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TAX CREDIT
CORNER
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St. Louis
Convention Center Hotel
By Pres Kabacoff
The State of Missouri has multiple tax credit programs to provide
incentives for investments and charitable contributions to approved
projects. This regular column features examples of how the various
Missouri state tax credit programs benefit the State, generally,
and St. Louis in particular.
When the America’s Center was renovated in 1995, St. Louis added
more than a professional football team to its resume, it also opened
the 11th largest convention center in the United States. St. Louis
was primed to become one of the nation’s great places for conventions
and exhibitions. However, one problem remained. There was not enough
downtown hotel space to fully utilize the convention center. Thus,
for years St. Louis was not able to capture the America Center’s
full potential. But all that is about to change. The construction
of the St. Louis Convention Center Headquarters Hotel Project will
help solve the problem of hotel space by opening more than 1,000
hotel rooms, banquet facilities, and an 880 car garage directly
adjacent to the America’s Center. Renovated and renamed will be
the historic Statler Gateway and Lennox Hotels, built in 1918 and
1922 respectively. Altogether, the Renaissance Gateway Hotel and
the Renaissance Suites Hotel will be an investment of more than
$250,000,000 in downtown St. Louis and will forge a public-private
partnership between local, state, and national organizations like
the city has never seen.
When the City of St. Louis was interviewing development teams for
a convention center hotel, Historic Restoration Inc. (HRI) seemed
like a long-shot to win the job. They were competing against groups
that were well-known in St. Louis, familiar not only with the history
of the city, but with this project. Based in New Orleans, HRI set
itself apart from local developers by making a commitment to more
than just this project, but to the entire neighborhood. Proposing
a holistic design scheme that encouraged pedestrian traffic and
urban revival, HRI stood out among many qualified developers. Committed
to more than just the project, but to make the entire neighborhood
vibrant, HRI was granted the development rights.
In addition to the development work done by HRI, the City of St.
Louis was also a major player in building the convention center
hotels, issuing $98,000,000 in senior lien revenue bonds, while
state and federal involvement was present in the form of several
tax credit programs. Realizing the myriad opportunities, Firstar
Bank put together an innovative financing package that capitalized
on these Missouri state and Federal tax credit programs, finalizing
the deal.
Of the tax credits used to finance the construction of the convention
center hotels, the most significant were the Missouri State and
Federal Certified Historic Rehabilitation Program Tax Credits. These
credits each offset income tax liability for certain costs related
to historic rehabilitation. The Missouri State credit is equal to
25 percent of the qualified costs and expenses of the historic rehabilitation
to the extent that they exceed 50 percent of the owner’s basis in
the property. Even more importantly, these state historic credits
are transferable, meaning to the extent that those earning the credits
exceed their Missouri tax liability, the tax payer may transfer,
sell, or assign them through Firstar’s Missouri Tax Credit Clearinghouse.
In addition to state credits, the project also benefited from federal
historic tax credits. Using the federal historic tax credit program,
the convention center hotels captured an additional 20 percent tax
credit for rehabilitation. With participation coming from so many
different sources, this project became truly unique. “The deal benefited
from city, state, and federal participation as well as investment
from the private sector. This is probably the best example of a
public-private partnership that I have ever seen,” says president
of Firstar’s Missouri Tax Credit Clearinghouse.
The availability of the project’s federal historic tax credits attracted
the commitment of the key private sector participant, Texas-based
Kimberly-Clark Corporation. Kimberly-Clark made a $38,000,000 equity
commitment to the project and brought in Solomon Smith Barney to
sell the $98,000,000 of Empowerment Zone bonds. In large part, Kimberly-Clark’s
significant equity commitment to the project enabled the bonds to
receive a favorable investment grade rating and significantly reduced
financing costs. It also enabled the project to proceed on a fast-track
basis with an early commencement of construction that accelerated
the hotel opening by two months. “Without the extraordinary commitment
that was made by Kimberly-Clark Corporation to the project, the
Convention Center Headquarters Hotel Project would still be on the
drawing board, as it was 13 years ago, as opposed to being under
construction today,” says Tom Leonhard, senior vice president for
HRI.
“The Convention Center Hotel Complex is the cornerstone project
for 24-hour activity in downtown St. Louis,” notes Ron Silverman,
HRI’s vice president and regional manager. Indeed, this significant
investment in downtown will likely lead to surrounding redevelopment.
In the shadow of these two great hotels, the city will once again
boast a vibrant urban corridor and be able to re-direct its attention
to other areas. If so, St. Louis will undoubtedly again call on
the help of Missouri State and Federal historic tax credit programs
to turn the imagined into reality.
Pres Kabacoff is president, Historic Restoration Inc.
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