The pending sale of the former hospital property to Wayne Johnson, a Georgia-based real estate developer, has been delayed due to further negotiations.
Johnson still plans on purchasing the former hospital for $200,000, but now wants the additional six lots behind the building for free in exchange for demolishing the former hospital.
The original purchase and sales agreement, which was set to close May 31, stated that Johnson would purchase the hospital property for $200,000 and the six lots for their appraised value of $316,800. The original agreement did not include a requirement that Johnson demolish the old hospital building or develop any buildings on the land.
The borough assembly approved the sale of the hospital property and six lots under the original agreement in April.
Johnson has said he plans to develop 36 to 40 two- and three-bedroom condos on the combined properties.
A public hearing on the new agreement will be held at a special borough assembly meeting at 5:30 p.m. Monday, July 1, at City Hall. Final approval is up to the assembly.
According to the new purchase and sale agreement, if the demolition of the old hospital building is complete by June 30, 2026, Johnson will then receive title to the six lots for zero dollars.
The new agreement also states that if Johnson wishes to purchase the six lots before demolition is complete, he can do so for $60,000 per lot. If he does so, his payments will be refunded upon the completion of demolition.
Because the new agreement proposes selling the six borough-owned property for less than fair market value, it went before the economic development board in a special meeting June 19. The board unanimously agreed to recommend that the assembly get more information about Johnson’s plans through an in-person work session with the developer before approving the sale.
Board members agreed that they didn’t believe they had enough information from Johnson to make a recommendation to approve or deny the sale of the properties under his proposed new agreement.
Questions arose at the meeting about Johnson’s plans and why he renegotiated the terms of the sale.
Board members also pointed out that Johnson has never appeared before the assembly in person to present his plans.
From the borough’s standpoint, Economic Development Director Kate Thomas recommended approval of the sale because the borough would benefit from the demolition of the building and from the properties being added to the tax roll.
Thomas noted that in the original agreement, there was no way to require demolition of the old building without the borough being held liable in some way. But the new deal, which will give Johnson the six lots upon satisfactory completion of the demolition, allows the borough to ensure the building is demolished without being liable for any of the work.
Currently, the borough spends around $100,000 a year maintaining and insuring the property. In 2020, it was estimated that it would cost the borough roughly $2 million to demolish the old building.
Borough Manager Mason Villarma said June 19 in an interview that it would likely end up costing the borough closer to $3 million to demolish the building, which contains asbestos.
Thomas also noted that though she would love to have some sort of guarantee that Johnson would build housing or develop the land, the value for the borough is in saving the demolition expense.
The former hospital property has been on the market since 2022, with no real prospective buyers until Johnson.
Johnson said in an interview June 20 that he wants to renegotiate the price of the six lots because he anticipates the demolition and removal of materials from the old hospital building will be costly.
He said demolition will take 60 days, noting that the work could be done during the winter months. He said he hopes the demolition will be complete long before 2026, hopefully by the end of 2024, with construction beginning soon after.
Johnson added that before demolition, he will allow people to salvage any materials from the building in exchange for a donation to a community playground fund in Wrangell.
The $200,000 for the purchase of the hospital property, he said, is ready to be transferred as soon as the sale agreement is finalized.
Johnson said he planned to attend the June 25 and July 1 borough assembly meetings.
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