When it comes to downtown Durham development, the recession has slowed the commencement of major new projects and slowed the news cycle in general, though the upfit of existing retail spaces and the like has continued to move along smartly.
Which makes it all the stranger how active Tuesday was in downtown Durham news stories -- one quite worrisome to many, the other remarkably bullish, pardon the pun.
The troubling story, no surprise, is the latest turn in the Greenfire Development saga over the Liberty Warehouse, Durham's last remaining standing auction house for tobacco, though inactive for that use for decades and now serving as office and business space for a range of largely non-profit organizations.
But "last remaining standing" risks being anachronistic, with City partial condemnation actions over leaks and squabbles with tenants followed by this weekend's rain soaking leading to a roof failure. On Tuesday, the City forced the lock-out out of all tenants, leading them to scramble to find new homes.
Meanwhile, Tuesday also noted the big reveal (in the form of ex-Herald-Sun reporter Monica Chen's story in the Triangle Business Journal) that Capitol Broadcasting had filed site plans for the expansion of American Tobacco -- including both Diamond View III and the long-awaited wrapper building for the east parking deck.
CBC real estate VP Michael Goodmon notes that the filing is procedural at this point, and that there aren't tenants linked to the project and a construction start date isn't ready. The wrapper buildings could include office space, could include residential units, could be a boutique hotel, based on past reports.
Still, we have a hunch here at BCR that given market demand and the size of the spaces, much of the space would be ideal to "tweener" companies, the next-level in downtown entrepreneurship who, to paraphrase Goldilocks, need a space that's not too small and not too big.
Which, ironically, are the very tenants that seem to sit at the heart of Greenfire's plans too.
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First things first, in terms of disclaimers: I like the folks at Greenfire and want to see them succeed. Between writing this blog and just getting to know some of the principals and staff through living near and working in downtown, it's hard to not want a firm run by Durham natives to succeed in rehabbing buildings and enlivening the city center.
And certainly there have been successes, from the Baldwin and Kress projects, to the Rogers Alley space where Dos Perros, Bull City Burger & Brewery, and others hold court.
And there are also quite a few question marks -- among the biggest, the Spark luxury hotel long promised for the Hill/SunTrust building downtown.
Greenfire's plans came to fruition just as the economy began to collapse in 2008, and nothing was moving on hospitality projects for a long time. In recent months, Greenfire has said they think they'll be able to get conventional financing for the hotel, though we're essentially waiting to see a promised summer 2011 financing appear. Meanwhile, while Greenfire waits, on comes the competition: a Residence Inn is poised to rise at Watts and Morgan, while construction is set to start soon on a Hilton Garden Inn off Ninth St. at the Erwin Mills complex.
The Residence Inn, at least, was as of last year set to be financed out of retained earnings by Concord Hospitality, the large Raleigh-based Marriott developer and franchisee.
And therein lies one of Greenfire's challenges. The firm doesn't talk publicly about their sources of funds in acquiring large numbers of properties downtown a few years back. But the question for many watching the developer's progress is, the developer's had the funds to purchase -- but where will the dollars come from, in this economy, to redevelop the structures?
Enter the Liberty Warehouse.
When the N&O's Durham News first broke (I think) the story of Liberty Warehouse's condition back in late April, the story was pitched as one of get-what-you-pay-for, with Greenfire saying that they knew there was maintenance needed to the old warehouse, but that they also wanted to for the time being preserve the building as an affordable place for organizations like the Liberty Arts sculpture studio and the popular non-profit The Scrap Exchange.
And part of that preservation, to Greenfire's point at the time, meant, well, that there just weren't so many dollars to go around towards repairing the structure.
Not that it's an easy structure to picture a future for. Two hundred thousand square feet, half a city block, few windows, lots of beams inside. As the comments over at Endangered Durham show, there's plenty of head-scratching about what could, or perhaps soon what could have, ever have been done with the structure.
But it's not clear that Liberty will get that chance. This weekend's heavy rains led a part of the roof to fully collapse, soaking a number of tenants' spaces and leading the City to ask that tenants stay out of the building to avoid the risk of harm -- causing, in turn, a lockout of the building by Greenfire, who reportedly let tenants in only to retrieve certain items.
Popular creative reuse store The Scrap Exchange has settled temporarily across the street; though it was hard for them to turn down a way-below-market rent of a couple of bucks per square foot per year, they started a capital campaign last year for a new building, seeing the handwriting on the wall -- or on the roof, as it were.
Greenfire's telling the media that they're planning to shore up what needs shoring up, including perhaps interior walls to allow a part of the building, at least, to reopen.
Yet even with the best of intentions, Greenfire's challenges with the Liberty Warehouse will certainly reopen the questions that have plagued the developer in recent years: do they have the resources to maintain and improve their structures, if a deteriorating roof over one of their largest buildings couldn't be shored up before this weekend's mess?
Is that a fair test for Greenfire to face? Maybe. Maybe not, particularly given the long-held opacity of their LLC structures, and public curiosity as to how fungible funds are between their buildings. (A concern which BCR has long understood to track all the way back to City Hall, where there was reportedly worry during the 2008 financial crisis that any collapse by Greenfire could render dozens of properties into legal limbo.)
