Developer: $3 million-plus needed to redevelop hotel

March 29, 2011

By MICKEY POWELL - Bulletin Staff Writer

A local developer estimates it will take more than $3 million to redevelop the former Henry Hotel in uptown Martinsville, but he is optimistic that the money can be obtained.

Officials with the Phoenix Community Development Corp. hope renovations to the building can begin next year, said Executive Director Ray Gibbs.

Phoenix is a nonprofit developer involved in uptown revitalization efforts. Its first major project is the former hotel at the corner of East Church and Broad streets. In 2009, the Martinsville City Council bought the four-story building for $520,000 — including a $425,000 loan from The Harvest Foundation — with plans to have it renovated.

The hotel is targeted for mixed-use development, Gibbs said. That includes businesses on the first floor and apartments on upstairs levels, he said.

Gibbs is exploring the possibility of developing some upstairs space as an inn for area visitors needing a place to stay for extended periods. He emphasized that such businesses operate differently from motels.

He also is interested in developing part of the basement for “a little Irish pub” or a similar type of establishment, he added.

Gibbs estimated the redevelopment will cost $3.5 million to $4.5 million. He is lining up various types of tax credits and loans to cover the cost, he said.

One of those funding sources has hit a snag, though.

Phoenix found that the hotel renovation did not qualify for the New Markets Tax Credit Program this year due to economic conditions as of the year 2000 in the Martinsville census tract that includes uptown. The tract also includes Druid Hills and Mulberry Road, Gibbs noted.

Factors taken into account in determining whether projects in a particular census tract qualify for the program include unemployment rates, median family incomes and poverty rates, according to Gibbs.

He said results of the 2000 census showed the tract had an unemployment rate of 8.65 percent. That was just below the level of 8.7 percent or higher required for the tract to qualify for the credits, he added.

The New Markets credit equals 39 percent of the investment, paid out over seven years, Gibbs said. Later this year, organizations can start seeking the credits as part of the 2012 cycle, and qualifications will be based on results of the 2010 Census, he said.

Because Martinsville’s economy has worsened since the 2000 Census, Gibbs thinks the uptown census tract will meet all requirements for New Markets credits in the upcoming cycle.

“We’ll have to shop this project” because Phoenix itself would not be able to apply for the credits, Gibbs said. Instead, an entity that is able to apply for the credits — such as lending institutions or the National Trust for Historic Preservation — on behalf of Phoenix will have to be found, he said.

In the meantime, Gibbs said Phoenix will proceed to complete other things related to redeveloping the Henry, such as other funding arrangements and architectural/engineering drawings.

“This will give us some time to look at things a little closer so we can make the best long-term decisions ... so when we start (the hotel redevelopment), we’ll know it’s going to work,” he said.

After plans are in place and all the needed funding is obtained, it probably will take up to two years to renovate the building for tenants, Gibbs said.

“It takes at least a year, and usually two ... to build anything of any (large) size,” he said.

Gibbs said no commitments from tenants have been obtained yet. Plans for the Henry are not far along enough to pitch to prospective tenants, he said.

Ultimately, Phoenix aims to refurbish the building in an attractive way that will not only lure businesses, but also attract others who want to locate near the hotel, he said.

The more businesses that are uptown, the more people who will visit the central business district and spend money there, Gibbs reasoned.

He hopes a lot of those visitors are from out of town. Having an extended stay-type inn at the Henry would help keep them here for a while, he said.


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