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Lack of funds hinders hotel redevelopment
Tuesday, July 24, 2012
By MICKEY POWELL - Bulletin Staff Writer
A lack of money is why the former Henry Hotel in uptown Martinsville has not yet been redeveloped.
“We don’t have any cash to put into it,” said Ray Gibbs, president and CEO of the Phoenix Community Development Corp., a nonprofit developer that is spearheading efforts to revitalize the city-owned structure.
He estimated that about $4.5 million is needed. The building is targeted for mixed-use development, including businesses and apartments, but no definite uses have been determined yet, officials have said.
Efforts to secure funding so far have failed, but Gibbs is optimistic that will not be the case in the future.
For example: Last year, Phoenix applied for industrial revitalization funds from the Virginia Department of Housing and Community Development but did not receive them.
Redevelopment projects for other types of buildings — including hotels — also qualify for industrial revitalization funds, according to the department’s website.
Gibbs said officials from the department came to Martinsville to see the hotel and were impressed with the project, but funds ran out before the department received Phoenix’s formal application.
Phoenix did not miss any deadline to apply for the money, he emphasized.
The industrial revitalization funds are being replenished this year, and to try and get the state to consider the project sooner, “I’ll personally submit the (next) application by hand,” Gibbs said. “I’ll drive it to Richmond.”
The project did not qualify for federal tax credits — called “ New Market Tax Credits” — but it does now under local 2010 Census data, Gibbs said. Because of the complexities involved in securing those credits, Phoenix is retaining the services of legal and accounting firms with experience in tax credit issues to try and secure credits for the hotel, he said.
If industrial revitalization funds and New Market credits are received, “these would pretty much enable us to do” the project, Gibbs said. “I am hopeful. I think our chances are good.”
But there is no guarantee because those funding sources are “always competitive,” he said.
“You just have to keep waiting through (funding) cycles,” and reapplying for the money if necessary, “until your project is approved,” he added.
Applications can be submitted for federal and state historic tax credits, but those require projects to have timelines, including starting dates, Gibbs said. “So you don’t want to submit your application until you get other funds.”
If the federal government approves historic tax credits, so will the state, he noted.
Private investment is possible, although “there’s not a backlog of people falling over themselves” to invest in the hotel project, Gibbs said. But several local developers have shown interest, he said, adding that they have not said “yes” but they have not said “no,” either.
“This project isn’t as high on their list” as opportunities to invest in private projects, such as the construction of new stores or bank buildings, in which they likely would see a higher return on their investments, Gibbs said.
They expressed interest in the former hotel mainly because it is a local project and they care about the community, he indicated.
Three years ago, the city bought the four-story building at the corner of East Church and Broad streets for $520,000. The Harvest Foundation provided a $425,000 loan toward the purchase.
Gibbs said he has heard some people say the estimated $4.5 million cost to redevelop the property “seems so high.” However, “not all of it is going to a contractor” eventually, he said.
Of that amount, he estimated, the actual construction will take about $2.4 million to $2.6 million, with the rest going toward “soft costs” such as fees for architectural and engineering services.
A report to be discussed during a Martinsville City Council meeting at 7:30 tonight shows the city has since spent about $55,000 per year to keep up the building and provide utilities to tenants, including residents who have since moved out and a restaurant and insurance office still there.
Some council members have said they think that is too much.
Martinsville officials want to transfer ownership of the building to Phoenix, the report shows. Forget that for now, Gibbs said Monday.
“At this point in time,” he said, “we’re not in a position to accept it” due to a lack of funds to pay for upkeep and utilities.
He estimated that Phoenix already has spent about $100,000 for studies of how the building should be redeveloped and efforts to get tax credits. “We think our money is better spent on that,” he said.
Usually, nonprofit developers such as Phoenix do not take over a building’s ownership — if they do so — until construction involved in redeveloping it is occurring, he said.
Besides transferring ownership to Phoenix, other options listed in the city’s report include listing the building for sale on the open real estate market and demolishing it. Gibbs dislikes the latter option.
If the city council has “a couple of hundred thousand dollars to tear it down, let them give it to us and we’ll put it toward” redevelopment, he said.
Gibbs denied that Phoenix is dragging its heels on redeveloping the former hotel.
Phoenix also is involved in efforts to redevelop the former social services building uptown and make uptown — the city’s central business district — look nicer, its website shows.
Gibbs said, though, the Henry is on his mind every day, even if he is not actively working on the project on a particular day.
The building is “just not an easy project,” he said, and “certain things are out of my control,” such as federal and state officials’ decisions on which redevelopment projects get allocations of funds or tax credits.
Efforts to redevelop the former hotel have been ongoing for about a year and a half, and that is not a huge length of time for such projects, he said.
“I’ve seen buildings sit for a very long time” before redevelopment efforts moved full steam ahead, said Gibbs.
Gibbs has more than 30 years of experience in community planning and real estate and economic development, including the revitalization of downtown Greensboro, N.C. But in Smithfield, N.C., it took him about five years to get a building redeveloped there, he recalled.
For more than seven years, officials in Salisbury, N.C., have been trying to redevelop a former downtown hotel there, he said.