Bibb Mill: A Threat to Columbus' Industrial Heritage?

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In the fall of 2007, one of Columbus, Georgia’s largest mills, Bibb Mill, was threatened with demolition. The owner applied for and received a demolition permit to remove 2/3 of the historic mill for a new hotel and parking, an action that not only jeopardized the huge mill complex but the city’s waterfront industrial National Historic Landmark district.

In order to discourage the demolition, Historic Columbus Foundation, The Georgia Trust for Historic Preservation, and the National Trust for Historic Preservation worked together to convene a group of large-scale redevelopment experts on November 1, 2008. Focusing on large projects in small cities, the panel discussed financing, marketing and adaptive uses, and structural and rehabilitation issues.

Bibb Mill Complex

STATUS
The ell structure north of the largest (main) mill building has already been rehabilitated into an event center. Five warehouses, two from 1918 and three from 1938, arranged in a crescent north of the main mill, were demolished about 10 years ago for parking and access to the event center.

The current proposal for the site requires the demolition of more than 2/3 of the largest main mill building, removing all but the original 1898 portion near the river and the 1920s façade along First Avenue. The remaining portion would be redeveloped as a luxury hotel. The one-story mill additions to the south of the main building would be removed for later, phased, development.

Owner Brent Buck (Buck Investments) has been granted a demolition permit for the above, contingent on the completion of a master plan for the complex. He has agreed to investigate the feasibility of retaining the entire main mill building and rehabilitating it using new market credits, investment tax credits, the state tax abatement, state tax credits, and low-income tax credits.

UPDATE: July 2008
Owner Brent Buck has decided to invest in rehabbing the one-story warehouse space, for he has been approached by someone interested in leasing the space for warehouse use. He is also working with someone interested in using part of the large mill structure for warehouse and office use. Brent considers this an interim plan, but the building seems safe in the short run and we will continue to work with him on his long run plans.

FINANCING
Bibb Mill’s eligibility for state and federal tax incentives is hampered by prior warehouse demolition and the sandblasting on the event center exterior and inside(~ 5%) of main mill, and the current proposal to remove the one-story structures south of main building.

Tax credits provide equity that helps support conservative debt. Typically, 30 % of a projects total costs can be covered with Investment Tax credits (ITCs) and New Market Tax Credits (NMTC’s). Low-income tax credits could also be an option for portions of the project that meet their requirements.

The Investment Tax Credit
The Investment Tax Credit (ITC) (20% tax credit) is one of the federal government’s most successful and cost-effective community revitalization programs. Historic structures must be income-producing and a certified historic structure. HPD, Historic Preservation Division of the Department of Natural Resources provides final approval and recommendation.

The New Market Tax Credit (NMTC)
The New Market Tax Credit is a 39 per cent credit on an equity investment to a Community Development Entity (CDE). The program permits taxpayers to receive a credit against Federal income taxes for making qualified equity investments in designated Community Development Entities (CDEs). To date, the Fund has made 294 awards totaling $16 billion in allocation authority. (The National Trust for Historic Preservation, corporations and banks such as Wachovia, SunTrust, and Bank of America.)
Businesses, investors, and communities will benefit from the NMTC. The NMTC program was designed to make investment capital available to businesses in qualifying low-income communities, to create jobs and spur additional economic development. The Federal Government created the 39 percent in NMTC as an inducement to private investors to open the flow investment capital into these communities. These tax credits, when considered along with the potential return on their investment in the CDE, create a substantial financial benefit for the investors as well.

Low income Tax Credit

• Must be low-income census tract (Bibb Mill qualifies)
• Must contain a 30% commercial component
• 39% Tax Credit
• Need to apply and be approved as an investment. Hotels are attractive projects.
• Successful applicants must prove strong, positive, long-term impact on the community.
• NMTC’s are designed to blend with ITCs. Each incentive can also stand alone.
• 7-year compliance
• Currently sell for ~ 75 cents on the dollar
• Pre-rehab approval required to ensure freeze of appraisal at pre-rehab level
• Uses the Secretary of the Interior’s Standards for Rehabilitation. Credits, for good or bad, set direction – go with that direction. Tax projects are a negotiation.

FINANCING TOOLS

State Property Tax Freeze
• 8 ½ -year freeze on property tax appraisal of property at pre-rehab level

State Tax Credits
• Currently 20%, $5,000 per-project cap (legislation passed in May 2008 raised the percentage to 25% and raised the project caps to $100,000 for residential, $300,000 for commercial).
• Georgia losing out to other states with higher credits and no caps.

