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City approves stimulus bonds for private projects

Al Harris January 12, 2010 5

A handful of local projects could get a big boost from a federal stimulus program that funds tax-free bonds.

Last night City Council approved a resolution submitted by Mayor Dwight Jones requesting approval of five projects to be financed using Recovery Zone Facility bonds, a program of the federal stimulus act. The city has been allocated $8.8 million in bond issuing authority under the program. A total of $15 billion was allocated nationwide.

One of the projects is for a build-out of Bio Tech 8 at the Virginia Biotechnology Park, which requested just over $5 million in financing.

Bob Skunda, the park’s president and CEO, said the center was attracted the bond program because of their tax-exempt status.

“It means the cost of the money is less than conventional lending, so we can incentivize the rent a little bit,” Skunda said.

That will make it easier to find tenants to occupy the unfinished second floor of the research facility, he said. Either way he will need a letter of intent before construction would start. The bond would cover the full cost of the construction.

“My knowing that it has been approved allows me to go after these prospects more aggressively,” he said.

The combined total requested by the five applicants is about $22.8 million, but the city may be able to draw on a pool of stimulus funds allocated to the state to fulfill the full amount.

Below is the list of projects:

Virginia Bio-Technology Research Park requested $5,040,700 million to build out Biotech 8.

Crosland requested $4,575,000 to build a parking deck at Manchester on the James, a planned apartment complex on the south end of the Lee Bridge.

Macfarlane Partners requested $5 million for the conversion of the P. Lorillard Company Building into office and retail space.

CMB Development requested $2.75 million for a parking deck to serve SunTrust and UPS employees working in Manchester. The company is also planning a 160-apartment complex on the site.

James Center Property LLC requested $4.5 million for a parking garage at 10th and Canal streets.

Before the vote, several Southside residents spoke out against the ordinance to approve the projects–taking exception to one project in particular, Manchester on the James.

“If a developer will not fully commit their own funds it probably means in their expert opinion it is not viable,” said Jeremy Weiland, a blogger behind SpringhillRVA.org, a website for the neighborhood where Manchester on the James is planned.

The project was given the green light when council approved a Special Use Permit in the spring of 2008. That SUP was set to expire this year, but was extended by an act of the General Assembly last year that extended such permits another four years because of the recession. Weiland and other speakers contended that had the stimulus bonds not been available the project would not be moving forward.

The project, developed by Charlotte-based Crosland, was strongly opposed by adjoining neighborhood associations when it went before council a year and half ago. Around 1,200 signatures were gathered on a petition against the project. Council approved the SUP by a vote of 6-3. The final SUP allowed for a four story building and a maximum of 200 units.

Attorney Andrew Condlin of the law firm Williams Mullen defended the project on behalf of Crossland.

“The vote tonight is not for or against the project, we already took care of that,” Condlin said.

Condlin said Crosland is going to spend $23 million on the project, about $7 million of which is their own money. The rest will be financed, including the $4.5 million requested from the stimulus bond.

“This is about jobs and economic stimulus,” said Condlin.

Peter Chapman, deputy chief administrator for the Mayor who is also in charge of economic development, said that in order for the projects to qualify they must be fully funded and have a letter of intent from a bank or other financial institution.

“The bottom line is this is not a grant, it is not a loan. These are bond issuances that demonstrated the ability to receive private sector financing,” Chapman told Council.

The Council approved the measure by a vote of 8 to 1; Eighth District Councilwoman Reva Trammell voting against.

Al Harris is a BizSense reporter. He covers commercial real estate. Please send news tips to Al@richmondbizsense.com.

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5 Comments »

  1. Carter Snipes January 12, 2010 at 8:26 am - Reply

    Crosland is simply using this “loan” as a component of the financing structure for the project. What’s wrong with that?

  2. Scott Sirles January 12, 2010 at 1:27 pm - Reply

    $11,825,000 or 54% of the $21,865,700 stimulus is devoted to parking decks and garages. Parking facilities use up scarce land that would be better used for high density buildings. Buildings generate much more tax revenue than parking facilities. This is happening because we do not have a mass transit system in Richmond. Done properly, a mass transit system uses very little land and encourages denser development. The stimulus money is actually working against Richmond’s long run welfare.

  3. sfd28 January 12, 2010 at 5:32 pm - Reply

    Scott – Richmond doesn’t build up, it builds out… That’s why nothing is taller than 28 stories. Besides, if Richmonders had less parking decks, what would they do? Not drive? That’s not the Richmond way… Ever get stuck in that Richmond traffic? It’s brutal!

  4. Stuart Squier January 13, 2010 at 11:33 am - Reply

    I agree the city would be better off if we stopped subsidizing car driving to the degree we do in Richmond. It’s odd that everyone frets so much about how to “get people downtown” and then their solution is to build more parking garages instead of more businesses and homes. Parking facilities create a vacuum instead of activity. And of course transit is undermined every time we subsidize a new parking garage and continue enforcing minimum parking requirements of every development in town. It’s a feedback loop we’re stuck in because council makes development decisions instead of our staff of professional planners.

  5. Stuart Squier January 13, 2010 at 11:48 am - Reply

    It’s also a missed opportunity for the city since we had the leverage to get more concessions from these developers. For example we could have made a condition of getting this financing that the first floor of the parking garages be commercial space and the top floor have enough solar panels to make them energy neutral structures.

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