The master developer of Santa Fe’s midtown campus project on Thursday requested the city mutually end its exclusive negotiation agreement.

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.

(5) comments

Khal Spencer

I think we are stuck with this white elephant until we are beyond the pandemic and we see where the local economy goes. Last thing we should do is make a short term decision to stop short term pain while not looking at the long term goals.

That said, this should be a decision made on the basis of economics, not someone's pet project.

Stefanie Beninato

I am SO NOT surprised. Yes, the campus has been run down and with Public Works running the homeless shelter there you can expect lots more "we're working on it" for any type of infrastructure process. And speaking about process maybe a team of city staff should NOT have been the vehicle for selecting a developer--perhaps actual residents should have been involved. And the public sessions that the city had seemed not to be incorporated into the goals of the development anyway and were vague (we got to comment on infrastructure plans without knowing what types of development would be allowed.

NOW look to CHARTS (the so called truth and reconciliation non-committee). It will be a staff designed process with staff selection of facilitators. If you do not participate in every round of discussion you have NO chance of being on the committee that will be formed. Many groups can have their own first round giving them an unfair advantage since they can pick a time and date convenient to members.

And of course Webber's constant spin (we have a lot more information now--yeah about what? How hard it will be to get a developer. This one promised they had deep pockets and could weather the pandemic.

Paul Davis

I haven't gone back to check, but I have a distinct feeling that predictions last May that in January 2021, 400k Americans would be dead of COVID, and the daily new case load even in our county would have peaked in Dec at well over 100-per-100k would have been derided by you as delusional. I suspect even the idea that peak case load would be way over 100x what it was in May would have met with derision from you as ridiculous scaremongering. If not, I apologize, but there were definitely plenty of commenters here taking that position.

And now, January 2021 here we are. A far worse pandemic than anyone wanted to accept, and much, much longer to go until we (maybe) get back towards some kind of normal.

But somehow, the mayor, the council and this company was supposed to know that.

I don't think the planning process for the campus was satisfactory at all, but complaining that people should have seen this coming and acted on that is pushing it.

Stefanie Beninato

Is that a response to my post, Paul? I am not surprised the developer pulled out because 1. they were not going to be able to make it almost entirely into a big film studio location; the city has run the campus down and made it much less desirable with the homeless shelter and other uses there; and I don't know about you but I think if in May you thought it was going to be over by the fall, you were being shortsighted. As soon as the extent of the spread was known (which occurred before May) it should have been anticipated that everything would be disrupted until vaccines were available. It is the developer who assured the city it had the deep pockets to get through the pandemic. I am critical of a staff controlled process done in a backroom despite whatever guidelines they said they were following and the failure to take to heart the little input residents were afforded.

Donato Velasco

lets see if the city receives any funds that they have already put out, for this project..

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