In tune with the redevelopment times – An Interview with Vanguard Magazine

It’s a strategy that involves far more than one-note purchases, you could say about the business plan of New York-based Somera Road Inc. and it’s making some sweet music for its investors.

It was an approach that began with Somera Road focusing on distressed commercial building loans and properties from the 2008 recession, then expanded as the company discovered additional opportunities in midsized U.S. cities. Now the company is taking advantage of the 2017 changes to federal tax laws that have created economic opportunity zones as a method of spurring new investments in underserved areas across the U.S.

Michael Fralin — Somera Road Inc. Vanguard Law Magazine

“At the outset we didn’t look at markets as much as we looked at assets first,” explains Somera Road General Counsel Michael Fralin. “We looked at hundreds of loans and then chose to invest in particular assets based on how the surrounding market was performing in the location.”

Long distance information, give me Memphis, Tennessee

Since 2015, Somera Road has bought more than 50 properties worth over $1.1 billion across 32 U.S. markets.

“Typically, we’re not buying buildings that are physically dilapidated or stressed,” Fralin, 44, says. “A lot were constructed during the real estate boom of the early 2000s, and the problem is they were saddled with too much debt, so they are financially distressed.”

In Memphis, where the heart of rock ‘n roll started beating, this approach took Somera Road to the Gibson Guitar Co. factory built in 1998 and within picking distance of Beale Street  and B.B. King Boulevard. Beale Street is renowned as the center of the city’s blues scene and B.B. King Boulevard is named for the legendary blues guitarist. The low slung brick expanse of the building covers an entire city block, but its future hit some sour notes a few years ago when Gibson announced it would consolidate its manufacturing to a plant in Nashville.

Michael Fralin — Somera Road Inc. Vanguard Law Magazine

Somera Road bought the building in 2017, and Fralin says there were five different business plans for its reuse before delivery giant Federal Express (which started in Memphis in 1973) was lured as a tenant for 150,000 square feet.

By 2020, FedEx will be leasing 200,000 square feet of the space for its logistics center headquarters, and Fralin says Somera and FedEx are in advanced negotiations to lease space in the office building next door.

From Memphis, Somera Road took the show to Music City, as the firm bought two of Gibson’s adjoining buildings in Nashville in 2017-18, converting them into mixed-use commercial and retail projects. One is now home to Pins Mechanical Company, a hipster bowling center combining strikes, songs and suds. The second acquisition will be converted to a large-scale, mixed use development that could approach 600,000 square feet of commercial and retail space.

The communal workspaces Somera Road favors are built in neighborhoods where other new development is spurring activities day and night. Somera Road may add amenities like a gym or rooftop deck, but the bigger lure is landing in markets that are heating up through buying undervalued properties.

“The first thing is cost basis,” Fralin says. “We’re sometimes buying properties at 20 percent of their replacement value; we’re coming in at very good levels.”

A whole new tax tune

Tennessee has been fruitful for the Somera Road model, but so are cities such as Cleveland, Detroit, and Louisville, Kentucky, with the advent of the opportunity zone program offering investors a method to defer, discount or abate capital gains taxes over periods of seven or 10 years.

“This is the next business phase,” Fralin says plainly of the opportunities coming in cities where Somera Road has already invested.

In the larger picture, Fralin handles all aspects of the deals–purchase and sales, office leases, financing agreements, third-party and vendor contracts. On the ground locally, he works with the officials and outside counsel and consultants to square away zoning and other local regulations that make or break deals.

“Once in the market, we get to know the local government, the interest holders and the other stakeholders. Other opportunities organically presented themselves from there.” says Fralin.

In Strongsville, Ohio, a horn’s blow from Cleveland, Somera Road bought a 125,000-square-foot vacant office building sitting on 20 acres. Somera Road and Fralin worked with local politicians and local community groups to rezone half of the site for ground-up retail development.

Fralin says the zoning change allowed the company to nearly 80 percent of the 75,000- square-foot center to tenants such as Homegoods, Panera Bread, Outback Steakhouse and City BBQ. In addition to the retail, the vacant office building was successfully sold by Somera Road to a local user.

