Divestment of Pascalis project properties, a short history of the Pascalis properties, and the question of future allocations of property sales proceeds. 

(Update: The final RFQ is available here. The two key changes are that Warneke Cleaners was added to the bundle of properties to be marketed, and the portion of the Beckman Building on Laurens Street, SW was removed from the list).

by Don Moniak
December 11, 2023

Aiken City Council will hold its final work session and regular meeting of the calendar year tonite, at 111 Chesterfield Street, South. The Work Session begins at 6 p.m. and has a single agenda item—an update on the stormwater runoff induced “ravine” along Hollow Creek in Woodside Plantation. Remediation costs for that project are presently estimated to be in the $2 million range. More details on the “ravine” issue are provided in this Information Release.

Also on the agenda is a closed-door Executive Session, an event that has become routine, whether justified or not. More information on the this scheduled Executive Session, and a less justifiable session held on September 11th, is provided in this Executive Session Background article.

But it is the last agenda item of the regular meeting, a draft Solicitation for Real Estate Services for the Pascalis project properties, that will draw the most interest.

Introduction to Divestment Agenda Item

The last official action, other than adjournment, of the last scheduled Aiken City Council meeting for this calendar year, will involve the future of five of the seven AMDC-purchased and City-owned Pascalis project properties—the Hotel Aiken, Holley House Motel, the McGhee Building, Taj Aiken Restaurant, and a portion of the Beckman Building on Laurens Street. 

Also at issue is the future of seven businesses that are currently City of Aiken tenants. Taj Aiken Restaurant, Security Finance, and Flawless Glow Cosmetics are tenants in properties to be put up for sale. Warneke Cleaners, Vampire Penguin, and Ginger Bee are tenants with an entirely unknown and uncertain future. Tenant Newberry Hall is currently in negotiations with the City of Aiken to purchase its property, an option built into its previous and current lease arrangement.

This very last agenda discussion and approval item is also the most awaited:

Approval of Solicitation for Real Estate Services for Property Located Along Laurens Street SW, Richland Avenue West and Newberry Street SW.”

The Solicitation is designed to facilitate the marketing and sale of four of the Pascalis properties and a portion of a fifth. Only one property, the former Holley House Motel, is eligible for demolition under the proposal; historic renovation or reuse is mandated for the other properties.

This draft procurement document, which is likely to be approved by City Council, shows that the City of Aiken is moving forward in divesting itself of its commercial real estate acquired to pursue Project Pascalis; and doing so by contracting with an experienced, professional real estate firm—which was noticeably lacking during the original Pascalis property acquisition process.

The history of the properties is outlined in brief in Part One of this article. The details of the solicitation are in Part Two, followed by the lingering questions in Part Three. 

Part One: A Short History of the Pascalis Properties. 

Tonight’s meeting will occur three years after the Aiken Economic Development Department wrote in its monthly report that it “continued to work with ownership and various suitors interested in acquiring and redeveloping the Hotel Aiken.” 

Between December 2020 and March 2021, the City of Aiken and its Municipal Development Commission (AMDC) first pursued a strategy, in tandem with private investors, that was articulated in the AECOM Master Economic Development Plan for the city of Aiken:

• “Engage in partnerships to assemble land/properties for redevelopment in target growth areas.” 
• “Explore options for property acquisition by the City/Aiken Municipal Development Commission of parcels that can be acquired, assembled, and developed for medium-to- high-density mixed-use, mixed-income residential development.” 

The AECOM report’s basis for these strategies and goals was that downtown has too many property owners:

“One of the major barriers to new development/redevelopment is fragmented property ownership. This makes it difficult for both public and private entities to assemble land for larger-scale redevelopment.”

For the original Pascalis project, several individual properties were combined into a single development area in March and April of 2021 by private investors WTC Investors LLC (Agent Ray Massey) and Aiken Alley Holdings LLC (Agent Ray Massey). The purpose of Project Pascalis was to demolish the historic buildings and redevelop the properties into a modern hotel, apartments, conference center, parking garage, and retail space. As shown in The Changing Views of Project Pascalis, that vision evolved over time but never deviated from the original purpose.

That property assemblage (Figure 1) consisted of: 

• The Shah Properties: The Beckman Building on SW Laurens Street, and the Hotel Aiken, Holley House Motel, Taj Aiken Restaurant, McGhee Building on Richland Avenue, and Warneke Cleaners at 113 Newberry St, SW.
• The Anderson property: Newberry Hall at 111 Newberry Street, SW.
• The Alley properties: 200 The Alley, 210 The Alley, Bee Lane Parking Lot, the State Farm Property at 121 Newberry Street, SW.
• The Aiken Antique Mall on SW Laurens Street, which WTC Investments attempted and failed to purchase. 
• The Brinkley Building portion of the City of Aiken’s former Municipal Building at 213 Park Avenue, SW. The entire Municipal Building was later added as a proposed site for the conference center.
• A portion of Newberry Street, SW, owned by the City of Aiken. 

