NORFOLK
Amid a meltdown in the credit markets and with the economy slumping, downtown is experiencing a building boom.
Three-quarters of a billion dollars of construction is under way or planned.
Norfolk is pushing ahead with a big helping hand from taxpayers. City, state and federal dollars account for nearly half of the new construction. Much of that money is for light rail.
“All over the country, projects are being shut down,” Mayor Paul Fraim said. “We are bucking the trend.”
Developers and city leaders broke ground this week on one of the projects, the Wachovia Center. The $171 million, mixed-use development will include a 22-story office tower, 175 apartments, 250,000 square feet of office space, 50,000 square feet of retail and nearly 2,000 parking spaces.
Other major developments bolstering downtown renewal efforts include:
- Light rail, a $232 million mass transit system being funded by the city, state and federal governments, will run from the city’s medical complex through downtown and to the Virginia Beach border. Like the Wachovia Center, it is under construction and scheduled to open in 2010. The city’s share will be $33 million.
- A $27 million, nine-story Residence Inn by Marriott at Brambleton Avenue and Duke Street is being developed by LTD Management of Chesapeake. The land was sold to LTD at $1 million less than its appraised value, but city officials say the appraisal was overly generous.
- The Belmont at Freemason, a 241-unit apartment complex costing $41 million, is being built by Kotarides Developers just west of the Residence Inn. The city sold land to Kotarides for the appraised value of $1.1 million.
Officials also expect to announce next week the finalization of a deal for a 300-room, 25-story Westin Hotel. It will be attached to a $50 million convention center and a parking deck.
The Westin project, at a cost of nearly $200 million, will be one of the most heavily subsidized projects downtown. The city will build the convention center, which will be paid for with meals and hotels taxes. It will also provide LTD Management, the hotel’s majority developer, with a $7.5 million “performance grant.”
Performance grants are paid for with tax revenue generated by a project. City Councilman Barclay C. Winn defended the city’s involvement in the project, which the council approved unanimously several years ago.
“The convention center will fill a void downtown,” he said. “It’s expensive, but that’s the nature of building a convention center.”
The city has long focused most of its economic development efforts downtown, constructing Scope, Waterside, Nauticus, Harbor Park, Town Point Park and a cruise ship terminal over the past four decades. The $330 million MacArthur Center shopping mall was jump-started with about $100 million from the city, most of it for parking garages, streetscape improvements and a loan to build the Nordstrom store.
City leaders have spent money on downtown redevelopment over the objections of some community leaders, including members of Norfolk Tea Party II, an anti-tax group, which has said the city has neglected many of its neighborhoods.
But the city’s downtown investments have resulted in increased tax revenues, Fraim said. A study done for the city by Chmura Economics and Analytics, a Richmond firm, found that from 1996 to 2006, downtown generated $18.5 million per year in taxes in excess of what the city was spending there. Employment downtown also has increased, from 16,916 jobs in 1996 to 24,933 jobs in 2005.
Wachovia officials, who are financing the Wachovia Center for developer S.L. Nusbaum Realty, said their lending standards have tightened since credit markets hit a slump. But they say they have confidence in downtown Norfolk, in part because the city is helping to subsidize large projects by providing grants, land or parking garages.
Nearly a decade ago, Wachovia financed the downtown office building at 150 W. Main St., and later the first office tower built by Armada Hoffler at Town Center in Virginia Beach. Both projects were supported with city dollars.
For the Wachovia Center, Norfolk is contributing $5.4 million for utilities and right-of-way improvements and is giving developer S.L. Nusbaum land valued at about $3.6 million. The city also is spending $53.4 million on parking garages; parking fees will pay for the 1,950 spaces.
When the Wachovia Center opens in 2010, it will generate about $3 million in direct taxes for the city, Fraim said. That revenue would not exist without the city’s participation in the project, he said.
Christopher W. Brown, director of income property for Wachovia’s downtown Norfolk office, said city participation helped make Wachovia Center an attractive project to finance. Brown said the bank will centralize its administrative activities from four offices in the region – 130 jobs in all – at the Wachovia Center. That gave bank officials a sense of ownership in the project, he said.
