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VOL. 125 | NO. 126 | Wednesday, June 30, 2010

Wharton Hagale Sign Bass Pro Shops Lease For Pyramid

By Bill Dries

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There is a lease agreement to reopen The Pyramid as a Bass Pro Shops superstore with other attractions in the structure and around it.

Memphis Mayor A C Wharton Jr. and Bass Pro Shops CEO and President Jim Hagale signed the 20 year lease with seven renewal options of five years each Wednesday at the end of a City Hall press conference to announce the deal five years in the making.

“This is the most complex, complicated public private partnership ever undertaken in this region,” Wharton said. “Despite barriers that included the worst economic meltdown in 40 years, we have persevered and the agreement we announce today will transform the gateway to Memphis.”

The night before the announcement, Wharton began referring to the project as “The Gateway” to include coordinated plans for redevelopment of The Pinch commercial district.

“You get a little bit of deal fatigue,” Hagale said referring to the long term talks that were in limbo for months at a time over the last five years. “We think that this redevelopment, from the River to St. Jude, is the last remaining and we think important piece to redevelop the entire Downtown area.”

In the lease, the city and Bass Pro Shops also agreed on the seismic standards that would be used in a costly seismic retrofitting of the structure. Wharton hoped to have a signed lease agreement by the end of April. But sources involved in the negotiations said it wasn’t that easy to reach terms on the retrofit.

Preparing the structure to be more earthquake resistant nearly derailed the project in its early stages.

Consultants hired by Bass Pro Shops were concerned the soft soil beneath The Pyramid could render any new construction “economically unfeasible,” according to an Aug. 2008 report from the Herenton administration.

The city will use $41.5 million in federal recovery zone facility bonds for the retrofit and also for public improvements around The Pyramid. The amount is the city’s entire allocation of the bonds. The money is basically a federal subsidy of the interest on the bonds which will be issued by the city.

”This building is complicated. There are some things that have to be done,” Hagale said referring to the seismic retrofit. “It has been a long process. But no one, I don’t think, on either side … has lost any enthusiasm or commitment to make sure that we saw it to conclusion.”

City Housing and Community Development Director Robert Lipscomb put a preliminary estimate of the cost of a seismic retrofit at $4 million to $5 million.

“We thought it was going to be a lot more,” he told The Daily News after the City Hall press conference. “Until you get into it, you really don’t know. … That number could change.”

One factor in reducing the cost might have been a decision by Bass Pro Shops to abandon the idea of trying to build a 200-350 room hotel inside The Pyramid. Supporting a hotel would have complicated the retrofit.

“There cannot be hotel rooms put inside The Pyramid because of some of the limitations from a seismic standpoint,” Hagale said. “So, those will be things that will be discussed outside The Pyramid but will certainly be under consideration.”

Even early alternate plans included a hotel at the Front Street entrance connected to The Pyramid but not a part of the structure or within it.

The overall project will also be financed through a Tourism Development Zone (TDZ) in which sales tax revenue is held in a fund for financing the project.

Lipscomb said more approval will be needed from the State Building Commission for that part of the project.

The city has committed to $30 million in construction costs and expenses on the building itself. Wharton said the project will be self supporting and not use city tax revenue.

The lease agreement is one of several goals pursued in the last year by the three mayors the city has had in that short time span. But the pursuit of Bass Pro Shops began in 2005 during Mayor Willie Herenton’s fourth term in office.

Herenton hoped to bring in the contract agreement before he left office at the end of July. Mayor Pro Tempore Myron Lowery also had it on his to do list.

The Pyramid has been one of Wharton’s top priorities since taking office in October after winning the special mayoral election.

The breakthrough came in April when Bass Pro Shops executives set a target date of November 2011 for reopening The Pyramid with a super store, aquarium, hotel and other attractions.

Hagale said at least for now the opening date is a good date.

“My answer to that is yes,” he said when asked specifically. “The building is there so once those remediations and retrofits are accomplished, we can move very quickly towards the end build component of our store.”

The lease talks began in detail this past April with an added element. Memphis developer Poag-McEwen was also at the bargaining table to set terms for a redevelopment of The Pinch, the commercial-retail district east of The Pyramid.

The firm has been involved in similar developments near other Bass Pro Shops super stores.

The Pyramid closed in Sept. 2004 as FedExForum opened.

The forum came with a no compete policy that gave its managers first right of refusal on events and a clause that required it to be available to the Memphis Grizzlies basketball team as a back up game site.

Herenton put together a task force in 2005 to come up with a best use of The Pyramid. The early options included demolition of the structure or its conversion to use as a church.

But the group recommended a tourism retail destination use with Bass Pro Shops as the preferred tenant. Rival outdoor retailer Cabela’s was also considered and had been approached by Downtown developer Henry Turley earlier. Turley didn’t get much traction and moved on to other projects.

But Bass Pro Shops executives were interested when approached by the city team.

The company signed a letter of intent to take possession of The Pyramid with a June 30, 2006 target date.

Wharton and Herenton as well as Bass Pro Shops founder Johnny Morris made the announcement in Feb. 2006 in a ceremony in which they used fishing rods to lift the cover off a mock up of what the reconfigured Pyramid would look like.

“We don’t guarantee the success of a project. We don’t do that. No one can do that,” Hagale said. “But we do provide and we continue to provide the kind of incremental traffic to a development that comes from outside the market and community that gives other development an opportunity for success … The model is distinctive. … We’ve been very fortunate through this whole thing that it continues to perform.”

PROPERTY SALES 97 410 20,632
MORTGAGES 116 472 23,745
BUILDING PERMITS 227 1,085 42,594
BANKRUPTCIES 60 300 13,180