential-retail space instead of an office-retail space. The alternative maintained the proposed 80 affording housing units.

As a second alternative, Fallon offered to add 11 more affordable housing units, marked for 80% area median income. For this option, the company asked the city for nearly $800,000 in financial aid.

Overall, both counter-offers would have reduced the property’s value over 10 years by $3 million to $3.8 million. Under the original plan, the site would have been worth over $11 million.

Neither alternative would have opened up the building’s first floor as a public space or brought it closer to West Chapel Hill Street.

The city had given Fallon three extensions between October 2020 and April 2021 to evaluate the property before closing the deal, according to the city’s memo on the project.

Back to the drawing board

Stella Adams, housing chair for the Durham Committee on the Affairs of Black People, asked city leaders at a council meeting last week not to rush ahead with a decision.

“There’s nothing magical about making a decision within the next month,” Adams said. “There should be an opportunity for community groups and organizations to understand what is available. There should be an opportunity for other developers to put forward proposals.”

Tom Miller, the president of Preservation Durham, said his organization is pleased when affordable housing and historic preservation come together. But he expressed disappointment with any project that would reduce the city’s financial take.

“This is a valuable piece of property, and that value should be properly leveraged by the city,” he told the council members. “Your staff has done an excellent work and has kept an eye on that all the way through.”

Fallon’s counter-offer to spend less money on the site and to remove public access to the building’s first floor was a problem, Schewel said.

Council members asked to see more options.

Mayor Pro Tem Jillian Johnson appreciated the city staff’s effort to negotiate with Fallon, but the company’s new offer didn’t satisfy her.

“I don’t feel comfortable moving forward with it without first seeing if there’s another development team that could get us closer to what we really want,” she said.

Council member Javiera Caballero echoed the disappointment that Schewel and others felt. Her main priorities for the site are to build more affordable housing and preserve the existing building, she said.

“It is true that we have done a huge disservice in Durham about keeping our old buildings. We have torn a lot of things down,” she said. “We have not done the preservation that we need to, and so my opinion on that has changed over time.”

Council member Pierce Freelon noted how his late father, architect Phil Freelon, designed the fire-escape for the existing building.

He also suggested another option: removing the old police headquarters altogether.

“I definitely understand and appreciate the idea of historic preservation. But you know, as we go back to the drawing board, I’m really curious to see what a proposal — what else is possible if our hands weren’t tied by the insistence that that building remained,” he said. “Start with a blank canvas, so to speak.”

Re-considering Akridge?

Council member Mark-Anthony Middleton questioned Fallon’s reasons for backing out of the original plan.

City leaders chose the company over a proposal by Akridge — which offered to buy the block for $2 million more — partly because of Fallon’s connections and expertise, he said.

“Anybody who’s ever rode that elevator in the building, when the police department was in there, knows how bad a shape that building was in,” he said.

“I just find that curious, to me, that the level of expertise that was brought to bear — that was trumpeted would be brought to bear with this outfit — did not find some of these things out sooner,” he added.

He suggested giving Akridge another shot.

Akridge, based in Washington D.C., partnered with Durham-based New South Ventures on its proposal, The News & Observer reported.

New South Ventures was founded by Michael Lemanski and includes Dewayne Washington as a partner and Carl Webb as a principal. Its projects include the renovation of the 14-story historic N.C. Mutual Life building next to the old police headquarters, The N&O reported.

The City Council considered Akridge’s and Fallon’s offers in 2019 and unanimously picked Fallon after a recommendation from staff. Former Mayor Bill Bell also was a proponent of Fallon, The N&O reported.

“It just seems very organic and natural that if the first one doesn’t pan out, that you would at least take a look at the second one, if for no other reason, just to honor the immense amount of work that the staff has already done,” Middleton told The N&O.

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