Raleigh staff recommends continuing hotel negotiations, affirms 160-unit affordable project at Moore Square

Ken Bowers of the Planning and Development Department summarized options for roughly 4 acres of city-owned land east and south of Moore Square and recommended continuing negotiations on the proposed hotel site while preserving an affordable-housing project already under way. The council voted to approve staff recommendations by voice vote.

Bowers told the council the parcels originally offered through an RFP issued in March 2022 total just under 4 acres — about 2.6 acres east of Moore Square and about 1.2 acres south — and include land around City Market, a parking lot, the old Esso station, the Norwood House and two Blake Street parcels. “The stuff in green on this map is land that the city made available for disposition,” he said.

The most advanced piece is a 160-unit affordable housing development led by Harmony Housing, which Bowers said “is in an advanced state of the process” and holds an option on the land. The project is a seven-story podium building on roughly 1.2 acres (about 140 units per acre) and is in development review; Bowers said all-in development cost is about $385,000 per unit and the city’s share of subsidy runs roughly $95,000–$100,000 per unit.

To help close a financing gap for the affordable project, staff urged the council to keep negotiating with the team that proposed a hotel on the south-side parcel. The hotel pad was appraised at $6.6 million for a 12‑story zoning envelope, but the developer’s initial offer was $4.5 million; staff negotiated a structure that would begin with a lump-sum payment at construction start and a ground lease with annual lease payments and a purchase option. Bowers said the developer proposes to meet most guest parking needs by leasing roughly 100–120 spaces in nearby city garages and decks.

Bowers said physical constraints on the south parcel — it is about 105 feet wide, while typical ramped parking decks require about 120 feet — make a hotel a plausible highest-and-best use because it can be parked on-site with a nonstandard approach. “There is a physical constraint here,” he said. “If you’re going to put a parking multi level parking structure on it, you have to use a different approach than is typical.”

On the east side, staff said the affordable component is moving forward but that market conditions have changed since the RFP. Bowers noted rents peaked in 2022 and interest rates have since risen, increasing development costs and lowering project valuations. He said the developer obtained an option on an adjacent privately owned “Hadley” parcel that could be assigned to the city; that option must be exercised by March 13, 2027.

Council members who spoke expressed support for preserving the affordable housing and for trying to activate the site. Councilor Harrison asked to confirm the affordable housing was proceeding regardless; Bowers replied, “We’ve committed, we have given Harmony Housing an option on the land. They’ll exercise that option when the project is funded and ready to go forward into construction.” Several councilors said they supported staff’s recommendation to continue negotiations on the south site and to pursue market analysis and possible reissuance of an RFP for the east site if necessary.

Bowers laid out next steps should the council decline the negotiated offer: place the property through the negotiated-offer/upset-bid process to sell fee-simple to the highest bidder, issue a fresh RFP with clarified parameters, or maintain the status quo. Staff recommended continuing negotiations on the south-side hotel parcel, pursuing a market study for the east side to assess feasible building height and timing, and continuing conversations with Raleigh Rescue Mission about a possible relocation that could improve assemblage and project viability.

During the meeting a motion to approve staff recommendations was made and seconded; the motion passed by voice vote. Council staff noted Councilor Mitchell Silver was absent and excused. The council did not set binding deadlines in the motion; staff said if the council accepts negotiated terms they would firm up agreements within 60 days and bring draft agreements back for manager authorization and future council action.

If the city moves forward with the negotiated south-side structure and the Blake Street parcel sale, Bowers said those proceeds might contribute roughly $4.9 million toward the affordable project but that staff still estimate about $11 million remains unfunded unless other land-sale proceeds or housing-fund dollars are applied. Bowers warned tapping the city’s affordable housing fund to fill the full gap would reduce funds available for 250–300 units elsewhere in the city.

The council’s approval sends staff back to the negotiating table on the south-side offer, directs staff to study market feasibility on the east side and continue outreach with Raleigh Rescue Mission, and preserves the Harmony Housing option for the affordable project to proceed into financing and construction review.