His own tune

Real estate is such a passion for Fralin he is also a managing partner for Couzens Hall Advisors LLC in New York, where he offers consulting and legal services. A native of the Boston area, he credits his brother, a broker in northern California, with drawing his interest into the field.

Michael Fralin — Somera Road Inc. Vanguard Law Magazine

Politics was also an early love for Fralin, who earned a Bachelor of the Arts from the University of Michigan in political science and government, and even served as a staffer of the later Sen. Ted Kennedy, D-Massachusetts, before entering law school at Boston College. He earned his Juris Doctor from BC in 2002 and began working in real estate law immediately thereafter.

Fifty properties later, the thrill of the chase has not waned for Fralin, and the change in strategies for acquisitions opens more avenues for Somera Road to grow. His first legal love has not changed, however.

“Complex real estate and structured financing is what I love most in my career, because it’s in this field that I cut my legal teeth,” Fralin says.

 

Originally shared on: https://www.vanguardlawmag.com/case-studies/michael-fralin-somera-road-inc/

New owner plans $20M investment to revitalize SouthSide Works

The new owner of SouthSide Works will get more time to develop the last three vacant parcels at the site, including two on the Monongahela riverfront, as part of a major overhaul that could include up to $25 million in investment.

Pittsburgh Urban Redevelopment Authority board members are expected to vote Thursday on whether to give New York-based Somera Road Inc. as much as four more years to develop the prime riverfront properties as the firm works to bring new life to the 34-acre retail, entertainment, residential and office complex.

Somera, a commercial real estate firm that targets distressed assets, took over SouthSide Works, site of a former steel mill, from Soffer Organization, the longtime owner, this summer.

In an interview Tuesday, Ian Ross, Somera founder and managing principal, said the goal is to bring the popular South Side destination back to life, particularly on retail side, which has fallen on hard times with empty storefronts dotting the streetscape.

Building a connection: Developer to break ground on 280-unit apartment complex at SouthSide Works

Somera, he said, is planning to spend $20 million to $25 million to revitalize the property. As part of its deal with the URA, it also has agreed to invest at least $1 million to upgrade the town square and other public spaces. Mr. Ross said that spending likely will end up closer to $2 million.

He declined to say what plans Somera had for the riverfront parcels, one of which is next to the Hofbrauhaus restaurant while the other is located between the Hyatt House Hotel and an office building.

But Herky Pollock, a CBRE retail broker who has been serving as a consultant to Somera, said the firm is exploring the “highest and best use” for the riverfront land.

“There are many different options in play, and they’re currently evaluating which adds the most to the overall vitality of the project,” he said.

As for the vacant retail spaces within the complex, Mr. Pollock has said in the past that he envisions a mix that includes entertainment, health and wellness, restaurants, and perhaps even daily needs such as a grocery.

Under its agreement with the URA, Soffer had until next July to develop the three remaining parcels. It would have paid $450,000 an acre for the land.

As part of the new deal, the URA, which owns the land, plans to lease the tracts to Somera rather than sell it, with the price increasing the longer it takes to get a project rolling.

A tale of two developments: SouthSide Works and Station Square look to rekindle their mojo

It is giving the firm up until July 1, 2022, to start developing the parcel next to Hofbrauhaus.

If Somera does so by July 20, 2021, it will pay $27,072 an acre each year under a 99-year ground lease. After that, the price per acre goes up to $55,000 until Nov. 1, 2021. And if Somera hasn’t started by then, the price jumps to $91,615 an acre.

Should the firm fail to start by July 1, 2022, the URA has the right to request proposals from other developers for that parcel as well as the one next to the hotel if no work has begun there.

If Somera does start development of the Hofbrauhaus parcel by July 2022, it will have until Oct. 12, 2023, to close on the land next to the Hyatt House Hotel. Annual lease rates for that parcel could vary from $27,072 to $78,209 an acre, depending on when work begins.

“We’re paying more if we take longer,” Mr. Ross said.

As with the other riverfront parcel, if the land next to the hotel is not developed by the deadline, the URA can issue a request for proposals to give others a crack at it.

The agreement also includes a provision to adjust the lease rate for the parcels by 5% every five years.

