Developers of The Walk, formerly Union Row, respond to COVID-19 challenges
MEMPHIS, Tenn. (WMC) - It’s been called a “game-changer” and billed as the biggest redevelopment project in Memphis history.
The project formerly known as Union Row has experienced some changes and delays. Some of those changes are connected to the financial uncertainty caused by COVID-19.
The massive project is projected to cost $741 million during the first phase.
Developers recently changed the name from Union Row to The Walk on Union to align with the desire to make downtown a more walkable area.
But they say the goal of the project remains the same. They intend to “deliver what downtown has been hungering for.”
That means upscale residential, retail, office space, hotels (two in the first phase) and the fastest internet in Memphis.
Just one problem.
“The impact of COVID-19 has pushed pressure on to the project. They’ve had to lower expectations on the rents and the ability to fill up the buildings as soon as normal,” said Jennifer Oswalt with the Downtown Memphis Commission.
Oswalt told Shelby County Commissioners Wednesday the historic economic uncertainty caused by the pandemic has taken a toll.
“There’s just immense challenges not only from pressure from the lending institutions, but also market pressure and uncertainty, which make things difficult,” said Oswalt.
In light of those challenges, developers are seeking approval for a 30-year PILOT, or payment-in-lieu-of-taxes.
This would replace the TIF (tax increment financing) previously granted to the developer.
Developer Kevin Adams says it will provide reassurance to potential investors.
“I don’t know what’s coming in the future and we have to depend on those capital markets, you know, that they’re willing to invest if it’s in Memphis or it’s anywhere,” said Adams. “But this is going to give us the opportunity to keep moving forward.”
According to documents from the Downtown Memphis Commission, “The result of current market conditions reduced the public incentives as a percentage of total sources from 25 percent to 18 percent, or $135 million; yet the overall investment remains at $741 million.”
The hope is for construction to start early next year. It is estimated that Phase 1 will be finished in 20-24 months.
COVID-19 has also led to developers making some minor design changes to the project, like more contactless doors.
According to their application for the PILOT, developers are also seeking the ability to pay 100 percent of the property tax and have the PILOT payments (75% of the incremental increase in property taxes) deposited in a trust account used to pay debt service on the project.
The Memphis City Council and the Shelby County Commission would each have to approve that.
The city council has already signaled its approval, and commissioners seemed to be on board as well during their committee hearing Wednesday.
The full county commission is set to take up the issue Monday.
State law limits PILOTs to 20 years, so the State of Tennessee would also have to grant approval.
The developers are also seeking approval for the hotels that are part of the project to be able to charge a five percent tourism surcharge to help pay the bond used to finance the development.
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