Drawn to Downtown
CCIMs find commercial real estate opportunities near civic developments
By Stephanie Bell |
Located at the bull’s-eye of four intersections, Court Square in Shelby, N.C., is the perfect location for an attraction that will draw local residents as well as tourists to the downtown area. “There is a huge population explosion in western North Carolina because people want the small-town feel,” says Brownie Plaster, chairman of Destination Cleveland County in Shelby. Hoping to tap into this growing interest, Plaster and partner Marta Holden, executive director of Destination Cleveland County, are working to transform the town’s old courthouse into a music center and rehab an adjacent performing arts theater. These two civic-oriented projects are paving the way for other nearby commercial real estate developments while simultaneously helping to reinvent Shelby’s central business district.
Nationwide, markets of all sizes are taking steps to re-energize their downtowns with civic-oriented developments. Attractions such as theaters, sport stadiums, and convention centers are a boon to local communities’ tax bases. And they also present unique opportunities for commercial real estate professionals. The developments surrounding civic properties can range from mixed-use to retail to multifamily, and industry professionals are getting involved in all phases, ranging from development to brokerage to occupant.
The four-story, mixed-use building that Marlene G. Peeler, CCIM, is developing on the Court Square in Shelby “was a great coincidence,” since it came into play at the same time as Plaster and Holden’s projects. “Shelby welcomes development with open arms, as long as it’s good for the city,” Peeler says.
As broker and owner of Prudential Carolinas Realty in Shelby, Peeler’s project stemmed from her need for a new office. “I wanted new space and my idea for a mixed-used building on the square grew from there,” she says. Totaling just under 60,000 square feet, Peeler’s building, The Marington, will include 24 residential units, eight retail spaces, and eight office spaces.
The Marington is within walking distance of Plaster and Holden’s two rehabbed civic projects. “The old courthouse on the square is being turned into the Earl Scruggs Center of Southern Heritage Music, and in conjunction with that, the old theater is becoming the Don Gibson Theatre,” Peeler explains. Gibson and Scruggs are Shelby natives and members of the Country Music Hall of Fame. These city-owned properties were designed to honor them and bring more name recognition to Shelby. The Marington will be another component of Court Square, helping to rebuild the area as a desirable place to live and visit.
Larger markets also are capitalizing on the draw of civic developments. In Cincinnati, Scott D. Yards, CCIM, a senior associate with CB Richard Ellis, is a leasing agent for The Banks, a more than $1 billion mixed-use development on 18 acres of riverfront land between the Cincinnati Reds and the Cincinnati Bengals stadiums.
“After the two stadiums were built there was a vision from the city and county … to develop the acres [in between] into commercial property,” Yards says. Once completed, the property will include 1,800 apartments, 500 hotel rooms, and a $30 million park.
The Banks, a mixed-use development in Cincinnati, will be located on 18 acres of riverfront land between the Reds and Bengals stadiums.
Even markets with already thriving tax bases look to civic-oriented properties as magnets for people and tourists. “Mayor Oscar Goodman was told that in order to redevelop the city and make it dynamic, he needed a large piece of land,” says Wesley A. Drown, CCIM, president of the commercial division of Prudential in Henderson, Nev. The project the mayor envisioned is being built at Nevada’s Union Park site in downtown Las Vegas. This public-private mixed-used development totaling more than 60 acres is planned and managed by Newland Communities as well as the city of Las Vegas, Drown says. Overall, the Las Vegas City Council has authorized $40 million in funding for the first phase of infrastructure for the project.
Drown is working as the leasing broker on the medical office component, which will include both medical office space and a business hotel. The Lou Ruvo Brain Institute and the Surgical Research Training Institute already are on board as anchor tenants. “There will be a 45,000-sf facility surrounded by 45,000-sf tech showroom and 40,000 sf for the medical offices,” Drown says. His goal is to make the area a medical convention hub.
Two other major civic tenants, the Smith Center of the Performing Arts and the World Jewelry Center, will help draw residents, business travelers, and tourists to the development. The entire project will include 1.9 million sf of class A office space, 363,000 sf of ground-floor retail, 3,100 high-rise residential units, 1,750 hotel rooms, the Charlie Palmer hotel, and a small gaming facility. Adjacent to the site will be a new city hall, Drown says.
The economic impact of civic developments is a welcome bonus for both the tax base and town traffic. The increased tax base benefit has been a strong selling point for Scott Rechler, chairman and chief executive officer of RexCorp Realty LLC in Uniondale, N.Y., who is working on a $2 billion transformation of the Nassau Veterans Memorial Coliseum into The Lighthouse, a suburban mixed-use center that will include offices, multifamily, and sports entertainment.
