VOL. 125 | NO. 197 | Monday, October 11, 2010
One Commerce Investors Want to Raise Tax Freeze to 20 Years
By Andy Meek
The Memphis investors who are buying One Commerce Square and, with the help of an incentive package from governmental agencies worth several million dollars, bringing Pinnacle Airlines Corp. to the tower want to extend a tax freeze they’ve been awarded for the project.
The investors will ask the Center City Revenue Finance Corp. next week to extend the 15-year tax freeze that’s been awarded up to 20 years. Karl Schledwitz, one of the investors behind the deal, has written a letter to CCRFC chairman Lucy Shaw explaining the reasons why.
To secure an intent from Pinnacle to negotiate a long-term lease at One Commerce, Schledwitz said the investors had to make “substantial and significant modifications” to their plans.
“In aggregate, these concessions exceed $2,500,000 over the life of the lease,” Schledwitz wrote.
He said the concessions include reducing the rent by 50 cents per foot on a 150,000-square-foot lease. That amounted to $975,000 over 13 years.
Schledwitz said the investors also had to remove two floors – 30,000 square feet – for two years from Pinnacle Airlines’ requirement. That resulted in a $400,000 loss of income.
And he said the tenant improvement allowance has been increased by $4 per square foot, resulting in an additional $600,000 of up-front costs. The investors also are providing 10,000 square feet for storage and common space to Pinnacle for no additional charge.
“These concessions became necessary for us to become competitive,” Schledwitz wrote, adding that the investors have now obtained a 20-year financing commitment and need to deliver a 20-year tax freeze to correspond with the loan.
“Ms. Shaw, as a former long-time member of the CCRFC board myself, I am intimately aware of the necessity that the board should limit its exceptions to 15-year PILOTs,” Schledwitz wrote. “I would hope that the board would concur that an exception for a project that lands a corporate relocation with over 500 jobs should merit a 20-year PILOT.
“In fact, a careful review of past PILOTs shows that virtually all of the buildings commonly considered Class A office buildings in downtown Memphis have enjoyed 20+ PILOT terms. This includes Peabody Tower, The Toyota Center, AutoZone, Morgan Keegan, Cotton Exchange and Brinkley Plaza.”