As for the third undeveloped tract, which is located at Sidney and South 28th streets, the URA will lease it to Somera long term at a nominal rate with a purchase option.

At least initially, Somera plans to activate and maintain a public-oriented space that could include a farmer’s market, a dog park or public art. URA officials said they structured the deal that way for that parcel because it is smaller and more difficult to develop.

Nathan Clark, the URA’s real estate director, said the agency decided on a ground lease rather than a straight sale for the riverfront parcels because it believes there is value in holding on to such assets. They also will provide a steady source of income for the agency.

“It’s not how we have traditionally done real estate. This seemed like a good opportunity to utilize the structure,” he said.

He and Robert Rubinstein, URA director of special projects, said the additional time given to Somera to develop the parcels is appropriate given the level of investment and commitments the firm has made to improve the complex, which has been a showcase for the city in the past.

“We think they have the balance sheet and the expertise to reinvigorate the retail portion,” Mr. Rubinstein said. “Retail is a tough thing. It’s just not here in Pittsburgh, it’s nationally. It’s continuously evolving and needs to be meticulously curated.”

Besides Hofbrauhaus, SouthSide Works is home to The Cheesecake Factory and other restaurants, a movie theater and apartments. It also is the location of the American Eagle headquarters and an Amazon tech hub.

Originally shared on https://www.post-gazette.com/business/2019/09/11/New-owner-investment-SouthSide-Works-retail-pittsburgh-development/stories/201909110090

PPL Plaza is ‘hands down the best office space in the market,’ new building owner says

Since Ian Ross founded Somera Road Inc. in 2014, the New York commercial real estate investment firm has done over 50 deals, totaling more than $1 billion and representing about 11 million square feet of space across nearly 40 U.S. cities.

The firm’s most recent acquisition: PPL Plaza in downtown Allentown, a property Somera officially added to its portfolio after submitting the top bid of $16 million at a sheriff’s sale last month.

The office building at 835 W. Hamilton St. and accompanying parking garage at 940 W. Linden St., essentially stuck in neutral for two years while foreclosure proceedings played out, fit into Somera’s focus on distressed, value-add properties in secondary markets that are in need of a fresh start. While the building only has a few tenants, Ross attributed the low occupancy rate to the prior ownership group being overburdened with debt after buying the property for more than $90 million in 2006.

But now, he told The Morning Call on Monday, the property is owned at the right price, giving Somera the ability to offer prospective tenants compelling rent pricing and capitalize on the nationwide trend of suburban office tenants returning to urban cores. With a brighter financial outlook, Ross believes PPL Plaza — due for a rebranding soon — has features that speak for themselves, namely an LEED Gold certification, a rooftop garden space, and architecture that leads Ross to say, “They just don’t build buildings this way anymore.”

“It’s hands down the nicest architectural construction product that we own in our portfolio,” said Ross, Somera’s managing principal. “Going back to the value proposition, we’ll be able to provide what’s hands down the best office space in the market at a fraction of the cost of new construction. One thing we love about our position here is we can provide better product at a lower price than our competitors, and we’re excited to see that next big company come to Allentown and excited to compete to be a space provider for them.”

Ross spoke to The Morning Call about the building’s condition, the property’s tenant prospects — the building was in the running for ADP before the payroll processor selected Five City Centerlast year — and a Kansas City project that Somera carried out that has some similarities to PPL Plaza. Here are excerpts from the conversation:

Q: In court documents, the property’s receiver mentioned the Plaza received interest from Blue Cross and Buckeye Partners as potential tenants. Are those deals still alive or are there companies interested in the building now that the foreclosure is over?

A: We’re actively engaged with a handful of prospective tenants that are compelled by the live-work-play environment that can be created in downtown Allentown, especially with the parking ratio that we’re able to provide at our building. There’s a great value proposition here, I think especially as compared to the suburbs. A lot of these suburban users are saying, “Not only is this not the environment that I want to be in out in the suburbs for my newer generation workforce, but if I move down there into the downtown, I can have the right environment at a cheaper price.”

