Chattanooga: Despite city aid, tenants still missing

Chattanooga downtown boosters thought they had a plan to revitalize a core block of the central city.

But a decade after the RiverCity Co. bought part of the 700 block of Market Street — and three years after transferring the site to a private developer — the downtown development group still is waiting for the development, dubbed Mayfair on Market, on the fenced-off construction site.

In the current economic slowdown, even government-backed projects such as Mayfair on Market are struggling to get enough financing to move forward.

Three blocks away from the stalled Mayfair on Market, another condo project, Renaissance Square on M.L. King Boulevard, has only one tenant, although it opened more than a year ago. Three blocks to the south, what was once Chattanooga’s biggest downtown retail development — Warehouse Row — is half empty and still trying to land new tenants even with a parking boost coming from the city.

“It’s a very difficult time right now and very hard to get financing for new projects,” RiverCity President Paul Brock said. “In the past few months, the environment has really turned down on just about every front. Fortunately, Chattanooga is doing better than most cities and our downtown is still showing signs of growth.”

Next year, BlueCross BlueShield of Tennessee will open a $299 million corporate campus atop Cameron Hill. Downtown, construction is slated to begin on a 12-screen movie theater and another hotel near the current location of the Bijou Theatre.

But in the meantime, the slowing economy has thwarted the building or leasing of the three government-aided projects in the central city, including $18.7 million of current or proposed condominium projects and a $10 million hotel once envisioned for Warehouse Row.

Developers blame tight credit markets and the faltering economy and insist that eventually their projects will bear fruit.

help from city hall

During better times over the past couple of years, such assurances led the city and agencies it supports — the Chattanooga Housing Authority and the 28th Legislative District Community Development Corp. — to collectively lend or invest more than $5 million in projects that are now waiting for more money or new tenants.

Tim Price, a Chattanooga businessman who helps lead the anti-tax group known as Tennessee Town Hall, questions why local governments backed the now stalled projects.

“Any public official who would spend that kind of public money downtown in this economy is crazy and irresponsible,” he said.

But Mayor Ron Littlefield dismisses such criticism and insists the city’s investment is relatively modest in comparison to the advantages of the proposed projects. Mr. Littlefield likened the downtown investments to what the city and county spent to buy and develop the Enterprise South industrial park, which ultimately helped Chattanooga land Volkswagen’s $1 billion auto plant now under construction. That plant and its spinoff suppliers are projected to add 11,477 jobs in the Chattanooga area.

“In our downtown, which is the heart of our city, we need to think just like we did at Enterprise South,” he said. “We put money in and that leverages new investments and new jobs.”

CHA invested $2.1 million of a $3.23 million federal loan in the proposed Mayfair on Market complex. Developer Trey Stanley demolished the buildings on the site, but his development group was unable to get private financing to move ahead with his proposed residential apartment or condominium complex before he was sued last month by RiverCity Co.

courtroom battles

In a lawsuit pending in Hamilton County Chancery Court, RiverCity claims Mr. Stanley’s 700 Block Development Partners violated its purchase agreement by not commencing construction after buying the site. RiverCity, which allowed Mr. Stanley to use the value of some of its property to buy another part of the 700 block of Market Street, wants to reclaim the site.

Mr. Stanley said he is pursuing a couple of options for the site, but he conceded that the current market makes any development difficult for the foreseeable future.

“I don’t think you are going to see very many starts of any residential condominium projects probably for the next 12 months,” he said.

Mr. Stanley said is “very disappointed” that RiverCity decided to sue to get the site back.

“It’s very difficult to start any project in a down economy when there is filed litigation involving it,” he said.

Mr. Littlefield said at least the aging and often smelly buildings in the 700 block have been demolished and the site readied for future development. The mayor said he is confident the site will ultimately bring needed new development. Other sites downtown that the city has helped also should find new futures, he said.

changing course

At the Renaissance Square condominium project at M.L. King Boulevard and Lindsay Street, UTC is talking with local foundations about buying the largely vacant 21,000-square-foot complex to potentially house an expanded SimCenter, said Chuck Cantrell, spokesman for the University of Tennessee at Chattanooga.

At the nearby Warehouse Row, the mayor said the 70 extra surface parking spaces being added in place of a downtown park should help both Warehouse Row and other downtown sites, including Chattanooga’s City Hall. The city is spending $375,000 to replace the park and provide more paved parking in and around Lindsay Street behind Warehouse Row.

“The park wasn’t heavily used and I think attractively done parking will be much more of an asset to downtown and should help with the revitalization of Warehouse Row,” Mr. Littlefield said.

Denis Pellerin of the Atlanta firm Pellerin & Salomon, whose company manages Warehouse Row, said plans for a hotel were abandoned this year after the credit crunch limited money for such projects. But Mr. Pellerin said the investment group that bought Warehouse Row two years ago still expects to invest about $20 million in its purchase and renovation of the 330,000 square-foot complex.

“Certainly, the economy is impacting everyone,” he said. “But we’re renovating the north building to offer class A office space and we remain optimistic about the future of downtown Chattanooga.”