VOL. 131 | NO. 154 | Wednesday, August 3, 2016
First Tennessee Consolidating Real Estate
By Madeline Faber
First Tennessee Bank is renovating and restructuring three of its Memphis properties in a project totaling upwards of $62 million.
First Tennessee is renovating its Downtown tower to make room for a third tenant.
(Daily News/Andrew J. Breig)
When the project is fully completed in the third quarter of 2017, the bank will offer a full-floor vacancy at its prominent Downtown office tower and will relocate 440 employees to its pair of Memphis International Airport-area office buildings.
Additionally, First Tennessee will vacate the Court-Thomas Building at 55 N. Danny Thomas Blvd. so that the 228,000-square-foot building can be sold.
“It’s an effort to reduce our overall cost per square foot and be good stewards of operations dollars and reduce our overall footprint,” said Robert Hardwick, assistant director of facilities for First Tennessee.
The 25-story Downtown tower and the bank’s First Ops building at 3451 Prescott Road are undergoing a conversion to a collaborative, open-floor plan.
“Think Google or Microsoft. Very high-tech and fun with lots of color,” said Hardwick. The move away from cubicles to an open-floor plan will bring space efficiencies and significant cost savings, he added. The 640 employees currently housed at the Court-Thomas Building will be split between the tower and the First Ops offices.
The space-saving conversion will also free up the 15th floor at the First Tennessee tower for a third tenant. Fisher & Co. will begin marketing the space in the third quarter of next year.
Ron Kastner, senior vice president with CBRE, said full-floor vacancies are difficult to come by in the popular East Memphis office market, which could help in the marketing of Downtown space.
“Typical floor plates in Downtown high-rise buildings are about 15,000 to 18,000 square feet,” he said. “This alone has not been enough to attract a user from outside of Downtown, however, it has become more and more difficult for tenants to find space of this size in East Memphis, so perhaps, yes, it could be seen as an attractive opportunity.”
First Tennessee owns the tower and operates out of the first 15 floors and the 23rd through the 25th floors.
Long-time tenant Baker, Donelson, Bearman, Caldwell & Berkowitz occupies the remaining floors. Mark Glover, the Memphis office’s managing shareholder, said the law firm still has about 10 years left on its lease and is not interested in leaving.
Hardwick said First Tennessee considered selling the 509,000-square-foot tower as recently as March of this year, but it is currently off the market. A possible sale will be reconsidered in a couple years.
Three blocks away, the bank’s Court-Thomas Building is headed to sale. First Tennessee built the eight-story building in 1971 and has used it for back-office operations. The building is off the grid of the Central Business District, the standard area for Downtown offices and amenities. With the Downtown office market already seeing high vacancies, Hardwick thought First Tennessee would have to donate the building for tax credits because a sale was unlikely. Unexpectedly, it drew interest quickly as an out-of-town company is currently completing its due diligence on a potential purchase.
“I see the challenges for the First Tennessee building being it’s not located in the heart of the CBD or South Main area and more than likely the building is set up for a single tenant,” said Elliot Embry, vice president with NAI Saig Co. “The first thought is to try and land a large GSA (federal General Services Administration) or state office deal for the building. Multifamily housing development in Downtown Memphis is growing toward the South Main area, so I don’t see this building being repurposed for that.”
Just by closing off the building, First Tennessee will save $2 million annually, Hardwick said.
Out near the airport, First Tennessee is building up its First Ops offices with a $27 million renovation. The two buildings, totaling nearly 200,000 square feet, have been used for back-office operations and check processing. The buildings are located in a struggling office market with few amenities nearby.
With the renovation, First Tennessee is turning the pair of buildings into a mini-office campus complete with a cafeteria, work-out facility and open-floor plan to rival any other quality office building, he said.