This story was originally published May 19, 2011.
When a section of the Liberty Warehouse roof in Durham collapsed during a thunder and hail storm last weekend, it inevitably raised questions about the health of the property’s owner: Greenfire Development.
The company bought the 200,000-square-foot warehouse for $3.5 million in 2006, one of about 30 buildings it has acquired in and around downtown in recent years.
Those acquisitions turned Greenfire, a company with a limited track record, into one of the most influential players in downtown Durham’s revitalization.
It has been nearly eight years since Michael Lemanski, Greenfire’s founder and managing partner, started quietly buying up property in his hometown.
The company has had some notable successes in rehabilitating historic properties - the Baldwin Building, the Kress Building and Rogers Alley, to name three. But it has failed to move ahead with some key projects.
Greenfire is far from the only real estate developer to have its plans sidetracked in recent years. The economic downturn, combined with the credit crunch, caused numerous projects to be delayed or canceled.
But Greenfire’s ambitious strategy - the firm hopes to rehab a chunk of its portfolio instead of doing it piecemeal - has increased skepticism about whether the company can deliver.
Greenfire’s creditability in the marketplace is unlikely to be helped by recent events at Liberty Warehouse, which was condemned by the city Monday. The company also owns a burnt-out, roofless building on Parrish Street that required the city’s attention in March.
The troubles at those properties have made it even more imperative that Greenfire nail down financing to convert the 17-story SunTrust Tower into a luxury hotel.
If the company doesn’t begin construction on the project by July 31, its public-private partnership with the city of Durham will expire. Greenfire has already had one larger public-private deal involving multiple properties expire.
Lemanski and Carl Webb, a Greenfire partner, said in an interview Wednesday that they expect to have financing in place and for construction to begin before July 31.
Greenfire earlier considered using federal stimulus bonds to finance construction of the project - an approach being used to renovate Durham’s Chesterfield Building.
Lemanski said the stimulus bonds were a “last resort” that only made sense if Greenfire couldn’t find alternative financing.
“Since, really, the beginning of the year, we’ve seen a change in the credit markets,” he said.
Greenfire, he added, is in good financial shape overall.
Range of riskiness
The company manages its portfolio of properties as though each is a small business. Greenfire’s investors, which now include about 60 people, are able to invest in projects that have different rates of return depending on the level of risk involved.
He classified five of the company’s properties as being dilapidated.
Unlike many real estate companies that were active in the years before the recession, Lemanski said Greenfire isn’t highly leveraged. That’s largely because most banks had little interest in lending to a company buying up distressed assets in downtown Durham.
Greenfire’s timeline for moving ahead with redevelopment of its properties will depend on market demand, Lemanski said.
He cited two that could move ahead soon: A new office building on the block once occupied downtown by Woolworths; and an apartment complex on one of several potential sites in downtown.
Both those projects will face stiff competition from the American Tobacco Campus, whose deep-pocketed owner, Capitol Broadcasting, recently filed plans for three new buildings.
As for Liberty Warehouse, which was built in the 1930s and 1940s, Greenfire disputes the idea that the roof collapsed because of neglect.
“We were taking care of the building,” Lemanski said. “You don’t plan on an unprecedented storm surge.”
When it bought the old tobacco auction house in 2006, Greenfire said that any redevelopment of the property was likely years away.
The company still doesn’t see enough demand to warrant a major redevelopment, which means Greenfire will focus on repairing the structure to the point where some tenants can return.
“We wouldn’t let it be knocked down,” Lemanski said.
“Everything is about historic preservation,” Webb said.