Abandoned brownfield to create upscale workforce
By Julie Franklin
Did you know that the term “serendipity,” meaning the occurrence of events by chance in a beneficial way, was first coined by a guy named Horace Walpole in 1754? Walpole was inspired by a mid-16th-century story called “The Three Princes of Serendip,” in which the heroes “were always making discoveries, by accidents and sagacity.” Which brings us to the term “sagacity,” meaning having acute discernment or wisdom.
It is only appropriate that the new user of the old Plush Mill along Easley Bridge Road (Highway 123) be a company named Serendipity Labs, since it took adventurous spirit, fortuity, and know-how to make this redevelopment project a reality.
“I thought I was just trying to find somebody to buy this building to redevelop it.” – Shelby Dodson
The 3-acre industrial site that operated as the Piedmont Plush Mill between 1925 and 1983 sat dilapidated and abandoned for decades (i.e., a brownfield). Shelby Dodson, first vice president with CBRE, says she became aware of the property on her daily commute to Clemson 15 years ago, and seeing the potential, later tried to broker a deal to multiple developers, but everyone thought it too risky.
Then, three years ago, a chance encounter brought Dodson an unexpected partnership with Mark Peters, CEO and principal of engineering firm Britt, Peters and Associates. Dodson says, “When Mark and I … started talking about it, we definitely shared a similar passion and ended up wanting to do it together.” Peters and Dodson purchased the property through a limited liability corporation, Farm Products LLC, in October 2016.
“When we bought it, people thought we were a little nuts.” – Shelby Dodson
The initial phase included environmental cleanup, development of the site, and renovation of the original 24,000-square-foot mill building for office use. The biggest challenge was reconciling the high costs with realistic market lease rates for an end user. According to Dodson, the project costs averaged about $375 per square foot, which translated to rates of $27 per square foot — rates more aligned with those in Greenville’s downtown Class A office space than those of a west Greenville single-tenant building. Ultimately, it was the ability to access a variety of tax credits that allowed the developers to salvage the original mill building and keep the lease rate at a point that could attract a tenant to the location. Earlier this year, the entire building was leased to Serendipity Labs, a for-profit network of collaborative workplaces that provides corporate short-term and small-office-space options.
“Brownfield projects are not for the faint of heart or those low on cash.” – Mark Peters
According to Peters, only about 30 percent of the total $9 million capital investment was financed through conventional lending. The remaining funds came from a combination of tax credits and personal investment.
The project qualified for and was issued new market tax credits (NMTCs) from an entity in Chattanooga, Tennessee, which added $3.12 million (or 39 percent of the $8 million allocation) of equity to the project. After the discounted sale of the credits to investors, typically about 70 percent of value, that translated into about $1.5 million in much-needed upfront funds. Yet, according to Peters, ultimately, over the next seven years, the net benefit will be less due to future tax liabilities.
Two programs reduced future state-income-tax liability. The Textile Communities Revitalization Tax Credit, for abandoned textile mills, was the most significant, providing credits of 25 percent of qualified expenses. The developers opted for the 10 percent rehabilitation tax credit for older, nonhistoric buildings, rather than the larger historic rehab credits, due to significant challenges meeting the program’s requirements, particularly salvaging additional structures.
Yet, Peters says that even with the tax credits, the project still required significant personal investment to move forward, even before any financing was secured. He cautions, “If you are working with an environmentally compromised property, it takes cash, because you have to acquire the property, clean it, and stabilize it – molding the site so you can market it. And, it’s not for a quick in and out. You have to hold property for the complete seven years, or give up the credits.”
Critical to the project was finding a bank with the desire and expertise to deal with the project’s complicated financing structure, as well as to underwrite an “out-of-the box” tenant with a relatively new business model. Iberia Bank invested in the NMTCs and provided both the construction and permanent financing. Earle Harding, Iberia’s senior vice president, says that while it was unique to be both the investor and lender, it started with a conversation and morphed over time. “You just don’t decide to do that overnight. The structure is pretty complex,” he says.
“The brownfield program is like wrapping a warm blanket around your risk.” – Mark Peters
The developers negotiated a voluntary cleanup contract with the South Carolina Department of Health and Environmental Control, which allowed them to acquire the property as a nonresponsible party and obtain liability protection in return for performing remediation. Participation in the program also allowed depreciation of some of the environmental cleanup costs, as well as provided the assurances needed to obtain bank financing.
“The Project … is anticipated to act as a catalyst for high quality development within the surrounding area – all to the benefit of the City and its citizens” – city of Greenville (Ordinance for Development Agreement w/Farm Products LLC)
The developers annexed into the city of Greenville to gain access to water and to rezone the property from industrial to flexible review district. Additionally, the parties agreed to partner on associated public improvements. The City Council approved the final reading of a development agreement to reimburse the developers for a portion of the total costs, up to $364,000, for an enhanced gateway and pedestrian pathway on Highway 123, lighting, landscaping, on-street parking, and a public plaza on Traction Street to be called Point Park.
Serendipity Labs plans to feature local artists’ work within the common areas of its lease space, and in partnership with Farm Products LLC, is providing free coworking space to five local community nonprofits.
The mural facing Traction Street gives a nod to the adjacent burgeoning arts district, the Village of West Greenville, and is a collaboration between Dodson and artist Bill Donahue, with local history provided by Don Koonce and Richard Heusel. It is a vibrant compilation of images celebrating the old mill, including the Ford Model A and velvet fabric in honor of two of the mill’s products — mohair auto upholstery and theater curtains.
“These are labors of love.” – Shelby Dodson
Dodson acknowledges, “It’s easier to build something new than to try and renovate something old. And it’s easier to get conventional financing and choose a deal that pencils without … layers of tax credits, and in an area that everyone wants to be in.” Yet, both she and Peters say if you are patient, and engage early with quality partners, projects such as Plush Mill can be very rewarding.
And a little serendipity helps, as well.