One of Richmond’s most powerful executives and fundraisers took his case for redeveloping a swath of downtown to area commercial real estate brokers Tuesday, revealing new details about the $1.4 billion proposal in the process.
Tom Farrell, the Dominion Energy CEO who is spearheading the proposed Navy Hill redevelopment, presented the project that would include a replacement of the Richmond Coliseum to members of GRACRE, the Greater Richmond Association for Commercial Real Estate, at a breakfast Tuesday morning at the Country Club of Virginia.
Displaying a sometimes-wry sense of humor despite fighting a cold, Farrell provided an overview of the proposal that he described as transformative for Richmond. He also encouraged attendees to show their support at meetings when the project and enabling legislation is presented to and reviewed by City Council – a process he expects will start soon.
“You all have a tremendous amount of influence in Central Virginia,” Farrell told the group. “Showing up will make a huge difference. Being there will make a huge difference. It’s very important, if you’re interested in this project, to come and show your support for it as we go along.”
Among new information Farrell shared about the project is that the Coliseum’s replacement, planned to be a 17,000-seat expandable arena, is being designed by the same group behind the new Mercedes-Benz Stadium in Atlanta, where this year’s Super Bowl will be played.
Hotel, affordable housing are planned
Those components include a renovated Blues Armory, an anchor hotel for the Greater Richmond Convention Center, mixed-income and affordable housing, a new bus transfer station, local job creation and a financing plan with no moral or general obligation to the city.
“In other words,” Farrell said, “have a brand-new coliseum that they (the city) own, that the citizens are not on the hook if something goes wrong. I don’t think there’s anything else like that in the country, not that I’ve identified.”
The group responded with a proposal that Farrell said would meet all of the city’s requirements, including creation of 9,000 permanent jobs and 12,500 construction jobs, with $300 million in contracts to be set aside specifically for minority-owned businesses; a 527-room Hyatt Regency-brand hotel; and 680 income-based housing units that would add to 2,520 market-rate apartments.
Plans also call for replacing the GRTC transfer center along Ninth Street; new build-to-suit office buildings, one of which Farrell said has a commitment from VCU; and putting a 20,000-square-foot food court, 900-seat music hall and a ballroom in the armory, an historic building that was part of the 1980s-era Sixth Street Marketplace – a failed project that Farrell said he’s heard enough about.
“If I hear about that again as long as I live: ‘Hey, we did the Sixth Street Marketplace 35 years ago and that didn’t work. How can we do something else?’ Are you kidding me?”
The group has retained Fairfax-based Concord Eastridge and CEO Susan Eastridge, along with Michael Hallmark and his Los Angeles-based Future Cities, as master developers of the project through an entity called Capital City Partners.
TIFs to help pay bills
The $1.4 billion investment would be funded in large part through the establishment of a tax-increment financing (TIF) district, in which real estate tax revenue from new development in the district would be used specifically to pay for the project.
Plans call for the TIF district to cover areas beyond the 10-block project area, spanning a chunk of downtown bordered to the west and east by First and 10th streets and to the north and south by Interstate 64-95 and the Downtown Expressway. The expanded area includes the new Dominion tower under construction on South Sixth Street and the site of a planned second tower nearby.
Farrell said the size of the proposed TIF district is needed because much of the downtown properties involved are nonprofit- or government-owned and do not generate taxable revenue. He said such districts, while less common in Virginia, have been used to success in cities across the country, such as in downtown Indianapolis and Dallas.
Big projections for tax revenue
An analysis by Chicago-based Hunden Strategic Partners project the Navy Hill redevelopment to produce $1.7 billion in additional tax revenue in 30 years, whereas Farrell said doing nothing would produce $420 million. Farrell said the notion that comparable tax revenues could be generated without the project, with so many untaxable properties involved, “ludicrous.”
The new incremental revenues from the TIF district, which would be managed by Union Bank, would be used to pay back $300 million in non-recourse revenue bonds to be floated by the city and underwritten by JPMorgan Chase and Citigroup. The project’s remaining $1.1 billion cost would be fronted by NH District Corp.’s investors, who the group has not identified.
Additional incremental revenues projected from the project would be allocated, as Mayor Levar Stoney announced last year, with $600 million going to schools, $180 million to housing, $12 million to support local arts initiatives and $400 million to support general city services.
“The project is far more than a new coliseum,” Farrell said. “The project is going to transform the city of Richmond, in a way that would take decades to do otherwise.”
“It holds up financially,” he said of the proposal. “I don’t think there’s anybody who’s going to be able to seriously question the financial models here. They have been through two years of hand-wringing and all sorts of stress-testing.”
Farrell acknowledged further review would come from City Council, which last month approved the formation of a commission to review and advise them on the proposal when it is presented.
Farrell said the proposal and enabling legislation is being finalized with guidance from Roth Jackson attorneys Mark Kronenthal and Jennifer Mullen. He said negotiations continue with the city about certain details of the proposal.
“It is a big project; it looks more complicated than it is at least in my opinion, but there’s a lot of detail that has to be worked out,” Farrell said. “Everybody wants to make sure that we provide the city with a fully thought-through plan that they feel very comfortable supporting.”
Clarification: Hunden Strategic Partners conducted the third-party analysis of the NH District Corp. proposal. Davenport & Co., the city’s financial adviser, has presented the analysis but was not involved in it. An earlier version of this story incorrectly described both companies as having conducted analyses.