VOL. 132 | NO. 159 | Friday, August 11, 2017
Memphis Medical District Bakery Project Closer to Inking Office Deals
By Patrick Lantrip
After receiving a 20-year tax incentive from the Center City Revenue Finance Corp. this week, one of the most ambitious projects to come out of the Memphis Medical District in recent memory is one step closer to repopulating the Edge District with an influx of office tenants.
The $73 million, multiparcel Bakery Development project being spearheaded by Development Services Group would add about 600,000 square feet of commercial, residential and parking space to the area surrounding the former Wonder Bread factory, 400 Monroe Ave. The payment-in-lieu-of-taxes, or PILOT, incentive awarded by the CCRFC Tuesday, Aug. 8, will go toward construction costs.
While the 286 apartment units will be the project’s financial linchpin, the 150,000 square feet of office and retail space will serve as its public face.
Ethan Knight, director of project management for Development Services Group, said one of the biggest questions he was asked after the announcement was made was why they were building so much office space when Downtown Memphis already has a plethora of empty buildings.
The Bakery Apartments, shown from the angle of Monroe and Lauderdale, would be built just east of a section of the Wonder Bread factory adapted into office space. The project’s developer says an out-of-town financial services firm is interested in the space. (Submitted)
“It seems like an odd venture to try to make, but we have already filled well over half of the space,” Knight said. “At this point they are verbal agreements, but they are good verbal agreements with excellent tenants who will make the neighborhood.”
Knight said the crux of the office development is a yet-to-be-announced tenant that is seeking to relocate its corporate headquarters to Memphis.
“We have 75,000 square feet of the adaptive reuse portion of the old Wonder Bread bakery that will be a financial services tenant we’re bringing in from out of town,” Knight said.
He said DSG and the potential tenant are in late-stage negotiations, with only the city’s approval as the last remaining barrier.
“They love the area, love Downtown Memphis, but it needs to make sense for them, and for it to make sense for them, it’s got to make sense for us as a viable project.”
Which is where the apartments come into play.
“It would never return the value that we put into it if we proceeded without the Bakery Apartments,” Knight said. “It’s an expensive cost-per-square-foot redevelopment, and the return on office space isn’t that great, so it doesn’t make sense on its own.”
In addition to the main office tenant, another parcel – the Cycle Shop at 421 Monroe Ave. – will house a co-working facility that will house a group of smaller tenants, including the Memphis Medical District Collaborative.
Knight said that he has been working with this group of smaller tenants since 2015 and that they’re all excited to move into the collaborative space together.
Meanwhile, Knight said he is also working to bring in another “high-end” user to occupy the two-story building at 411 Monroe Ave.
“We’re working with another 17,000-square-foot office tenant for that location,” he said. “I can’t divulge who that is, but it’s a very positive addition to the neighborhood.”
The last parcel to be redeveloped during the project’s first phase will be former BNH Architectural Glass building, located at 445 Madison Ave.
Knight said he has been in talks with several users to fill both sides of the dual warehouse-office layout of the building.
“Think along the lines of an athletic gym for the warehouse component, and we have another 16,000 square feet of office space that remains available.”
Since the CCRFC approved the project for tax incentives Tuesday, the next hurdle lies with the Downtown Parking Authority. If an agreement can be reached with the DPA surrounding the project’s 480-unit parking garage, it will go before city and county officials for final approval, at which point Knight said the lease agreements can be signed.
“We’re confident we can fill the rest of the space, or really it will fill itself once the activity picks up and people start moving in.”