- (female announcer)   Production funding for   Behind the Headlines   is made possible in part by   the WKNO Production Fund,   the WKNO Endowment Fund   and by viewers   like you, thank you.

- A look at development and redevelopment in Memphis, tonight on Behind the Headlines.

[intense orchestral music] I'm Eric Barnes with The Daily Memphian.

Thanks for joining us.

I'm joining tonight by Paul Young, President and CEO of the Downtown Memphis Commission.

Thanks for being here again.

- Thank you for having me.

- First time in person.

- Yeah.

- Actually since-- - In a long time.

- In a long time, in a long time.

Thank you.

Along with Bill Dries, reporter with The Daily Memphian.

I wanted to start, I mean, Downtown Memphis Commission, actually, it's not just Downtown.

You guys have actually a much bigger footprint and influence.

But I did wanna start talking about one specific project, 100 North Main, not just cause it's an iconic building in Memphis and it's a big, you know, multi, a hundred million, two hundred, three hundred million redevelopment but also in a lot of ways, it's emblematic of a lot of what's going on.

So it's about a 100 North Main but it's about others.

And we'll talk about other things going on big and small throughout Downtown, Midtown, Medical District and really citywide.

But one of the interesting things about a 100 North Main was it was, you know, essentially blighted.

It was sort of abandoned by all its tenants.

It was in great disrepair to the frustration of many, you know, just again, it's a bad look when this iconic building Downtown is empty and dark.

Ultimately, and it wasn't you, it was your predecessor, DMC bought that building.

And it's a little controversial because the developer who had let it go dark and let it get really blighted, ultimately kinda made money on the deal.

And also people question should DMC be buying and selling buildings?

I mean is so, but it's worked out it seems like, right?

Billy Orgel has come forward.

He's had a very successful track record.

Other locals, Kevin Woods, and others involved with it.

Is that a successful model for redevelopment of blighted buildings in Memphis?

And do you think you might end up doing other things like that, big or small?

- Yeah, I do think it's a successful model.

It's a building that was stuck.

And in some instances, particularly in Downtown Memphis where you have these large buildings, you have some people that believe that they can make a greater return if they just sit on the property and it's to the detriment of the whole community.

And so we have a building that went dark in 2014, 2015, been dark ever since, had no future.

There was no hope for the building, for the structure at least in the short-term.

And so it was important that DMC and the city step up to the plate and find a way to get this property unstuck.

The way that we did that was we acquired the structure and you're absolutely correct, it started before I got there.

Jennifer Oswalt and the team began the process of activating the acquisition.

They acquired the building shortly after I got there.

I think it was March, April when we actually got the building in our hands and we aggressively put forth an RFP for developers.

We didn't get into this saying that we want to develop the structure ourselves.

We knew that we weren't quite suited to do that, but we knew that we could facilitate the development.

And it was really, really exciting.

And it was a great testament to Memphis.

The fact that we got 11 teams, 11 qualified teams, many of which were outside of the Memphis market were interested in developing the tallest structure in Memphis, 37 stories.

We went through a very competitive process.

It was probably the most difficult, competitive process that I've been a part of because there were so many good qualified teams, great ideas.

And I was grateful that we had a home team that came and put forth a competitive application.

And they're the ones that are going to take this property into the future.

- But, quick question, will the city actually make money on the deal?

- We won't make money.

The team did agree to pay what we paid for the property.

- Okay.

- So we look at that as an opportunity to be able to continue to reinvest.

And if there are other properties that are stuck in the future, we can use those funds to try to do a similar process if needed.

- One more question, I'll go to Bill.

Does the fact that 11 teams, again, local and all around the country come forward with, you know, very, very robust proposals.

Does that speak to maybe a turning point in Memphis as Downtown development, in Memphis development generally?

And that maybe some of what you have to do when you have to unstuck a building, unstick a building or the incentives that you all do and others do, are those maybe not as nest necessary now for there is that level of demand?

Or are we still in that business where you guys are gonna have to step in and have to do the kinds of incentives you have to do?

- Yeah, I definitely think we're still in that business.

