A UNC School of Government report on Hillsborough’s Colonial Inn gives stakeholders some hard numbers to consider when it comes to saving the rundown 176-year-old building.
On January 12, the Hillsborough Board of Commissioners voted to pay $8,500 to the school’s Development Finance Initiative to analyze different models for making the Colonial Inn an attraction for private developers.
DFI works exclusively with local governments, with the goal of attracting private development and investment in community projects.
Christy Raulli is associate director for DFI.
“So we put together a development budget,” said Raulli, “to give them that total project cost – how much a developer could access from federal tax credits; If the North Carolina State Historic Tax Credit comes back, how much they could likely access through that.
“So, how much a developer could access from debt and equity though a variety of sources. And then we calculate what the gap is.”
According to DFI, the project cost is close to $3 million – mostly, in renovations.
Mayor Tom Stevens and town Commissioners looked at that report on Monday night.
“They said that the value of it, currently – depending on which model – is somewhere between $142,000, and less than zero,” said Stevens.
As it stands, private developers could expect about a 3 percent return on that $3 million investment. Generally, developers are looking for between 18 and 20 percent.
So now, the task of town government is to sweeten the pot somehow.
“The cost of the rehabilitation would make it prohibitive for the town to just take it on as a solo project,” said Stevens.
Grants, tax breaks, philanthropic contributions and various incentives could make the Colonial Inn more appealing to developers, although it may take willingness on their part to lower expectations on a return.
One sticking point that remains is the asking price for the property. Owner Francis Henry, who purchased the Colonial Inn at auction for $410,00 in 2001, has found himself in some legal battles with the town over the upkeep of the place.
Now, the ball is in his court to come up with an asking price developers can live with, if he even chooses to sell. He’s turned down several offers.
Still, the mayor said he is hopeful.
“Francis Henry did, in fact, come to one of our board meetings, and presented us with a letter, and said he was appreciative of the process,” said Stevens. “I believe he saw that the town was going to fund this – which is an independent third party – to take a look at the inn. I think that was perceived as a positive step, and as an investment the town was willing to make upfront.”
Stevens said he’s just glad that stakeholders now have realistic numbers to look at.
“I would be surprised if nothing is happening in the next six months,” said Stevens. “I think, at that point, the town would probably want to flex its muscles a little bit.”