“The city has created an atmosphere downtown for good projects,” he said.
The office vacancy rate downtown is about 7 percent, down from historical averages of 10 to 12 percent. The timing is right for a building the size of the Wachovia Center, said Donald Crigger, senior director of office properties for GVA Advantis, a real estate company with offices in Norfolk.
“I wouldn’t say the demand is all that robust, but it’s been very stable,” he said.
Although vacancies will be created when tenants move from other downtown office buildings into the new center, those spaces should be easily absorbed, Crigger said.
Hotel occupancy rates are flat, given the sluggish economy and rising gas prices, but the long-term prospects “are very good” for the hotels planned for downtown, said Anthony DiFilippo, president and CEO of the Norfolk Convention and Visitors Bureau.
Two other large projects are proposed for the downtown area.
Norfolk physician Keith Newby and the Lauth Property Group of Indianapolis plan to build a nine-story, $66 million medical office building across Brambleton Avenue from the city’s medical complex. The city will provide a performance grant for the project, to be called Fort Norfolk Plaza, but the amount has not been announced.
The Aniesh Corp., a Norfolk hotel-management company, plans to build a 15-story, $18 million Hampton Inn on Brambleton Avenue, half a block from the Residence Inn project.
Developer Raj Randeria has said he hopes to begin construction late this year on the project, which will have no city participation.
One large downtown project remains in limbo – the $180.5 million Granby Tower, a 34-story condominium that was to be downtown’s tallest building.
Work halted last year when developer Buddy Gadams lost his financing, in spite of a $22 million performance grant from the city that would be awarded after construction was nearly finished.
Gadams has said the project will resume, but several contractors have sued the developer over work for which they have not been paid. Eventually, Fraim said, Granby Tower or some other development will rise there.
“Buddy just got caught up in a very difficult market,” he said. “We’re still hopeful that as the market improves, that Buddy will be successful.”
Staff Writer Deirdre Fernandes contributed to this report.
Harry Minium, (757) 446-2371, harry.minium@pilotonline.com
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hmmm
last I checked money spent on Ipod's and Gas went into pockets outside of Hampton roads, more specifically outside America! Tax money used to invest in Norfolk development sounds like a better local investment...Econ 202, the chapter you didn't get to!
another thing
I guess a lot of these people were loving it when Norfolk was a place to avoid and the downtown deteriorated and was at an all time low. There wasn't any revenue, and no hope of anything being built. Chances are things will continue to be the same anyway, Norfolk and Virginia Beach will continue to build up their downtowns, the other cities; eh, it's hard to tell. Perhaps Portsmouth, there was a lot of interest in Suffolk a while back but it'll probably build up to be that ultra-suburban that VB is trying to get away from. For now downtown Hampton Roads will continue to be whatever these two cities have to offer. On the plus side, this will encourage the development of some much needed transportation, something other than 30 lane highways actual public transportation, rail, better bus systems, etc.
wow
Boy you guys need to get out a lot more. Norfolk's downtown rivals Virginia Beach by far, and VB is a third larger. Norfolk's downtown is nothing though compared with cities in the Northeast that are a lot smaller, and has a long way to go. Norfolk is on the right track, this is the direction that urban planning has been for quite a while, and is the model that cities everywhere from both coasts and even in the Midwest are following. This is what people want, particularly those moving to the area. Everyone whines and complains as though we're duplicating New York here, nothing of the sort, NYC has over 5,200 high-rise buildings, Chicago like 1,100, not even close. I don't even think we're on par with some of the cities in NOVA, I think Alexandria is like 60 buildings. But it's more than just high-rise buildings; if planners can give Norfolk an atmosphere that bland cities like Toronto are lacking then we're in no worry to feel as though we'll turn into those areas.
I resent the push for downtown
This very same thing happend before Waterside was opened, and all focus was on downtown. Many, many other area's need improvement also, but they don't get the infrastructure dollars to do so. Norfolk still operates on the premis that if they build it they will come, and we know that's not necessarily true. The ship terminal cruise lines will be cutting cruses in 2009, Waterside has hit bottom, and well, if you've been on the ship once, you don't go back again. The only people going downtown are those that work there, the drunks at Waterside and the homeless.
