Credit: Cassandra Sherrill/Journal
Blue Cross Blue Shield of N.C. is testing the waters of a state tax credit aimed at breathing life into formermanufacturing plants, with an investment of up to $16 million toward renovating a tobacco warehouse donated to Piedmont Triad Research Park.
The insurer's investment over three years, announced Monday, represents 18 percent of the projected $87 million cost of renovating Building 91 at Fifth Street and Patterson Avenue. R.J. Reynolds Tobacco Co.donated the building to the research park.
The renovation project was announced with great fanfare in June by park officials and the developer,Wexford Science and Technology LLC of Baltimore.
Wexford will own the property and will lease the building to Wake Forest University Baptist Medical Center, which owns the research park.
It is the insurer's first major investment in the tax-credit program, spokeswoman Stephanie Skordassaid.
Brad Wilson, the insurer's president and chief executive, said, "Blue Cross Blue Shield of North Carolina has a 77-year tradition of investing in the health of North Carolinians. We are pleased to continue that tradition with this investment, which creates new medical-research labs from historic tobacco warehouses.
"You could say we're preserving the past while creating a new future for this part of the Triad."
Skordas said Blue Cross doesn't plan to move any operations into the building. The company has more than 600 employees in a customer-service and claims-administration operation at Madison Park in northwestWinston-Salem.
Renovation of the building, which has been renamed Wake Forest BioTech Place, is expected to be completed by year's end.
Officials at Wake Forest Baptist, which is landlocked on its main campus, have longed for years for expansion space for its research departments.
The building will offer 242,000 square feet of space for laboratories, offices and other uses, primarily for operations that Wake Forest University Health Sciences is transferring from its Hawthorne campus. About 350 employees will work in the new space — a 38 percent increase in the park's work force to 1,275.
Wake Forest Baptist plans to occupy 85 percent of the space. There are plans for laboratories for startup companies and retail that could include a cafe and a financial-services company, Dan Cramer, a regional executive for Wexford, said in June.
To qualify for the tax credit, the building must have been used as a manufacturing facility, a warehouse for selling agricultural products, or a public or private utility. It must be certified as a historic structure, and it must have been at least 80 percent vacant for at least two years when eligibility is certified.
The state mill rehabilitation tax credit would be paid to Wexford, which would pass it to Blue Cross, Skordassaid.
It is unclear, however, how much of a tax credit Blue Cross would receive.
According to the N.C. General Statutes, there is an overall 30 percent state tax credit for rehabbing of income-producing historic structures in a tier 3 county such as Forsyth. The project also likely qualifies for 20 percent federal investment tax credit.
"We expect to receive a market-based return on our investment," Skordas said.
The amount of tax credits will depend on the project costs, Skourdas said. Investors receive returns from the federal and state incentives and from leasing the space, she said.
Cramer said the tax credits could "take the $87 million project down to, say, $55 million to the tenant. We could not, and they could not, do this project without these historic tax credits."
Doug Edgeton, the president of the park, said the tax credit "is a very effective tool for sustainable redevelopment and provides tremendous benefits to the local economy.
"It enhances the financing of the project and preserves a historic building."
Lisa Davanzo, a spokeswoman for Wake Forest Baptist, said the health-care system hopes to leverage the tax-credit program in the future.
Mike Walden, an economics professor at N.C. State University, said Blue Cross is making the investment in part to enhance its reputation as a "good corporate citizen in North Carolina."
"There can be good long-run returns in carefully selected commercial real-estate investments," Walden said. "So the move could accomplish both objectives."
The city and Forsyth County agreed to split the $6.2 million cost of infrastructure upgrades. Mayor Allen Joines said a key was the Wake Forest subsidiary agreeing to pay taxes on the building.
Both Edgeton and Cramer expressed confidence that the project could be the first of many involving the groups.
rcraver@wsjournal.com
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