With regard to potential tenants, there’s really no good reason that this building should be empty. I think it’s the worst-kept secret that ADP was strongly considering, and was actually at the finish line, of taking over this entire building. We weren’t really involved at that time, but I think the unfortunate truth there was tenants don’t like potential disruption. They were concerned that the prior ownership didn’t have the capital and the positioning, with regards to the capital structure, to be able to hold onto this asset long term. And I think there probably were concerns about an ongoing foreclosure battle, ongoing receivership, potential bankruptcy, and no tenant wanted to take that risk. But outside of those risks, which are clearly neutered at this point now that you have a sophisticated, low-capitalized owner that owns at the right basis, I think ADP absolutely loved the building.

Q: The Plaza was built in 2003. Are there certain parts you want to refresh?

A: When we look at our portfolio around the country, that’s a lot of times what we’re doing. We’re fixing distressed buildings. [Senior Associate] Basel [Bataineh] and I were in the market a couple days last week, and we were actively looking for ways to spend money improving the asset. The truth of the matter is: This building is in pristine, mint condition. The mechanical engineering, the plumbing, the building’s systems, everything is in perfect shape, even the rooftop garden still looks great. With regard to some of the aesthetic features in the lobby, we might do some upgrades there, but the design has stayed extremely well and the building shows great. For better or worse, there’s not a lot for us to do.

Built in 2003, the LEED Gold-certified PPL Plaza, which has a public gathering space in front of the structure at Ninth and Hamilton streets, is now in the hands of Somera Road Inc., a New York commercial real estate investment firm. (CHRIS KNIGHT/SPECIAL TO THE MORNING CALL)

Q: How do you envision the property? Because when you look at development in downtown Allentown, a lot of the construction has been down the road closer to PPL Center. If the Plaza gets full, can it help that end of the district?

A: I think the PPL Tower is really the anchor of downtown, and I think our building is inside of that anchor. I think you’ll continue to see these four, five blocks infill inside of those anchors, and I think we’re on the right side of that building, if that makes sense.

Q: Do you think you’ll be hitting the market about the right time? Because City Center Investment Corp. has ADP taking 10 floors of the 13-story Five City Center being built at Eighth and Hamilton street, and then will need to build more office space.

A: Absolutely. With regards to our value proposition and our ability to provide space at highly compelling rates, I think we’re in a great position to attract the next large user to this building. There’s certainly no longer any noise around distressed ownership or anything of that sort. It’s an incredible asset, in great shape. I don’t want to knock any competition, but we can provide better space at a lower price. I think we’re certainly in the market at the right time, and we’re excited about seeing the next great company come to downtown Allentown.

Q: Is there a specific type of tenant you believe will be drawn to the building?

A: I think because of how well designed this building was, it offers itself up to a variety of tenants, whether that’s a single user that wants the entire building or whether that’s single-floor users. The building can be very easily multitenanted. Furthermore, because of the efficiencies of the floor plate, the floor also chops up really well, so if you wanted to look at two, three or four users per floor, we could certainly do that, as well. Again, we often have these problems in smaller floor-plate buildings or older vintage buildings — this is not that. This building was designed to perfectly fit a user, from 5,000 square feet to 250,000 square feet. I think it really leaves us very open to the kind of companies that can fit in here.

Q: When you look at your portfolio, is there a similar property that would serve as a good blueprint for what you plan to do to the Plaza?

A: There’s a building in Kansas City that we acquired in 2016 called the 3Y building, at 300 Wyandotte and the River Market. We bought that building, also architecturally significant, very similar in style, a lot smaller in scale. It’s about 100,000 square feet, all steel and glass, beautiful building that was only about 10 years old that was designed by HOK Architects, which actually occupied a majority of the building. In a similar situation, the building was overleveraged with too much debt and acquired by a tenant-in-common group at too high of a purchase price, where come renewal, HOK — the firm had renamed to Populous — Populous couldn’t get a compelling enough rate as compared to alternative options in the market.

We ended up acquiring that [mortgage] note, taking title of the property and, as of today, we are now 100% leased at the asset, fully occupied with multiple tenants and an average lease term of about eight years. It’s been a great success story taking that building from entirely vacant to entirely occupied.