This story does not go far enough is a great brochure piece
The issue is that downtown forsakes all other areas of the city.The elected officials won't listen to the citizens who elect them.
Why not just state that the city is propping up downtown like it were a model for the few rather then those who inhabit and pay taxes?
I just wish the pilot would do a story rather then something the city advertisers can use in the market brochure. I want growth but just not by proxy of exploiting the citizens who actually live there. It seems the interest of the few outweigh the majority again
no blight
No blight in Atlanta eh?
Foreclosure due to ARM's is happening everywhere
Foreclosure due to out of control property tax assessments is happening in Norfolk. Most responsible cities have a limit on the % of tax or assessment increases per year. Having families literally taxed out of homes while handing tax monies to fund private business ventures for profit is criminal. It is a part of the reason Norfolk continues to wallow in blight (Wards Corner, Ocean View, Colonial Place, ODU area,etc etc) as other cities improve and redevelop.
Quote-"oh look at me, I know how to gripe about development which will keep Norfolk economically stable. Get over yourselves and your old way of thinking. Norfolk is blowing up and and light rail too. Who cares about the taxes you were just going to spend that money on gas and ipods...chill!"
Econ 101 - They teach this in college but you have to actually go and study - Each dollar of consumer spending regenerates around 4 times the economic result of a government dollar spent.
You need to be happy people have disposable income to spend on Ipods and even the "unecessary" things like gas to go to work and school. That is what drives the local economic engine. Those dollars are respent in the community. $Millions$ in our t
Forclosure
Forclosure is not just a Norfolk problem, it's happening everywhere.
Dont worry about it Wayne
We need to supply our hard working residents tax dollars to large corporations and developers. Residents can get a second job or eat cake. Two homes in my Norfolk neighborhood into forclosure in the past 6 months. Neither was on a adjustable rate mortgage. One resident was semi retired and the other was military (a good friend). House payment increases over the past 4 years due to exponentially increasing property tax rate and increased insurance literally forced them into forclosure. Both homes are on the market priced under the assessed value and both sitting vacant and run down. But boy....how about the Buddy Ghaddams huh? When he finishes Grandby Tower with our $22M and makes all that profit, 500 wealthy people will move in and save us all. Right Paul? Oh Paul missed that econ class where they explained that demand creates supply and not supply creates demand. Small oversight.
complain all day
oh look at me, I know how to gripe about development which will keep Norfolk economically stable. Get over yourselves and your old way of thinking. Norfolk is blowing up and and light rail too. Who cares about the taxes you were just going to spend that money on gas and ipods...chill!
Develpoing Poverty
Developers and city leaders must realize is that for every tax - someone gets pushed into poverty.
The city’s share of Wachovia Center will be $33 million.
That's about $125 for everybody in Norfolk.
That's just part of the list.
Some people are just making ends meet, they go under.
Have a heart.
Understand but still not a development project. Not a building
Its interesting that in Charlotte the residents are complaining of exactly the opposite along the blight rail route. Property values are FALLING along the corridor and residents are up in arms about it. Values along the corridor are falling due to the awful noise, traffic congestion, pollution, and the undesireables that have come with the route. If you have never been around one of these things folks...they are LOUD. The rail in Charlotte has at grade crossings as well that are causing horrendous traffic back ups due to the crossing gates stopping traffic. The pollution problem cited is due to diesel fumes of idling diesel vehicles sitting in traffic jams waiting to cross. Yeah, real development driver. Nashville actually has several high rise mixed use condos under construction from West End to Music Row to the Gulch to downtown. Several finishing up right now as well. No state income tax. Property taxes about 1/3 what they are in the Tidewater area.
But Stevenc......
Your forgot one thing. The choo-cho that norfolk sold the farm for IS for development puropses. One of the major selling points was for redevelopment along the old rail line. So for norfolk to count federal and state tax money toward their inflated cause is only true. If it was indeed a mass transit system, it would be built to relieve traffic congestion. Along I-64 would be a true mass tranist system. Instead we get a $230 million replacement for the NET.
