An old textile factory in Greenville, SC, is being transformed into an 800,000-square-foot multipurpose campus in a multi-phase development financed with new market tax credit (NMTC) and historic tax credit (HTC).
Judson Mill is a joint venture of Belmont Sayre and Taft Family Ventures.
“I would say this is one of the best developer partnerships I’ve worked with, because what they did was combine two experts,” said Eric Brubaker, director of acquisitions at HTC equity investor Foss & Co. “[Belmont Sayre’s] Ken Reiter, with whom I worked on many projects, knows the mills very well. He takes the lead with the historical component and Tom Taft [of Taft Family Ventures in Greenville, N.C.] is one of the most successful real estate developers in the Carolinas. Having the combination of an incredibly successful real estate developer with someone with such experience in historical rehabilitation is a fantastic combination and contributes to a unique successful project. “
While the first phase continues – 204 market value and workforce apartments that will open in early 2021 – the joint venture recently launched the second phase: A $ 19 million commercial phase that includes a $ 16 NMTC allocation, 5 million from The Innovate Fund. When completed, the commercial property will be anchored by Feed & Seed, a local non-profit organization with a mission to increase food security for Southern Carolinians, using a farm-to-table format for schools, churches, community kitchens, restaurants and individuals. There will be a YMCA for low-income residents, a climbing gym and a music venue, as well as other tenants.
Phase 2 will help catalyze the next three phases, a mix of residential, commercial, office and retail use.
Partnership forms
Reiter, whose company has been involved in dozens of historic renovations, bought Judson Mill in 2017, when the HTC state in neighboring North Carolina was in danger.
“A group from Greenville came to Durham, [N.C.,] for a round table, ”said Reiter. “I was looking to the future and asking, ‘How can I do projects in states that still have historic tax credits?’ I looked at several factories in the Greenville area and Millikin and Co. was in the process of closing the factory and putting it up for sale. That was when we jumped. “
Reiter has partnered with Taft Family Ventures, a 78-year-old regional family company that owns, develops, builds and manages properties of all types, and with HTC developer Dustin Mills.
“Dustin Mills had experience in historical tax credits with Ken at the American Tobacco Company,” said Taft, a former lawyer and senator from the state of North Carolina. “When Ken called and I started listening to him, I was drawn to the prospect of restoring what was once the largest cotton factory in the world and was complementary to our current 100-year-old historic restoration plans as part of a project apartment with a market value of 250 units in a Raleigh dormitory community. It was complicated, more complicated than anything I’ve ever dealt with. ”
Taft brought in several members, including his sons Thomas and Jonathan, along with their development and construction directors, all with deep experience. Reiter called the combined group “a team of stars”, which made it easier for investors.
“We like the development team very much,” said Chris Leutzinger, NMTC relationship manager at Truist Bank, who invested in the NMTCs. “They have a lot of experience with a wide variety of projects and experience with adaptive reuse and tax credit financing.”
The renovation takes place 108 years after the factory was launched.
Notable history
Westervelt Mill, as Judson Mill was originally called, opened in 1912 as the first fine goods textile factory in the south. A year later, the name was changed to Judson Mill, in honor of D. Charles Judson, from Furman University, the mentor of the new president of the factory, Bennette E. Geer. When Geer retired in 1933, Deering Milliken Co. took over the operation and bought the plant in 1960. When it closed in 2015, the plant was one of the last two plants in the Greenville area and had only about 200 employees, a cry since its glory days with thousands of employees
After Reiter bought the building, he signed up for the National Register list because it is an example of the textile industry that was once thriving in South Carolina. Phase 2 property benefited from that designation.
“The 100,000-square-foot building is a 90’s addition to a historic building,” said Reiter. “In fact, we wanted to demolish it and when we spoke to NPS and SHPO, they said, ‘no way’. I asked if we could get credits, which would help. … It started to grow in us and we were allowed to change it from a historical perspective. “
“What is really good about this property is that it was up and running until recently,” said Brubaker. “Structurally, it’s in great shape. It was a successful business and continued to expand. … For construction, Phase 2 is probably the easiest historic project I’ve ever seen. “
Prime location
“It’s a great place,” said Brubaker. “It’s great because it has a slightly more suburban feel. It’s a campus. Many people want to have access to all [downtown] amenities, but they want to be able to park. “
Being able to renovate a historic building was attractive to Taft.
