Call it a crisis of confidence. It's what Greenfire Development could be facing as city officials consider whether to help fund what may be the company's most ambitious project.
Within the last 10 years, Greenfire, which is based in Durham, has purchased more than 900,000 square feet of property in or near downtown, including the SunTrust tower, Southbank and Liberty Warehouse. But some city officials have questioned Greenfire's ability to develop these properties; during the economic downturn, the company failed to launch several projects while allowing at least one other building, Liberty Warehouse, to degrade.
Now Greenfire officials say they've found a viable way to develop at least the SunTrust tower, the iconic building at 111 Corcoran St. that helps define Durham's skyline. Kentucky-based developer 21c Museum Hotels has offered to buy and convert the building into a 125-room luxury hotel, with a public art gallery.
However, the deal hinges on whether 21c Museum Hotels can secure tax incentives from the city and county. On Monday, Aug. 6, Durham City Council will hold a public hearing on the proposal, for which the city would contribute $5.7 million in tax incentives to reimburse 21c for renovation costs.
In the early 2000s, Greenfire founder Michael Lemanski began buying properties in and around Durham's central business district. At one point, the company owned more than 30 of them. Greenfire officials now say that if everything had gone according to plan, the redevelopment of those properties would have helped spur a downtown revitalization. Unfortunately, it didn't.
The company hit a wall in 2008 when the recession hit. City officials and local business-people criticized Greenfire, saying some of its decrepit holdings were a blight on downtown.
Greenfire officials acknowledge the company's shortfalls. With its stalled developments and the collapse of Liberty Warehouse roof in 2011, the company stumbled, says Paul Smith, Greenfire's managing partner.
However, the perception that the company is holding on to the properties with little regard for their condition is false, Smith says. "The company has been focused on getting these larger projects off the ground," he says. "We're not holding on to them for the sake of holding on to them. If we have a credible buyer who has a credible plan, we would absolutely sell those buildings."
That may not satisfy some city officials. While generally supportive of the 21c proposal, City Councilman Eugene Brown says the potential sale is an opportunity to force Greenfire to make "concessions."
The agreement would require 21c to purchase the building from Greenfire for about $5 million. Then, if council approves, the city would enter into a public/ private partnership with the new hoteliers, aided by $5.7 million in taxes generated by the hotel over the next 20 years.
To begin receiving incentive money, 21c would have to start construction by June 30, 2013, and complete it by 2015. Greenfire would keep a minority stake in the hotel.
With City Council approval as the carrot—and disapproval the stick—Greenfire needs this deal to get out from under the SunTrust project, Brown said. "We only have leverage over them until it goes through."
Brown won't detail the nature of the concessions and the leverage, nor will he discuss whether council will hold up approval of the deal. But given that Greenfire's properties are privately owned, the city's power to force the company into action are limited. Previous partnership agreements between the city and Greenfire have expired or been voided; the city has zero public money invested in Greenfire's holdings, say company officials.
City Councilman Michael Woodard says the city should remain patient as Greenfire tries to work through its financial and property issues. "That said, we're always going to have to ask ourselves at what point does our patience run out," Woodard added.
City officials could condemn Greenfire-owned properties that violate city code. In May 2011 city officials condemned Liberty Warehouse after the roof collapsed during a storm the month before. The city required Greenfire to submit plans to address the structural deficiencies that led to the collapse. City officials say that those plans have been submitted. Smith of Greenfire says roof repairs will be completed by October.
The city could not condemn Greenfire properties to force concessions out of the company. "We must do our due diligence and be cognizant of whether any of the buildings in the company's portfolio are a threat to public safety," Deputy City Manager Keith Chadwell says. "If we experience any abject failures down that road, then we would certainly pursue remedies to rectify."
Carl Webb, a Greenfire partner, says that none of the company's properties are in danger of being condemned.
Smith says Greenfire is rebounding from the difficulties it has experienced since the recession.
"We know our brand has taken some hits," says Smith. "But we're digging ourselves out."
This article appeared in print with the headline "For sale: SunTrust tower."