Ritzing Up the Pizitz

5 min read

Catalyst for Growth in Birmingham
Hometown boys, vision, persistence, patience, creativity, and business acumen—and tax credits—are transforming the Pizitz, a department store built in 1923 and empty since 1988, into a new landmark for downtown Birmingham, Alabama’s rejuvenated Second Avenue North corridor.

Shopping at Pizitz epitomized elegance and style when childhood buddies David Silver-stein and Jeffrey Bayer would take the bus downtown to go to movies. They both now own portions of Bayer Properties, a Birmingham-based development company known for major projects in nearly a half-dozen states.

“In 1999, when the Jeffrey and I attended the opening of the McWane Science Museum in what had been another classic department store,” Silverstein says, “we saw the Pizitz Building across the street and said to each other, ‘Someone ought to wrap their arms around that building and protect it,’ and that’s what we did. No one had used the building since 1988, when the Pizitz family moved its store to the suburbs.”

A few months later, Bayer Properties purchased the Pizitz Building; and in 2008, was about to renovate it into commercial office space, but the national economy collapsed, and so did their financing. Now, after fifteen years of holding onto an unused building, they are transforming it into a major mixed-use landmark with residential and commercial retail space.

The renovated Pizitz, scheduled to open in October 2016, will join the McWane Science Museum, Alabama Theater, Lyric Theater, 20-story Thomas Jefferson Tower apartments (the former Thomas Jefferson Hotel) and other buildings in a rejuvenated downtown. “Young people are coming to this commercial and entertainment core to live,” says Silverstein. “Millennials are returning to Birmingham after college. They do not want to live in the suburbs; they want a life-style allowing them to enjoy the energy of a vibrant downtown.”

Birmingham Mayor William A. Bell, Sr. calls the Pizitz redevelopment “transformative” and “another catalyst for growth in Birmingham.” The building, he says, “will retain its historical significance while providing new residential housing and retail for our growing community.”

Food Market in the ‘Desert’
The historic seven-story, 255,000-square-foot Pizitz Building will have about 143 apartments, including 29 affordable rate units. At ground level will be 21,000 square feet of retail space; and 11,000 square feet of office space will occupy the mezzanine, which will offer short-term, temporary beta office and meeting space to young entrepreneurs who can pay for a few hours or a days at a time.
On the ground floor will be a “Public Urban Market”—more than two dozen stalls from which local vendors sell fresh produce, cheese, meats and other foods—in a sense, a large, in-door farmers market. This will put Birmingham at the cutting edge of a national trend. “Food markets and stores have are the new focus for community and street life in neighborhoods throughout more and more cities,” says one urban development expert.

The market at the Pizitz will serve another vital function: Approximately 88,000 of Birmingham’s 212,000 people live in food deserts—neighborhoods without easy access to healthy, affordable food. The area around the Pizitz, for all its growth and vitality, is has been, until recently, such a desert.

An adjoining —connected by a walkway—parking garage with nearly 400 spaces will help make the Pizitz viable in an economy still dependent on cars, but its most attention-getting exterior feature will be an elaborate, Beaux Arts, terra cotta facade, popular from the late 19th century to the 1930s, restored—using local Birmingham craftspeople—to its original condition.

Unique Features
“The building retains its historic appearances, but inside, it’s quite modern,” says its renovation architect (and co-developer) Marcel Wisznia, who is based in New Orleans and most famous for preserving historic architecture while integrating new ideas. ”The Pizitz will have a 45-by-45 foot, seven-story light-well, which you experience only from the eight apartments on each floor that gain their natural light from this source. The light-well was introduced because the length and width of the building would have otherwise forced each floor to have less usable space be-cause no natural light could reach those areas. We also placed the light-well so not as to be perceived from outside, so the National Park Service could embrace it as compatible with historic preservation.”
He adds: “Such a modern interior to this historic building is at the core our approach. Our tenet is to respect and maintain the rhythm, scale and proportions of the past, and fit in with the historic fabric, but shape and embrace the future.”

This respect for the past allowed renovation of the Pizitz to benefit from Historic Tax Credits (HTC), which are among the eight funding sources for its $67 million capital stack. Nearly $12 million of Federal HTC equity and $3.6 million of State HTC equity was bridged by IberiaBank and combined with the owner’s equity to generate the $16 million leverage loan. Na-tional New Markets Fund provided $23 million of allocation creating $7.7 million of additional New Markets Tax Credit (NMTC) equity. U.S. Bancorp Community Development Corporation served as the Federal HTC investor as well as the NMTC investor. Stonehenge Capital, based in Baton Rouge, Louisiana, invested in the state HTCs, provided tax credit advisory services, and joined the ownership team— the first time it has transitioned from financier to owner/ sponsor.

Highland Mortgage Company, LLC, based in Birmingham, AL, functioned as the HUD 220 MAP lender responsible for origination and ongoing administration of the $27 million senior loan, which is insured by HUD. Birmingham’s Downtown Redevelopment Authority, a sales tax exempt entity, has entered a short-term ground lease with the project to submit the purchase orders on all materials; the resultant construction materials sales tax abatement will save the project upwards of $1 million.
After so many years with his “arms around the Pizitz,” David Silverstein of Bayer Properties remains optimistic. Such projects can be complicated, he says, but are very doable. In a talk titled “Birmingham Isn’t Mars,” Silverstein notes that everything accomplished so far can be just the beginning. “We all have momentum,” he says.