KNOXVILLE, Tenn. — More than a year and a half after Knox County officially sold the Andrew Johnson Building to a Nashville-based developer, construction has yet to start and county leaders are threatening to take the building back if developers don't begin construction within the next 90 days, according to a letter sent Monday on behalf of the county.
BNA Associates closed on the historic building in downtown Knoxville on Aug. 1, 2022, with plans to turn it into a luxury hotel. By the agreement signed with Knox County, the developer was supposed to begin construction within 60 days of the Aug. 1 closing date.
Hundreds of days later, BNA has not started construction.
On Monday, G. Mark Mamantov, an attorney representing Knox County sent a letter to BNA Associates' co-founder Philip Welker. It said construction was supposed to begin Sept. 30, 2022, and the developer was supposed to provide the construction contract and a notice of the beginning of construction.
"As you know, none of these requirements have been fulfilled," Mamantov wrote.
Mamantov's letter said the county needs BNA Associates to provide a realistic timeline for the construction of the AJ Building and begin construction within the next 90 days. If BNA does not provide an acceptable schedule, Mamantov said, the county could retake possession of the property.
"We prefer to get this project moving forward and not start all over again," said Chris Caldwell, the Knox County chief financial officer.
Before the COVID-19 pandemic, BNA Associates planned to convert the AJ Building into a boutique hotel. During the pandemic, developers planned to build apartments, because the hotel industry suffered.
Welker said in a phone interview with WBIR that inflation delayed the project in 2022. Developers "couldn't hold a budget," Welker said.
Now, Welker said BNA Associates is in the process of securing investors to build a full hotel, with 169 independent rooms.
"We're in the middle, if not past the 50-yard line," Welker said about securing funding to build the hotel.
Before Knox County sold the building to BNA in 2022 for $6 million, Knox County Schools used it for administrative offices and school board meetings.
In 2015, then-Mayor Tim Burchett suggested county leaders wanted to sell the AJ building and move KCS offices to another location.
"I would rather private entities own it and get it back on the tax rolls," Burchett said in a 2015 interview.
The county formally requested proposals for the purchase and redevelopment of the building in 2017. BNA Associates was selected and signed a purchase agreement in March 2020.
Knox County, in the meantime, negotiated to move school district offices to the TVA Building near Market Square, Caldwell said. The district didn't clear the AJ Building until the summer of 2022.
"He was patient with us," Caldwell said. "COVID happened, building costs skyrocket. Since then, interest rates have went up. There has been a lot of negatives that went against him in this development as he waited on us."
Caldwell said, and Mamantov echoed in the letter, other developers in the area are starting similar construction projects after pandemic delays.
City of Knoxville building records show developers have taken out a construction permit on the AJ Building to replace an existing HVAC boiler. Builders applied for a permit to build a model hotel room but they never paid the fee to receive the permit, according to the permit fee list.
Both Burchett and current Knox County Mayor Glenn Jacobs emphasized the importance of collecting property taxes on the AJ Building. While the county owned the building, it collected no money on the riverfront real estate in Downtown Knoxville.
Recent records from the Knox County Trustee's Office said the new owners of the building owe $127,948 in property tax. The taxes from 2022 are listed as delinquent and 2023 haven't been paid, Knox County records show.
Until recently, the base tax for the Andrew Johnson Building was listed as $0.
Knox County Property Assessor John Whitehead said the paperwork hadn't been processed until somebody brought it to his office's attention.
The Andrew Johnson Building was a hotel in the 1920s, according to the Knoxville History Project. Celebrities visited it, including Amelia Earhart and Duke Ellington. Legend has it country legend and songwriter Hank Williams spent the last night of his life at the Andrew Johnson before his death in 1952, the Knoxville History Project said.
Property records show the Knoxville Public Building Authority bought the AJ in 1991. Ownership was transferred to Knox County in 2005.