The Harrisburg Town Council agreed on Monday night to loan $3 million to the Charlotte-based developer that plans to invest more than $150 million to revitalize Town Center.
Awarded to CapitalNexus LLC, the $3 million loan – which must be repaid to the town by June 30, 2020, as part of the agreement – will be spent on the $8.4 million purchase of 15 acres at Town Center, a mix of open space and buildings. The resolution was approved by a 4-2 margin.
CapitalNexus had already secured the other $5.4 million to close on the properties, but found itself $3 million short after their current owner altered the terms of the sales agreement roughly 45 days ago, according to Town Manager Haynes Brigman.
To protect itself in case CapitalNexus defaults on the loan, the town is requiring that the developer put up two of the properties as collateral: the 1.38-acre lot on which the old Sports Junction building stands and was recently appraised at $2.3 million, and a vacant 3.2-acre lot appraised at almost $1.7 million.
“It’s a pretty strong collateral position to be in for the town,” Mr. Brigman said, pointing out that the town is receiving $4 million in collateral on a $3 million loan.
The town also stands to earn $120,000 in interest on the loan, which CapitalNexus intends to repay by mid-May, he added. The town is charging 6 percent on the loan, Mr. Brigman said.
On the flip side, the town will be loaning $2 million from its Fund Balance and another $1 million from its Capital Reserve Fund to cover the request, according to Mr. Brigman. In turn, the loan will reduce the town’s Fund Balance to $3 million, while the Capital Reserve Fund will have about $300,000 left in it once the transaction is complete. The plan is to reimburse both funds once the loan is paid off in the spring, however.
Still, the loan will significantly lower the town’s Capital Reserve Fund, which should contain 40 percent of the town’s operating budget each year. Once the loan is awarded, the $3 million remaining will represent about 21.5 percent of that amount.
The loan request’s short notice, combined with concerns that the town should not be lending money to developers, prompted two Town Council members – Rick Russo and Ron Smith – to vote against the measure. Council members Troy Selberg, Benita Conrad, Diamond Staton-Williams and Christopher Barfield all voted in favor. John Booth was absent on Monday.
As part of its mixed-use development, CapitalNexus intends to construct 333 residential units, 176,000 square feet of retail and commercial space, and 148,000 square feet office space. Additionally, it plans to convert the former Sports Junction building into a new arts and cultural center, and create 15,000 square feet of public greens.
The development represents an almost $152 million investment, and is expected to generate more than 760 new jobs, according to town officials. The influx of new residential and commercial space is expected to produce more than $500,000 in new tax revenue annually for the town, Mr. Brigman said.
If the developer defaults, the town can either foreclose on the two properties and sell them, or seek their outright ownership. Both scenarios also raised concerns, with Mr. Smith suggesting that the town would get “pennies on the dollar” if it attempts to sell land it is foreclosing on.
Two Town Center business owners – Dave Damone of Rocky River Coffee and Zach Hinschberger of Percent Tap House – urged Town Council members to approve the loan in the interest of revitalizing what should be the town’s commercial center. Both lamented the current condition of Town Center, which has a large number of vacancies.
“We have been waiting for this to happen for years, and years, and years,” said Mr. Damone, who has owned Rocky River Coffee since 2007. “If we lose out at this point, it could be another 10 years, or more, before we have another opportunity again.”