Morning Call reporter Jon Harris can be reached at 610-820-6779 or at jon.harris@mcall.com

Original post: https://www.mcall.com/business/mc-biz-somera-road-ian-ross-ppl-plaza-allentown-q-and-a-20190508-k7p6tdwebrbuxk7ca2s5rvttae-story.html

New PPL Plaza owners detail plans for property improvements

ALLENTOWN, Pa. – The PPL Plaza in Allentown is headed in a new direction and preparing for a new name.

The new owners invited media inside for a tour Wednesday after purchasing the property in a sheriff’s sale last month.

The building, though 16 years old, was way ahead of its time and offers a lot of modern features.

The biggest change up is the plaza. The new owners want to make it more of a communal space. The water fountains go, but they’ll add more places for people to sit and beef up entertainment.

The PPL Plaza has a spectacular lobby skylight, rooftop gardens and countless eco-friendly features.

The PPL Plaza building was sold at a sheriff’s auction to Somera Road for 16 million, a fraction of what it cost to build it. It most recently was home to Talen Energy, a PPL spinoff.

The owners aim to make the building once again attractive to tenants, who recently have gone for newer, cheaper builds thanks to the Neighborhood Improvement Zone.

The old PPL Plaza Is in the NIZ, and the new owners could be eligible for NIZ benefits for new improvements like upgrading the lobby and revamping the plaza space.

Ian Ross says there’s a lot of vendor interest in the vacant restaurant space, especially with 2,000 ADP employees soon to move in just down the street.

“A lot of vendors want to play into that and be accessible from a street front perspective,” Ross said.

About a half a dozen companies have already expressed interest in moving into the building.

“Companies are saying I want to be downtown,” Ross said.

The new owners aren’t naming those companies, but they say they expect tenants will start moving in by the end of the summer.

 

Original post: https://www.wfmz.com/news/lehigh-valley/new-ppl-plaza-owners-detail-plans-for-property-improvements/1081928942

New PPL Plaza owner shows off building, expects tenants this year

PPL Plaza in downtown Allentown has posed something of a conundrum for its new owner, Somera Road.

The New York commercial real estate firm typically acquires distressed properties in need of some obvious renovations. While the PPL Plaza (or, its previous ownership group) has certainly faced financial distress, the 16-year-old LEED Gold-certified structure is already “hands-down the architectural gem” of Somera Road’s portfolio, founder and managing principal Ian Ross says.

“We’ve banged our heads against the wall trying to figure out how to make it a better space,” Ross said in the atrium of the building prior to a tour Wednesday.

He later said it might be the “nicest vacant office building in the country.”

Ross reiterated his conviction that the more than 200,000 square feet of office space is of superior quality to any other office building in the city, and he promised to lease it at cheaper rates than anywhere else downtown.

Prospective tenants like that value proposition, he said. A half dozen are actively looking at the seven full floors of office space, he said, and three are interested in the retail space on the southeastern corner of the ground floor. Somera Road hopes to begin announcing tenants in the next three to four months and have its first tenants move in this fall.

“The interest has been astounding,” Ross said. “We’ve barely gotten started.”

Somera Road, which owns 55 buildings with about 11 million square feet of space across nearly 40 cities, has hired original building architect Robert A.M. Stern to consult on some modest upgrades.

That includes a redesign of the lobby, including new furniture and removing security turnstiles; fresh foliage in “winter gardens” on the third and fifth floors; and some demo work on the top two floors to create more open spaces attractive to today’s tenants.

It also wants to bring food trucks to the outdoor plaza, as well as more events and seating, Ross said. (It will feature the main stage of the city’s Blues, Brews & Barbecue festival June 8).

“We want it to again be the focal point of downtown,” he said.

Somera Road officially added the office building and accompanying parking garage at 940 Linden St. to its portfolio after submitting the top bid of $16 million at a sheriff’s sale last month.

Liberty Property Trust built the $60 million project in 2003 for PPL Energy Supply, which later became Talen Energy after the parent company headquartered next door spun it off.

A firm led by investor Joshua Safrin bought the property for more than $90 million in 2006, taking out a $83 million mortgage. The debt proved too much, and it’s been mired in foreclosure proceedings the past two years following a mortgage default in late 2016.