There's still an economic reason for the incentives.

We were getting to the point where the rental rates and I'll just talk about housing.

When you talk about apartments in Downtown Memphis, we were getting to the point where the rental rates were starting to tick up and it looked like the incentives will be less necessary than they had been in the past.

But right as we got to that point, the pandemic hit and the construction costs have skyrocketed.

And so even with the uptick in the rental rates, it's still difficult for project to pencil out.

And so those incentives are still very critical.

- Ah, Bill.

- 100 North Main, the city's tallest building is just less than a block away from what was going to be the site of a second convention center hotel.

That's not gonna happen at least with Loews and at least at this point.

Does that change the outlook for that general area around 100 North Main?

- I don't think it necessarily changes the outlook.

Obviously, we were all looking forward to seeing Loews come in that space and it's no for now.

We're hopeful that as things settle down and the economy moves back in the right direction, that, that project could potentially move forward or come back in some different form.

We still have projects like the Hyatt Grand which is getting close.

And so we're really excited about that.

That's the project at 1 Beale, which is adjacent to the Hyatt Centric and the Hyatt Caption which is under construction.

I know that's a little bit of ways away but that just gives us optimism with regards to our convention aspect.

In terms of that area in particular, we still have the size of that 100 North Main structure still gives us significant activity.

It livens up that block.

And remember it's not just the building 100 North Main, there are the four adjacent structures that are next to it along Main Street.

And so when you activate those structures, it still creates a very, very vibrant scene on that block.

- Has the pandemic made financing hotels more difficult?

- Yeah, from what we've heard, we've heard that it is more difficult during the pandemic, you know, as hotels and tourism is starting to move back into a positive direction, I think that financers will have more confidence in markets.

But yeah, it's definitely been more difficult.

- And yet on the other hand, we've got the hotel construction.

You mentioned that it's part of 1 Beale.

And there has been some talk that I've heard that maybe this could lead to other hotel developments further east, maybe at Main and Beale, possibly south on Beale where I think there had been plans at Fourth and Beale for it.

What can you say about that?

Namely, Main and Beale.

- Yeah, I can say that there's always people looking at different projects and initiatives in Downtown Memphis.

I actually haven't heard about the one in Main and Beale that you're you're referencing but I do know about the one that's over near FedExForum.

There's a group that's looking at acquiring some property in that area that has some ideas around hotels.

I still think that we have a very strong market.

There's still a lot of demand.

There's still a lot of developers that are circling and trying to figure out the right project for Downtown whether it's a hotel or apartments which tend to do very well in Downtown Memphis and other retail amenities.

So I have a lot of confidence and optimism that Downtown is gonna continue to be strong well into the future.

- Well, our offices are located in the South Main District and after being at Fourth and Jefferson initially for our offices, and the contrast has been pretty interesting with South Main coming along, development going up to Crump in some cases on the other side of Crump.

Has that kind of altered the geometry of Downtown development?

- It's definitely stretching Downtown out.

You know, the entertainment district, that area around Beale Street was traditionally the heart of Downtown.

Now, you have South Main being activated.

You have more activity happening in the core with projects like the Commonwealth on Madison.

And then when you look in the Uptown area, the work that's happening with Conwood that Billy Orgel has been a part of or Malone Park Commons which Andre Jones has initiated.

There's a lot of things that are happening in Downtown that stretching it out and adding that vibrancy in more parts of Downtown.

- All that is against the backdrop, you mentioned COVID and how things changed or stopped and it obviously had a huge impact on tourism.

It's also had a huge impact on offices.

Memphis already had an okay office market Downtown.

I mean, there was a certain amount of vacancy.

100 North Main was an office tower.

There are others, the former Morgan Keegan building right on the water and so on.

The Morgan Keegan building, I'm gonna call it the Morgan Keegan building 'cause I can't remember apparently.

Raymond James, Morgan Keegan, it's all the same.

But right down, overlooking the water at, you know, the end of Jefferson is now I think gonna be turned, I think I heard, or I think we wrote that it's gonna be turned into residences, into apartments and there's rumors of other office buildings being turned into residential.

