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VOL. 126 | NO. 251 | Monday, December 26, 2011

Beyond Square One

City Council approves Loeb’s plan for renovating entertainment district

By Sarah Baker

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Memphis City Council’s approval for spending $16 million to improve Midtown’s Overton Square marked a milestone for neighborhood supporters, grassroots leaders and financial stakeholders – especially Loeb Properties Inc.

Funding approved for a new parking garage and detention pond that will help developers revitalize Overton Square, the once-thriving entertainment district in Midtown. (Photo: Lance Murphey)

During its last meeting of the year on Tuesday, Dec. 20, the council voted to move forward with revitalizing the district that housed Memphis’ first booming entertainment destination and the nation’s first T.G.I. Friday’s franchise in the 1970s.

“The square when it first started was probably the first watering hole in the Memphis area after liquor by the drink (was allowed),” said Loeb Properties president Bob Loeb. “This is the most public project we’ve ever been a part of. I was involved with Henry Turley and the fairgrounds, which was a lot bigger project, but we didn’t get any traction with the city. There are a lot of projects that are a lot bigger in dollar terms, but it’s just been interesting the amount of press attention. What I’m trying to do is see if I can translate that into once we’re open, people are going to be interested.”

With the exception of making headlines at the end of last year with its $10.3 million purchase of Park Place Centre from Belz Enterprises – marking the biggest retail transaction of 2010 – Loeb’s bread-and-butter deals are small bay retail and strip centers.

“This has been complicated for us because we’re used to not being in the public realm, just making decisions, keeping a low profile and a constant pace of doing things,” Loeb said. “To just sit around and wait on the public process has been good in some ways that it’s forced us to think and rethink our plans and to talk with a bunch of stakeholders, but it’s been frustrating in other ways, because we’re ready to start work.”

The longtime Memphis commercial real estate firm has owned property in the Overton Square area for more than 30 years. When the Square property in question sold 15 years ago to the Colorado family that still owns it today, Loeb came in second place during the bidding process. Two years ago, when Oklahoma City-based Sooner Investments’ development plans for Overton Square were postponed – due in large part to opposition by nonprofit preservation groups Save Overton Square and Memphis Heritage Inc. – Loeb Properties jumped on the opportunity to strengthen its presence in the Midtown district.

Overton Square will be the first development in Shelby County that will conform to the city-county Unified Developed Code, which is designed to create more walkable, bikeable, pedestrian-friendly, multiuse neighborhoods. But little did the local developer know just how complicated the process would be for breathing new life into the Square.

The original design was to anchor the district with a suburban-style grocery store. Upon that plan falling through and hearing from various public and private inputs, Loeb ultimately devised a “Heart of the Arts” plan, building on the success of current theater tenants while also relocating black repertory theater company Hattiloo Theatre from Marshall Avenue to the south side of Overton Square.

The $35 million project encompasses about 120,000 square feet in redevelopment and new buildings, $19.2 million of which Loeb will provide. The city was asked to contribute $16 million for infrastructure, including streetscapes, traffic-related expenses, Hattiloo’s new site, and a three-level, 450-space parking garage with a water detention facility underneath to alleviate rain flooding throughout the Lick Creek basin that contains Overton Square.

The council in May approved spending $6 million at the site for a two-level garage and detention basin. Subsequent to the May resolution, a parking study was conducted by national engineering consulting firm Tetra Tech Inc., which led the city engineering department to increase the size of the water detention facility 14-fold to 1 million cubic feet.

“As for the numbers, they have continued to change,” Loeb said. “The biggest increase in our costs had to do with the growth and the size of the water detention. Well, that has nothing to do with the Overton Square redevelopment; it has to do with the Lick Creek flooding problem downstream.”

Moving forward, annual sales tax revenues are also a variable, Loeb said. The firm projects a new annual sales tax of $2.1 million – $500,000 of which is local – and a total annual ad valorem (property) tax increase of $282,000. That’s an incremental tax of about $2.3 million a year, based on Loeb’s projections to build four new buildings while also renovating the buildings around Madison, such as the Radius and Palm Court buildings to the south; Memphis Pizza Café and Golden India to the west; and Boscos Squared, the former Paulette’s Restaurant, Bayou Bar and Grill, Chardonnay and Malco Studio on the Square to the north.