The previous ownership group argued the financial distress was a result of an unfair playing field created by the city’s Neighborhood Improvement Zone, where developers can tap into certain state and local taxes to pay the debt service on their construction loans.

It filed numerous lawsuits against the city and the Allentown Neighborhood Improvement Zone Development Authority, including a claim that the tax subsidies offered competitors constitute a “de facto taking of the property for which just compensation must be paid.” Talen moved three blocks last year into City Center Investment Corp.’s Tower 6, where rent per square foot was up to 30 percent cheaper.

In April, Lehigh County Judge Doug Reichley ruled against the former owners.

Somera Road, the new owner, claims it too has been unfairly hurt by the NIZ. On May 9, it filed a notice of appeal before Commonwealth Court.

According to Lehigh County Court records, Somera Road took on Wells Fargo’s obligations in the mortgage foreclosure judgment. That amounts to about $56 million, Ross said. Somera Road bought Wells Fargo’s interests in the mortgage last year for roughly $18.4 million, according to Trepp, a New York firm that monitors commercial property mortgages that have been bundled into bonds.

Somera Road also was one of the investors that sustained a considerable loss on the JP Morgan Chase mortgage-backed security that included the PPL Plaza loan, Ross said.

“We think we have a viable claim,” Ross said. “There was an artificial supply created in this market that unjustly burdened this building.”

City spokesman Mike Moore declined to comment Wednesday on Somera Road’s claim.

The building still has a few tenants: PPL Gold Credit Union, a restaurant and a BB&T bank branch on the first floor, along with some PPL Electric Utilities employees on the third floor. Somera Road said the third floor will again be vacant in a few months.

While the firm is open to leasing all the office space to a single tenant, Ross said it’s leaning toward multiple tenants, with most taking one floor and a marquee player taking the top two floors, which features an outdoor garden.

Morning Call reporter Andrew Wagaman can be reached at 610-820-6764 or awagaman@mcall.com

 

Original post: https://www.mcall.com/news/local/allentown/mc-nws-allentown-ppl-plaza-somera-tour-20190529-vwqtxvktajhrvmtrx35nj4qzdq-story.html?outputType=amp

Fairgrounds site sells

A fairgrounds-area property has sold for about $9.3 million — three times the amount at which it last changed ownership hands a mere four years ago — and its warehouse is slated for a major overhaul from a New York City company.

The address is 1414 Fourth Ave. S., with the property located within an opportunity zone and near Wedgewood-Houston. The buyer was commercial real estate firm Somera Road, which plans to convert the building to creative office and retail uses. According to a release, the project will be called WeHo Crossing and will eventually offer 60,000 square feet of office space and 12,500 square feet of retail and restaurant space. An early-2020 completion is eyed.

The seller was 4th Avenue South Ventures GP. The partnership acquired the roughly 4-acre property in January 2015 for about $2.9 million, according to Metro records.

Lance Bloom, a vice president with Colliers International Nashville, brokered the deal.

Grooms Engine Warehouse previously occupied the now-empty building, which spans about 115,000 square feet and opened in 1950.

The sale is the equivalent of about $80.40 per foot (based on the building’s size).

“As Nashville grows and becomes a prominent global business hub for the knowledge economy, we are seeing substantial demand increase for offices that provides unique and creative workspaces for the millennial employee set. WeHo is no doubt on the verge of becoming the next big neighborhood of Nashville,” Ian Ross, principal of Somera Road, said in the release, adding the site is near the future SoHo House, restaurants, apartments, condos and makerspaces.

“It’s exciting to watch this neighborhood grow right before our eyes and it’s hard to find a more rapidly developing ‘cool’ neighborhood across the country,” he added.

According to the release, Somera Road has enlisted Manuel Zeitlin Architects for design. Charlie Gibson, Cushman & Wakefield, will represent Somera Road on office leases, with Elam Freeman, Baker Storey McDonald Properties Inc., representing the company on retail leases.

Of note, Somera Road plans to update a Gulch property home to a former Gibson Guitar facility. The company will undertake a 45,000-square-foot mixed-use development at the Church Street site, which was the subject of legal action after Gibson decided to sell the property to a different New York investor. The remaining structure at the site was once home to Gibson’s Valley Arts brand (read here).

