The council purchased the facility for $2 million in December 2006 to transform it into a one-stop shop for human services.
The church brokered an agreement with the city that allowed it to stay on the property rent-free for six months after the close of sale with an option for an additional six months at $100 per day.
The original plan for a one-stop shop didn’t materialize in the interim.
During 2009 the city hired L.S. Johnston Architects of Austin to conduct a new assessment and feasibility study. Johnston’s recommendations combined social services with city offices and civic uses. The concept was presented to the council in June.
At a July 7 workshop Jamail Construction of Killeen presented the council with an estimate for renovations to the property of $4.3 million. Architectural and engineering services would be $320,000.
Mayor Tim Hancock said adaptive reuse would not only spark a downtown revitalization but would benefit the entire community.
“I support the plan for the church,” Hancock said. “I believe it will give the downtown and the whole area an economic and social boost.”
Hancock said plans are for the church sanctuary to be converted into an auditorium that could accommodate 700-800 people for stage plays, musicals, concerts and special events. A large room behind the sanctuary with an existing commercial kitchen could be rented for banquets and special events, he said. And the existing chapel could be rented for weddings, wakes, funeral services and religious events.
“We are spending $100,000 a year downtown to rent space for various city offices that could be relocated to the renovated church,” he said. “It could encourage shops, restaurants, boutiques and patio dining to move into the area.”
Council member JoAnne Purser said she has no problem with the viability of the use of the space.
“But I promised the taxpayers we would be frugal in how we spent their money and we need to really know what we are buying,” Mrs. Purser said.
She said she noticed that plans for an open-air produce market didn’t have an expense next to it.
“When I asked the contractor he said he had not figured that yet,” she said. “And the proposed contract with the contractor is open end - it’s cost plus. There is no cap on what it can be. Will it be $50 a square foot to renovate? Or will it be more? This frightens me.”
Mrs. Purser said she needs more time and much more information.
Council member Larry Cole said the plan isn’t a complete restoration.
“There is some renovation - moving of a few walls - but primarily they will work with what we’ve got.”
Cole, who is a real estate appraiser, said he has seen no letters of intent or signed leases from prospective tenants. The estimated rent role is $310,000 per year on triple net leases - meaning the tenants are responsible for maintenance in their suites. He said after management and common area maintenance the net operating income would be about $290,000 annually.
“With a capitalization rate of 10 percent that would put the income value of the property at about $2.9 million,” Cole said. “But we paid $2 million for it, gave the sellers $400,000 in free rent to occupy it after the sale, and we are proposing to spend $4.3 million on renovations. That’s $6.7 million in the project against a value of $2.9 million. It means we are $3.8 million in the hole.”
Cole said true due diligence is not complete because there are too many unanswered questions. His recommendation is to cut the city’s losses by selling it.
“If we financed a sale, we could sell it for less than we paid for it and recoup some of our losses through interest on the mortgage. And we might be able to sell the note later.”
Council member Billy Workman said he likes the concept of the proposed use for the property but can’t support the $4.3 million expense during a time when the budget is tight.
“And it could go to $7 (million) or $8 million, “ he said. “I just don’t agree with it.”
Mayor pro-tem Scott Cosper, and council members Kenny Wells, Fred Latham, Ernest Wilkerson and Juan Rivera could not be reached.
A vote to sign contracts with Johnston and Jamail and move forward with the project is on the agenda for the council’s regular meeting on Tuesday, July 14.
