Insider Louisville has had more than one post lately about the dire downtown office vacancy situation, with thousands of jobs moving to the suburbs in what’s looking increasingly like a repeat of the 1980s.
Yesterday, Metro Mayor Greg Fisher announced he’s running for re-election.
In his email to supporters, Fischer took credit – mostly deservedly so – for setting the stage for Louisville to exit the Great Recession.
“Government doesn’t create jobs – but we create the right environment for entrepreneurs and the private sector to do so.”
Fischer also touted his participation in the Ohio River Bridges Project and new libraries, including funding construction of the Southwest regional library in Valley Station.
There were exactly zero references to downtown.
Downtown is at a crossroads for two reasons.
First, KFC Yum! Center is putting a $10 million hole in the city’s budget because the Tax Increment Financing District meant to fund the downtown arena isn’t.
Before the recession, arena proponents sold the idea Louisville could afford the $348 million facility because it in turn would revive downtown investment, generating the tax revenue to pay for the bonds. Yet, the blocks south and east of the arena – an area that was supposed to be in a full-blown renaissance by now – have stalled projects, vacant buildings, blighted blocks and unrealized potential.
Second, downtown office vacancies have – seemingly overnight – risen to 16 percent, the highest vacancy rate since the dark days of 1987. There are at least four large downtown office buildings in foreclosure.
The Meidinger Tower at Fourth and Muhammad Ali, which sold for about $28 million in 2004, was auctioned yesterday by Jefferson Circuit Court for $16.6 million, or a 4o percent discount.
Not an indicator of a healthy downtown.
According to the Courier-Journal, appraisers who valued the Meidinger at $20 million noted downtown office space sits empty as companies shift to newer, cheaper office space in the suburbs. “There is no information available suggesting that any companies needing large office space are considering a move to this community,” the appraisal said.
Which is not exactly a glowing endorsement of Louisville’s economic-development efforts.
A quick drive around the central business district reveals a city with a vital Main Street from NuLu to the Humana building, the Kentucky Center for the Performing Arts, 21C Museum Hotel and all the West Main Street museums and attractions.
But the farther south you go, the more tears appear in the fabric of the city, from a massive number of surface parking lots to completely empty blocks.
Here are the projects we hope Mayor Fischer might assess as he leads the city to new and bolder downtown redevelopment policies.
• Whiskey Row
Just a block east of KFC Yum! Center, it’s hard to believe that Whiskey Row started out six years ago as Iron Quarter, a Todd Blue project. Blue proposed a $48 million project with offices, hotels and restaurants. He purchased a half a block of dilapidated iron facade buildings in 2007 for $4.7 million. After the Great Recession hit, the developer realized all bets were off, and decided the highest and best use would be a surface parking lot for the nearby KFC Yum! Center.
Without getting out our copy of the “The Ancient History of Louisville” and rehashing the preceding six years, let’s just say Fischer did not cover himself in glory when he announced a February 2011 deal to allow Blue to level the buildings, a deal made just after he was elected. By April that year, a group of investors, including Laura Lee Brown and Steve Wilson, announced they were buying the buildings from Blue for $4.8 million. The Fischer Administration agreed to help stabilize the decaying buildings, investing $100,000 for every $1 million invested by the investment group up to $1.5 million. Brown, Wilson and company announced plans to stabilize the buildings on the way to building a $40 million project. Though it quickly became clear there was no actual “plan.”
Wilson told Wall Street Journal reporter A. D. Pruitt that he and Brown weren’t initially interested in the block because they already have a huge project going in the national expansion of their 21c Museum Hotel project. Since then, 21C has expanded to Cincinnati and Bentonville, Ark., with plans for more hotels in Lexington, Ky., and North Carolina.
In the WSJ story, Wilson confirmed Whiskey Row investors had no master plan, just an idea or two.
Mr. Wilson said they don’t even have a master plan for the site, but are eying a big bourbon distillery that will be part of a “bourbon trail” of six distilleries across the state where tourists can sip different brands of bourbon.
One of IL’s early scoops was reporting in February 2012 that Whiskey Row was in limbo after contractors found weaknesses that made the renovation project financially impractical.
Our sources confirmed a number of the buildings were too far gone to save. As we noted at the time, not good news for all the people who’d already invested millions on the block, including Valle Jones and Bill Weyland, who have something like $20 million in Whiskey Row Lofts on the west end of the block. Not to mention all the restaurant owners. Not to mention the impact on the city’s ability to service the arena debt should the buildings sit empty, a persistent drag on downtown instead of enhancing the surrounding entertainment district.
Back in 2012, an insider told us the majority of members of the investor group were hoping someone would take Whiskey Row off their hands. Since then, very little has happened beyond the demolition of two buildings, with two more stripped to the facades, supported now by iron frames. A few weeks ago, Jones spoke at a Rotary Club of Louisville meeting, saying investors in the project are in discussions with some “very fun and interesting” people in food and whiskey-oriented businesses who could bring entertainment concepts to the site. So, they’re still talking after six years about what to do with this pivotal block.