“The plan could unfold a million different ways,” Loeb said. “We’re estimating the size of the buildings and the use of the buildings and using industry standards, but obviously as this thing develops out, it’ll continue to evolve.”

For example, “a large retail user” has approached Loeb recently, which would bring in a higher-than-average sales tax and employment number. And conversely, if Hattiloo is successful in its fundraising and is able to relocate to the Square, the tax-exempt organization won’t pay ad valorem tax.

Hattiloo is most interested in the site at the northwest corner of Cooper Street and Monroe, Loeb said.

“We would just sell a site to the city who would lease it to Hattiloo and Hattiloo would have a capital campaign to construct its own building,” he said.

Tuesday’s approval by the council was crucial for Loeb’s timeline because the firm’s due-diligence contract with the Colorado owners expires Dec. 31. But the message Loeb has had all along is that regardless of whether the city agrees, it will still move forward with its plans. The developer was backed by local supporters from Memphis Regional Design Center to the Midtown Memphis Development Corp. and many in between, as evidenced by a 2,000-signature petition that was referenced during Tuesday’s meeting.

“If you’re going to do economic development and you’re going to create jobs, you’ve got to pay attention to the details. Parking is necessary, and adding the detention just makes really good sense. It’s like solving a big problem that everybody’s been dealing with. Now is the time to do it.”

– Mary Wilder, Lick Creek Coalition

Among those in attendance were Mary Wilder, member of Lick Creek Coalition and a resident of Midtown’s Vollintine-Evergreen neighborhood. The city’s approval is a move in the right direction toward addressing the storm water flooding fee that Memphis Light, Gas and Water Division customers have been paying since 2006, Wilder said. And the detention basin’s reach extends further than just alleviating flash flooding, Wilder said. Loeb’s analysis of the project’s economic impact shows 294 new jobs.

“If you’re going to do economic development and you’re going to create jobs, you’ve got to pay attention to the details,” Wilder said. “Parking is necessary, and adding the detention just makes really good sense. It’s like solving a big problem that everybody’s been dealing with. Now is the time to do it.”

What’s more, the deal is expected to have a “multiplier effect” on an already defined theater district, said Jackie Nichols, founder and executive producer of Playhouse on the Square. Studies by the nonprofit have concluded that the four theaters in the immediate area – Playhouse, Circuit Playhouse, Theater Works and the Studio on the Square – attract more than 100,000 people annually, 87 percent of which patronize nearby restaurants and bars.

Since the area is already what Nichols calls a “marketing engine” for nearby businesses, relocating Hattiloo will bolster an area that has the potential to replicate what cities like Washington and Boston have already done – provide options for theatergoers.

“It’s like Cooper-Young is a kind of restaurant district right now, it’s got 15 or 20 restaurants. You go to one restaurant and it’s full, you’ve got another option,” Nichols said. “That’s true in the theater too. Midtown and Overton Square is really a melting pot for the entire community – gay, straight; rich, old; black, white; liberal, conservative. The renovation and the addition of the parking garage is just going to make it more of a cultural attraction for people to move into the area for either their residential lives or with their entertainment, and that’s going to be more revenue for the city.”

Less than two years ago, coinciding with Playhouse’s 40th anniversary, the nonprofit theater company built a new $12.5 million facility made possible by individual and corporate contributions. Nichols said Loeb’s project is admirable because he took chances by putting in time and financial investment that “nobody else had been willing to do.” And just as former opposing businesses of the Madison Avenue bike lanes now embrace the amenity, the council’s approval is a baby step toward making Memphis a more livable city, Nichols said.

“A lot of times, people are scared of change,” Nichols said. “Some people, the only way that they can have any power is to complain about something or to say no, rather than let’s try this and see if it works. There’s always the segment of the community that thinks a developer is simply capitalizing, but what Loeb is doing is really going to have a very visible, visual impact on improving our community.”

PROPERTY SALES 0 291 21,272
MORTGAGES 0 160 16,194
BUILDING PERMITS 258 692 41,920
BANKRUPTCIES 1 117 6,579