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Greenfire stumbles, American Tobacco promises big expansion in a day of odd downtown duality

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. 

~ ~ ~ ~ ~

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.

~ ~ ~ ~ ~

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.

Comments

Sean Sondej

I agree that seeing businesses flounder is not in the best interest of Durham, but I think that the bad press for Greenfire around the Liberty Warehouse is well due. What the warehouse roof collapse has demonstrated is that though a locally-born company, their sense of community has wandered.

I can see that Greenfire may have overextended themselves in purchasing properties such that they didn't have as much funds for maintenance. But as I was talking with some of the Liberty business owners, they described that as they were being evicted at the beginning of the week, the Greenfire representatives stood across the street and watched as the owners and employees carried things out of their building.

To me, this is as shameful as deferring maintenance and is the cause of the reaction seen across my blog, the newspapers, and in the neighborhood listserves. There is a growing sense that Greenfire is not as concerned with the Durham community as they once were, and compounding that is their PR efforts are at best misguided.

The Liberty Warehouse was symbolic before as the last tobacco auction house, but it has also come to represent something else in the eyes of Durhamites: development gone wrong.

And, potentially the most unfortunate thing in all of this is how the businesses that occupy Liberty Warehouse are not being talked about (with the exception of The Scrap Exchange). They were left without a place of business, no alternatives offered, no leasing/rental help from their current landlord. I pray that they find new homes soon so that they are not further impacted.

The Liberty Warehouse community is coming together tonight, for Third Friday, next to the Liberty Warehouse Pavilion across from the Farmer's market. Stop by between 6-9pm and show your support. They, and Durham, need it.

Down with developers

Greenfire needs to be held accountable for what happened to the Liberty Warehouse as they knew about the buildings deficiencies and barely did anything to fix it. Seems to me that they had other plans for this building other than saving it. Now they potentially are going to be asking Durham for more money/tax incentives for the Sun Trust building. Unbelievable!! Wake up Durham and demand answers!

idigdurham

I know I am out of the loop and didn't realize that there is to be a Diamond View III. I love the view of Downtown Durham from inside the ball park and feel it gives such a sense of place. It will be a shame when that is gone.

Visconti

I would help the artists and nonprofits from Liberty Warehouse find affordable spaces elsewhere. That warehouse is one of the ugliest buildings in the Central Park area. It should be remodeled or redeveloped as residential space: condos, townhomes, brownstones, whatever.

Downtown Durham still lacks residential space and Liberty Warehouse is a very large, ideally located space. There are too many blocks downtown that become ghost towns after 5:00 pm when office and service workers and artists go home.

 not getting it done.

there should be no incentives granted to an organization that is negligent with their buildings and turns it back on its tenants, who live in the same town as the owners do.

In addition to being unable/unwilling? to walk the walk and not just talk the talk ... Greenfire has been morally deplorable.

seems like it time to stop giving them slack and the benefit of the doubt --a nd start expecting them to act responsibly and honestly.

When was the last time Greenfire made public comments about situations and plans -- other than quotes to the newspaper that are obvious lies or blasts of hot air/meaningless promises

jonn

Doesn't Greenfire also own that building downtown with no roof that is in shambles? It's definitely a common theme that they can't take care of or rehab the buildings they buy.

While the rogers alley development is a success with Dos Perros and Bull city Burger..there are still 2 prominent empty spaces.

Guess this means that green space downtown will be there for a while longer.

Good to hear about the ATC expansion as well...nice to have you back BCR.

It's just a lil leak?

"Before Lemanski, Webb and the team can worry about competition, though, there's still that leaky roof to patch."

which leak?... the building with no roof for years on end on Parrish, the Rogers Alley building where Preservation Durham got rained on and had to head on down the road, or the Liberty Warehouse, or...?

This article's conclusion, and kid gloves approach to article, seems to trivialize the situation at both Liberty Warehouse specifically, and in a broader sense with Greenfire's mismanagement of many buildings.

Sean up above hits on a key point when he says "And, potentially the most unfortunate thing in all of this is how the businesses that occupy Liberty Warehouse are not being talked about (with the exception of The Scrap Exchange)."

Greenfire is spending a helluva lot more time painting an unrealistically bright picture to the media (who often seem to buy it instead of digging deeper into the situation) and they are neglecting buildings and its tenants along the way.

Kevin Davis

@Jonn -- Thanks (tho with Mom in the shape she is in, likely to still be hit-and-miss here for a bit). And worth noting that the H-S is reporting that one of the folks behind Crooks Corner are looking to open a cocktail bar/wine bar kind of concept in 200 N Mangum near Dos Perros; not sure if thats the old HSPD space, or the space where Eno publicized their opening before they decided not to open there after all.

JRH

Greenfire's plan from the beginning seems to have been to buy up so much property in Downtown Durham that they could then blackmail the city into giving them incentive after incentive, lest they fail.

They failed anyway.

