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.
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.
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.
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.
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 here, here 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.
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.
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.
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.
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.”
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.
Developers who announced big new plans for Downtown Memphis on Tuesday, Feb. 12, said their bottom line is a stronger live-work-play environment in the center city.
Somera Road Inc. of New York and Orgel Family LP of Memphis are at the center of a new FedEx Logistics headquarters in the Gibson Guitar building and an adjoining, $250 million office tower, hotel and retail center across the street at B.B. King and Dr. Martin Luther King Jr. boulevards.
The FedEx Logistics headquarters will repurpose the guitar factory and bring as many as 700 new workers Downtown, while a mixed-use project dubbed The Clipper will meet needs for new Class A office space, a full-service hotel, restaurants and perhaps a grocery store, said Somera Road founder and principal Ian Ross.
Ross, along with Benjamin Orgel, a partner with his father, Billy Orgel, in Orgel Family LP, spoke with The Daily Memphian about the FedEx project, announced Tuesday morning, and The Clipper, announced two hours later.
And giving a preview of coming attractions, Ross said Somera Road is working with its local partners on a future project on the north end of Downtown, the former Conwood Co. property dubbed the Snuff District.
The Clipper, planned for Gibson’s surface parking lot, would include 200,000 square feet of office space on top of 50,000 square feet of ground-floor retail, and a 250-room hotel of a brand not yet disclosed, plus parking levels with a public parking component.
The Clipper is a FedEx reference, to company founder Frederick W. Smith’s observation that FedEx is the clipper ship of the computer age. A statue of a clipper ship will be placed prominently as part of the FedEx Logistics development.
A transcript of the conversation, edited for clarity and brevity, follows:
Ross: We’re really excited about what we’re going to do over at The Clipper. We think the market needs a modern, Class A, creative office building that speaks to the needs of office users today, and when we looked around the Memphis market, we certainly believed there was a dearth of Class A space for both companies within Memphis and companies outside of Memphis that are looking at the market.
So we’re excited about building that office building, about putting it right in the epicenter of Downtown, right across from FedEx Logistics headquarters, a block from Beale Street, a block from the FedExForum. It’s really going to enliven that area and create that live-work-play environment connecting to South Main and the residences there, connecting north to Downtown, just really a tremendous location for that.
We’re also excited about the retail we’re going to put in there. It’s about 50,000 square feet of retail, fast-casual restaurant, full-service restaurant, convenience, potentially grocery. We’re really excited about stuff that fits into that live-work-play mix.
And when we start looking at the hotel market, there’s obviously been a plethora of limited-service boxes coming up, and I say boxes because I mean boxes, there hasn’t really been high-quality, full-service products built in Memphis since the Westin was built. It’s a tremendous hotel that’s doing very well and we got to know the Senate Hospitality team early on in our work here and in Nashville, and they explained to us why they do so well and what their faults are.
They realize they need more conferencing space, so we’ll be building a best-in-class hotel that’s full-service, with food and beverage outlets, with pool, rooftop bar, and with tremendous conferencing facilities for corporate users and conference users. Senate knows exactly what’s needed. They’ve had a ton of success here at the Westin, and we’ll be looking to build on that with the delivery of our hotel on that site.
The Daily Memphian: Will the new hotel represent competition for The Westin?
Ross: They view it and we view it as additive.
TDM: What will be the phasing of construction?
Ross: The entire site will be developed simultaneously. It will happen from a sequencing perspective, the work there (The Clipper) will be going on at the same time as the former Gibson building. The FedEx Logistics/Gibson building will deliver first, and The Clipper project should follow probably 12 months behind.
TDM: Will FedEx Logistics use The Clipper as an expansion area to handle future growth?
Ross: I think it’s certainly a possibility. We spent a lot of time with the state of Tennessee, with the Department of Economic and Community Development and the Downtown Memphis Commission and the (Greater Memphis) chamber and Mayor Strickland and his team.
I think it’s very clear Memphis needs Class A office space for a few reasons. To attract companies from the suburbs that want to take part in the live-work-play environment Downtown. To stimulate further growth within the market from existing users. To replace some of the existing and potentially decaying office product or office stock in the market today. Lastly, to attract tenants from outside the market that are looking at Tennessee as a place for growth or relocation, and who may be apprehensive to Nashville at this point because of the compression in that market. I think Memphis is ripe to attract a national user or corporate headquarters. I think one thing the market needs here is office space that speaks to the revival that we’re seeing Downtown.