Do you see more of that?

And do you all get engaged in that in terms of supporting those kinds of transformations?

Because it doesn't seem like there's gonna be as much demand for offices anywhere in the country.

Obviously, cities like New York and San Francisco are being hit really hard.

In some ways we have the benefit of not having as much office, you know, space Downtown and so that doesn't hit us as hard.

But these transformations are gonna be more of them.

- Yeah, so we certainly are engaged in those conversations.

We're not quite ready to give up on offices just yet.

We know that there's a lot of flux as a result of COVID, but we are starting to hear more large employers say that they want to move back into offices.

So our large Downtown companies like AutoZone or Terminix, all of them have been thinking about when they're going to bring people back in the office and they're in the process of doing that.

So while we know that some of those buildings like you referenced are having some tough times right now, we are not necessarily pushing them to make those conversions.

Obviously, if they want to do it on their own, we're supportive of them doing it.

We're not necessarily looking to incentivize it.

But if they're looking to do that, then, you know,-- - That's interesting.

Why so explicit that you don't wanna incentivize it?

- Well, we don't want to give up on the opportunities to bring large employers to Downtown.

- Got it.

- And when you see large structures like that where there's the potential for Class A office space, for us to incentivize that transition would not necessarily be the best use of public dollars.

- But then you've got the risk that a building like that goes dark, right?

I mean, a 100 North Main coming-- - It's definitely a risk.

It is definitely a risk.

But we believe that it's important for us to maintain opportunities to bring those large companies back to Downtown, at least in the short-term.

- Yeah, you've mentioned before the incentives structure and that rental rates were getting to the point that those incentives weren't quite as necessary.

Obviously, COVID kind of turned everything upside down.

We did a show back in the fall with a bunch of housing advocates including Dorcas Young, a woman I think you have known for quite a while.

- Heard of her.

- Heard of her, heard of her.

That's his sister, who works for the county and she and others, you know, talked about, yeah, there is this boom among middle and upper middle class and, you know, higher end staff across the city, but there isn't enough affordable housing, you know, and that, that is a dynamic that, you know, I can't remember how many thousands, it might have been tens of thousands that they need in terms of affordable housing, that people can get into it, that even people, this is not, I mean, this is people with jobs.

This is people, maybe not the best credit report but they're working, they have the money and they simply can't find a place to live.

You used to run, you know, Housing/Community Development for the city.

You're very close to these issues.

How does DMC and how do you balance that, these high end expensive apartments going in for which there's a lot of demand, which pay a lot of taxes, which makes sense with the need for affordable housing?

- Yeah, so the demand for affordable housing obviously is very high.

And if we wanna go down that lane, I can talk pretty in depth about it.

The way we balance it with Downtown Memphis is we ensure that any property that receives an incentive, our biggest incentive being the PILOT program.

But any property that receives a PILOT must have at least 20% of their units serve families that earn at least 80% of the area median income which is a, you know, working class wage.

We believe that it's really important that we have a diverse mix of housing in Downtown.

We wanna make sure that the people that live Downtown reflect the culture and the character of the city, that we continue to have the vibe of Memphis.

We don't wanna be a city where all of the people that make Memphis, Memphis, aren't able to afford to live there.

And so we balance that by ensuring that the projects that we incentivize have that affordability component.

In addition to that, we also have some larger affordable housing developments like South City which is a mixed income development which is right on the cusp of Downtown, is kind of the bridge between Downtown and South Memphis.

You also see projects like what Elmington Capital has been doing in Downtown.

So Forum Flats, Patterson Flats, there's some other properties in Uptown which are truly affordable housing developments with low income housing tax credits.

And so as long as we continue to see projects like that take place along with the higher end projects, we believe that we'll have a good mix Downtown.

- And to that end, I think South City is just about to start its last phase.

- Yeah, it's getting close.

- Yeah.

And as that's happened, well, the thought initially was all of this is going to link up.

South City is going to link up to what's happening further west toward to toward the river.

And these things certainly don't happen by accident or by osmosis either.

So in South City's case, I think a lot of this was informed by other HOPE VI federally funded projects which does to your housing and community development background again.