• City Block/O’Malley’s Corner:
Talk about unintended consequences. From Fourth Street and Muhammad Ali north to Liberty Street, the city gave away a cluster of buildings to Baltimore-based developer The Cordish Cos., a deal that became the Fourth Street Live entertainment district. In turn, Fourth Street live and its cluster of restaurants and bars captured the modest downtown nightlife, killing another full block of bars just two blocks east at Second and Liberty … and three blocks south of KFC Yum! Center. City Block started out as O’Malley’s Corner and Coyote’s, a complex of bars that had been wildly successful dating back to the 1980s country music craze. The clubs closed in 2009, with the club owners owing the two landlords who own the block tens of thousands of dollars. A few bars have come and gone, but the block has mostly remained vacant.
• Action Loan building
At Second and Market streets is the headquarters for Gus Goldmith’s real estate, payday loan and pawn shop empire. Goldsmith is a successful businessman, and by his own account one of the wealthiest people in Louisville. But, is a pawnshop the highest and best use of a property so close to KFC Yum! Center and KICC? To his credit, Goldsmith has the building for sale.
Center City was – like Iron Quarter – another plan hatched when Louisville was on a pre-Recession real estate adrenaline high. Cordish was going to invest $250 million to redevelop several blocks along Muhammad Ali – from Second to Sixth streets – into stores, restaurants, condos, movie theaters and a hotel. The vacant former Louisville Water Co. headquarters and other abandoned buildings on the block would be replaced by a vibrant entertainment center. Cue to April 5, 2013. Cordish proposes reviving Center City, but this time the plan is basically a hotel-and-grocery combo on the Third Street site, where that cluster of empty buildings still sits. City leaders say Louisville can’t afford to participate unless Cordish is going to shoulder more of the costs. But the alternative is a non-performing asset embarrassingly close to KFC Yum! Center and the Kentucky International Convention Center. Like so much of the area near KFC Yum! Center, a row of large buildings sits abandoned.
• The Fort Nelson Building
This is yet another project that city officials and company executives announced with great fanfare, only to have it dissipate into the Ohio River fog. New York-based Chatham Imports bought the Fort Nelson Building at Eighth and Main streets back in 2011. There, said Chatham executives, they were going to invest $8 million into the cool but creaky building in order to create an urban bourbon distillery for its Micther’s brands. Chatham closed on the building nine months later, then began renovation and stabilization. But as of earlier this week, that work appears to have stopped. Contractors built a large steel frame on the east wall of the building, closing Eighth Street. If the Michter’s project happens, it could be transformative, with more urban bourbon projects to follow. If not, it will be yet another false start in a city with a long history of false starts.
• Museum Plaza
Just this week, two attorneys announced a tentative agreement with the city, an option through 2015 to acquire and develop the Main Street property where the star-crossed Museum Plaza was to be built. Forgotten, apparently, was an embryonic plan that included a major participation by U of L. About 15 months ago, U of L officials hired Allen Cowen, the former Fund for the Arts CEO. Cowen was charged by U of L Provost Shirley Willihnganz to create the “Center for Creativity,” a center “where the university and the arts community come together.”
As of January, 2012, U of L held a 1-year contract to buy four facades – 615 W. Main through 621 W. Main – part of the Museum Plaza project, which was cancelled in August, 2011. The U of L effort was a holdover from an earlier plan to create “The Center for Graduate and Executive Education,” relocating several programs, including U of L’s Hite Art Institute and the Professional MBA to the Museum Plaza complex. The four building facades were to be incorporated at street level into the larger Museum Plaza skyscraper.
Is the U of L deal still on? Who knows? U of L officials take pride in being accountable to no one. But here’s an interesting link back. Lacy Smith, husband of current Fund for the Arts CEO Barbara Sexton Smith, is one of the two attorneys with the option on the Museum Plaza property. Barbara Sexton Smith replaced Cowen as CEO of the Fund for the Arts.
• The Stewart’s Dry Goods Building
This may be the most crucial key to a vital downtown. Stewarts Dry Good’s Building, a former luxury department store at Fourth Street and Muhammad Ali Boulevard, was once the center of downtown’s thriving retail sector. Since 2008, the building has sat empty and decaying after the recession extinguished a grandiose $60 million plan to redevelop the building into a hotel. BUT, we’re hearing increasing chatter from hotel executives and city officials that a new project is about to be announced. If nothing happens, it’s hard to image a Renaissance with an empty Stewart’s building and a half empty Meidinger Tower in the heart of downtown.
Still, it’s fun to go back and relive those golden moments when this city was still high on the fumes of the Go-Go 2000s.
We’ll leave you with this Business First article about developer Eric Bachelor’s plans for the Stewart’s building:
The lobby for the Embassy Suites would be on the ground floor and would be surrounded by ornate features, including marble floors, granite countertops and plush couches. The lobby also would have a fireplace and waterfalls, Bachelor said, adding that the renovation will marry the Hilliard Lyons Center’s traditional look, which dates to 1910, with a “cutting-edge” style that travelers might expect to find in Las Vegas or more exotic destinations. The first-floor restaurants would include an upscale steak or seafood concept, a sports bar and a jazz club. Bachelor said he is in talks with companies that would operate the three restaurants, and he hopes to strike deals in the next two months. “I’m talking to some good people,” he said, although he declined to identify any of the potential operators.