The master developer of Santa Fe’s long-gestating midtown campus project on Thursday requested the city mutually end its exclusive negotiation agreement, citing financial risk and the site’s deteriorating condition as its chief concerns.
In a letter to Mayor Alan Webber and the city, Dallas-based KDC Real Estate Development & Investments/Cienda Partners outlined “challenges” to its development plan caused by the coronavirus pandemic.
“The complications and uncertainty caused by COVID and the government ordered shut-downs have created greater risk and cost to this redevelopment that neither Party could have fully anticipated,” KDC/Cienda wrote in the letter. “Given the challenges, extending time and risks outlined above, KDC Cienda respectfully suggests that the City and the Master Developer do not amend the ENA but instead mutually terminate [our agreement].”
In May, Webber and the City Council voted 7-2 to strike an exclusive negotiation deal with KDC/Cienda as the property’s master developer, but an agreement on a finished outline for the property had not yet been finalized.
The developer proposed a plan that included affordable housing, film studios and collaborations with a variety of partners, including Santa Fe Community College, YouthWorks, Christus St. Vincent Regional Medical Center and the University of New Mexico.
Webber said he and the City Council discussed the letter and potential avenues for the property during an executive session Thursday, and a decision will be made on whether to mutually terminate the contract on Jan. 27.
“I think the overarching reason was the change in our economy,” Webber said in a phone call after the meeting. “That includes things like a developer’s access to capital and the changing framework of work. Their proposal includes things like office space, but they don’t know in the future how many people will be going into offices. There are a lot of unknowns.”
The contract signed in May does make it possible for either party to terminate the contract; however, KDC/Cienda has sought a “mutual” termination.
According to the letter sent by KDC/Cienda, the entity raised concerns about how much risk it would absorb under the agreement compared to the city.
“In the final ENA, all of the financial risk for due diligence and planning was transferred to the master developer,” KDC/Cienda wrote. “Successful development will require an alignment of risk between the City and any developer.”
KDC/Cienda also noted that the site may require close to $30 million in public subsidies for “incomplete and obsolete” infrastructure, while buildings the developer expected to rehab or put to other use were deemed unfit.
“Due diligence has confirmed that the existing buildings have no commercial value,” KDC/Cienda wrote.
Webber said that despite KDC/Cienda’s concerns, he does not believe others will sour on the project.
“This relationship with this master developer yielded what we wanted — more information, a whole set of new factors that we need to take into consideration,” Webber said. “Now we need to digest that and come back with a new way forward.”
He added that other developers expressed interest in the site prior to KDC/Cienda being selected.
“We had other developers who asked to be considered for that role,” Webber said. “This group rated the highest. They were the ones selected, but we do have other developers who expressed an interest.”
The city purchased the campus — which once held the College of Santa Fe — from Christian Brothers of New Mexico in 2009 for around $30 million. The Santa Fe University of Art and Design was later brought in as a tenant but closed in May 2018.
The city is spending $2.23 million a year to pay off the purchase until 2036.