But what have we seen so far from South City in terms of living up to that promise?

- I think it's definitely lived up.

Obviously it's a very attractive development if you drive by there.

The structures look amazing and it feels like a neighborhood and it feels like a neighborhood that's integrated with the community around it.

I think we're already seeing the impact.

I don't think you would see a project like the Walk which was proposed a few years ago and they are getting very close.

You wouldn't see projects like the Walk but for projects like South City.

You wouldn't see projects like Butler Row which was just proposed at the corner of G.E.

Patterson and Second.

You wouldn't see Wiseacre which is located on B.B.

King rather.

You wouldn't see those things take place.

You have projects that COGIC are doing along Vance Avenue.

Also on Vance, you have a project that I was involved with before I came to DMC at Fourth and Vance where Tyrone Burroughs and Scott Bojko are working on a new development right there.

There are a lot of things that are happening adjacent to South City that would not have taken place but for the investment that the city and HUD and others made into that project.

- And this is one of those projects where there's been a lot of discussion about displacement.

And in this case, there are actually more units on the sites of the two housing projects, public housing developments that were there than there were before this transition.

- Yeah, I think there were 420 units on the site before the property was demolished.

They're rebuilding 712 units, four hundred and sixty of which will be affordable.

So there's actually more affordable housing on the site than previously existed.

And back when I was involved around a year ago, in terms of the numbers of people that had returned to the property, that number was well beyond what we had seen return at other projects that had been done in the past.

So I believe that it's a positive for Downtown.

- In terms of Memphians adapting to this new thing of mixed income housing, because we did tend in this city and in other cities to segregate ourselves economically and racially without there being laws involving that.

Have Memphians changed their mind about that?

Are they more willing to look at mixed income, mixed use neighborhoods as well?

- Yeah, I think so.

I mean, if you look Downtown, any residential project that gets completed, fills up relatively quick because people like that lifestyle.

And always take it back to how my parents grew up.

My parents grew up in South Memphis.

Both of them grew up in different parts of South Memphis.

And in their neighborhood, they had the janitor living next door to the teacher, next door to the doctor, next door to the lawyer.

And so we had mixed income communities.

It's the way neighborhoods were traditionally made.

And we're just going back to that.

- You mentioned we could talk a lot more on... Well, we've got seven minutes left so let me move along and we'll get you back soon to talk more about this affordable mix and so on because it's a fascinating development we did.

Archie Willis who you were on the show with, who's developer, South City, and Roshun Austin were on recently.

We talked about the area around Northside and just what it takes to rebuild neighborhoods and people like you who've been in the heart of it.

But we'll move on.

You mentioned Union Walk was originally Union Row.

And so, you know, for people who don't live or work Downtown, maybe just come down sometimes for a game or for, you know, whatever, a restaurant or Orpheum or something.

As you're coming down Union towards Downtown, the big vacant lot, right?

That they're, it's a, what, billion dollar plus proposed development over 20 years.

But it's been stuck.

You said it's looks like they're about to move on that.

- Yeah, they're getting close.

- Do you worry about, I mean, there's still empty spaces in Downtown, right?

As much, I mean, I've worked down there for 20 years.

It lived down there off and on.

How do you approach that, the projects that get delayed?

You know, I mean, we sometimes are guilty of running a headline, you know, billion dollar proposal, two hundred million dollar proposal.

Really though, it's not done, it's not cooked, it's not ready and it's years from breaking ground.

How do you handle that?

Do you keep pressure on the developers?

Do you just kind of stay in touch with them?

Do you ask them to mow the lawns, and, you know, paint the surfaces, you know, keep things tidy?

I mean, how, how does that work?

- Yeah, I mean for The Walk specifically, obviously, we have a very close working relationship because there's a lot of nuance that goes into a project that big.

There are a lot of steps and obviously they ran into the pandemic as a part of that so that didn't help.

But in terms of how we handle it in general, people come to us relatively early in the process when they have an idea.

Because if they're not able to get the incentive then the rest of the deal doesn't work.

