Go Zone Bond Financing Requests have Changed

Published by the Mobile Press Register

GO Zone mix may change

Sunday, August 12, 2007
By KAIJA WILKINSONBusiness Reporter

The Downtown Mobile Alliance wants to make low-interest financing available for new projects, or increase the budget of those already planned.

Some of the nearly 30 downtown revitalization projects that had initially sought hurricane relief financing have been put on hold or used other funding since the alliance requested $44.4 million in tax-exempt Gulf Opportunity Zone Act bonds.

That means there will likely be more low-interest loans available, said Denise Browning, a Daphne consultant who is working with the alliance on the initiative.

The alliance, with the support of Mayor Sam Jones' office, initially sought the bonds in October 2006, when the funding was already spoken for. At the time, the state had allocated its entire $2.2 billion in GO Zone lending to other projects, including nearly $1 billion intended to help lure German steelmarker ThyssenKrupp AG.

ThyssenKrupp forgoes bonds

As it turned out, the financially solid ThyssenKrupp decided to build its $3.7 billion steel facility in north Mobile County without the bonds, so funding went back on the table. The alliance received a letter last month from state Finance Director Jim Main saying that its request had been granted.

Browning said that, with approval of the state, projects could be added or per-project allotments increased. Her goal is to use all
$44.4 million before a July 2008 deadline.

The downtown alliance is a partnership of the nonprofit Main Street Mobile Inc. and a management corporation formed in 2005 to run the city's business improvement district, or BID.

GO Zone bonds are a way borrowers can save money on their loans over the long term. They typically carry lower interest rates than commercial loans.

Browning said the bond rates will be between 5 percent and 6 percent, plus about 2 percent in fees. That could be better than what a borrower might get from a commercial lender, she said, adding that the bonds will mature in 25 to 30 years.

Decision deadline

Browning said smaller borrowers on the original list have been asked to decide by the end of Labor Day week whether or not they want the financing.

"That's when I'll know who is moving forward with this and who isn't," she said. "The goal is to make as many beautiful places in downtown Mobile as possible."

She said feedback she's gotten in the last two weeks have been positive, with several of the smaller and larger borrowers expressing interest.

Smaller potential borrowers include the owner of Veets bar on South Royal Street, who wants to upgrade the property, and larger ones include the developers of

$80 million mixed-use Water Street Landing at the foot of Government Street, restaurateur Bob Baumhower and New York developer Larry Posner, Browning said.

Baumhower and Posner are both eyeing projects that would help continue to transform historic Ft. Conde Village, whose buildings are some of the oldest in the city.

Baumhower, the former Alabama and Miami Dolphins lineman who owns the Wings Sports Grille restaurants, said he still wants to open a new concept restaurant in the former Roussos restaurant at 166 S. Royal St.

"We're going to look at the comparison between conventional borrowing and the bonds, but (using the bonds) is a possibility," Baumhower said.

Posner said he is working with the city of Mobile -- which owns Fort Conde Village and grants long-term leases -- and is optimistic about his plan to transform four 1800s building on St. Emanuel Street into bed and breakfast units and offices, a project originally pegged at $5 million. He has already renovated nine of the 13 buildings in the area.
Other property owners, meanwhile, have opted to proceed without GO Zone bonds.
Law firm Lyons, Pipes & Cook, for example, has either completed or nearly completed four downtown renovation projects totaling more than $1.5 million using accelerated depreciation, another benefit of the Gulf Opportunity Act, said Cooper Thurber, president. Accelerated depreciation translates into big tax deductions for property owners like the law firm.

"It was of greater benefit to us," Thurber said.
Lyons, Pipes & Cook's holdings include about a fourth of the downtown block at the southeast corner of Royal and Dauphin streets, and had originally proposed a parking garage and retail complex there, Thurber said. Those plans are indefinitely on hold due to skyrocketing construction costs, but the property could be developed if a feasible plan is presented, he said.
Change in plans
Terry Hillery, a Boston developer with roots in Mobile, had originally planned to use the bonds to finance a seafood shipping business and office renovation in a pair of historic properties he owns, but those plans have changed, he said.
Hillery is now considering turning his building at 355 St. Michael St. into a residence for himself, and a building on St. Francis Street on the market for potential condos. They were originally slated to be offices.
Browning said on the advice of the city's bond counsel, she is compiling a list of parties who would be interested in any excess GO Zone bonds. She met with several of them last week. Anyone interested in being added to that list may call Browning at 625-6291 .
She said the bonds don't work well with residential projects such as rentals, which must have a certain portion priced for lower-
income residents and that, combined with rising construction costs, can make a project financially unfeasible.