The Civic Center Plaza building that is currently Memphis Police Department headquarters is out of the running to be the site of a second convention center hotel.
“That site was contemplated in the beginning. It’s no longer in the running,” Downtown Memphis Commission president Jennifer Oswalt said of 170 N. Main St. on the WKNO/Channel 10 program “Behind The Headlines.”
Loews Hotels Holding Corp. and THM Memphis Acquisitions LLC are nearing the end of a due diligence period with the city for their plan to convert Memphis’ tallest building, the 100 North Main Building, and surrounding property into a convention center hotel complex with mixed uses.
The skyscraper may not be the convention center hotel itself, but the companies have pledged it will be used in some way.
Oswalt, who along with city leaders is working with the Loews-THM partnership, said the desire to have the hotel closer to the Memphis Cook Convention Center is still being explored.
Jennifer Oswalt
“They are looking at some of the land surrounding, sort of in between that building (170 N. Main) and my office,” she said of the DMC offices on the northeast corner of Adams Avenue and North Main Street. “That’s sort of the civic plaza.”
Meanwhile, NEC Realty and Capital Group still has plans to develop a boutique hotel at the northwest corner of Adams and North Second Street in the old police headquarters building across Adams from 100 North Main.
Oswalt said there had been some discussions between NEC and THM.
“They’ve talked, but there is nothing formal on them working together,” she said.
The tentative plans by Loews and THM include two towers to be built next to and south of 100 North Main that could include apartments as well as a parking garage with retail on its ground floor.
“Behind The Headlines,” hosted by Eric Barnes, publisher of The Daily News, can be seen on The Daily News Video page, video.memphisdailynews.com.
The convention center hotel plans come as the DMC’s Center City Revenue Finance Corp. continues to look for more apartments to increase density Downtown, and the Economic Development Growth Engine for Memphis and Shelby County – or EDGE – is in a trial period of property tax abatements specifically for multifamily apartment development outside Downtown.
“We’re trying to build a campus that serves our employees who are working Downtown and our residents, both of which have grown significantly recently,” Oswalt said. “But we are still not to a point where we have the density to attract a lot of the retail that we want. If you walk Downtown, you know there are still some pretty big gaps that we need to fill.”
EDGE has given four multifamily incentives or PILOTs – payment in lieu of taxes – in the trial period with a total of 10 projects being the limit before EDGE assesses whether to retain the program.
Reid Dulberger
The multifamily PILOTs are part of a larger debate about the tax abatements that are used to get businesses to relocate or build new headquarters or plants.
EDGE president Reid Dulberger said multifamily PILOTs are an answer to a 30-year drought in new apartment construction across much of the city.
“You can never actually answer the question if we waited longer,” he said of the argument that such development might come without having to offer such incentives. “Having waited since, in some cases the 1980s, to see growth of apartments outside the Downtown area, I think the argument was we’ve waited long enough – that we need to seize the moment. “Memphis has an opportunity to grow and the question is, are we going to be aggressive and go out and help make these things happen where possible or are we going to sit back and be passive?”
Multifamily projects are long-term investments for private investors, he said, who aren’t interested in projects that will lose money in the short-term.
“When you look at these projects and you analyze the numbers without assistance, they don’t make sense,” he said. “Some of them have negative return on equity without the assistance. Even with the PILOT the numbers really aren’t outstanding. These are long-term, build-and-hold plays.”
The CCRFC has more experience than EDGE with multifamily, having done more than 50 PILOTs for them in four decades of issuing tax incentives.
CCRFC’s experience also points to the difficulty of making rents affordable for the Memphis market. It includes a requirement that 20 percent of the units financed with a PILOT must be made available to renters who make 80 percent of the city’s median income.
“It’s a constant battle for our city to maintain affordability as well as serve all of the different needs of our residents,” Oswalt said. “We do have some people looking for a high-end apartment with high-end amenities – structured parking and all of these things. But we also want to be sure that we build a Downtown that’s for everyone so that our prices remain, at least to some degree and in some mix, available to all.”
City and county property taxes account for 15 to 19 percent of a monthly rent payment, Dulberger said, another factor that makes multifamily projects more difficult in the Memphis market because that 15 to 19 percent doesn’t go toward the cost of development.
“Yes, in a market where rents are essentially too low given our construction and operating costs, anything we could do to lower the cost is going to spur development,” he said. “Whether we are talking about residential, office space, even industrial space, the people who put capital at risk, the developers, will tell you lower taxes would help.”