I think it could both be expansion space for FedEx, although there’s no deal there at this time. It could be space for existing users Downtown. It could be for suburban users that are looking to be in the urban core. I think what would be most exciting for the city and the state is finding new users from outside of Tennessee.
TDM: Are there plans to connect the FedEx Logistics headquarters with The Clipper?
Ross: Way too early at this point to tell. I think skybridges have their pros and cons. It allows for connectivity. … It’s something we’ve thought about. We also like to see vibrant streetscapes, and skybridges can hurt that. It’s something we’ll certainly consider and look at the feasibility of.
TDM: Who’s involved from a construction and professional services perspective?
Ross: LRK (Looney Ricks Kiss) of Memphis, architects on FedEx Logistics; ESA (Earl Swensson Associates Inc.) of Nashville, architects on office tower; Danny Bounds of Bounds & Gillespie Architects of Memphis on the hotel; Grinder, Taber & Grinder of Memphis, contractor on FedEx Logistics, with J.E. Dunn of Kansas City as an investor; J.E. Dunn, contractor on The Clipper; Kimley-Horn, engineers; and Cushman & Wakefield/Commercial Advisors, real estate services.
TDM: Will The Clipper be comparable to The Gulch in Nashville (where Somera Road owns property)?
Ross: When we look at some of the design that’s happened in Nashville, the Nashville community has done an incredible job of bringing best-in-class, modern, architecturally significant new office and hotel product to the market. We admire what they’ve done and would like to see some of that in Memphis, but we’re not creating The Gulch here.
TDM: How will parking be handled, considering Gibson’s surface parking lot will be the site of The Clipper?
Ross: The parking that Somera and the Orgels and our team has to offer at The Clipper project can’t be matched anywhere in Downtown Memphis. We spent a ton of time doing thorough parking studies across the market and making sure – when you look nationally at our portfolio, parking today is such an important component of making projects work, and we don’t take that lightly.
We’ve amassed parking in the immediate area, including at Lee’s Landing, next to the Westin, including FedExForum, and including the parking we’re planning on building as part of this project. Not only will we be able to park the Gibson building, we’ll be able to offer at least three (spaces) per 1,000 square feet at The Clipper office building, which we believe is really unmatched in this market.
The total spaces are TBD right now.
The Grizzlies have been incredible partners, working with us to make sure the parking at their facility is well utilized, creating a vibrant Downtown. They have a lot of parking that can be offered for shared uses. It’s obviously needed for game night, but allowing that parking to be freed up for 9-to-5 workers, I think is very important in encouraging lots like our parking lot to be developed. We’ll be extraordinarily well-parked for the entire project.
TDM: Will The Clipper include public parking?
Ross: There will likely be a public component as we work with the city with regard to public incentives on parking. And there will certainly be a public component.
TDM: What public incentives are you seeking through the Downtown Memphis Commission and affiliates?
Ross: I’d rather not go into incentives at this time. We certainly are going to need a lot of public support, which I believe Mayor Strickland and (DMC president) Jennifer Oswalt and their teams are eager to help us provide. 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.
TDM: What else can you tell us?
Ross: I don’t think there’s any market we’ve worked in quite like Memphis where everyone is so welcoming and encouraging.
I’m just in awe of the civic-minded community here in Memphis. In all avenues we’ve explored here, in all the stakeholders we’ve gotten the opportunity to meet, there’s just a real civic-minded approach, notably as seen from Benjamin and his father, Billy (Orgel). Everybody’s eager to succeed and to see this city grow. It’s truly been special to watch and learn and become part of it.
TDM: What else is Somera Road developing in Memphis?
Ross: In Memphis, we’ve been pursuing a variety of other projects. We’re partnering with the Orgels on what we’re calling the Snuff District (the former Conwood tobacco property in Uptown), almost 55 acres just north of the Pinch District, which we believe will continue to benefit from the compression we’re seeing Downtown. As the market moves south for residential development, we believe it will also start shifting north as well. And we’re excited to be partnering with the Orgels on that project as well.
TDM: What’s the perspective of Somera Road’s local partner on these projects?