For every Greenfire owned building that has been renovated in Downtown in recent years there have been 4 or 5 non-Greenfire buildings renovated. At this point they are standing in the way of progress, not fostering it.

BigAl

I try an avoid thinking about DV III. The prospect of losing a great open space and the view from the ballpark is...ugh, there I go ,thinking about it again.

clif

too bad the Durham Central Market didn't work out a deal with Greenfire about using that space. a million bucks can fill a pretty big hole in a roof.

John Davis

What Greenfire does with a building he ownes is his own buisness. Why don't the people complain buy the building and fix it up.

As far as DV III Mr. Goodman should be able to build whatever he wants on property he ownes. After all he owns the ball park so he is not going to build an eyesore.

Jeremy

Do all of you hyper-critical (yet opaquely anonymous) posters truly believe that Durham would have been better off had Greenfire not begun its campaign of buying up vacant, dilapidated buildings downtown over 7 years ago? Yes, their strategy of amassing properties before investment is risky, but well-founded. I would also argue that theirs was a leadership position that fostered demand from other developers to do the same.

They bought many broken buildings and yes, some of them remain broken. But many others have been completely transformed and are now occupied by thriving businesses or happy downtown dwellers.

Diane Wright

I could be wrong, but I don't think Mr. Goodman owns the ball park - we, the citizens of Durham do. Mr. Goodman owns the Durham Bulls.

Opaquely Anonymous Asshole

@Jeremy-
I don't know if having one developer sit on a million square feet of real estate downtown is really a good thing for Durham. Especially when that company has been teetering on the verge of bankruptcy for two years.

Yeah, of that one million square feet Greenfire owns, they've rehabbed about 50,000 of it (I believe you referred to this 5% as "many others"). Here's to hoping they get around to the other 95% of property they own before they go bankrupt. Would Durham be better off when one less developer? Probably not. But no one can argue that Durham will be well off if Greenfire kicks the bucket.

Don't get me wrong, I want Greenfire to succeed. If they don't, then downtown's going to be crippled for an extra decade as the 40+ investors in the company figure out who owns what. Watching the company struggle to start renovations on the SunTrust building has me more than concerned. And seeing Greenfire unable to do simple maintenance on the Liberty Warehouse can't be comforting to anyone in our city and county governments.

@Diane-
You're correct. The city owns the ballpark, and leases it to the Bulls.

gonzo

whether greenfire's folks are nothing but mindless jerks, i dont know. i do know that business plans which looked conservative and cautious four years ago have suddenly become untenable in this lending environment. every developer in the country is struggling with this, some better than others. i do wish greenfire would respond by unloading some of their properties instead of clinging to them while they rot. theres a rumor going round that walker stone offered to buy the warehouse back from them last year. if thats true, i sure wish theyd taken him up on it. stone knew how to manage that place. of course the accuracy of that rumor is worth the paper this comment isnt printed on.

Khalid

@OAA - Equity investors are the last ones to get paid in a bankruptcy and usually get nothing. That is one reason that they require a higher rate of return for the risk involved. If most of Greenfire's undeveloped properties are unlevered or have little debt then the threat is greater that the investors start demanding the return of their money. A typical investment fund lasts 7-10 years. Since Greenfire is not overly transparent (which is common with private investments) in this regard I'm not sure if they have one fund or a separate fund for each property.

As far as transparency is concerned, I'm not sure if it would do them any good because there will still be a more vocal segment that will denounce ANYTHING that they attempt to do. It is hard to form partnerhips in the community in that type of environment. They say that your family is your harshest critic but at the end of the day but at least they still have love for you.

I hope Greenfire gets it together. Its hard to balance things like below market rent for non-profits and maintaining a failing old property that has had little maintenance for dozen's of years. You can only patch so much.

I'm still trying to figure out what a $50M renovation of a 200k sq ft warehouse gets you. It wouldn't take that much to return it to its former state...not sure if that would give you a marketable property in the 21st century...maybe a publicly-funded museum not any type of mixed-used adaptive reuse.

I may not agree with all of Greenfire's methods or strategies but I still wish for their success as well as the non-profits that will probably relocate at some point. The next 5-10 years should be exciting for downtown and the surrounding neighborhoods as long as the wheels don't fall off the Commercial RE lending environment.

Myers Sugg

Like with residential real estate, particularly rental property....if you can't afford to invest in/maintain, the property, you need to find someone else who can. Leaving properties derelict does no good for anyone. Sure, one should be given a reasonable amount of time to make things better. Unfortunately with property in this kind of condition, the possibility of a tear down looms. I absolutely don't advocate for that. It's just that it seems this road is paved with good intentions. At some point those intentions need to be re-evaluated......

AR

Does anyone know why there is a fence around the 'pocket park'(aka Green Wall Park) at the corner of Main and Corcoran?

clay

@AR, http://www.indyweek.com/indyweek/greenfire-on-the-hot-seat/Content?oid=2522135

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