Save Money in this Sunday's paper

comments

Eastland developer seeks total of $38 million in public investment

To turn the Eastland Mall site into movie studios, a hotel and retail space, a development group wants the city to provide 80 acres for free along with $24.7 million in city and county grants.

A City Council committee on Thursday heard for the first time a detailed request from Bert Hesse’s Studio Charlotte Development group, which has tried for more than a year to enter into a public-private partnership for Eastland.

Eastland Mall was once the commercial hub of east Charlotte. But the mall’s decline and 2010 closing mirrored the eastside’s loss of prosperity.

The city hopes a bold project will be a catalyst to remake the area.

Under Hesse’s plan, the city would give the developer roughly 80 acres of the Eastland site that it bought in 2012 for $13.2 million. The city is also spending nearly $1 million to demolish the mall, a project that’s underway.

Hesse’s plan calls for Eastland to be redeveloped into four “districts,” with the first anchored by eight new sound stages for movie and TV production. That would cost $89.7 million, according to a presentation to the economic development committee.

After that, three other districts would be built. They would include 125 residential lofts, a hotel and theater, 200,000 square feet of retail and commercial space, and a magnet school that could be built in partnership with Charlotte-Mecklenburg Schools.

Total cost of all four phases would be $297 million.

City staff gave a detailed breakdown only on how Hesse has proposed paying for the first phase, which would cost $89.6 million.

Hesse said he and his partners – Pacifica Ventures of Santa Monica, Calif. – would bring $19.4 million in cash to the deal. They would take out $39.2 million in debt and seek tax credits worth $15.2 million.

For the first phase, that leaves a “funding gap” of $15.9 million. For all the phases, he has requested $24.7 million.

Hesse has said that money would be spent on infrastructure for the project, such as roads and sewer and water lines.

The city often helps finance projects through a program known as a Tax Increment Grant. The idea is that a developer builds new taxable property, and the city and county then rebate the developer a portion of the new tax dollars to help pay for the project.

The city used this method recently to help build an outlet mall in southwest Charlotte, by reimbursing the developer $5.1 million from future property taxes in exchange for off-site road improvements.

There are significant hurdles to that approach for the Eastland project.

The first phase of the project isn’t expected to produce enough new property tax revenue for the city and county to refund $15.9 million. City staff estimated the first phase would create, at most, $8.5 million in new city and county taxes over 10 years.

It’s also possible that number could be lower, said the city’s economic development director, Brad Richardson. The reason is that some of Hesse’s cost estimates include so-called “soft costs,” such as planning and design, which wouldn’t translate into taxable property.

If the entire project were built at once, there would be enough new property tax revenue to cover Hesse’s financial needs, the city said. But the Studio Development Charlotte proposal needs nearly $16 million sooner rather than later.

It’s possible that the City Council could ask city staff to find other ways to help Hesse financially, outside of the property tax rebates.

But Pat Mumford, who heads the city’s Neighborhood and Business Services division, said after the meeting there isn’t any extra cash in the city budget.

He noted that much of the city’s reserves have been pooled to create a $63 million pot of money to build a 2.5-mile streetcar extension. And the bond money dedicated for Eastland is almost exhausted after the city bought the mall and hired a contractor to demolish it.

Republican council member Warren Cooksey asked Hesse what he would do if the public funding fell short. Hesse replied he would “go to private markets” to seek additional capital.

The council’s economic development committee did not vote on the plan Thursday.

The committee and full council won’t vote on the project until next year, when there will be a new mayor – Patrick Cannon – and five new council members.

Democrat Billy Maddalon, who was appointed to the District 1 seat when Patsy Kinsey became mayor in July, said at the end of the meeting that he is encouraged.

“These are big numbers,” he said. “But the potential for the eastside community (is) equally large.”

Maddalon, however, is leaving the council in two weeks.

Mayor-elect Patrick Cannon, a Democrat, asked whether Hesse has been tracking whether the General Assembly in Raleigh will continue generous financial incentives for the film and TV industry in North Carolina. In the past Hesse has said those incentives are crucial to his project succeeding.

“We are confident (Raleigh) won’t do anything to impact film jobs,” Hesse said.

Hesse is in the third month of an exclusive six-month window to negotiate with the city. Rick and Noah Lazes, who developed the N.C Music Factory, had proposed building a massive recreation center on the Eastland site – complete with outdoor ski slope – but they pulled out, leaving only Hesse’s group.

Hesse has also proposed making the movie studios a tourist destination to help raise money for the project. Studio Charlotte Development has said studios could attract at least 350,000 visitors in the first year. That would be more than the $200 million NASCAR Hall of Fame attracted in its first year, when 272,000 people attended the racing shrine.

Harrison: 704-358-5160
Hide Comments

This affects comments on all stories.

Cancel OK

The Charlotte Observer welcomes your comments on news of the day. The more voices engaged in conversation, the better for us all, but do keep it civil. Please refrain from profanity, obscenity, spam, name-calling or attacking others for their views.

Have a news tip? You can send it to a local news editor; email local@charlotteobserver.com to send us your tip - or - consider joining the Public Insight Network and become a source for The Charlotte Observer.

  Read more



Hide Comments

This affects comments on all stories.

Cancel OK

The Charlotte Observer welcomes your comments on news of the day. The more voices engaged in conversation, the better for us all, but do keep it civil. Please refrain from profanity, obscenity, spam, name-calling or attacking others for their views.

Have a news tip? You can send it to a local news editor; email local@charlotteobserver.com to send us your tip - or - consider joining the Public Insight Network and become a source for The Charlotte Observer.

  Read more


Quick Job Search
Salary Databases
Your 2 Cents
Share your opinion with our Partners
Learn More