Return to Virginia Business - March 2002

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- A cultural gem

by April Rubino

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For 28 years, Korean businessman Sung Lim has run Soul Train Stops 2, a men-and-boys clothing store in downtown Richmond. Stocked with sweaters, gloves and the latest in urban contemporary fashions, the shop sits on East Broad Street, within the shadow of the city's convention center and just a few steps from the Marriott Hotel. In the past, the convention business hasn't translated into much business. "Travelers don't usually buy much - maybe socks, underwear, something they forgot," he says.

Soul Train thrived for years on support from local shoppers, but their numbers have waned. "There used to be lots of people downtown," recalls Lim. Now, "everyday looks like a Sunday." Still, he's hoping that a nearly completed expansion of the convention center will bring new conferences and trade shows that fill the streets again. When the facility opens, he says, maybe he'll see some new customers.
Richmond civic leaders feel much the same way: The $162 million Greater Richmond Convention Center is the linchpin for what could be $300 million in public and private investment in the dilapidated core of the city's central business district. While downtown Richmond held its own through the 1990s as a center of business and government, the office buildings empty out after 5 p.m., leaving retailers on a respirator. Boosters hope the convention center, combined with a new arts complex and an upscale hotel, will create a critical mass that will transform downtown into a vibrant, regional destination.

The convention center amounts to the largest public-private development project in the Richmond region, if not in Virginia. It costs more than all previous redevelopment projects in the immediate vicinity. When finished, the 600,000-square-foot, meeting facility will have enough flexible space to host huge events, vaulting the city from a destination for local and regional meetings to a competitor for national conferences and trade shows. Although the ballroom is already hosting events, the center won't be fully open for business until 2003.

If planners have their way, other projects will follow, providing entertainment, shopping, dining and lodging right across the street from the convention center. A performing arts complex with two theaters is slated to replace the old Thalhimer's building on 7th and Broad. On the same block, plans call for converting the old Miller & Rhoads department store into a 216-room hotel. To make way for shops, restaurants, parking and a new federal courts building nearby, much of the ill-fated 6th Street Marketplace - a relic of a 1980s-era redevelopment effort - will be demolished along with neighboring buildings. The transformation from the now-empty storefronts will be dramatic. Says James E. Ukrop, chairman of Ukrop's Super Markets Inc. and one of Richmond's most visible boosters: "It is really going to make all the difference in the world. … We're on the cusp of something really great."

The vision is inspiring, but there are many obstacles and the project will take years to complete. When the convention center opens, it will be down the street from what is now largely an urban wasteland with vacant storefronts and deteriorating buildings patronized mostly by minorities. The scene might make some affluent, suburbanite conventioneers nervous about venturing onto the streets.

Among minority residents and business people nearby, the project draws mixed reviews. At Ann's Soul Food Restaurant two blocks west of the center, owner Alexander Sally serves lunch to a mostly African-American clientele. "Conventions have never helped me and I've been here 14 years," he says. Yet Lynda Sharp Anderson, president and CEO of The Metropolitan Business League, which represents mostly minority companies, says the convention center will boost the surrounding neighborhood. "We welcome people back here. There will be new technology and copying centers across the street from the center to help visitors."

Meanwhile, money is being raised for two elements vital to the convention center's success: the new hotel and the performing arts complex. It doesn't help that all three projects are located literally next door to two city-backed projects that went bust: the 6th Street Marketplace and the recently bankrupt Marriott Hotel.

A tumbling crime rate has inspired well-heeled visitors and residents alike to come back downtown. Still, yuppies and empty-nesters tend to gravitate to the riverfront districts of Shockoe Slip, Shockoe Bottom and Tobacco Row, where shops, restaurants and nightlife have taken root with mostly private money. But the deteriorating neighborhood of Jackson Ward next to the convention center, has largely resisted gentrification.

Skeptics ask if the barren, old "city center" is really the best place for the community to be investing public dollars or whether it should follow private dollars to the riverfront and Canal Walk. Efforts like the 6th Street Marketplace were just "debacles because, basically, the city was trying to ... force the market to go where they wanted," says Ivor Massey, a major downtown business investor.

Convention center boosters remain undaunted. The expansion was the brainchild of a group of city and county leaders for circumventing Virginia's municipal structure that prevents the city from assessing surrounding counties for financial support. Their solution: Build a facility downtown that will draw people from all over the country, transport them to and from lodging and entertainment across the metro area, and fund the construction, plus a portion of operating and maintenance costs, with hotel sales taxes collected in all immediately adjacent counties. This funding model is standard in other states, according to Jack Berry, President and CEO of the Richmond Metropolitan Convention and Visitors Bureau.

The expansion plan got off the ground in early 2000; the commonwealth kicked in about $10 million, the convention authority issued hotel revenue tax bonds for $158 million and construction began. Unlike the 6th Street Marketplace and Marriott Hotel, the new convention center does not depend upon pie-in-the-sky goals. The financing is based on conservative revenue and expense assumptions; bonds are backed by specific, tiered allocations of tax revenue which, after meeting the debt service, feed into reserves for future debt service and operating costs. These fully funded reserves provide an ample cushion for all but catastrophic, multi-year swings in tax receipts and operating revenue. The financing has passed its first test already: the 9/11 attacks that devastated the conference and travel industries for weeks afterwards. Since September, hotel sales-tax revenues for the entire metro area are only off 3 percent from internal projections - and ahead of the numbers laid out in the bond prospectus - while costs are below budget.

