Physical and financing structuring for ambitious development project
The developer of the University Commons retail project in Knoxville near the University of Tennessee campus selected John Waters and Long, Ragsdale & Waters to be its general counsel. This project involved numerous challenges, both for developer and counsel. It had to be physically and financially structured in a unique way.
Physically, the University Commons site is an environmentally contaminated Brownfield, sandwiched between a blue water stream and two railroad lines. The project includes a Walmart, Publix and 40,000 square feet of additional retail space. The anchor stores had to be located on a second floor above a structured parking area due to the small site size. A new street ramp to an existing bridge was necessary for access. Railroad crossings were necessary to access parking.
The financing was the most complex aspect of the project. In order to provide public infrastructure, including roadway improvements and a parking garage, and as a result of the contaminated site, construction costs were extraordinarily high. Conventional financing would not work. The only way to aggregate the necessary funds was to combine equity funds from a third party investor, two separate construction loans, tax increment financing (TIF) loans from both the city of Knoxville and Knox County, federal New Markets Tax Credit (NMTC) financing and a City of Knoxville contribution for new public infrastructure. Further, the project needed to be structured so that separate parts could be sold upon completion of construction in order to replace construction financing with permanent financing. The only feasible structure was to subject the project to a commercial condominium regime, with Walmart leasing one condo unit, Publix leasing another and five other units being set up for retail space.
John Waters took the lead on this project and assembled a team of LRW attorneys, including Dennis Ragsdale (public and private financing), Randy Miller (title), Mike Ivens (condominium law) and Lee Popkin (tax issues). John and his team were able to close all of these transactions at one time just prior to the end of 2012, well ahead of schedule.
University Commons is expected to open in August of 2014.