Benjamin Orgel: I think it’s amazing and it shows – and not to steal the trademark of our Mayor Jim Strickland – how much momentum we have in Memphis that sharp, sophisticated real estate investors that are in over 40 markets and that are out of New York City, they took a chance on Memphis.
Ian is one of the smarter investors, because he noticed Memphis has legs and momentum, just like our mayor said. And they come down here, and I give it to them, he partnered with someone who knows the market and does development in Downtown Memphis, and I commend Ian and his team for being a big out-of-town investor. I think this just opens the door for other investors from other cities around the country to come in and make Memphis even better. We’re definitely on an upward trend.
Chairman’s Circle members Benjamin and Billy Orgel, partners announce expansive new development adjacent to FedEx Logistics future headquarters in Downtown Memphis
Hot on the heels of the announcement that FedEx Logistics will consolidate its headquarters in Downtown Memphis, New York-based real estate investment firm Somera Road Inc., its affiliate Somera Gibson Holdings (“Somera”) and local partner Orgel Family LP have announced The Clipper, a significant new mixed-use development adjacent to FedEx Logistics’ future headquarters at the former Gibson Guitar Factory building.
“A strong Downtown Memphis is critical, and we wanted to be a part of its momentum,” said Ian Ross, managing director of Somera Road, Inc. “We are thrilled to welcome the FedEx family to the Gibson building, and we’re grateful for the vision and support of the State of Tennessee, Mayor Strickland and City of Memphis, the late Phil Trenary and the Greater Memphis Chamber, EDGE, Jennifer Oswalt and the Downtown Memphis Commission, among others who have made this milestone possible. We would also like to thank City Councilman Berlin Boyd, who was a constant cheerleader for Downtown throughout our efforts and a visionary as to the creation and significance of a FedEx campus within the Memphis urban core. The Orgels, my team, and I look forward to further contributing to this vibrant neighborhood through The Clipper.”
“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.”
– Richard W. Smith, President and CEO, FedEx Logistics and Chairman of the Greater Memphis Chamber
The Clipper will include a 250,000-square foot, 8-story Class-A modern office tower, the first such new office product built in the downtown in over 20 years. The building will include 50,000 square feet of ground-floor space for potential restaurants, boutiques, and other retailers, multi-level parking, and activated public greenspaces and streetscapes. Additionally, the project will include a state-of-the-art approximate 250-key full-service hotel, flush with best-in-class food and beverage amenities, a rooftop deck, and conferencing center. The hotel will be built in partnership with Senate Hospitality, owners of the highly successful Westin Beale Street.
“The FedEx tenancy at the former Gibson site, our market research of the supply and demand dynamic Downtown, and the continued support and commitment from our investment committee have affirmed that we truly can reimagine a block of Downtown Memphis by strategically activating and bridging this valuable corridor between Beale Street and South Main,” continued Ian Ross. “The project will be a dynamic mixed-use, transformational connector.”
Somera Road engaged father-and-son Billy and Benjamin Orgel, Orgel Family LP, in April 2018 as local partner on the development.
“The Orgels have an innate sense for the needs and desires of a vibrant Downtown, and their partnership though this process has been instrumental,” said Ian Ross. “The Orgel’s civic-minded consciousness, the leadership of the Memphian public sector, and the larger community’s engagement overall have been especially welcoming, transparent, and inventive.”
“The Clipper represents the cutting edge of a live/work/play environment,” said Benjamin Orgel. “This is the next wave of energy that Memphis’ residents, employees, and visitors need.”
From a hospitality perspective, Nashville-based Senate Hospitality could not be in a better position to understand the Memphis market’s demand for full-service hospitality product, as they have seen tremendous success over the years at their Westin Beale Street hotel and look forward to delivering a new product that builds on such success.
“Senate is the perfect hotel development partner for us and Somera to bring to the table to join The Clipper’s vision,” continued Benjamin Orgel.
Glenn Malone, President & CEO of Senate Hospitality stated, “Downtown Memphis is a dynamic destination attracting leisure and corporate travelers as well as meeting planners and their groups from the mid-south and nationally. We are currently reviewing franchise brands and evaluating the amenities for this new full-service hotel that fit with this dynamic destination and its broad appeal. Senate looks forward to developing and operating this element of The Clipper.” Malone added, “We are pleased that Somera Road chose Senate Hospitality as its partner in this new hotel after evaluating other hotel development and management companies.” More details regarding the hotel will be announced in coming months.
