City Officials and Pittsburgh Penguins Reach Tentative Agreement on Development of Former Civic Arena Site

PITTSBURGH, PA (November 6, 2017) - The Pittsburgh Penguins and the Office of Mayor William Peduto today reached a tentative agreement that will kick-start $750 million of private investment through a private/public partnership to assure development of the former Civic Arena site.

The two parties agreed to amend the Option Agreement to eliminate obstacles in developing the 28-acre site on the Lower Hill. The amendment will be presented to the URA and SEA board meetings this Thursday.

“This agreement will pave the way for $750 million in private investment that will be truly transformative for Pittsburgh, creating a dynamic development that the region can be proud of – in addition to jobs, small business opportunities, affordable housing and community programs,” said David Morehouse, president and CEO of the Pittsburgh Penguins.

The development will include over 1,000 residential units (20 percent of which will be affordable housing), 500,000 square feet of office space, and 250,000 square feet of entertainment and retail. It will also include the highest levels of MWBE employment opportunities in a Pittsburgh development project. Among other benefits to the community, a LERTA program will generate more than $25 million to be re-invested in the upper, middle, and lower Hill District.

Infrastructure work on roads and utilities continues at the former arena site and is almost completed. The Penguins have retained major national developers McCormack Baron Salazar (retail) and Clayco (office), and have an agreement with a minority developer (for residential) that will be announced soon. The Penguins also are working on destination entertainment development and have worked with internationally-renowned BIG on an open-space plan. Beyond that, a new district energy plant that will service the development is currently being constructed behind PPG Paints Arena.

Under the terms of the deal, the Penguins agreed to forgo receiving the $15 million which was a credit under the original Option Agreement to be deducted as payment for land value – with any net amount payable by the public to the Penguins at the end of the option agreement. The credit was viewed by the parties as a significant obstacle to development, which led to unnecessary delays and difficult negotiations.

In exchange, the Option Agreement will be amended to eliminate the land valuation procedures and revise the internal development deadlines to match current development deals in place. The Penguins will be obligated to develop 6.25 acres by 2020, or they will forfeit a portion of parking revenue to be deposited in the Greater Hill District Reinvestment Fund (instead of the current risk of forfeiture of development rights under the current agreement). The forfeiture of parking revenue was pushed by the city to move the development forward more quickly, and would align the Penguins more closely with the public to cooperate together to pursue development.

“This has been a complex negotiation, and we reached an agreement that makes the Option Agreement better for the public,” said Mayor William Peduto. “The Penguins agreed to eliminate the public’s obligation to pay $15 million, and we agreed to reasonable adjustments to allow more flexibility to deliver development on site that builds more affordable housing and creates substantial value for the middle and upper Hill District, and for the entire city.”

The current option term will be extended by one year to October 22, 2025 and the Penguins retain the ability to pay for an additional two years of extensions. However, there will be no further extensions to the 2028 option termination date or 2023 parking revenue termination date beyond the terms of the current Option Agreement, so all proposed amendments are within the overall time and economic constraints of the original agreement.

The amendment also returns a development parcel to the URA and SEA to build a parking garage of up to 1,000 spaces on the 28-acre site (subject to a parking demand study), which will support the planned development and PPG Paints Arena. The public will retain title to the land, revenue from the net operations of the garage, and air rights to construct additional development on the first floor and on top of the garage. In addition, up to 10% of parking taxes generated by the garage will be contributed to the Greater Hill District Reinvestment Fund.

In addition, there are specific public commitments dedicated to solving environmental conditions on the site, financing additional infrastructure and collaborating with the Penguins on building affordable housing. The parties agreed to jointly prioritize low income housing tax credits for the development, and upon award of such credits, make 20% of the residential units affordable at 60% of area median income, which is a higher commitment than contained in the Community Collaboration and Implementation Plan adopted in 2014.

###