VOL. 127 | NO. 248 | Thursday, December 20, 2012
Bioworks Seeks to Restore Hotel
By Sarah Baker
Memphis Bioworks Foundation is working to renovate the old Holiday Inn building in Memphis Medical Center into a mixed-use facility.
Brandon Wellford, chief financial officer and director of real estate for Memphis Bioworks Foundation, said the vision is to redevelop the 12-story property with hotel space on the top; apartments for Memphis Medical Center students, staff and faculty in the mid-levels; and retail on the ground floor.
Restoring the long-vacant structure at 969 Madison Ave. near Pauline Street is expected to cost about $26 million. But the challenge is securing project financing by combining a slew of public incentives in order to make the deal as conservative as possible for banks in today’s market.
“You just have to figure out what these programs will fund and aggregate all of the pieces together,” Wellford said. Payment-in-lieu-of-taxes agreements “are frankly the easiest ones – if you create so many jobs and put in so much investment, you can get at least some relief on real estate taxes.”
Memphis Bioworks Foundation, at 20 S. Dudley St., is a nonprofit organization whose mission is to lead the collaboration between public, private, academic and government entities to accelerate the growth of the bioscience industry in the region. The property was quitclaimed to Memphis Bioworks Foundation in 2005 for $500,000.
Wellford said his group is utilizing a Brownsfields Economic Development Initiative that comes through Housing and Urban Development for $2 million of the project. That money can only be used for two purposes: acquisition costs and abatement and remediation of asbestos and the like.
Another portion of the project’s financing, about $4 million, will stem from the Section 108 Loan Guarantee Program. It’s also a program through HUD that is structured as a loan from the city.
“Any time (multifamily) turns, it’s immediately leased. With all the thousands of people and students that are right here in the Medical Center, they have no place to live.”
CFO and director of real estate, Memphis Bioworks Foundation
“The city is basically guaranteeing it on behalf of the project, and it gets repaid back to the city and the city repays HUD,” Wellford said.
In addition, Memphis Bioworks Foundation is working on a program through the federal government called ED-5, which brings in $1 million of foreign investment for every 10 jobs created. Wellford said in all likelihood, ED-5 equity would be about $6 million to $7 million of the project’s total capital.
“We figured there’s going to be at least 60 to 70 direct jobs,” Wellford said. “There’s sort of a question over how the indirect jobs are going to be calculated, but that could be at least double that number.”
Then there’s the possibility bringing in historic tax credits. Even though the building, built in 1968, is less than 50 years old, Wellford said there are some exceptions that they’re exploring.
Finally, new market tax credits are feasible, although those can only be used toward the facility’s hotel portion. Wellford said that component would translate to about $3 million in equity. Talks are also “well under way” with InterContinental Hotel Groups about putting one of their brands on the hotel.
“Even in the best of times, money for a hotel is some of the hardest to raise, but it’s even more difficult today,” Wellford said. “But the multifamily today is one of the easiest things to finance. We’re hoping by combining those two together, it takes away a little bit of a risk by having the multifamily component.”
Multifamily would certainly help satisfy a huge need for housing in the Medical Center. Wellford said many of the district’s neighboring apartment communities have 90-day waiting lists.
“Any time anything turns, it’s immediately leased,” Wellford said. “With all the thousands of people and students that are right here in the Medical Center, they have no place to live, except for going all the way Downtown or out East or in some other Midtown apartments.”
Wellford said the soonest date for the project’s financing to be pulled together is June 30, although it could take even longer than that. Once construction kicks off, he anticipates an 18-month timetable to completion.
The development group that Memphis Bioworks Foundation is working with has brought on John Pruett Architects, and “they’ve done some preliminary work on the plans,” Wellford said.