LOUISVILLE, Ky. (WDRB) – The 30-story office tower at 5th and Jefferson streets has long served a poster child for the problems plaguing the market for office space in downtown Louisville.
The downturn started in the aftermath of the Great Recession. The Jefferson Club, a private club where bankers, lawyers and other professionals once lunched on the top floor, closed in 2010.
Once called PNC Plaza, the building then lost its anchor tenant when PNC Bank consolidated its footprint following a merger. Meanwhile, the bank closed the spacious branch it maintained on the first floor. Other tenants fled to the suburbs, leaving the building more-than half vacant.
Last year Taco Luchador, like so many other downtown restaurants, closed its doors amid pandemic-induced emptiness in the Central Business District and racial justice protests.
But the building’s new owner has a $16 million plan to breathe “new life” into the aging office tower, which is now called 500 West Jefferson, a nod to its street address.
“What we’re doing is going to change the trajectory of 500 West. And it’ll be noticeable,” said Andrew Marchetti, the New York-based vice president of SomeraRoad, a private equity firm.
SomeraRoad scooped up the tower for a song — $22.5 million – in November, according to public records.
The previous owners — who turned out to be Ukranian money launderers, according to the U.S. Justice Department – paid $77 million for the tower in 2011. SomeraRoad fetched the building for a substantial discount even to the $33.3 million it commanded in 2000.
SomeraRoad began work about two weeks ago on a multipronged project to restore the building to its former glory.
“We are heads-down focused on delivering the best building in the market,” Marchetti said in an interview with WDRB.
Plans include doubling the size of the building’s lobby and opening it up with a two-story atrium and mezzanine, as well as reorienting the main entrance from Fifth Street to Jefferson Street and adding sidewalk seating.
“Fifth Street is great, but it felt like a secondary entrance,” Marchetti said.
On the fourth floor, SomeraRoad will convert leasable space in a tenant lounge and enclose a currently unused roof to make a rooftop terrace for drinks and private events.
The lounge will include seating areas, TVs, a bar and private “bourbon cabinets” where tenants can store their liquor.
On the other side of the floor, the company will build a 1,700-square-foot fitness with locker rooms and showers.
“If you want to come into the office early, work out, shower and go to work, you can do that,” Marchetti said.
The renovations should be done by the end of the year or the first few months of 2022, he said.
The renovations follow a move by Baird, the company that bought Louisville financial services firm Hilliard Lyons in 2019, to move up to the top five floors of the building and become its anchor tenant. (Baird is still downsizing its overall footprint in 500 W Jefferson after eliminating jobs following the merger).
New amenities aside, SomeraRoad will be looking for office tenants at a time of historically high vacancies in the Central Business District. The vacancy rate for Class A space – the sort available at 500 W Jefferson – was 22% as of March 31, according to real estate brokerage JLL.
Marchetti said 500 W Jefferson will attract new tenants even if it means a game of “musical chairs” among existing companies, but he thinks the overall market for Central Business District space will grow.
“We think that there will be considerable effort from business leaders to say, ‘You know what, I may be out in the suburbs, but downtown is on the rebound. And I’d like to be a part of the solution, I should look down there,’” he said.
WDRB News reported Thursday that Humana, downtown Louisville’s biggest office tenant, is planning to reopen its offices after Labor Day after sending nearly all employees home last year.
Marchetti said that bodes well for repopulating downtown.
“There’s activity out there right now … there’s traffic, there’s folks moving around, walking around at night … So I think it’s certainly headed in the right direction,” he said. “And I think it’s going to continue to get better month by month, especially as Humana brings folks back.”