The Empire Hotel redevelopment project continues to move forward following the completion of key objectives and continued work on proposed financing by Empire Hotel developer, Black Point Investments, LLC (BPI).
First, in its bid to redevelop the historic property on South Main Street, BPI and Downtown Salisbury, Inc. (DSI) received approval on the proposed master lease from Salisbury City Council in early fall, as well as from the North Carolina Local Government Commission (LGC). The master lease funding outlines the City’s obligation if the Empire Hotel commercial tenant defaults on or cannot cover in full the lease amount. The obligation cost could total $12 per square feet, per year for 13,319 square feet of commercial space equaling $159,828 per year for 10 years. The potential obligation cost will be shared with Downtown Salisbury, Inc. using funds from existing incentive grant programs. Currently BPI is in discussions with several potential tenants.
Second, after an extensive application, the project has achieved North Carolina Historic Tax Credit and Landmark status necessary for this type of redevelopment.
“The Empire Historic Tax Credit process took longer than expected for several reasons,” said Britt Weaver, BPI partner. “First, the project is actually three separate buildings that make up the ‘Empire block.’ This results in three separate historic preservation applications. Second, historic preservation tax credits typically address exterior property features such as facades and windows. The Empire project also has interior historic preservation constraints. These include preserving the mezzanine and staircase in the former Montgomery Ward department store and maintaining the former hotel hallways. These design constraints required project concept redesigns resulting in added time to the project.”
Third, BPI has completed Part Two (of Three) of the National Park Service Historic Preservation Certification Application. This distinction will provide additional, federal tax incentives for certified rehabilitation of a certified historic structure – the Empire Hotel.
Next steps for the project are to secure financing through Housing and Urban Development (HUD), and to demonstrate a parking resolution for approval. BPI is already working with a HUD market lender with whom it has an existing relationship.
Weaver added, “The HUD program targets residential projects where the recipient serves as an economic catalyst to further economic development in the area. Specifically, HUD serves as a guarantor of large non-conventional loans with long amortization periods – often 35-40 years. The HUD 221(d)(4) program is ideal for financing projects such as the Empire Hotel. While the subject project must meet strict underwriting standards for both HUD and the lender, the program is a great fit for historic preservation.”
Finally, to complete the financing application, the development team must address concerns from HUD. The first concern was the project’s commercial space – answered with the master lease approval. Second, HUD indicated that the project lacked sufficient parking. Salisbury city officials are currently working on a parking solution that will satisfy the federal program.