VOL. 133 | NO. 165 | Tuesday, August 21, 2018
Crosstown Concourse Leaders Switch Financing
By Bill Dries
Crosstown Concourse now has permanent financing that replaces a complex mosaic of financing from dozens of institutions that allowed the renovation and readaptation of the 1.5-million-square-foot landmark.
“We are able to secure a very long term – a 20-year loan with 20-year annum, which means in 20 years the project will have zero debt,” McLean Wilson, co-leader of Crosstown, said on the WKNO/Channel 10 program “Behind The Headlines.”
The elimination of debt in two decades at a competitive interest rate gets the year-old concourse to sustainability after a construction and renovation process that assembled 32 different sources of financing. It also represents a significant change in how financial institutions view such projects, which have become the face of economic development in Memphis since the economy has improved.
“Five years ago, it was difficult trying to interest these financial institutions in New York and otherwise to think about Memphis at all and to get them to even have a conversation with us, much less get on a plane and come visit,” said Wilson, who assembled financing to begin work on the 20-years-dormant Sears Crosstown store and distribution center. “During construction banks just don’t want to take on the risk that they would have to step in the place of developers. But being able to prove what we kind of sold them on - which was this vertical urban village and our ability to lease up the retail, office and the residential - was a risk during development, during construction. But now that risk is more or less mitigated.”
Crosstown Concourse co-leader Todd Richardson says there are some clouds on the horizon, including the prospect that historic tax credits for such renovations and re-adaptations may not be as readily available from the federal government.
“It’s increasingly more pressure because, unfortunately, the incentives that allow renovating old buildings are coming under attack if you will,” he said. “New market and historic tax credits – but for those things Crosstown doesn’t happen. Those are federal subsidies to incentivize renovating old buildings and then renovating in low-income census tracts that need the development the most.”
So, Richardson said, the pressure to build new instead of renovating becomes more intense.
“Fortunately, in terms of development, we’ve moved to a time when everyone wants to be unique. It’s not about going to a strip mall where you can be anywhere in America,” he said. “It’s about being somewhere and you know you are there and you’re not anywhere else. The way that you can do that from a real estate development is to invest in the buildings that are in your city that have been there and help to define that identity. They are unique. They don’t exist anywhere else.”
Wilson said there is a concern about what happens around Crosstown Concourse and other hot spots in a city where construction cranes are not the most visible sign of economic development as they are in other cities.
“I think you have increasing demand and I think when there is increasing demand people from all around - not only locally but also nationally - want to participate and they want to participate quickly,” he said. “Our hope is that developers that come into Downtown or other places in Memphis are just thoughtful about what they are going to build and not just throwing something up to take advantage of the present day, but really thinking long term about not only the structure of it but the architecture and what it’s going to be and look like years in the future.”
That is a concern around the concourse. The concourse itself is surrounded by some property owned and leased by the separate Crosstown Arts organization, but other property is not.
“We made a conscious decision not to go buy a bunch of property early on and kind of by faith and by process let things evolve as they need to evolve,” Wilson said. “The way in which we curated the tenants and who we recruited, how we attempted to really allow the building to look and feel like Memphis as a whole … that was one of our ways in which we attempted to allow for a gentrification if you want to use that word in a way that was in keeping with Memphis.”
Richardson says Crosstown Arts leases 38,000 square feet in the area around the concourse, including offices they worked from while the concourse was under construction. And Cleveland Street’s commercial strip beyond the concourse is part of the Midtown overlay – rules and guidelines specifically for new development in the defined area.
“We’ve always seen the business corridor on Cleveland from the concourse to Overton Park Avenue as kind of the arms of the building,” Richardson said. “When we moved … we then subleased to UrbanArt Commission and Levitt Shell and a couple of artist studios, the Hi-Tone. A few other new tenants are coming in that buy into the neighborhood and the community aspect of it and want to keep it in character.”
“Behind The Headlines” is hosted by Eric Barnes, publisher of The Daily News.