But realistically, it's the question of resources that'll be the asterisk by the developer's name in the court of public opinion in the years to follow.
In Durham, nonprofits enjoy remarkable support from the community. And some get even more love than others; the Scrap Exchange, for instance, is widely and deeply beloved by many. Seeing the Scrap Exchange get flooded out of shop and home is a powerful image for Durhamites, judging not least by the outpouring of concern on local listservs and blogs -- with a great deal of that concern aimed directly at Greenfire.
The story also doesn't help critics -- some of them competing property owners, to be fair -- who've expressed concerns on the volume of properties bought up by Greenfire in recent years.
Some say that bad PR is better than no PR. But I can't imagine that Michael Lemanski, Carl Webb and the others at Greenfire really wanted to see their firm's name in the paper this way.
Especially when they have plenty of other leasable space still to renovate and manage in the city center.
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To that point, though, let's turn to Capitol Broadcasting, whose real estate division was also in the news this Tuesday -- for far more optimistic reasons.
The TBJ revealed that CBC had filed site plans with the City for a wrapper building around the ATC east parking deck -- where banners cover up the exposed concrete long-planned for a new-construction residential or office exterior, along with a second building to be adjacent to the DPAC.
Take the 160,000 sq. ft. of space that that project would make available, and add to it another 125,000 sq. ft. being proposed for Diamond View III -- to be built along Blackwell St., alongside the ballpark and the recently-build Diamond View II -- and you're talking about expanding the total square footage of American Tobacco by almost 30%.
The buildings, the TBJ and Herald-Sun note, could contain a mix of residential units (a boutique hotel has long been rumored for the site), along with ground-level retail, something that makes sense given the proximity to the DPAC and the ballpark.
Now, CBC is noting carefully that the projects don't have a committed start date for construction, and don't have tenants linked to them. (For anything adjacent to DPAC itself, there's also some access issues to address.) Still, the buildings hadn't progressed farther than conceptual plans in the past, so the developer's move to feasibility planning with bona fide site plans is a distinctly important next step forward.
Let's go out on a slightly speculative limb for a moment, though, and think through what office space is going to be available in any CBC build-out along the East Deck or other space-constrained DPAC areas.
One of the signature differences between American Tobacco and its competitors downtown has been that the old factory space has plenty of wide-open office spaces, so-called large floor plates where companies can put hundreds of employees together contiguously.
City Center properties don't have that luxury; buildings are often two to four stories, and even the signature Hill Building skyscraper may be tall, but has room enough for only a dozen or so people on any of its upper floors -- making it wholly inappropriate for modern office space.
The American Institute of CPAs actually looked for space downtown, reportedly, when they moved here a few years back, but bailed for the I-40 corridor of Durham when the right space couldn't be found.
Instead, the older buildings in the City Center district are in many cases best suited for firms with a dozen or two employees, needing a few thousand square feet, and enjoying the opportunity to nestle into spaces above restaurants or retail.
The mid-twentieth century architecture of American Tobacco's newer Strickland and Crowe factories, on the other hand, are perfect for larger companies or organizations wanting to take square footage measuring in the tens of thousands of square feet.
GlaxoSmithKline, until a few weeks from now, has controlled just under 90,000 sq. ft. of that kind of space in the Crowe Bldg.; Compuware held a large place in that building, and Duke's made significant use of Strickland along with other facilities in the ATC.
Diamond View III may have some ability to shoehorn in such large tenants, but it's hard to imagine any such floor plates existing in the DPAC neighbor or particularly in a building wrapping around a parking deck.
But it's there that we wonder whether CBC doesn't have an interesting market niche to exploit.
American Tobacco, after all, got its pre-lease commitments from big tenants, but in the past year has made a much bigger noise going after startup firms in the American Underground space, an intriguing re-imagining of some seemingly useless space in the dark basement of the complex.
For startups working with incubators or just to bootstrap an idea, the shared amenities of conference spaces and kitchens makes sense, as does the close-in, all-in environment for collaboration.
But where would a startup turn when it reached the ten employee level? Twenty? Thirty?
The rest of American Tobacco is likely out on price and size. (Assuming the 98%+ leased complex had space.)
That leaves Brightleaf Square and the rest of downtown -- including a number of Greenfire-owned properties downtown.
Now, we can see CBC going plenty of different directions with their new buildings.
But it would in no way be surprising to see the smaller buildings now proposed for the site be designed in a way that's perfectly suitable for small and mid-sized companies that have "grown out" of an Underground-style habitat.
Bigger than a velociraptor but not ready to be a Bronto (Software, a larger mid-sized tenant at the ATC)? Take your bad-ass triceratops self to Diamond View III, or to the edge of the East Deck.
Speculative? Sure. But if we're right on this one, it certainly would make the south-of-the-tracks American Tobacco district a player in a space that's heretofore been less feasible for the adaptive reuse project.
Greenfire's still a dominant player in the City Center district. But the ATC expansion offers some intriguing possibilities for a more diverse tenant base in the American Tobacco area.
Before Lemanski, Webb and the team can worry about competition, though, there's still that leaky roof to patch.