The developers behind Downtown Memphis' tallest building received additional capital from the Economic Development Growth Engine for Memphis and Shelby County (EDGE) board on Wednesday.
On July 17, the EDGE board approved an additional $1.8 million in commercial loan funding for the project, although the exact use remains unspecified. The increase comes nearly a year after the developers were awarded a $5 million loan from the EDGE for demolition and cleanup, which remains ongoing.
"With the 100 N Main project being a quarter of a billion dollar investment, just on phase one alone, the $1.8 million dollar extension is a relatively small, but vital funding component to ensure progress," Adam Slovis of 100 N. Main LLC said via email on Tuesday. "We are very appreciative of EDGE’s partnership and continued support on such a major economic opportunity for our city."
The ownership group 100 N. Main LLC is comprised of local developers Slovis, Kevin Woods, Bily Orgel, Jay Lindy and Michael McLaughlin. The group was previously known as 100 N. Main Development Partners. 100 N. Main LLC is partnering with Kansas City-based Block Real Estate Services for the redevelopment project. (The real estate firm was previously one of the six finalists lobbying for the redevelopment bid of Memphis' tallest building.) The ownership stake is split 50-50 between the two entities. Block Real Estate was announced as a partner during the project's ceremonial groundbreaking in December 2023.
Prior to Block Real Estate's involvement, the 100 N. Main LLC (then known as 100 N. Main Development Partners) was approved to begin cleanup and demolition worth an estimated $7 million by the Downtown Mobility Authority in January 2023. The Downtown Mobility Authority is an affiliate board of the Downtown Memphis Commission (DMC). The demolition work was expected to be conducted in three phases and take up to 18 months to complete. (The first phase of demo work was initially planned for February 2022.)
Both Orgel and Lindy were present at Wednesday's meeting. EDGE board legal counsel Mark Beutelschies said the initial $5 million loan awarded to the developers in August is closed. The additional $1.8 million funds are to be added via an amendment, which was approved Wednesday.
Vice president of operations for EDGE Joann Massey said the payback for the added funds will at least match the existing terms from the initial $5 million loan: 4% fixed interest rate and a 20-year repayment plan. Repayment begins when permanent financing begins (or change in ownership). Massey characterized the funds as "gap financing."
"EDGE wants this [project] to move forward, but EDGE is not a bank," EDGE chairman Al Bright Jr. said.
The sentiment was echoed by Massey and other members of the EDGE board, but the agenda item passed unanimously.
During the meeting, some changes to the project arose. Orgel said the general budget is between $270 million to $280 million and an increase in the number of parking spaces for the proposed parking garage. In February, the development team's payment-in-lieu-of-taxes (PILOT) application with the DMC featured a budget near $282 million and plans for a parking garage with 378 parking spaces.
Lindy said, the garage will be upwards of 400 parking spaces and confirmed the final budget is still being finalized within that range. The development team plans to close its financing by the end of the year, he said.
Where does 100 N. Main stand with additional financing and incentives?
In February 2024, the Center City Revenue Finance Corp., an affiliate board of the DMC, awarded the developers a 30-year PILOT. In March, the Center City Revenue Finance Corp. approved preliminary bond financing for the project. During that meeting, Lindy said the development team planned to secure financing by May 2024.
That incentive package also includes a 5% Tourism Development Zone (TDZ). The developers also benefitted from an extended PILOT length due to when the project was awarded. In February 2023, the DMC approved changes to its PILOT incentive program including term limits (20 years would be the max). Those changes took effect on July 1, 2023.
Since the project was awarded to 100 N. Main Development Partners in 2022 during the previous PILOT term conditions, it remained eligible for the previous program rules, per the development agreement for the 100 N. Main project.
According to the PILOT application, the development project would cost $282,479,999. That figure increased by more than $20 million since November 2022, when the project's initial budget was $261.28 million. The construction costs and PILOT incentive, however, are for only the first phase of the mixed-use project including the 37-story tower and adjacent parking garage.
The developers are planning a second phase of redevelopment for the adjacent properties along 80 to 88 N. Main street. Those properties were included in the pre-development agreement and will require additional financing if and when they are pursued for redevelopment.
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When the first phase of financing is closed and finalized, ownership for the 37-story tower will change, according to the development agreement. The Downtown Mobility Authority has owned the building since March 2022.
That ownership agreement also has some nuances. In January 2023, the Downtown Mobility Authority agreed in principle to sell the building to 100 N. Main Development Partners for $10 million. Per that agreement, the developers would purchase the building and surrounding 2 acres for $10 million, that price tag would be spilt into two $5 million installments. However, if demolition began prior to the development agreement being signed the developers would be reimbursed $3.75 million for expenses, effectively reducing the purchase price to $6.25 million.
The 30-year PILOT is still pending approval from the Tennessee Department of Economic and Community Development (TNECD). The total culminative real estate tax benefit for the term is estimated at $76.7 million. In February, DMC legal consul James McLaren said the incentive is structured with al the mixed-use operations for the building operating under the umbrella of the 30-year PILOT with all extensions expected to close at the same time.
Additionally, the TDZ surcharge, which requires approval from Memphis City Council, is being used to help pay for construction costs. The 5% surcharge is generated from room and occupancy revenue along with food and beverage sales (the 100 N. Main tower will have a 160-room hotel). The TDZ surcharge component is comparable to the One Beale agreement.
The 100 N. Main building and adjacent property is located in one of Shelby County's three TDZ zones: Downtown Memphis, Memphis Fairgrounds and Graceland. The Downtown zone expires in 2031. (The are eight Tourism Development Zones in Tennessee.)
The PILOT agreement and TDZ surcharge are similar to the incentive package previously approved for the Downtown Memphis Sheraton Hotel in October 2022. The Memphis Sheraton is now up for sale and with its pending sale, the incentive was made void, creating an opportunity for 100 N. Main developers to seek similar incentive packages.
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What will the new 100 N. Main include?
The speculative timeline for completion on the project is 2027. Once completed the 792,873-square-foot 100 N. Main building will feature a 160-room hotel, 8,000 square feet of meeting space and 200 apartments with an additional 80,000 square feet of office space on the tower's upper floors.
In December 2023, during the ceremonial groundbreaking, former Memphis Mayor Jim Strickland announced that the city signed a lease for 60,000 square feet of office space inside the building. The renovated tower will also include more than 400 parking spaces and nearly 20,000 square feet of restaurant and commercial space.
In March 2024, the development team confirmed the 160-room hotel portion of the hotel will be a Marriot brand. Lindy said the team has not finalized a contract with Marriott yet, but expects to do so in the coming weeks. The developers are targeting one of Marriott's "premium" brands, such as the Autograph Collection.
The 100 N. Main building dates back to the 1965 and has been vacant since 2014.
Neil Strebig is a journalist with The Commercial Appeal. He can be reached at neil.strebig@commercialappeal.com, 901-426-0679 or via X: @neilStrebig.
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