My Turn, Michael Young: Decide on Empire Hotel and move on
By Michael Young
If learning from your mistakes makes up for the fact that the Empire Hotel is not under construction, then there has been a heck of a lot of learning going on.
The long, slow dance between Black Point Investments, Downtown Salisbury Inc. and the city was painful enlightenment. The immense size of the project limited the pool of developers who could take on the project. And now that the project has three local developers willing to take on parts of it, with financing in hand, DSI and the city should be ready to go.
But indecisiveness still may torpedo the deal. Worse, the inability to close the deal in a timely manner is having negative cascading effects on downtown. It’s time to decide!
The current trajectory for the Empire development can be traced to Ed Clement, former trustee with Historic Salisbury Foundation, Inc. With the project stalled with Black Point he continuously asked, “Why isn’t the foundation helping to package a deal to develop Empire?” With that said, the foundation’s Property Committee and board floated the idea of breaking the Empire into three smaller pieces to make it more palatable to a broader pool of developers. To financially back up that idea, it floated the idea of using part of its $5 million equity in The Salisbury Station to help collateralize the Empire project. The foundation owns The Salisbury Station, which is a Revolving Fund property.
Floating the idea and being financially prepared to back it, the idea of breaking the project into smaller pieces got enough traction to end the slow dance with Black Point and go back out for new proposals. Smaller pieces helped DSI and the city tap a larger pool of investors. Today, they have some great local developers with financing ready to go — Something that Black Point couldn’t seem to muster. So, what is the hold up now? Analysis paralysis? Too many good options? Fear of choosing wrong? The desire for the ideal conditions?
Yes, plus the foolhardy desire for the Empire to have a hotel component.
Never mind pre COVID-19, few upscale hotels were being financed and built. Never mind that during COVID, hotels were being sold for 10-20 cents on the dollar. Never mind that today, most banks will not finance anything that has a hotel component.
Mayor, put it out of your mind! The development proposals submitted represent what the market will bear. If a hotel was the highest and best use for the Empire, it would have come through in one of the developers’ proposals. It is time to choose one of the viable offers on the table and don’t look back. Be decisive.
The cascading effects of indecision include:
First: We have been without a Main Street manager (downtown manager) for over a year. A manager that is seasoned, professional, experienced with business and real estate development experience.
Second: The city is no longer enforcing the commercial maintenance code (CMC). For those playing at home, the CMC is like a minimum housing code for commercial properties. You must have a water-tight roof, windows, paint coatings and no rats. Why lack of enforcement? The Empire Hotel is one of the biggest offenders.
Third: The longer this goes on, the more likely the developers will move on. The more damage is done to downtown.
Why are these things important? A Main Street manager understands the financial costs of indecisiveness and advocates for moving at the speed of business, not government. The extended decision times make keeping potential tenants (pre-leases) on board difficult. The extended decision times make keeping financing commitments and commitments to buy tax credits more difficult.
An enforced commercial maintenance code makes it financially uncomfortable to be a slumlord. You either spend the money to fix the building and rent it to recover your costs or you sell it. Without being forced to maintain your building to a minimum standard, a slumlord can allow his building to sit vacant, rot and bring down adjacent property values. This is hard on existing business and property owners who are making investments. If it continues, it will stifle future development.
The city and DSI have viable development offers on the table from reputable developers whose financing decisions were backed by market-rate decisions. For the good of downtown and our community, stop forcing a bad idea on the development process. Decide and drive on!
Michael Young and wife Diane are former Main Street managers currently working as consultants and developers. They recently renovated and live in the Historic O.O. Rufty Building in Downtown Salisbury.