The timeline of offers, transactions, and purchases is as follows: 

March 2, 2021: WTC Investments signed a Purchase and Sale Agreement (PSA) for the Shah Properties for $7.5 million, depositing $100,000 in earnest funds. 

March 15, 2021: Aiken Alley Holdings purchased the three Alley properties for $2,025,000. The newly formed investment group also was pursuing the State Farm building at 117 Newberry Street at the same time. (link)

March 17-22, 2021: The first Project Pascalis project announcement was made, although no details were provided; and WTC Investment’s development arm, GAC LLC, signed a predevelopment cost-sharing agreement with the AMDC—which was not publicly disclosed.

April 15, 2021: WTC Investments signed a purchase and sale agreement for the Anderson Property for $2 million, depositing $35,000 in earnest funds. 

April 19, 2021: The first Project Pascalis concept plans were completed—but not publicly released. They show a complex of four to five-story apartments, a hotel, and a parking garage; with a conference center and retail on the ground floors. 

April 30-May 6, 2021. WTC/GAC withdrew from its agreement with the AMDC and a series of negotiation meetings ensued between WTC’s Weldon Wyatt and city officials. (The decision for the City to obtain the properties via the AMDC is believed to have been made at a final May 6th meeting.)

May 22, 2021: The Aiken Chamber of Commerce took “assignment” of the Shah Properties PSA, and WTC was reimbursed its $100,000 of earnest money.

June 3, 2021: The Chamber took assignment of the Anderson property, and WTC was reimbursed its $35,000 earnest money.

June 8, 2021:  Aiken Alley Holdings purchased the “State Farm” property at 121 Newberry Street SW for $675,000. 

August 25, 2021. City of Aiken approved a $10 million general obligation municipal bond issuance to fund AMDC property purchases in the ~950-acre “Parkway District.” There was no public disclosure that a two-acre portion of downtown Aiken was under assignment to the Chamber of Commerce, with options for the City or AMDC to purchase. (Figure 2).
The bond issuance was made two months later.

November 9, 2021: Using funds from the October 25, 2021, bond issuance, the AMDC purchased the Shah and Anderson properties for $9.5 million.

December 27, 2021: Ray Massey, representing CTR LLC, signed a pre-sales agreement to purchase the city’s Brinkley Building for $750,000. City Council was presented with the proposed sale on January 25, 2022, but chose not to move forward. (Proposed Sale agreement begins at Page 256).

March 28 and May 9, 2022: Aiken City Council held hearings on an ordinance to privatize a portion of Newberry Street SW which the AMDC had deemed essential to the success of the project. The ordinance involved conveying city property to RPM Development Partners, in exchange for the Aiken Alley Holdings property at 121 Newberry Street, SW.  During this period, the AMDC announced the conference center location would be moved to 213 Park Avenue NW. 

September 14, 2022: RPM Development Partners terminated the contract. The AMDC followed suit two weeks later, calling it a “purported” contract. 

November 2022 to September 2023: In partnership with the Aiken Corporation, the City pursued plans to locate the Savannah River National Laboratory (SRNL) “Workforce Development Center” on all or parts of four of the Pascalis properties. Highlights of the partnership included the January 23, 2023 announcement, and the March 13th approval of a $250,000, no-bid, predevelopment contract with Aiken Corporation; with the architectural firm of McMillan, Pazdan, and Smith as subcontractor. 

September 25, 2023. The Aiken Corporation selected its own property on Newberry Street, NW, for the SRNL office complex, which by then was rebranded as a mere “Mixed-Use” spec buildings.

December 11, 2023: Aiken City Council to vote on draft Solicitation of Real Estate Services to be facilitated by the city’s procurement department.

Part 2: The Draft Solicitation for Real Estate Services.

The Draft Solicitation prepared by City staff, which is subject to City Council approval, is prefaced by the City Manager’s brief memorandum on Page 99 of the agenda.

“Council has directed staff to develop a solicitation document to select a real estate firm experienced in marketing property for adaptive reuse and renovation primarily fronting the southern side of the 200 block of Richland Avenue West. A draft document follows this memorandum for Council’s consideration.”

The date of this directive is unknown, but City Council has met in closed-door Executive Session several times in 2023 to discuss the sale or lease of these city properties. 

The opening to the Request is as follows: 

“The City of Aiken [City] is seeking a qualified firm to provide Real Estate Brokerage services to assist the City with the sale of property. The City desires to engage a licensed and successful commercial real estate broker to market and sell commercial real estate property owned by the City for historic renovation and adaptive reuse.” 

Prominent aspects of the RFQ include: 

1. The exclusion of two properties, Warneke Cleaners and Newberry Hall; as well as 2/3rds of the Beckman Building at 106 Laurens St, SW.  In regard to the latter, only Flawless Glow Cosmetics is listed, which is one-third of the ground floor shops in the historic Beckman Building. The Newberry Hall tenant holds a lease with the legal option to purchase that property, and are currently negotiating with the City to do so.

