Durham's county commissioners unanimously approved $1 million in economic incentives Monday for a subsidiary of Greenfire Development to redevelop the former SunTrust bank building—the tallest in downtown Durham's skyline—into a boutique hotel and spa. The money would be paid only once the hotel is up and running and would be spread over 10 years in $100,000 installments based on performance, said Deputy County Manager Carolyn Titus.
Greenfire Partner Steve Mangano told commissioners the group is working to finalize financing for the $54 million project, which will create about 165 rooms in the 17-story building. Greenfire has already secured a commitment of $4.2 million in incentives from Durham's city council and preliminary approval of $25 million in federal stimulus bonds to redevelop the building, which was built in the 1930s. If built out, the property will be known as the Spark Hotel, Mangano said.
The recovery bonds are part of the 2009 stimulus legislation and a way for private companies to secure financing at low interest rates for economic development projects in designated areas, which include the city of Durham. The bonds are sold on the market and the proceeds then become available to the borrower. The borrower, in this case Greenfire, would be solely responsible for repaying the bonds, and Durham's local governments bear no fiscal responsibility.
According to Mary Nash Rusher, a local attorney and bond counsel, more than $600 million in recovery bonds were allocated to North Carolina through the federal stimulus legislation.
The federal bond financing for Greenfire is contingent upon the approval of the N.C. Local Government Commission. According to current law, the federal stimulus bonds must be offered for sale by Dec. 31, although there is the possibility the federal deadline could be extended, County Manager Mike Ruffin said. Ruffin added that Greenfire is about $11 million from its financing goals.
Although the incentives for the project had previously met with public opposition when brought before City Council last month, no opponents of the project itself signed up to speak before commissioners, including other area hoteliers who previously had denounced the contribution of public dollars to the project. One speaker, Charlotte Woods of Concerned Citizens for Accountable Government, raised issues with the transparency of the incentives process. Another citizen, Allan Lang, criticized Greenfire for the failing condition of some of the dozens of properties the group has purchased to redevelop, and asked that the county hold the company accountable for the condition of all its properties when paying out incentives.
Most who spoke on the matter urged county support because of the high profile history and location of the building, at the corner of Main and Corcoran streets downtown, and because of the need for additional hotel rooms in downtown Durham.
John White, public policy director for the Greater Durham Chamber of Commerce, was one of several people who spoke in favor of the project, and mentioned that during the recent N.C. Central University homecoming festivities, the event's host hotel was located in Cary because there weren't sufficient lodging spaces in Durham.
"They ran out of options," White said.
Shelly Green, CEO of the Durham Convention & Visitors Bureau, added that Durham is more than 80 percent below national benchmarks for the number of hotel rooms built in a downtown area. Bill Kalkhof, Downtown Durham Inc. president also spoke in favor of the additional rooms, saying the additional rooms would be critical to drawing events to the Durham Convention Center and perhaps reduce the center's $800,000 to $1 million annual operating loss in recent years.
The Greenfire project was just one of two transformative projects highlighted in pitches to commissioners Monday. The other, the redevelopment of the Chesterfield building and former host to Liggett & Myers Tobacco Company at the corner of South Duke and Main streets also earned unanimous support from commissioners in its bid to sell $65 million in federal recovery bonds to finance the $89 million project.
The seven-story Chesterfield building, which used to be a cigarette factory, was slated to be the final piece of the West Village development until its owner, Blue Devil Ventures, defaulted on a loan in December. Now former Blue Devil Ventures associate, Durham native and one-time commissioners candidate Josh Parker has put the project on the fast track via Chesterfield Partners, which has secured financing to buy the property from creditors. Parker's development company, TBL Group is now teaming up with GWH Ventures to redevelop the old warehouse.
On Monday, county commissioners approved the sale of the recovery bonds through the same federal program that Greenfire is employing to use bond sale proceeds to finance its capital project.
Just like in the case of Greenfire, neither the public nor the government has any obligation to repay the bonds. They are the sole responsibility of the borrower, Chesterfield Partners.
The county approval was just one of many steps. Chesterfield Partners still must get the OK from the Durham County Industrial Facilities/Pollution Control Financing Authority and the N.C. Local Government Commission before the bonds can be sold.
If the developers secure all the necessary approvals, they'll be ready to break ground in January, Parker said, with a completion date in the third quarter of 2012. The lower floors would house retail and office space with 152 loft-style apartments on the upper floors to rent between $800 to $1,400 a month, Parker said. The roof would offer a swimming pool, jogging track and even a community garden, Parker said. Parker also said the developers would set aside 4,700 square feet of office space to offer below market rates to nonprofit groups.