Somera Road continues to work with partnering agencies including the Downtown Memphis Commission (DMC), who granted a PILOT lease transfer in December 2017.
“We love the enthusiasm that’s growing in Downtown Memphis,” said DMC President & CEO Jennifer Oswalt. “New development and density are always exciting and replacing surface parking lots with mixed-use development aligns well with the mission of the DMC. We look forward to this project furthering the Downtown momentum.”
“Today is another great day for the City of Memphis,” said Mayor Jim Strickland. “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. 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.”
Cushman & Wakefield/Commercial Advisors will manage commercial leasing services of The Clipper.
“Memphis is experiencing remarkable growth, and we’re particularly proud to represent visionary new construction developments such as The Clipper,” said Phil Dagastino, Jr., Senior Vice President at Cushman & Wakefield/Commercial Advisors. “We look forward to welcoming a mix of commercial, residential, retail and hospitality brands to this prime real estate opportunity.”
All information on The Clipper, including 3D renderings and videos, may be found at clippermemphis.com.
The new owners of Century Center would love to see a Trader Joe’s come into the east Modesto shopping complex. And they’re betting a lot of you do, too.
So they’ve gone as far as erecting signs in front of the shopping center on Oakdale Road asking the public to contact Trader Joe’s about opening at the site. For decades the complex was anchored by Gottschalks department store and Raley’s supermarket before their departures several years ago. But since then it has struggled with vacancies.
Raley’s, which moved out in 2012 after opening its larger location in Village One, finally relinquished the lease it had in the complex at the end of 2018. Before that it had been paying for the vacant space and maintaining its non-compete clause barring other grocery stores from moving into the center.
But now with that restriction lifted, the center’s new owners have big plans to both renovate and attract new retailers. That includes wooing Trader Joe’s, which already has a location in northwest Modesto near Vintage Faire Mall.
Other planned improvements include major facade work to modernize the look and feel of the shopping complex, which debuted in 1979. Long-time tenants Round Table Pizza and Torii Japanese Steakhouse will undergo updating and major renovations. The center owners will also completely recondition the parking lot and upgrade to LED lighting.
New York-based commercial real estate firm Somera Road, Inc. and local investing group Graceada Partners, LLC. purchased the 214,389-square-foot retail center in November for $12.25 million. Already they have three new tenants lined up to move in: Satellite Healthcare, Golden Valley Healthcare and Taqueria El Maguey.
Ryan Swehla, who leads the Central Valley real estate investment group Graceada Partners along with fellow NAI Benchmark principal Joe Muratore, said the new tenants plus updates should help to return the center to its status as a retail epicenter for east Modesto. They hope that will include Trader Joe’s, and it’s not all just wishful thinking. He said they’ve been in contact with Trader Joe’s representatives and begun discussions with the company.
“We are taking a very hands-on approach to recruiting them to the center. We posted the signs to generate community feedback to Trader Joe’s expressing the strong demand that we know exists. We are in early discussions with them although there is by no means certainty around their interest in locating there. But we know Trader Joe’s listens to their customers,” Swehla said.
The signs, posted before the holidays, read, “Do you want to see Trader Joe’s here? If so, please let them know: www.traderjoes.com/contact-us/location-request.” The large white placards, which use the Trader Joe’s red company logo, are posted at the north and south ends of the center along Oakdale Road.
Trader Joe’s opened its Dale Road in 1993, and it remains a popular and busy shopping draw. Ask anyone who has stood in line at the Modesto TJ’s on any given Sunday and you’ll understand the desire for another location in the city.
For decades Century Center, on the opposite side of town, had one of the few large grocery stores on the east side with Raley’s, attracting residents from the populous nearby neighborhoods. The complex currently has 10 restaurants, ranging from long-running spots like Ridgway’s and the Ice Cream Co. to Jamba Juice and Pizza Hut. The new taqueria will move into space next to Vision First Optometry. The two healthcare centers will move into space near the back of the complex.
Graceada Partners and Somera Road representatives said they’re excited about the center’s future prospects.
“With these new tenants and updates, Century Center is quickly becoming the mixed use, lifestyle center that we envisioned when purchasing the property,” Swehla said. “Overall we are excited for the rejuvenation of this once bustling retail epicenter of east Modesto.”