“This project will create almost $60 million of annual real estate tax revenue and more than $200 million of recurring tax revenue,” Rechler says. The development also will add millions of sales tax dollars from the hotel, restaurants, and retail. The entire transformation will add more than $100 million incremental revenue over 25 years to both Nassau County and New York State, he says.
The developments in Shelby also will have a strong economic impact with a tax base increase of $200 million over 10 years. Aside from the increased tax base, Peeler has transcended her role as a local broker and joined the Gibson Theatre board and teamed up with the city to work on a local tax increment financing district. Once completed, the tax value of the new building will be about $13 million. Peeler’s next step is to get city council approval for the TIF. “It shouldn’t be a problem; the [TIF] is great for the town,” she says. And while she has to wait until closer to construction to meet with the council, she plans to take her mixed-use development to the market first as 60 percent presales are required to obtain financing.
The high-traffic element also plays a key role in Las Vegas’ Union Park development. “Retail is the engine for the market,” Drown says. Since it’s not just a gaming site, with the jewelry center, condos, and a nearby furniture warehouse, this project will draw non-gamblers to the market.
Equally as important as retail, Union Park’s multifamily component will be an economic draw. “Out of the 2,500 to 3,000 residences, some will end up being second residences and at least half will be condo-hotels,” Drown says.
The Banks in Cincinnati is bringing economic growth to the city and county by driving more than $600 million in private investment, drawing more than 3,000 residents, Yards says. “Overall, the project is economically inclusive and will help
the workforce become more diverse by creating more jobs for minorities,” he says.
The new development between the two sports stadiums also provides financial feasibility. Since the site must be raised out of the flood plain by construction of supporting parking garages and other infrastructure, the costs are very high. Increased development density can generate more TIF revenues and other tax revenues in support of the public infrastructure needed to make the plan work, Yards explains. The public infrastructure investment is up to $106 million and other sources include federal and state grants and loans, TIF bonds, and other city and county funds.
The public schools in Cincinnati also will reap some economic benefits. In accordance with the existing city agreement, 27 percent of the payments in lieu of taxes resulting from increased property values will be payable to the school district.
More markets seek to reap the benefits and opportunities that accompany civic-oriented properties and their surrounding developments. For the Las Vegas project, “the residential component and the more than 1 million sf of retail are key to the development,” Drown says. This high-density area will create a live-and-work urban center — not just for people to come to during the day, but for nightlife as well, he explains. With the big medical anchor tenants, the jewelry center, and the performing arts venue, the development will be “a mixture of culture and public projects for the residents [and tourists] to enjoy,” Drown says.
In Union Park’s medical component, Drown foresees a handful of research positions being based there with “3,000 physicians coming through the center,” he says. With the Surgical Research Training Institute as a tenant, Drown hopes that the tech-driven institute will attract world-renown medical scholars from all disciplines and specialties to the area.
In Shelby, the developments hold the key for future growth. “Both the Scruggs Center and the Gibson Theater are the ripple in the pond,” Plaster says. After 15 months of research on how other small towns were thriving, Plaster and Holden anticipate that their developments will be a “catalyst project,” paving the way for unique opportunities such as Peeler’s adjacent mixed-use building. It also will boost local commercial real estate opportunities by reaching out to entrepreneurs looking to relocate and start a small business in the Shelby area.
The Shelby developments also create opportunities for out-of-state investors. The region as a whole has premier tax credits for historical preservations, Plaster says. “There are incredible incentives, and the overlay for projects may end up being about 69 percent,” she says.
The Marington, Scruggs Music Center, and Gibson Theatre also will bring in more employment opportunities. “For the last 18 months, Shelby went through an economic depression and had unemployment in the double digits,” Plaster says. The community formed a task force to consider the types of developments that could improve the area’s economy. These projects create new jobs not just for the service industry, but also for the construction industry once buildings begin to break ground, Plaster says. This is similar to the opportunities arising from the construction of The Banks in Cincinnati. “The building of The Banks also will help develop hundreds of positions in the construction phase and then eventually in retail, office, and hospitality,” Yards notes.
The Banks also opens the door for small-business enterprises, including minority- and women-owned companies in the areas of contracting and business ownership, Yards says. By providing new sites for businesses, the downtown area will be more competitive with other cities, suburbs, and northern Kentucky, he says.
Given their complex nature, civic-oriented properties and their adjacent developments don’t spring up overnight. In New York, Rechler “will be rebuilding the Coliseum and the mixed-used development on top of the 73-acre parking lot that surrounds it,” he says. While the planning stage of the Uniondale project has been a success, phase 1 is projected to start in 2010.
In Cincinnati, “if all the stars align, The Banks will break ground in the first part of 2008 and the entire project will be completed in phases over the next seven to 10 years,” Yards says. The Earl Scruggs Center of Southern Heritage Music and the Don Gibson Theatre in Shelby are in full swing, with The Marington expecting to break ground early this year.