2. Historic renovation and adaptive reuse is mandated for all properties, except the Holly House Motel on Bee Lane constructed in the 1970’s:

“All structures on identified property must be purchased for historic renovation and adaptive reuse, with the exception of property located at 112 Bee Lane SW and identified as tax parcel number 121- 21-08-001. That property may be renovated and/or adaptively reused or demolished as the identified buyer sees fit; and the services required include: “Develop and implement marketing plans to sell City property for historic renovation and adaptive reuse.” 

Because of this provision, fifty percent of the bid award ratings will be based on the firm’s experience with marketing and selling historic properties and experience with historic property tax credits.

3. Properties can be offered singularly or can be consolidated:

Solicit purchase proposals for specific properties. Provide assistance as requested by the City, with post-contract due diligence requirements and closing.” 

4. Appraisals are required.

5. The contractor will represent the City of Aiken during site visits.

6. There are no deadline dates attached to the draft RFQ. 

Part Three: Lingering Questions

Why did this process take so long? 

On January 23, 2023, Mayor Rick Osbon promised a Request for Proposals for the Hotel Aiken within two months, a commitment made at the same time as the optimistic and hyped announcement of the SRNL downtown office complex project. 

There are a few factors beyond some expected bureaucratic inertia for the subsequent, eleven-month delay.  Among them are

1. Most of the properties were under consideration for the SRNL project until late September of this year, and it appears that even the Hotel Aiken was under consideration for the SRNL project. The Hotel Aiken Stabilization Report, from Bennett Preservation and Engineeering which was commissioned in late March of 2023, analyzed the option of repurposing the building for office use.

The Bennett report was not completed until September 21st, four days before the Aiken Corporation issued its recommendation to locate the Mixed Use/(SRNL) office building on its own Newberry Street, NW property.

2. The City of Aiken did not take official ownership of the properties until June 19th of this year. The process was delayed by at least two months when City Council chose an unexpected route. Instead of retaining the AMDC while transferring the commission’s properties and assets to the City, as proposed on March 13th, Council chose to dissolve the AMDC and have the properties automatically revert to City control.

What will the City do with the money?

The City of Aiken paid for the Pascalis properties with $9.6 million from a $25 million allocation of State of South Carolina plutonium settlement funds. The allocation specified the use of the $25 million for “Downtown and Northside/Hwy 1 Corridor Redevelopment and Development.”

The $25 million was one of the few plutonium settlement allocations that was vague in purpose; the rest of the legislative allocations for this region were for specific property developments such as industrial parks, and projects such as the new Aiken Technical College Nursing program building and the Barnwell County High School.

Will the City of Aiken choose to follow its traditional path of depositing property sales proceeds into its general fund? Or will it choose to return proceeds to its special plutonium settlement funds account? That issue does not appear to be on any present or future agenda.

Does the City have any choice in the matter? Did the intent of legislative language of “development and redevelopment” involve the option of buying and selling commercial real estate and using the proceeds—whether they sell for a loss or gain—to fund projects not intended by the legislative allocation?

This question arose during Council’s two hearings on the proposal to spend $15.5 million on the following:

$9.6 million to pay off the bond that funded the Pascalis property purchases.
$3.5 million for the “Northside Sewer Lift Station” project north of I-20 between Exits 18 and 22.
$3.0 million for construction of a new Fairfield Street Bridge.
$0.4 million to make up for the budget shortfall for the now “paused” Farmer’s Market/Williamsburg Street redevelopment project. (this line item was added for the second hearing on April 10th)

During the first Public Hearing on Feburary 13th, I asked:

“What are you going to do with the money that comes when you do sell some of these properties? Will it be returned to this fund or go to the General Fund?”

Linda Johnson of the Historic Aiken Foundation followed up on that a few minutes later:

“I wanted to follow up on the last comments that Mr. Moniak made. Regarding the fact that we got $9.6 million to use to pay off the bond, presumably sometime in the future we could recoup some of that by selling properties, etc. (We) would like to see the City make a commitment to set aside the recouped money for special projects, possibly something like more for the Northside, which did not really get a big part of the money. Maybe addressing historic properties that Council has heard about from other speakers tonight. Council could consider keeping any money the city gets back separate and using it for special projects.”

During the final hearing on the Plutonium funds on April 10th, I asked:

“If the property is sold to a private party what happens to the money? Does it get returned to the State? ….If the city pockets the money, what will it do with it? Is it legal to take state funds for a project, claim that project involves property purchases for the project and then sell the property for either a loss or a profit (after the project is cancelled?)”

On April 10th, Councilwoman Lessie Price unsuccessfully attempted to persuade the rest of Council to set aside $4 million of the remaining $8.5 million for Northside projects, as intended in the legislation. Her pleas were not only met with indifference, but two Council members chose to belittle the effort privately via text messages. In the end, only Councilwoman Gail Diggs joined Ms. Price in voting against the $15.5 million budget amendment, with the five other members voting in favor.