One of Downtown Memphis' most anticipated, and highly publicized, developments just cleared its first hurdle for a pair of incentives.

On Tuesday, the Center City Revenue Finance Corp., an affiliate board of the Downtown Memphis Commission (DMC), approved a 30-year payment-in-lieu-of-taxes (PILOT) for the 100 N. Main redevelopment project. The board also approved a 5% Tourism Development Zone (TDZ) surcharge, which was included in the project's proposal. Both will require additional approval (more on that below).

DMC President and CEO Chandell Ryan said the renovation of the building is key for Downtown. Tuesday was Ryan's first Center City Revenue Finance Corp. meeting in her new role. She succeeds former DMC president and CEO Paul Young, who is now mayor.

"It is just a great signal for our city," she said.

In February 2023, the DMC approved changes to its PILOT incentive program that would limit term lengths to 10 to 15 years, with a 20-year term length exception if certain criteria are met. Those changes took effect July 1, 2023. Per the development agreement for the 100 N. Main project, since the project was awarded to 100 N. Main Development Partners in 2022, during the previous PILOT program terms, it is eligible for the previous iteration of the PILOT incentive program.

DMC chief operating officer Brett Roler said the potential for rethinking a building of this size and scope for Downtown Memphis is huge.

Roler added that the PILOT and surcharge incentives are for the project's first phase of development: The 37-story tower and parking garage. The development team will look at financing the second phase of the project, the corresponding properties along 80 to 88 N. Main St. (Those properties are included in the pre-development agreement.)

Roler said the development team is looking to close financing on the first phase of development later this year. When the financing closes ownership for the property will transfer, for the tower portion of the property.

The 100 N. Main redevelopment project will look to restore the 37-story tower into a mixed-use development. The tower dates back to 1965 and has been vacant since 2014. Per the PILOT application, the redevelopment plan has changed slightly including a total budget increase from $261,288,654 (per November 2022 reports) to $282,479,999.

What will the new 100 N. Main look like?

The 792,873-square-foot building will include a 160-room hotel along with 8,000 square feet of meeting space, as well as 200 apartments and approximately 80,000 square feet of office space on the middle to upper floors of the tower. In December 2023, during the ceremonial groundbreaking for the project, former Memphis Mayor Jim Strickland announced the city has signed a lease for 60,000 square feet of office space inside the 100 N. Main building once renovations are completed.

The tower will include an 8-story, 378-vehicle parking garage. The lower floors will include restaurant and lobby space along with meeting space. Office space will occupy floors nine through 14 with hotel rooms located on floors 15 through 22. Apartment units will be located on floors 23 through 36. A restaurant and longue area will be reserved for the rooftop area.

Memphis-based HBG Design and Allworld Project Management are also helping with the project. Raleigh-based Winston Hotels is managing the site’s hospitality component.

Apartment size breakdown for 100 N. Main

• Studio: 86 units

• One-bedroom: 57 units

• Two-bedroom: 53 units

• Three-bedroom: 4 units

Construction is expected to take 30 months, with an estimated opening date in 2027. Jay Lindy of the development team said they are close to finalizing a deal for the flagship hotel client.

During its Jan. 11 meeting, the Land Use and Control Board approved a road closure along N. November 6th Street from Jefferson Avenue to an alleyway between N. Main Street and Second Street. The roadway is adjacent to the 100 N. Main property and would be part of the second phase of construction. The board approved the road closure via its consent agenda last month. During the meeting, the development team and Roler said the adjacent area next to the tower would be used as a staging area for construction.

What's the PILOT tax abatement?

According to the PILOT application, the developers are projecting an estimated annual rental revenue for the property to be more than $24 million by 2028 and will exceed $30 million by 2047.

The estimated annual real estate tax for the property with the PILOT is $2,558,288, including city and county taxes. (Without the PILOT that total would be over $3.4 million. The PILOT reduces the total city and county tax by $852,763 annually.)

The total culminative real estate tax benefit over the 30-year PILOT term is an estimated $76.7 million. The 30-year PILOT will need to be approved by the state Comptroller and the Commissioner of the Tennessee Department of Economic and Community Development (TNECD), DMC legal consul James McLaren said.

During the meeting McLaren said all the elements of the mixed-use operations for the building are essentially operating independently for incentives, however, under the umbrella of one 30-year PILOT. He said all said PILOTs (i.e. hotel financing) are expected to close at the same time.