For doubters you are so un-informed about city planning and mgt
The Planning and Development of Norfolk is recognized by the American Planning Association as one of the leading well planned communities in America. Their embracing of Tradtional Neighborhood Development, and transit oriented development have created a framework for long term viability of the city.
For the un-informed who are doubters of the Norfolk success model and urban planning, it requires first public investment with private investment and norfolk has done wonderful in that arena.
I recommend many who dont understand or question the city, you might go back to college and invest in some courses in Urban Planning. The practices that all our future city planers graduating from Va Tech, UVA as well as others use the Norfolk model as the prototype of a well operated city. (and these schools are national leaders in urban Planning. Want to see another success go to Portland Oregon.
The future is not big box sprawling highways, but a comprehensive urban communities that are sustainable walkable. please see UTUBE under new urbanism
Nashville
Taking a look at the Nashville scene, I see they are getting a 70 story "Granby Tower" and it's under construction. It will be the tallest between NYC and Chicago, taller than anything in Atlanta. The Wachovia Center is real basic construction, which results in another bland building in downtown Norfolk. In it's position adjacent to The Scope, it should speak a different language, one that more compliments the plaza and the more daring structures at The Scope. Soon, downtown will be filled with more blandness and the whole will be blah and uninteresting. What are you developers scared of? Why is Design Review letting this stuff get through? When will there be architecture that puts Norfolk on the map?
Amazing
I always wonder why politicians find so much pleasure in wasting tax dollars for their pet projects? Between the council's of VB and norfolk, they have so many developers in their pockets, it's a wonder there is any room in there. It's one thing if norfolk wants to waste their own taxpayer money, but we have severe transportation issues in tidewater, and to spend $230 million of my taxes (state and federal) to promote redevelopment along a rail track, and replace a failed NET shuttle with a silly choo-choo is unacceptable. Seems only the politicians and developers are pleased. The poor citizens of norfolk seem to feel differently.
Nashville
A good friend of ours is graduating VaTech soon, and was trying to get a job back here in Homicide Roads. He wasn't getting much for leads, but he got offers from Lockheed in Syracuse for more then the median household income of HR, in Syracuse which has a lower cost of living. But he ended up taking the offer from the largest computer networking hardware vendor in Nashville. I think once he starts there we're going to take a road trip out there to visit. Lower cost of living and yet again a serious salary.
"Bucking the trend"???
Paul, you really need to get out more. Travel a little. Norfolk is not bucking any trend. It has been left behind. Far behind. Go to Raleigh, Charlotte, Nashville, Asheville, Atlanta, Myrtle Beach, Jacksonville, FL, on and on and on. There is so much development going in tax unassisted in these cities. Nashville is just exploding for a city that size with billions worth of private projects. That isn't a tide, its a wake. All of these cities left Norfolk in their wake long ago. Don't get me wrong, I love seeing development come to Norfolk. So long as it is in the same manner as the cities mentioned. Driven by economics and without tax payer dollars. We are setting a dangerous trend that inhibits private development. No one will do anything here without expecting a taxpayer handout. Counting blight rail $$ as commercial development is comical. That would be transportation and not commercial development. Charlottes blight rail is a disaster. Read the articles. It was budgeted at around $230M and went over budget by.....ready for this...$200M folks. Yes, over budget by $200M. Local taxpayers are none too happy about having to pick up the tab and the falling property values along the ro
Vicious cycle
The Norfolk process is obvious. First, destroy the trolly car lines, which bring people to downtown Norfolk to work and shop. Second, tear down building in which people live and work and build a parking lot because they have to drive downtown. Third, build a parking garage next to the parking lot so more people come. Fourth, widen all the highways for more cars. Fifth, build a new trolley line. Sixth, take up parking lot and destroy parking garage. Seventh, build a place for people to work and live and a new parking garage. Eigth, build a parking lot further away from downtown. Nine, Make them ride the trolley to downtown to work.
We've spent a lot of tax dollars on this cycle, when we already had a good thing with the trolly line, historic structures and nice retail downtown.
Gloom and doom
Ah yes, more gloom and doom hype. Yes, everyone should curl up into a ball and stop everything every time the GDP drops a few percent. What do you think causes the GDP to drop?