Developer ponies up $104 million to fill gaps in Downtown's recent renaissance

WAYNE RISHER | THE DAILY MEMPHIAN

Developer Tom Intrator and Downtown Memphis officials were talking the same talk Tuesday, Nov. 12, about the need to fill gaps among Downtown’s revitalization successes.

A Downtown board backed nearly $20 million in tax breaks for $104 million in projects led by Intrator, a New York developer who was attracted to Memphis as an apartment investor.

The Center City Revenue Finance Corp.’s entire agenda was taken up by Intrator’s 18Main LLC investment group. The five approved projects would be within a half-mile of each other in Downtown’s core.

“None of these really work too well on their own, but the whole thing starts to create an ecosystem which we very much need,” Intrator told the board. “I don’t think this is everything to take the city from A to B, but it’s a start. We’ll do what we can, and more will come in the future.”

Downtown Memphis Commission president Jennifer Oswalt added, “We also believe these projects are filling gaps for us, and that’s what’s most important on Main Street right now, where you make the walk, where you have dead spots or quiet spots less and less.”

The board approved the projects by 6-0 votes.

Downtown Memphis officials said the new development would produce a combined increase of about $6.5 million in city and county property taxes over the incentives’ terms. The agency labels potential tax savings for the developer as “hypothetical” because it says the development wouldn’t occur without incentives.

Intrator said simply building more apartments because occupancy rates are high Downtown would ignore the need to drive up rents and attract more investors like him to Memphis.

That’s why his latest projects are oriented toward creating things for people to do Downtown rather than just building new places to live.  Two of the projects would be mixed-use developments with a combined 189 new apartments.

His activity generators would include a Dream Hotel Memphis at 122 S. Main, “a more unique office space” at 107 S. Main and a multipurpose commercial building at 311 S. Main, described as a Crosstown Concourse on much smaller scale.

Intrator’s company, 18Main LLC, already is renovating 18 S. Main and has been buying up additional property on north and south ends of Downtown.

Apartment construction has boomed Downtown in recent years, and about 95% of the units are occupied. But Intrator and Oswalt agreed rents are lower than they need to be to attract investment without tax incentives.

Oswalt said rents average about $1.47 a square foot a month ($1,470 for a 1,000 square foot unit). “Everyone is trying to get to $2 a foot, but the market’s not there,” Oswalt said.

Until rents increase, the Downtown agency will have to continue offering incentives to offset high taxes and construction costs, Oswalt said.

Intrator said Nashville was getting $2.50 a foot for some apartments five years ago, when he first looked at investing in Downtown Memphis. “The rents haven’t moved that much in the last five years,” he said.

“If tomorrow you were to flood the market with a very high number of additional multifamily units, which would enable more, hypothetically, more residents into Downtown, would they absorb them, could they absorb these rates? I don’t think so,” Intrator said.

“…I personally don’t believe people will move Downtown unless they have somewhere to go. Main Street is less empty than it was five years ago, but it’s relatively empty. The office buildings, the employment, have relatively healthy occupancy…”

“Why is the street empty? People have nowhere to go,” Intrator said.

Oswalt said the commission has tried various approaches, in addition to incentives, to breathe life into Downtown’s un-revitalized spaces. Among them are pop-up retail, a Main Street retail emphasis and painting over empty storefronts with murals, such as one at 107 S. Main.

In the late 1990s the commission identified South Main between Union and Peabody Place as a demonstration block and offered extra help for developers. Intrator’s projects at 107 and 122 S. Main would fill in some of the last gaps in the demonstration block, Oswalt said.

Intrator referred to the 178-room Dream Hotel, an exclusive boutique chain, as a catalyst for more activity on Main Street and a project that has put Memphis on the map for potential tenants from New York and Los Angeles. He said the hotel would offer perhaps four or five food and beverage venues to cater to guests and the community.

“Dream Hotel is something I think in a New York, it’s not overly unique because you have so many. But in Nashville it was very big deal when it opened less than a year ago. I think if it was able to make a large splash in Nashville, it should be able to do the same in Memphis,” Intrator said.

The hotel was approved for a 20-year tax abatement, called a payment in lieu of taxes. The other projects were given 15-year incentives.

The $54.5 million hotel is tentatively scheduled to be completed by December 2022.

Board member Jeri Moskovitz asked about provisions for parking, and Sean Norris wanted to know about Intrator’s financing.

Intrator said the hotel would rely on valet parking and have agreements with nearby parking facilities to store vehicles.

Intrator said he’s confident about securing financing, owing to a career track record of $300 million to $400 million in debt without a default or late payment.

Intrator said Dream Hotel would manage the hotel and make an investment in it.

Across Main from the Dream Hotel site is a four-story, 34,000 square foot, circa 1910 building that was almost lost to water damage before it was stabilized and boarded up years ago.

“It’s actually been a blight priority of ours for over 10 years,” Oswalt said. “We look forward to seeing this back in full use.”

Intrator’s concept is commercial on the first floor and office upstairs. Plans call for a six-month, $7-million renovation to begin later this year.

311 S. Main, a 30,000 square foot, circa 1900 warehouse, would include a mix of commercial uses including retail/casual dining fronting on South Main. Intrator envisions it becoming a place where people can interact and spend time, taking advantage of activity on South Main and a connection with his adjoining development on Front Street.

The timetable for the $7 million project calls for construction to start a year from now and full occupancy by February 2022.

Intrator believes his two projects with apartment components – 386 S. Main and 316-320 S. Front – could benefit from an influx of professionals working at the new FedEx Logistics headquarters under construction at the former Gibson Guitar factory.

He proposes a five-story building with 24 apartments and ground floor retail at 386 S. Main, filling a gap between two historic buildings. The $6 million project is tentatively slated to start construction next April and reach full occupancy in August 2021.

He's proposing 165 apartments, ground floor retail and 120 covered, below grade parking spaces at 316-324 S. Front. The $30 million project calls for a new six-story building to fill a vacant lot and wrap around a renovated, three-story, circa 1900 building at Vance and Front.

The site is next to Gus’s Fried Chicken, across from Old Dominick distillery.

The schedule calls for construction beginning next November and full occupancy in April 2023.

Intrator said “higher quality” would differentiate his apartments from what’s available.

“Just with FedEx, (that’s) probably the one I am most excited by, because those are high-paying jobs. They’ve announced that a good chunk of those jobs they will need to hire from out of the market. That will add diversity. That will add ideas, etc. I believe, I assume, that of that employment, if they have the ability, a number of them will want to live in a nearby vicinity. The quality of what they can move into needs to be higher than what is available currently,” Intrator said.