|By Laura Oleniacz, The Herald-Sun,
Durham, N.C.McClatchy-Tribune Regional News
May 08, 2011--DURHAM -- The developers who want to turn the downtown SunTrust building into a high-end hotel and spa say they're on-track to begin the project this summer.
They have until July 31 to start the redevelopment of the Corcoran Street tower in order to qualify for $4.2 million in city incentives for the project. There is also another $1 million in incentives from the county government, but there is no clock ticking on that incentive.
Michael Lemanski, managing partner of Greenfire Development, said he's confident that the development company has the funding lined up that will allow the company to move forward in time.
Lemanski said Greenfire will be able to fund the project without $25 million in federal stimulus-backed bonds that they had previously planned to use to help finance the project.
Those bonds had to have been issued by Dec. 31 of last year, said Mary Nash Rusher, an attorney with the firm Hunton & Williams.
Rusher acts as bond counsel for the Durham County Industrial Facilities and Pollution Control Financing Authority, the governmental body that gave an initial go-ahead to allow for the tax-exempt bonds to be issued. The authority was only a "conduit issuer" of the bonds, which would have been paid by the developer.
"The fact that this didn't get issued -- they're not alone," Rusher said. "There are deals all over the state that couldn't get their pieces in place."
Rusher said many provisions of the federal stimulus bill were only good for two years. Although there has been legislation introduced in Congress to allow for an extension of the bond program and others, she said there's been no movement on it.
"There were many good deals that just flat ran out of time," Rusher said.
Lemanski said the new financing plan for the SunTrust building involves a combination of debt, equity, incentives from the city and county governments, and historic development tax credits.
"As the economy started getting better, we had interest from several lenders, more traditional lenders, in the project," he said. "That's what we've been pursuing since the beginning of the year, so we feel confident that we've got that lined up now, and because it was cheaper, the financials of the project work much better."
Lemanski said financing the project with the bonds was a "worst-case scenario." Because of the way the deal was structured with them, he said the company had to find more equity to finance the project, making it more expensive.
Carl Webb, a partner in Greenfire, said the company is "very, very close" to making a public announcement about the details of the funding sources for the project.
"Right now, we're in this stage of putting together all of the legal documents, and dotting I's and crossing T's," Lemanski said.
David Boyd, Durham's director of finance, said in an e-mail that Greenfire has to start construction by July 31 in order to qualify for incentives from the city.
That package includes a $1 million loan that would be given to the developer after the project has received a certificate of occupancy and the all of the legal documents related to the project have been executed, according to Boyd.
The total package is for the loan and $3.21 million in incentive payments that would be made across a 15-year period.
Marqueta Welton, interim deputy county manager, said county officials approved $1 million in incentives for the project last year, but she said the county didn't enter into a formal agreement with the developer laying out the terms of the incentive award.
"We were waiting for Greenfire to secure the necessarily financing," she said. "I have not heard from them, so I'm not certain what their status is at this point."
Bill Kalkhof, president of the downtown development organization Downtown Durham Inc., said there are private investors that have been "sitting on the sidelines" in the past few years that are now looking to invest in cities like Durham. He said he's hopeful that the redevelopment of the SunTrust tower will happen.
"It is a critical project for the City Center district," Kalkhof said.
A hotel could boost business along Main Street and elsewhere in the downtown, Kalkhof said, adding that he believes the city needs more hotel rooms to complement the renovation of the Durham Convention Center.
"We need this hotel," Kalkhof said.
The SunTrust building is just one of the downtown projects targeted for redevelopment or construction by Greenfire, which has amassed some 900,000 square feet of real estate downtown, much of it in the City Center.
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Copyright (c) 2011, The Herald-Sun, Durham, N.C.
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