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Churches enjoy tax-exempt status. But religious organizations still have bills to pay for property maintenance, and sometimes it makes more business sense to sell off assets rather than pay for upkeep.
That's mostly why Christ United Methodist Church in downtown St. Petersburg reached a preliminary agreement with the DeNunzio Group and the City of St. Petersburg that will see DeNunzio acquire the church’s 0.65-acre parking lot. The DeNunzio Group paid $5.3 million for the lot, at the southeast corner of First Avenue North and Fifth Street North. The firm intends to develop an office tower there that will include ground-level retail, multiple levels of parking and some loft-style rental apartments.
“If we can do something that the city needs and wants and it works within our program for development, it doesn’t get any better than that.” Dustin DeNunzio, DeNunzio Group
The $100 million project, for which the development plan awaits final approval from the city, will include at least 40,000 square feet of non-retail office space, says Dustin DeNunzio, founder of the DeNunzio Group. That's in addition to at least four levels of parking that will be owned by the city but managed by the builder. Church parishioners will be able to park free of charge on Sundays. "It’s a true mixed-use concept,” says DeNunzio.
Adds DeNunzio: “We’ve already been getting a lot of calls and inquiries about office space, from some pretty big [potential] tenants. Demand is off the charts. It’s been very hard for larger companies to find bigger floor plates for new office space that has the necessary amount of parking and things like that. The more office [space] we can do, the better.”
In addition to a big move by the church, the deal also represents a shrewd move for Palm Harbor-based DeNunzio Group, in capitalizing on St. Pete’s status as a model work-live-play city.
DeNunzio, 42, says the Sunshine City boasts the ideal combination of culture, sports, nightlife, workforce, open waterfront and other desirable qualities his company looks for when it embarks on a multi-purpose projects like this. The firm is so confident of the city’s potential it has since acquired a second downtown parcel, at the southwest corner of Fifth Avenue North and First Street North, for $4.8 million. It plans to build a Marriott hotel, apartments and restaurant there.
The privately held DeNunzio Group declines to disclose its revenues. But Dustin DeNunzio says the company, which he founded in 2005, works on only a couple of projects at a time to keep its leverage low. It also has a presence in Boston and Cambridge, Mass., a market DeNunzio, a Harvard and MIT graduate, knows well and says compares favorably with St. Pete.
“Think about Austin, San Francisco, New York, Boston, Cambridge,” he says. “St. Pete is going to be talked about as one of the most desirable cities in the country to live in, in the not-too-distant future. You’re going to see it at the top of people’s lists.”
The DeNunzio Group, also building a waterfront hotel with rental apartments and marina in Madeira Beach, has formulated a winning strategy for getting projects approved in red-hot markets like Boston, Cambridge and St. Pete. In addition to building mixed-use, pragmatic buildings that meet multiple urban needs, the firm provides a financial incentive for local governments to give a thumbs-up.
In the case of the office tower in St. Pete, the company projects an 85%/15% split with the city on parking revenues. The DeNunzio Group would receive a majority share of the proceeds but be responsible for covering expenses.
The city, in turn, will contribute up to $9 million to the project and own the four levels of parking in a condominium-style arrangement, though DeNunzio says his firm might fund additional parking, depending on demand.
“After their initial investment, the city will not have any obligations for ongoing expenses,” he says. “We’ll be paying for the upkeep.”
St. Petersburg City Council approved the project’s initial term sheet. But DeNunzio still faces a long road before shovels can go in the ground.
“Every speed bump in the world can come up,” he says, “but we're going to talk to the community, work with the city and try to get a project that everybody likes. We're not looking to max out on height or density. We just want to have the best combination of things that’s going to make for a profitable project.”
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