Low Income Housing Tax Credit
• When used with historic credit, provides additional 30% credit amortized over 9 years.
• Can provide missing financing element – ex. Roswell High School, 50% affordable.
• Can apply to seniors and military.

HUD Non-recourse Loans
• Process is complex but could apply here.
• Commercial component set at 10%, but can apply for a waiver to get it raised to 30%.

HUD Economic Development Initiative grants
• Leftover funds allocated by Congress.
• Requires lobbying for earmark.
• Rep. Sanford Bishop is on Appropriations Committee, which decides the grants.
• Funds come to the City for use on the project.

North Carolina Mill Credit
• Passed for a particular project.
• Provides 10-30% additional credit.

MARKETING/USE IDEAS

Columbus market appears strong
• No luxury hotel in city.
• Loft market generally underestimated (ex: Knoxville – market study said 2½ years, but units occupied in 3 months).
• Johnston Mill (570,000 sf; 50/50 low-moderate) occupancy 90+%.
• Large influx of residents expected: Ft Benning expansion (30,000), Aflac (2,000 jobs), Kia nearby (2,500 jobs).
• Consider a site-specific relationship with Fort Benning, possibly more than 100 units.
   - Explore use of affordable credits.
• Historic story increases marketing interest.

Phasing: “Build it and they will come”
• Takes time – large scale historic projects don’t make much profit in the short term.
• Each phase brings up the market for the next; each phase is higher-end than the previous.
• Earlier phases can be converted to higher-end condos.
• Building condos initially “leaves money on the table”
   - costs more
   - no ITCs
   - selling in pioneering market
   - Wait until market matures
• Rental seems better fit – fort expansion, cheaper to build, brings up market, convert to condos and sell when market develops around the area.

Hotel
• Possible Phase 1: hotel and rental.
• Hotel flag will be difficult – rehab doesn’t fit standardized product – ex would want brick and wood covered.
• Location of the hotel within building could change – who will pay most for views?
• Hotel could be the driver – provides synergy, helps qualify for NMTC’s.
   - Low income jobs
   - Opportunity for training
• Hotel could be designed to be converted to condos later.
• Separate the two uses - hotel entrance one side, housing entrance(s) on the other.
• Two uses could share some services; hotel amenities could be used to market the units.

STRUCTURAL ISSUES

Construction issues
• Structure is efficient: regular, rectangular shape; wide but not too wide.
• Four-five stories very efficient – once basement is configured, above are stacking three-four identical levels.
• Building appears to be in very good shape.
• Windows huge expense - with such high volume use a custom manufacturer or builds your own.
• Two worst issues; water intrusion and sound.
• Hire sound engineering consultant.
• Total electric in big building – easier construction or gas only on top floor.
• “Guard your money,” to keep a tight handle on costs and not overspend (Johnston Mill was done for $50,000-60,000 per unit).
• Ground floor is the most challenging; upper floors much more predicable.

Parking
• Use basic, off-the-shelf pre-cast concrete product, $8-10,000/space.
• Locate at low ground either side of main building.

Fire code issues
• Current code requires Bibb to be regulated like a high rise – pressurized stairwells, etc.
• Need to negotiate with city/state – new code for historic buildings, concessions, etc.
• Be reasonable but if demands are inflexible, keep negotiating.
• City did negotiate with Johnston and with Eagle & Phoenix.
• Fire truck accessibility required – atop parking?
• Extra stairways always required in mills – pressurized are tougher to do, seek to avoid.
• Fire rated walls not a big deal.
• Explore working with State Fire Marshall.

Connectivity
• Pedestrian (and vehicular?) access through the structure, perhaps with a breezeway near the center.
• Getting NPS approval of an opening would be very difficult.
• Piercing a building very problematic – water especially.
• Other suggestions: “open walkthrough” with empty window openings so people could see through the
• structure; vehicular “tunnel” at ground level where lot is at its lowest.

City, fire code and SHPO cooperation are critical to making a project like Bibb happen.

BALLPARK FIGURES: Phase One

100 rental units 1,000 sf at 80,000/unit, =                         $8,000,000

Hotel
$30-35,000,000
Total cost, phase 1 (hotel and rental):                             $40,000,000

Amount that qualifies for NMC:                                       $38,000,000

ITC credit                                                                          $600,000 ($38M x $.20 x $1)
NMC                                                                            $10,400,000 ($30M x $.39 x $.70)

Total tax credit equity                                                  ~$18,000,000

PLUS: state tax credits, property tax freeze

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