Somera Road previously acquired a nearby property, also from Gibson, at which it currently is retrofitting what had been a piano showroom so as to accommodate a bowling and arcade facility. The firm also owns two Gibson properties in Memphis, the result of what were the Nashville-based guitar company’s 2018 restructuring efforts. Nashville-based ESa is overseeing architectural work at the future bowling building, the address for which 1121 Church St.

The Somera Road Fourth Avenue South transaction represents the latest in various real estate moves involving properties located near The Fairgrounds Nashville (read herehere and here), Wedgewood-Houston and Chestnut Hill.

Established by Congress in the Tax Cuts and Jobs Act of 2017, opportunity zones are tools designed to stimulate low-income and transitioning communities with private capital. The law provides a federal tax incentive for investors to re-invest their capital gains into so-called opportunity funds.

Originally published by the Nashville Post: https://www.nashvillepost.com/business/development/commercial-real-estate/article/21065663/fairgrounds-site-sells-for-triple-2015-price 

AUTHOR William Williams

Manhattan investor unveils Wedgewood-Houston project

New York-based Somera Road Inc. bought the 4-acre property at 1414 Fourth Ave. S. on April 23 – with plans to overhaul the building, as depicted in this rendering.

A real estate investor from New York City bought a property in the buzzy Wedgewood-Houston neighborhood on Tuesday — with plans to overhaul the industrial building on-site.

Somera Road Inc. now owns the 4-acre property at 1414 Fourth Ave. S., immediately south of downtown. The developer is rebranding the building as “WeHo Crossing,” with plans to create 60,000 square feet of office space and another 12,500 square feet of retail and restaurant space. The project is set to debut in early 2020.

“There is a dearth of high-quality, creative, immediately available, unique space — similar to what Austin went through three or four years ago,” said Ian Ross, managing partner of Somera Road. “We can create that here, rather than some generic steel-and-glass building.”

Somera Road’s development cranks up Wedgewood-Houston’s transformation another notch, coming right on the heels of Apple Music and London-based boutique hotelier SoHo House signing leases for the nearby May Hosiery mixed-use development. (Those developers just revealed plans for another such project in the neighborhood, featuring the iconic guitar-shaped scoreboard from the old Greer Stadium).

Somera Road’s purchase also calls fresh attention to the fact that this fast-changing neighborhood lies within an Opportunity Zone. Those zones, created in the federal government’s 2017 tax law overhaul, grant investors lucrative tax breaks in order to entice them to back developments or companies located in those traditionally low-income areas.

Somera Road’s project is the latest in a spurt of local Opportunity Zone dealmaking that has also included the potential relocation of an aerospace manufacturer to North Nashville, apartments in that same part of town and a development in East Nashville.

Ross said he had been evaluating the prospective purchase before the government finalized its list of Opportunity Zones. “It makes a good deal better. It doesn’t really help make a bad deal good,” Ross said of the tax benefits. “We’re not making deals make sense because it’s in an Opportunity Zone. But it is really additive to our investors, if the deal works.”

The purchase price was not immediately available in public records. A spokeswoman for Somera Road declined to disclose the project cost.

This is Somera Road’s first investment in Wedgewood-Houston, after making its local debut by purchasing two buildings in the Gulch from Nashville’s Gibson Guitar Corp. Ohio-based entertainment concept Pins Mechanical Co. is moving into one of those buildings.

Project team

  • Manuel Zeitlin Architects: design
  • Charlie GibsonCushman & Wakefield: broker representing Somera Road on office leases
  • Elam Freeman, Baker Storey McDonald Properties Inc.: broker representing Somera Road on retail leases
  • Lance Bloom, Colliers International: broker who arranged the land sale

The project would involve 60,000 square feet of office space and 12,500 square feet of retail and restaurant space.

“There is a dearth of high-quality, creative, immediately available, unique space – similar to what Austin went through three or four years ago,” said Ian Ross, managing partner of Somera Road. “We can create that here, rather than some generic steel-and-glass building.”

The existing industrial building on the property will be renovated into this office and commercial space.

This is Somera Road’s first investment in Wedgewood-Houston, after buying two buildings in the Gulch.