So it's only so far that they're going to go without coming before our board and getting the approval for the incentive and then that kicks off a lot of the other work to do the financing, complete drawings.

And so typically when project comes to us, they're about a year from actually starting anyway.

And sometimes they're a little bit closer, but at least a year.

And so we just continue to talk to them.

We do regular check-ins, you know, if we hadn't heard anything in a while.

Most of the time they keep us in the loop because there's different questions that they have for us.

- How often do you have to go to a developer and just say, hey, we're gonna pull back those incentives because you've just taken too long to get going on this project?

- It's happened.

It hadn't happened as much since I've been there 'cause I've only been there for a year.

But I know that it's happened in the past.

And certainly when we reached that point, we certainly will do that.

For us right now, we are reviewing our PILOT program.

So it's a big deal if we change course on a PILOT that has already been approved.

Because if they had to come back, then they would have to be approved under whatever the new terms of our PILOTs are.

- Yeah, Bill?

- And, while the incentives provide some assurance to lenders and things like that, that's not the green light for these projects.

The lenders have a lot more due diligence past those incentives, don't they?

- Absolutely, I mean, the lenders want to ensure that the project is going to work.

They have to find, you know, if there are retail spaces.

They have to be sure that they know what the tenants are going to look like in that space.

They have to secure the equity for the deal.

So they may have a portion of the equity and they have to go and raise the rest of the equity, whether they go into, you know, large New York Wall Street groups for that equity or trying to find local people to put in equity on the projects.

They still have quite a bit of work to do in order to get those deals finalized.

- Are they as leery as Eric talked about of, okay, there's all this big bang of publicity about this project.

And they're the folks who have to get to the real meat of the matter on this.

So I would imagine in some cases that they can be pretty skeptical about that.

- Yeah, sometimes, but I don't think necessarily the public pressure influences the bank.

I think that, well, obviously public pressure influences everything, but in terms of the bank's decisions, they are more rooted in will the project cash flow, will it be sustainable for the term of the loan?

I mean, that's what they wanna know is making sure that the project will be able to repay whatever debt they're taking out.

And so they go through very strenuous means to ensure that.

- Just two minutes left here.

I wanted to talk about, we didn't talk about the Mobility Center which is the big, you know, garage and retail space and all kinds of things going in right next to The Orpheum that people are down there, they see that.

That will be finished real quickly-- - Next summer.

- Next summer.

- Next summer, summer 2023.

- Okay, lemme talk for a minute.

This is not enough time to talk about it, about crime.

You all don't have a police force.

You don't run the police force.

I understand that.

But, you know, there's a spike in crime nationally, there's a spike in crime locally.

And it's definitely at more of a topic of conversation.

It's always been a topic conversation in Memphis, I think in most cities, but more so now.

How do you coordinate and what is your perception of what's going on with crime and what would you like to see the police force do more of, or the city do more of?

Or is that not even something that you yourself with?

- Oh yeah, we certainly concern ourselves with it.

We are funded by a commercial assessment on commercial property owners in Downtown Memphis.

So when things are going awry, they certainly let us know and they want us to act on their behalf.

And so we coordinate with Memphis Police Department on a regular basis.

I recently had a meeting with Chief Davis and her team and we talked about some things that we can do to make Downtown safer.

We're looking at some lighting strategies being funded by Shelby County Commission where we're gonna increase the light in different areas.

The MPDs looking at bike patrols, some things that they can add.

We're doing some things to reduce some of the chaotic activity by having some of the scooters cut off late at night 'cause sometimes the scooters dart in and outta traffic.

On late nights, and that's just not a good mix.

And so we concern ourselves quite a bit with public safety and our goal is to coordinate with our Blue Suede Brigade team, MPD and even the Sheriff's Department.

- Okay, well again, I didn't give you enough time, but I appreciate you answering that.

Thank you for being here, Paul.

Thank you Bill.

That is all the time we have this week.

If you missed any of the show, you can get the full video at wkno.org or you can get the full podcast of the show at The Daily Memphian site, iTunes, Spotify, or wherever you get your podcasts.

Thanks and we'll see you next week.

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