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VOL. 6 | NO. 30 | Saturday, July 20, 2013

Change of Scenery

Commercial real estate mainstays prepare for transformation

By Amos Maki

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After spending years or decades in their current form, longtime staples of the local real estate scene are about to disappear or undergo major changes that will forever alter the city’s built landscape.

Many of the projects focus on the adaptive reuse of buildings – and even entire districts, such as Overton Square – and the further development of existing commercial real estate.

The signs of change are all around, from Downtown to Midtown to East Memphis.

“It’s just people getting creative with their real estate,” said Danny Buring, managing partner of The Shopping Center Group LLC.

“People for years have been scouring these streets and saying, ‘Is that really the best use there?’” said Buring. “As the market continues to strengthen, we’ll see more and more of this type of activity coming back. It’s starting to pick up again and that’s a good sign.”

The Super Submarine Shop and novelty store Whatever – both institutions on Highland Street near the University of Memphis – could soon be replaced by a new McDonald’s fast-food restaurant.

A site plan submitted to the Memphis and Shelby County Office of Planning and Development by SR Consulting LLC said the new restaurant would be constructed at the southeast corner of Highland and Southern Avenue with a double drive-through. The site plan shows a picnic area and bicycle parking places, and the new store would replace a nearby McDonald’s on Highland.

Cindy Reaves of SR Consulting said she has been working with neighborhood groups on revising the site plan and that the project is set to appear before the Memphis and Shelby County Land Use Control Board in August. The Submarine Shop is moving to 3316 Summer Ave., while Whatever has planned on moving across the street into the former home of the Double Deuce.

Meanwhile, the former U.S. Post Office building on Union Avenue is in the midst of being redeveloped. Baptist Memorial Health Care Corp. purchased the site for $1.3 million in March.

Baptist Medical Group, the physician unit of Baptist Memorial Health Care, is turning the 11,470-square-foot building into a primary care center.

“This location will allow Baptist to enhance patient convenience by providing an additional point of access for patients in the Midtown and Downtown area,” said Jason Little, executive vice president and chief operating officer for Baptist Memorial Health Care, in a statement.

Change comes in many forms, including the wrecking ball. That appears to be the fate of the Nineteenth Century Club building on Union Avenue, whose current owners have said they intended to raze the historic but decaying property at 1433 Union Ave.

The Nineteenth Century Club was built in 1907 by Rowland Jones, a Memphis lumber king. In 1926, the 15,813-square-foot house that is listed on the National Register of Historic Places was acquired by the Nineteenth Century Club, a philanthropic women’s organization.

The Union Group LLC won a competitive bidding process in January, beating out a group that offered $350,000 and wanted to turn the property into a women’s business center. Union Group representatives have said their intentions are to demolish the building, a three-story, wood frame structure that is commercially zoned and sits on 1.2 acres at Union between Kimbrough and Cleveland streets, but they haven’t revealed how they plan to redevelop the property other than saying they intended to raze the building.

The Union Group’s plans have remained a mystery that has been tied up in court after the company was cited by the city for owning a dangerous building. On July 10, the Union Group submitted a demolition plan to the court but General Sessions Div. 14 Judge Larry Potter prohibited the company from moving forward with demolition for two weeks while attorney Webb Brewer investigates if the sale was legal. Brewer said he had been contacted by a member of the club who protested the sale and that it was his understanding the entire membership of the club was required to vote on the sale, not just the executive committee, for it to be legal.

While the Nineteenth Century Club’s fate could be sealed, another historic building is being given new life.

The former U.S. Post Office building on Union Avenue is in the midst of being redeveloped. Baptist Memorial Health Care Corp. purchased the site for $1.3 million in March. Baptist Medical Group, the physician unit of Baptist Memorial Health Care, is turning the 11,470-square-foot building into a primary care center. (Brian Johnson)

The James Lee House in Victorian Village is being transformed into a bed-and-breakfast inn. The city transferred the long-dormant property to Jose Velazquez and his company, which plan to invest around $2 million in private capital to reconstruct the antebellum home.

Another stately but unused building is being eyed for reuse. The city of Memphis is considering consolidating public safety functions into the old police headquarters at 128 Adams Ave.

A recent cost estimate given to city officials put the price tag of renovating the building at around $18 million, far below the previous estimate of $40 million. The $18 million figure is for renovation costs and doesn’t include costs that would be related to a move.