Somera Road’s project is named WeHo Crossing.

 

Originally Published By Adam Sichko  – Senior Reporter, Nashville Business Journal

Office/hotel tower to rise Downtown next to FedEx Logistics

In a powerful one-two punch for Downtown, developers on Tuesday announced an eight-story, 250,000-square-foot office tower with a 250-room full-service hotel will rise next to where FedEx Logistics is moving its global headquarters into the Gibson Guitar building.


WAYNE RISHER: FedEx Logistics announces headquarters at Gibson Guitar building 


Called The Clipper, the new, $250 million office tower/hotel will include 50,000 square feet of ground-floor space for potential restaurants and retailers, multi-level parking and public green spaces.

The hotel will feature “best-in-class” food, a rooftop deck and conference center. Senate Hospitality, which owns the nearby Westin Beale Street, will be a partner.

The same landlords who own the Gibson Guitar building own the property where The Clipper will rise: New York-based real estate investment firm Somera Road Inc., its affiliate Somera Gibson Holdings, and local partner Orgel Family LP.

The Clipper will be built on what is now a 385-space, surface parking lots at 0 Pontotoc, immediately south of where Gibson Guitar is.

“A strong Downtown Memphis is critical, and we wanted to be a part of its momentum,” Ian Ross, managing director of Somera Road, said in a release. “We are thrilled to welcome the FedEx family to the Gibson building…”

The Clipper is a FedEx reference, to company founder Frederick W. Smith’s analogy that FedEx is the clipper ship of the computer age. A sculpture of a clipper ship will be placed prominently as part of the FedEx Logistics development.

Richard W. Smith, president and chief executive of FedEx Logistics, said in a prepared statement, “I am thrilled about this development project, which along with the FedEx Logistics headquarters at the former Gibson Guitar Factory building, will unlock massive opportunity for our business community and transform this southwest area of downtown Memphis into a thriving campus for our growing company.

“This is an ideal location for a global business like ours, which will benefit tremendously from the talent we will be able to attract to downtown Memphis,” he said.

“The Clipper represents the cutting edge of a live/work/play environment,”  project partner Benjamin Orgel said in the release. “This is the next wave of energy that Memphis’ residents, employees and visitors need.”


MICHELLE CORBET: First public incentives revealed for FedEx Logistics’ Downtown Memphis HQ


Downtown Memphis Commission president and chief executive Jennifer Oswalt said new development and density are exciting and “replacing surface parking lots with mixed-use development aligns well with the mission of the DMC.”

“Having two projects of this magnitude happening across the street from each other along with everything else happening downtown — St. Jude, Union Row, the Riverfront — shows the strength of our momentum,” Mayor Jim Strickland said in the release. “I said during my State of the City address that we’re going to ‘build up, not out,’ and this project is a prime example of that.”

Ross said developers weren’t ready to discuss yet what public incentives they’ll be seeking from the Downtown Memphis Commission and its affiliates, although he said,  “A project of this magnitude won’t work without public support and public incentives. With regards to specifics, we’re really not there yet, and we’re still kind of compiling our research and our work.”

Ross said there would be a public parking component, but The Clipper and FedEx Logistics wouldn’t be totally dependent on parking built on The Clipper site. He said arrangements have been worked out to use other parking facilities, such as at the FedExForum and the Lee’s Landing garage. The facilities have heavy night-time demand but spaces available during the day.

The Clipper project will include approximately three parking spaces per 1,000 square feet, he said. The total spaces in the project is still to be determined, Ross said.

Cushman & Wakefield/Commercial Advisors will manage commercial leasing services of The Clipper.

Ross said other contractor/professional service providers would be ESa (Earl Swensson Associates Inc.) of Nashville, architects on office tower; Danny Bounds of Bounds & Gillespie Architects of Memphis on the hotel; Kansas City contractor J.E. Dunn, contractor on The Clipper; and Kimley-Horn, engineers.

All information on The Clipper, including 3-D renderings and videos, can be found at clippermemphis.com.

Original post: https://dailymemphian.com/section/business/article/3046/Officehotel-tower-to-rise-Downtown-next-to-FedEx-Logistics