Memphis Center City Revenue Finance Corp. at its Tuesday, June 12, board meeting approved a 20-year PILOT (payment-in-lieu-of-taxes) program for the restoration of the Chisca Hotel led by Main Street Apartment Partners LLC.
The organization also committed to partner with the Downtown Parking Authority to help develop the Chisca’s attached garage.
The Chisca is owned by the Church of God In Christ but is under contract with a local partnership group made up of chief manager Gary Prosterman and members Terry Lynch, Gail Schledwitz and J.W. Gibson, who officially joined the group last week. The group plans to convert the 99-year-old hotel at 272 S. Main St. into a mixed-use facility including multifamily housing, retail and parking – a project that totals $19.6 million.
“We’ve been working for a while to recruit J.W. to be on the team and we’re really excited to have him on the team because we think he brings a lot to it and helps make it happen,” said Paul Morris, president of the Downtown Memphis Commission.
The 20-year PILOT is an exception to current policy that caps CCRFC PILOT terms at 15 years. The benefit over the 20-year PILOT terms will save Main Street Apartment Partners $5.6 million.
Other projects that have been granted the 20-year PILOT in recent years include the pending Royal Phoenix Hotel project at Dr. Martin Luther King Ave. across from FedExForum and the renovation of One Commerce Square.
“No project we do is really routine, but these are exceptional projects,” Morris said. “Most of the PILOTs we give are far fewer than 15 even, and of course we reject some PILOTs before they even ever get to the board.”
The vacant Chisca property has been in dilapidated and blighted condition for the more than 20 years. Due to necessary remediation, Main Street Apartment Partners has worked with the Shelby County Assessor of Property for a current appraisal of $595,000.
The ownership group proposes to invest about $17 million in private funds to pay for the acquisition and development of the Chisca.
Prosterman said the group’s total acquisition from COGIC is $900,000. That price includes the lot across the street, which they’ve assigned as $200,000, and then the existing structure, garage and lots, which is $700,000.
Morris said the project has a $3 million financial gap between the cost of the blight remediation and the work to get the project to a point where it’s viable for private development versus the likely returns.
“Part of the way of bridging that gap is for the CCRFC’s capital fund to be called upon to acquire and improve the Chisca garage, which will then support the apartment project,” Morris said. “The specific resolution is modeled somewhat after the project we did with One Commerce Square – we acquired and approved that garage to make the renovation of One Commerce Square occur.”
The CCRFC committed up to $1 million of the PILOT extension fund for Chisca garage acquisition and improvement. The CCRFC will lease the Chisca parking garage to Downtown Parking Authority, which will sublease the garage to the ownership group.
The city has provided in its fiscal year 2013 Capital Improvement Project budget for the grant to the Memphis Center City Development Corp. of $2 million in connection to the Chisca redevelopment.
The next step for the DMC and Main Street Apartment Partners is to go back to City Council for the appropriation of the $2 million it pledged for blight remediation. The groups also have to go back to City Council and the County Commission to approve the DMC using its capital funds for the garage portion of the development.
Meanwhile, Main Street Apartment Partners has to find investors to fund the $17 million and to sign the personal guarantees to the bank that will make the deal happen.
“Part of that process includes getting the package together from the public sector so we can present it and sort of do a road show to investors,” Morris said. “We’ve had lots of discussions with potential investors and we don’t have the commitments there fully to do the project. So there’s lots of hurdles, both on the public side and the private side to put this whole deal together.”
The project’s design plans will have to be approved by the Memphis Landmarks Commission and the Historic Preservation Office of the State of Tennessee.
“If everything were to go perfectly and we were to get everything together, our optimistic hope is that construction could start first quarter of next calendar year if not before,” Morris said.