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Room boom ending as tax abatement sunsets

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By Chris Cox
ccox@scbiznews.com
Published Nov. 9, 2015

From the Oct. 12 – Oct. 25 issue of the Columbia Regional Business Report

Columbia Mayor Steve Benjamin had his share of doubters when he first pushed Richland County to consider a tax abatement for student housing developments.

It won’t be fair to other businesses and developers, some said. With USC’s ever-growing enrollment, these projects would have come anyway, others noted.

But with the abatement ready to sunset at the end of the year, most agree that Benjamin’s push, and the county’s ultimate decision to adopt it, has been a rousing success for the downtown area.

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Peak Campus Development’s Station at Five Points, which is under construction at the corner of Gervais and Harden streets, is one of five privately-owned student dormitories that have gained approval for city and county tax abatements. (Photo/Chuck Crumbo)
“All you have to do is look at all the construction going on right now through downtown, Five Points and the Vista to see that our student housing incentives have exceeded every expectation we had generating hundreds of millions of dollars in new capital investment,” Benjamin said.

In order to receive the 50% tax break, developers had to spend at least $40 million in private money to build their complex and owe at least $750,000 in annual property taxes before the break. They must also have their own private parking of at least 400 spaces.

Impact

So far, five developments have successfully gained the abatement, though one of those in EdR eventually fell by the wayside. Two of those belong to Park7 Group, which has a project on Assembly Street and another at Blossom and Huger streets. Peak Campus Development’s Station at Five Points at Gervais and Harden streets also gained approval, as did Edwards Communities’ complex near Huger and Blossom streets near the Palmetto Compress redevelopment.

All told, these developments represent at least $160 million in development for the county, each paying a minimum $450,000 in taxes, Richland County economic development director Nelson Lindsay said. They are all investments Columbia might not otherwise had received.

Ben Johnson, research director at CBRE Columbia, said Ben Arnold’s property at Blossom and Huger streets was under contract three different times but no one ultimately purchased the parcel. Park7 nearly backed out too upon hearing the tax requirements, he said, before the deal finally went through thanks to the abatement.

“(We) thought it was going to be the easiest deal we’d ever done,” he said.

No student housing developments were built in Columbia between 2010 and 2013, Johnson said, and none of the abatement-approved projects would have entered without it.

“It has been incredibly successful,” added Fred Delk, Columbia Development Corporation executive director. “There are some people who say that all of this boom would not have occurred had we not done the tax abatement.”

Future

The tax credit is scheduled to end on Dec. 31, and there have been no discussions about pushing it further out to attract additional projects, Benjamin said.

“They’ve accomplished everything we wanted and more so extending them beyond the sunset just isn’t necessary,” he said.

The credit obviously has done what it was intended to do. But some suggested the county may just no longer want to deal with it any longer after the recent news of Holder Properties’ 6-year-old Aspyre apartments seeking a retroactive tax break. The company is the first existing complex to go after the abatement, and is the only one that would apply under its prerequisites.

Columbia City Council was scheduled to consider approval of Holder Properties’ request – the company is currently trying to sell the property– at its Sept. 1 meeting before delaying the vote.

Nevertheless, many would like to see some discussion for keeping the abatement alive into 2016.

“I think it would be worth mulling,” said Matt Kennell, executive director of the City Center Partnership. “For several reasons. As somebody pointed out to me, it’s not just for a project, it’s not just the half a million a year now that (it would) generate. It’s the million dollars it would generate 10 years from now.”

greene_
In order to receive the 50% tax break, developments like Greene Crossing had to spend at least $40 million in private money to build their complex and owe at least $750,000 in annual property taxes before the break. They must also have their own private parking of at least 400 spaces. (Photo/Chuck Crumbo)
Delk thinks Columbia is nearing the finish line of the current student housing surge. But with the university’s steady increase in enrollment, another phase of construction could be just around the corner.

“Twenty-five years ago students were interested in living in houses in Shandon and now they all want to live in resort-style living,” said Craig Waites, vice president and director of commercial brokerage at Colliers International.

“That’s the norm across the country and I think that’s just a change in the trend for student living. Assuming the university continues to expand, as I think they plan, they’ll obviously have the increased demand from these students for this higher-lifestyle living.”

Winding down

With a little less than two months to go on the tax break, time is of the essence for any developer wishing to still utilize the incentive.

Delk and Johnson agree that one or two more projects may try to get into the pipeline before the deadline. But anyone just now looking into the market likely has already missed their window.

“You could theoretically get it as late as December,” Johnson said. “But if you’re just now coming to town, you’re late.”

A few projects were announced before ultimately skipping town. EdR’s well-documented tussle with USC officials led to its departure, and Aspen Heights backed out of a plan for a development at a four-acre parcel at Catawba and Lincoln streets.

Potential apartments at the Shuman-Owens Supply Co. store on Shop Road also fell through again earlier this summer.

“We’re not seeing any more new projects in the works at this point, and that could be a factor of demand,” Waites said. “We put a lot of product on the market in a short period of time, so it might be a situation by the developers in the industry looking at it and saying, ‘How much more should we put out there immediately before we really understand the market forces surrounding the ones that we do have.’”

Regardless of what happens as its twilight begins, most agree the abatement was just what Columbia needed to spur student housing development. A surprising success, as Kennell calls it.

“I knew it would help attract development, but I really did not anticipate it at the scale that it did,” he said. “There were naysayers when it was first announced, and there were people that said downtown is going to be a bunch of 3 a.m. bars and people throwing up in the street. But we really have not seen that.

“It’s a much bigger economic and people generator than probably I would have expected it to be.”

Reach Chris Cox at 803-726-7545 or on Twitter @chrisbcox.

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