The aforementioned TDZ surcharge will require Memphis City Council approval. The surcharge is generated from room and occupancy revenue along with food and beverage-generated sales and revenue. Those funds are used into help pay for construction costs. The 100 N. Main building is located in the Downtown Memphis TDZ. Shelby County has three designated zones including the Memphis Fairgrounds and Graceland (there are eight total Tourism Development Zones in Tennessee). The Downtown zone expires in 2031.

McClaren said the TDZ is expected to generate $1.25 million in sales tax annually for the project, and is similar to the One Beale agreement. During the meeting, McLaren also mentioned the possibility of future city grants to help provide financial aid and bond funding for the project.

The PILOT length and inclusion of the TDZ surcharge are similar to the incentive package the Center City Revenue Finance Corp. approved for the Downtown Memphis Sheraton Hotel project in October 2022. The Sheraton Hotel is up for sale and looking for new owners. With the sale, the previously approved incentive is void.

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New ownership & funding breakdown for 100 N. Main

In the PILOT application, the previous ownership group of 100 N. Main Development Partners, comprised of local developers Billy Orgel, Kevin Woods, Jay Lindy, Michael McLaughlin and Adam Slovis; will be changing its name to 100 N. Main LLC.

The new entity has an ownership split of 50-50. The 100 N. Main Development Partners team owns 50% with Kansas City-based Block Real Estate Services owning the other 50% stake in 100 N. Main LLC, per the PILOT application. Lindy and McLaughlin were present during the meeting with Kevin Woods and Aaron Mesmer joining virtually via Zoom.

In December, the development team announced a partnership with Block Real Estate. The Kansas City-based firm was previously a competitor for the initial site redevelopment bid. Block was one of six finalists announced by the DMC.

Woods and Aaron Mesmer of Block Real Estate will be co-managers of 100 N. Main LLC, according to the application. (Mesmer spoke with media and officials during the December 2022 ceremonial groundbreaking.)

"We're really excited to be involved in this project," Mesmer said during Tuesday's meeting. "It [100 N. Main] is seen as catalytic and a hub for the community."

Financing for the project includes a variety of grants and equity. The developers have secured more than $43 million in historic tax credits along with a $10 million grant via the Accelerate Memphis program. In August 2022, the Economic Development Growth Engine for Memphis and Shelby County (EDGE) board approved a $5 million commercial loan for the project. The loan will be used to help finance the first phase of construction, which includes internal demolition.

McLaren said per the development agreement ownership does not transfer until financing is closed.

During the meeting McLaughlin said the group has spent approximately $5 million already with pre-development and site work. The statement sparked a remark from Center City Revenue Finance Corp. board member Sean Norris who said that is part of a being an "at-risk development, that's what you do."

McLaughlin and Lindy also added that per the request for proposal the development team will need to have a plan in place for phase two of the project by 2025. The team has a concept in the works right now.

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Breakdown of 100 N. Main financing

• Debt: $145,119,280

• Equity: $48,000,000

• Historic tax credits: $43,306,288 (100 N. Main was added to the National Register in 2015)

• TDZ/Surcharge: $421,304,491

• Accelerate Memphis grant: $10,000,000

• Downtown Mobility Authority reimbursement: $3,750,000

• HUD financing: $6,000,000

• EDGE loan: $5,000,0000

Additionally, the property is still currently owned by the Downtown Mobility Authority, an affiliate board of the DMC. (Billy Orgel's son, Benjamin Orgel, is chairman of the DMC board.)

The Downtown Mobility Authority acquired the property in March 2022 for $10.75 million.

In January 2023, the Downtown Mobility Authority approved a purchase agreement with 100 N. Main Development Partners for $10 million. Per that agreement, the $10 million payment would include the building, the surrounding two acres and would be split into two $5 million payments. In addition, the agreement had a stipulation that if demolition and cleanup work began prior to the development agreement being signed the developers would be reimbursed $3.75 million for expenses. (The reimbursement is included in the 100 N. Main, LLC financing budget in its PILOT application.)

The development agreement was signed in November 2023.

Neil Strebig is a journalist with The Commercial Appeal. He can be reached at neil.strebig@commercialappeal.com, 901-426-0679 or via X: @neilStrebig.

This article originally appeared on Memphis Commercial Appeal: Downtown Memphis: 100 N. Main tax break OK'd. What's next for project?