Convention facilities compete on overall price, including lodging, the quality of food and service, and accessibility, which includes the issue of proximity to population centers. Richmond's lodging prices reflect the city's moderate cost of living. Berry describes the management team as "top-notch," so quality is competitive. And, like Baltimore and Washington, Richmond is well-positioned, with half of the U.S. population living within a half-day's drive. That gives the city a tremendous advantage over other second-tier convention sites such as Portland, Ore., or Salt Lake City. "Being on I-95 is one of our greatest assets," Berry says. "It will prove so in this decade."

A few national conventions have already committed to dates in 2003 to 2005. The prestigious Council of State Governments will draw about 1,200 people from all 50 states this December. It won't be a large crowd but it will be notable for being Richmond's first national convention, says Berry. In March 2003, the Defense Industrial Association will bring between 50 and 100 attendees and enough equipment to fill every square foot of the expanded facility. And in 2004 Richmond will host the high-profile Presbyterian Church USA convention. Most conventions book years ahead, and other national groups are slated to come in 2007 and 2008.

"We're still selling a hole in the ground," Berry concedes. "Once it's complete, it will be easier to sell, and by that point we'll be coinciding with the cycle of '05, '06 and '07." This is perfect, he says, because the 2007 celebration of Jamestown's 400th birthday likely will generate loads of publicity, and Richmond's convention facilities will be the closest available to the Jamestown area.

As the two- to five-year booking cycle for Jamestown looms, however, the convention center suffers from a distinct lack of curb appeal. The proposed arts center and hotel complex will likely be in the construction phase. In the meantime, the city is trying to revitalize the shabby Broad Street retail corridor with funds for painting, replacing broken glass and building rehabilitation loans. The city has also helped revive the Historic Jackson Ward Business Association and is working with neighborhood groups to find new uses for existing buildings as the convention center changes the economics of the area.

Beverley "Booty" Armstrong, a part owner of the swank Jefferson Hotel downtown, is determined to be part of the solution. Shortly after joining the executive committee of Richmond Renaissance, a public-private partnership dedicated to downtown renewal, he became aware that the convention center had been approved and was ready to get under way. "I responded, 'Oh my gosh. If they're successful in getting any conventions to come there, people are going to walk out the front door and promise never to come back.'" He compares, with some exaggeration, the run down and vacant buildings to the bombed-out landscape of Beirut or Kabul. Chairing a committee to tackle the problem, he spearheaded plans to flank the new center with the performing arts complex, additional hotel space, parking and restaurants.

Richmond's performing arts center is a critical piece of the plan. The first phase of the project calls for the renovation of the Carpenter Theater near the convention center, the Empire Theater several blocks down Broad Street, and the Landmark Theater on the fringe of downtown. In addition, a new building on the site of the former Thalhimers department store will house two theaters with a capacity of 250 and 600 and serve as the next home for TheaterVirginia, Richmond's entry in the League of Resident Theaters. The total price tag: more than $80 million. The Capital Region Performing Arts Foundation, headed by former marketing pro Brad Armstrong, has been created to raise the money for this venture.

A third leg of the redevelopment plan will add hotel space to accommodate big blocks of rooms for conventioneers. Chicago developer Gary Beller, formerly a senior executive with the Zell organization and a 20-year veteran of public-private development partnerships, heads this project. Beller expects to convert the old Miller & Rhoads building into a 216-room hotel, add another 209 rooms to the downtown Marriott and tear down most of 6th Street Marketplace to reopen 6th Street to traffic. He envisions street side cafes and shop entrances lining the restored road.

It will take more than money to make those plans work. It will take political will. Booty Armstrong is blunt about what must happen. "One, we're going to have to make sure that when people come downtown they're not intimidated by panhandlers, vagrants, whatever you want to call them." Next, "we've got to get the buses off of Broad Street." Heavy traffic could cripple the convention center's ability to smoothly transport attendees to and from the facility. Finally, to create a destination that will bring visitors back time and again, "the city has to ensure that the redeveloped area will be well policed and kept very clean." If it takes relocating homeless shelters, he says, then so be it. "They have to not just endorse; they have to enforce."

Current plans are oddly reminiscent of Richmond's previous downtown plan, inked almost 30 years ago. Most of its big projects - from the Marriott in 1984 to the 6th Street Marketplace - have since failed.
So what's different this time? A lot, actually. While the 1980s saw soaring crime and middle-class flight, Richmond boosted the number of downtown residents by 1,200 over the decade, or by 28 percent, according to figures supplied by Richmond Renaissance. Crime rates are way down, thanks to better policing. New high-speed rail and expanded airport connections will help.

Demographic trends are working in downtown's favor. The city and counties have overcome their habitual quarrels to develop a sound funding plan for the convention center. Civic leaders are keeping their carping to a minimum. If they can bring back the old downtown magic, affluent urbanites will move back, suburbanites will drop by regularly, at least to visit, and tourists will shop and spend. All of this would make downtown vibrant. It won't happen overnight, but nothing lasting ever does.

Return to Virginia Business - March 2002