Memphis Mayor A C Wharton Jr. said the city could move police functions from the Shelby County Criminal Justice Center at 201 Poplar Ave. and relocate other public safety functions that are spread across the city in leased spaces.

In East Memphis, a much newer staple of the corporate real estate scene is undergoing a major transformation.

Highwoods Properties Inc. is developing two upscale restaurants – Capital Grille and Seasons 52, concepts by Orlando, Fla.-based Darden Concepts Inc. – at the Crescent Center, long considered one of the city’s premier office buildings. Darden is building the restaurants, which will be owned by Highwoods, as property outparcels.

Buring said developers and other businesses were increasingly taking second looks at existing developments and properties in an effort to maximize potential.

“The value a lot of times is not on the improvements that are currently there, the value is in the land,” Buring said.

Nearby, work will soon begin on a fourth International Paper office tower at the company’s East Memphis campus. In March, Highwoods signed a deal in which the real estate investment trust will deliver a $56.1 million build-to-suit tower for Memphis-based International Paper.

Perhaps the two biggest changes of all are happening in Midtown – the redevelopment of Overton Square and the Sears Crosstown building.

Leaders of the Crosstown Development Project are seeking to redevelop the giant 1.5 million-square-foot Sears building constructed in 1927 through arts, education and health care. The plans also include a mix of market rate and affordable rental units plus retail at the 86-year-old building.

Supporters say a repurposed Crosstown building would give new life to surrounding neighborhoods and Midtown as a whole while creating nearly 900 jobs and $1.5 million in sales tax revenue. Sears built 10 similar catalog and distribution centers across the country and four have been repurposed to great fanfare.

The hulking building has been empty for years. The retail store closed in 1983 and the distribution center was shuttered a decade later.

The $180 million project – which features $155 million of private money and $25 million in philanthropic gifts – includes ALSAC (the fundraising arm of St. Jude Children’s Research Hospital), Crosstown Arts, Gestalt Community Schools, Memphis Teacher Residency, Methodist Le Bonheur Healthcare, Church Health Center and Rhodes College as founding partners that have pledged to be tenants in the redeveloped building.

Project backers were seeking $15 million in city funds for infrastructure improvements and blight remediation efforts. Wharton proposed, and the City Council approved, $1 million in funds for the fiscal year that began July 1. Project officials said they are exploring all financing methods.

“We continue to be excited about the renovation of the historic Sears Crosstown building, which will be the largest adaptive reuse project in Memphis’ history,” said project manager Todd Richardson. “Our unique, mixed-use vision has been enthusiastically embraced by thousands of businesses, residents, city leaders and other stakeholders from every corner of the community.

“As you can imagine, given the enormous scale of the project and anticipated social and economic impact, we are exploring a range of public and private financing options to move forward with the development. We will welcome the participation of the city of Memphis and other public sources on select infrastructure and blight removal needs of the project, and are continuing to hold productive discussions to that effect.”

After serving as a major entertainment and retail hub for decades, Overton Square began a steady decline as more and more entertainment options became available.

However, Loeb Properties Inc. is investing more than $20 million to bring Overton Square back to life as a theater, arts and entertainment district.

Loeb is adding new tenants to expand and diversify Overton Square’s footprint, redesigning existing buildings and constructing new structures while the city is building a parking garage and water retention basin. Since redevelopment began, Overton Square has been infused with new life, with Local Gastropub, Chiwawa, Bar Louie and Five Guys on Union Avenue opening, and Breakaway Running and a boutique called The Attic have signed leases.

Hattiloo Theatre, a black repertory theater company founded in 2006, will be the fourth theater on both sides of Cooper between Union and Madison avenues, joining Playhouse on the Square, Circuit Theater and TheatreWorks.

Buring, who lived near the square in the early 1980s, said the revival is a boon for Memphis and Midtown in particular.

“I’ve been to Overton Square at night a few times and it was really hopping,” he said. “And I was so excited to see that.”

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 0 84 5,157
MORTGAGES 0 103 6,812
FORECLOSURE NOTICES 0 37 1,593
BUILDING PERMITS 0 0 11,979
BANKRUPTCIES 0 105 5,405
BUSINESS LICENSES 0 28 2,089
UTILITY CONNECTIONS 0 97 7,155
MARRIAGE LICENSES 0 24 1,482

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