An ambitious downtown Durham project could soon have new life.
Greenfire Development has applied for $25 million in federal stimulus bonds that it would use to convert the landmark Hill Building into a 165-room boutique hotel.
The bonds would cover half the cost of the project. Greenfire would still need to raise the rest of the money from other sources.
The 17-story Hill Building, also called the SunTrust building, is among the trophies in Greenfire's portfolio. The developer owns more than 30 buildings in downtown Durham and about 900,000 square feet of space.
"This is a key piece to helping to jump off on a couple of other projects," said Carl Webb, a Greenfire partner. "We are excited about getting this one moving."
Greenfire's application must be approved by Durham County officials and the state's Local Government Commission. The stimulus act allows for state and local government to issue up to $15 billion in tax-free bonds in distressed communities.
Construction could begin in October if the bonds are awarded and Greenfire is able to raise additional equity.
Without the tax-free bonds Greenfire would be unable to raise the money required for the project, Webb said. Greenfire is optimistic that the bonds will attract buyers at interest rates that won't be onerous to pay back.
Funding the project with stimulus bonds does carry risks. Greenfire would be awarded the money all at once - meaning it wouldn't be able to draw on the money as needed to limit its interest payments.
With that type of funding it's important that there are no delays during construction, said Bill Kalkof, president of Downtown Durham Inc. "You need to have a very tight construction schedule," he said.
Traditional bank financing for new hotels has been scarce in recent years as lenders have tightened their standards. Business and leisure travel has slumped during the downturn.
Downtown Durham needs more hotel rooms to accommodate the companies that have relocated to the area in recent years and the people who attend events at the Durham Performing Arts Center and other entertainment venues.
The city also needs additional hotel rooms so it can attract larger events to its convention center, which is on track to lose $1.4 million this year.
"If we want to stop the bleeding at the convention center operationally we have to get at least 700 hotel rooms down here," Kalkof said. "We need a transformative project in the city center. This could be it."
The only other hotel in the city center is the 200-room Marriott, a block away from the Hill Building on Foster Street.
Greenfire's funding application says the Spark Hotel & Spa project would be part of Starwood's Luxury Collection and would be managed by Interstate Hotels and Resorts. Webb said negotiations are under waywith Starwood. The deal with Interstate has been finalized.
The hotel would include a restaurant, rooftop pool and a 3,000-square-foot spa and fitness room, Greenfire wrote in its application.
Greenfire bought the Art Deco building in 2006 from SunTrust for $4.1 million. In March 2007, Greenfire announced plans to convert the building into a hotel and spa with partner Lifestyle Hospitality. The project stalled, along with a number of other Greenfire projects, when the credit markets froze up.
Earlier this year, iContact considered the Hill Building as a location for its headquarters. The tech company ended up relocating to one of the three buildings on Lenovo Group's headquarters in Perimeter Park.
The skyscraper was built in 1935 and was designed by New York City architecture firm Shreve, Lamb & Harmon, which is better known for its design of the Empire State Building.
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