“I love to reposition and save historic structures,” said Taft. “I love the nature of the story and the need to stay connected to the past to better understand the future. I also like the sustainability aspect of taking structures that could otherwise be demolished or damaged and giving them new life ”.
Community-focused tenants
For investors, tenants were important.
“To be interested, there must be an impact focused on the community,” said Leutzinger. “This project stood out because it has this component.”
Second phase tenants will include Feed & Seed, Greenville’s YMCA, Rockoon Climbing Gym and a concert hall. The YMCA building will be owned by the owners and managed by the YMCA.
The four tenants will use about 60% of the 100,000 square feet. Reiter said he is thinking of bringing a nonprofit incubator to part of the remaining space.
NMTC allocation
The Innovate Fund provided the NMTC allocation in two tranches, grouped in a financial close.
“We originally approved the project for our last $ 8 million NMTC allocation,” said Whitney Ferguson, program manager at The Innovate Fund. “We knew [Reiter] he had recently funded Phase I and was under construction and told him for several years to inform us when the first commercial phase was ready to go. The timing was perfect. “
The Innovate Fund made the allocation. Time passed and another option presented itself.
“In 2020, we had another $ 8.5 million allocation that, for unfortunate reasons, was unable to cross the finish line,” said Ferguson. “We went to Ken and said that we knew that he had enough project costs to support him. We were not in the middle of closing [the first allocation], so he replaced the building, which was about 40,000 square feet, with one about 100,000 square feet, and the second allocation was used to deepen rental subsidies for local, nonprofit tenants. “
For Truist, a second investment decision was necessary.
“Like any financial institution, post-COVID, our appetite for tax credit has been impacted,” said Leutzinger. “We had to weigh whether we were going to invest more in the project than initially planned, but we felt it was important to support this. Our additional investment will enable more affordable rentals for tenants with a community focus. “
Financing
As expected with multiphase multi-investor ownership, the commercial phase of Judson Mill’s renovation is complex.
“Combining new market tax credits with historical tax credits is always more complex, and in this case, there were about seven financial institutions,” said Leutzinger.
Truist invested $ 4.9 million in NMTC shares, while Foss & Company – the investor in the federal HTCs and bridge lender for Phase 1 – was the investor in the federal and state HTCs in the second phase. Other financial partners include CommunityWorks and Reinvestment Fund.
“Multiphase projects are difficult to carry out,” said Ferguson. We are happy to be able to enter and do one of the first phases, which will help to finish the rest of the campus. In terms of catalytic impact, this will be huge for the community. “
Reaction
Taft said the magnitude of the property makes it challenging and exciting.
“We’ve never done anything this big, 800,000 square feet,” said Taft. “If you overlap the size of the project with problems associated with restoring a 100-year-old plant, add complications from tax credits and place multiple layers of tax credits on top of each other and start dealing with different levels of financial institutions and subscription, it’s scary. We see this increasing our capabilities and our company wants to grow, make an impact and improve people’s lives ”.
Brad Elphick, a partner at Novogradac’s Atlanta office who did the accounting projection work, said this is a high-impact venture.
“Judson Mill is complicated, with multiple phases and all participants,” said Elphick. “Everyone involved deserves credit, because it will have a big impact on Greenville. It is an exciting property. “
Ultimately, the goal is for all five phases to complement each other. The second phase is essential.
“We think the more the campus is built and the mixed-use component comes in, the better,” said Brubaker. “It’s already phenomenal, but when it is completed, it will be the most exciting individual complex in Greenville.” ;
Judson Mill Phase II
Financing
- Allocating $ 16.5 million tax credit for new markets (NMTC) from The Innovate Fund
- $ 4.9 million NMTC shares of Truist Bank
- $ 5.5 million source loan from Reinvestment Fund Inc.
- $ 2.6 million in tax credit for Foss & Co. state textile factories
- $ 2.4 million Foss & Co. federal historic (HTC) equity tax credit
- $ 1.8 million from sponsor equity
- $ 925,000 in shares of state-owned HTC from Foss & Co.
- $ 750,000 permanent loan from Reinvestment Fund Inc.
- Permanent $ 250,000 loan from CommunityWorks Carolina