Memphis developers in for ‘a long rest of the year’
After delays in some of Memphis’ major projects were detailed in local news outlets, Downtown Memphis Commission President Jennifer Oswalt on Tuesday discussed the hardship developers face in a financial ecosystem altered by the coronavirus pandemic.
In particular, Oswalt touched on delays to Loews Convention Center Hotel and Union Row and gave a progress report on a planned $1.1 billion project in the Pinch District during a Tuesday morning virtual board meeting of the Center City Revenue Finance Corp.
The Commercial Appeal reported the delays for the Loews project last week while the Union Row delay was first reported in the Memphis Business Journal.
Both projects saw financing slowdowns as banks tighten lending in response to the pandemic.
“Obviously, new construction is last on the list with banks as they focus on their existing portfolios and stabilizing and dealing with all the (Paycheck Protection Program loans),” Oswalt told the board during her president’s report. “It is a challenge.”
Still, she emphasized, every major project that has already been announced is moving forward despite those challenges.
Oswalt told the board that Union Row developer Kevin Adams is reevaluating which parts of the project will be built during what phase.
Construction is still expected to begin before the year is out. Loews is considering redesigning parts of its project and work is continue to relocate util
ities to prepare for construction as financing agreements that were expected to be finalized in the fall get pushed to early 2021.
“We're cautiously optimistic,” Oswalt told the board. “The good news is that this hit when so many of our larger projects were early in planning and so it's not like the were expecting revenue during this time. Just know that is it a challenge and a lot of things are being reevaluated — certainly still moving forward but just reevaluated.”
Oswalt went on to say that it would likely be “a long rest of the year” for developers but she still expects new projects to be announced and development to continue.
So far, the biggest hurdle for the Pinch District project led by New York developer Tom Intrator is still the “extremely old” utility infrastructure in an area of what is currently mostly parking lots but, if Intrator can realize his vision, will one day hold apartments, hotels, office space and retail.
Another four weeks of work is needed to determine the full scope of the work before a formal development agreement can be finalized.
Board focuses on diversity amid slowdown
With many projects slowing down, CCRFC board members asked the Downtown Memphis Commission to keep a watchful eye to make sure developers continue to meet their spending goals with minority- and womenowned firms.
The subject came up — also during Oswalt's president's report — because a specially-called meeting on the topic planned for Monday was canceled.
Oswalt said the meeting was canceled because updated spending statistics were not yet available. Several board members, however, insisted it be quickly rescheduled.
“If we're realistic and we want to make a dent, we've got to get dialogue going,” said Sean Norris, a CCRFC board member, adding that now was the time to discuss how their board could combat systemic racism. “We need to meet, we need to engage and we need to get this going.”
Had the meeting occurred, the committee would have discussed a DMC diversity spending policy that initially required a spending plan that included minority- and women-owned businesses be submitted with incentive applications.
A revision to the policy could mean that plan did not need to be part of the application but would be necessary before a developer started to see benefits from a payment-in-lieu-of-taxes (PILOT) incentive rather than before the incentive was approved.
Generally speaking, a PILOT cuts a developer's property tax obligation by about 75%.
“In practice, as the projects grew and got more complicated, (developers) could not provide that at the time of the application,” Oswalt said. “They were just not even sure until they were approved if they have a project. We changed that to be the actual practice, which is once you are ready to close your PILOT and you have your financing lined up, and at that point you have fully vetted what you're going to build and you know what trades that will include and what professional fees, that's when we require it.”
Norris said he thought having a preliminary plan could be included with the application with the understanding that a final plan would be due later seemed like a better compromise.
That meeting to discuss the possible change will be rescheduled before the end of the month. Oswalt also encouraged board members to look for economic development policies in other cities that have been successful at addressing equity and diverse spending to see if there were other ways to meaningfully change DMC policies.
Desiree Stennett covers economic development and business at The Commercial Appeal. She can be reached at desiree.stennett@commercialappeal.com, 901-529-2738 or on Twitter: @desi_stennett.