Southgate property sold

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CHAMBERSBURG—The Chambersburg Area Municipal Authority has purchased Phase 1 of the Southgate Shopping Center redevelopment project, which includes the part of the shopping center south of West Washington Street, including the large parking lot, the building formerly occupied by Gold’s Gym and the building occupied by various businesses, including China Wok, Metro PCS, Spot Laundromat, Menard Confident Multi Services, La Union Mercado and Restaurant, Family Dollar and Big Lots.

Background

Several Town Councils over the last few decades have explored the concept of redevelopment at the Southgate Shopping Center.

The 2007 Elm Street Neighborhood Plan included the concept of a public-private partnership to redevelop the shopping center into a new mixed-use neighborhood.

Over the last 14 years, since that plan was adopted by the Town Council and submitted to the Pennsylvania Department of Community and Economic Development in the form of a community goal, the current adopted Comprehensive Plan called for economic development in the shopping center neighborhood. Finally, Town Council adopted the shopping center redevelopment project as a priority when the 2021 Borough budget was approved in December 2020, directing staff to determine a way to fund such a project.

In 2021, Town Council approved a list of projects to utilize the Borough’s share of American Rescue Plan Act, Coronavirus State and Local Fiscal Recovery Funds. This Federal grant, with no local match requirement, will fund eight transformational projects in the Borough, including subsidies for low-income utility customers, landlords, restaurant owners, extensive improvements to the Borough storm sewer system, the purchase of a dilapidated warehouse on S. Fourth St. and the Southgate Shopping Center. These projects were important goals in the  2022 Borough budget that was approved in December 2021.

Moving forward

A Resolution was approved by Town Council in 2021 authorizing entering into an agreement to purchase the Southgate Shopping Center in two phases, with Phase 1 (between W. Catherine St. and W. Washington St.) to be purchased in early 2022 and Phase 2 (between W. Washington St. and Loudon St.) to be purchased by October 2022.

Town Council and the current owners, Franklin Southgate, LLC, reached a negotiated sales agreement to permit CAMA the opportunity to purchase the shopping center so it could be subdivided and resold to private third-party developers for redevelopment. In 2021 Town Council authorized the execution of an Agreement of Sale for the purchase of the property, for a total price of $4,500,000 for both phases, with the Federal funding to provide any necessary money to accomplish the purchase of Phase 1 and potentially all of Phase 2.

By using the Federal funding, CAMA is able to obtain control of the site, something no other private developer has been able to do for generations. This is as a result of the Borough obtaining the Federal grant which allows the project to make financial sense. The project is to be funded without any Borough taxes. In addition to no local taxpayer money being used, none of the Federal funding recovered through the resale of the site will need to be returned to the Federal government. Any money recovered by resale can be reprogrammed by Town Council for use at the shopping center or at any other eligible community and economic development project in the Borough.

Town Council, working with CAMA, organized in the 1940s to assist with, among other things, community and economic development, will use the Federal funding to move forward with a decades old community vision to redevelop the shopping center. The project’s goal is to create a new sustainable neighborhood that promotes a mixture of land uses to include housing, employment, retail and health care services while increasing the Borough’s tax base and utility sales. In February 2022, Town Council approved the attached realistic and market based concept plan, depicting a vision of what private third-party developers might build at the shopping center site.

The Borough and CAMA will not be the final developers. They are merely providing the conduit to sell the land to private developers.

It remains to be seen what will happen to the businesses at the shopping center as the site is redeveloped.

The Borough will manage the leases for those businesses, which are of various lengths of time, and have many other commercial lease attributes. While the businesses remain open and the shopping center redevelopment plans unfold, the businesses will continue to pay rent and taxes. The income from rent will help subsidize the planning process. Most of the leases make the tenants responsible for many things including ongoing maintenance of the stores and even the local property taxes. The businesses and commercial part of the shopping center will continue to be taxable property. The Borough and CAMA hope the large parking lot will become tax-exempt. Generally, public parking lots, such as the Borough-owned parking lot next door near CVS, are tax-exempt properties. The Borough will ask for the large parking lot to not pay taxes, but ultimately the decision will be made by a Franklin County board.

According to borough officials, in no way will the Borough, or CAMA, be the long-term owners or the developers of the shopping center site.

As authorized by Town Council, CAMA has begun the phased purchase of the shopping center, which still brings in significant rental income, and intends to sell it to a private third-party developer, or developers, to redevelop the land to generate additional tax and utility revenue for the Borough.

Moving the shopping center from its current status to a more beneficial use for the community has been a multi-decade goal of the Borough. The Federal funding provided Town Council with a choice to do this now with no local taxpayer funds. Staff is proud to have provided a business plan to allow Town Council and CAMA to make informed decisions about the purchase and redevelopment.

According to borough officials, the next step is for a prospectus document to be drafted for review and approval by Town Council and CAMA. The document will outline opportunities available for private third-party developers that wish to invest in the project, including specific opportunities to buy and redevelop lots within the shopping center. The prospectus will have minimum requirements for investors, to include obligations and rules that are standard in the real estate business. Investors would then have an opportunity to submit proposals to buy and redevelop lots within the shopping center.

Questions about the Southgate Shopping Center redevelopment project should be directed to Guy Shaul, Community & Economic Development Specialist, at 717-251-2446 or gshaul@chambersburgpa.gov.