The New West End

Last year Jimmy White and Hiren Desai bought the 112 acre Alston manufacturing site from GE for $30,000,000. Which at first sounds like quite a chunk of change until you get into the numbers and realize that they paid only $6.15 per square foot of dirt for the property. An exceptional price for what is a cleaned manufacturing site.

Deal details aside it’s excellent that these guys bought the property and are doing the development. Having their local experience and being rooted in the city will prove invaluable not only in getting the project done but in developing a project that is reflective of the city and it’s values.

Patience may be their most valuable asset since the project is projected to take 20-25 years to reach full completion. Not a fly by night undertaking. At completion it will roughly double the current geographic size of downtown, adding ~150,000sf of office; ~440 residential units; and ~92,000sf or retail and dining in the initial ten years alone.

Retaining Dover, Kohl and Partners (https://www.doverkohl.com/) to draw up the plans the preliminary concepts look well thought out and very much in keeping with the city’s aesthetic.

The site plan provides for the overlay of a traditional street grid and what they’re calling a “car-optional” focus. Meaning you can have a car but it is not required to get around the neighborhood as it’s designed in a compact style.

Some of the noteworthy design ideas already laid out in the plan include a stormwater management solution that utilizes a canal through the heart of the project. Providing a very unique and aesthetically pleasing way to deal with the natural runoff from the site. The plan for the Food Hall and music venue are particularly interesting as well as they look to reuse a good portion of the old steel structure of the warehouses on the site while adding that cool factor with a huge neon city sign and open gathering area.

The concept of the food hall is one I think the city is long overdue for and likely will embrace as if it had grown right out of the fabric of the area. These are fantastic social areas that draw large numbers of people and provide excellent activation for an area.

A few ideas I had while reviewing the current iteration of the plan would be to add more pedestrian only areas (streets and alleyways). The city has already proven these to be very attractive to residents through the alley art program spearheaded by River City Company. In addition these provide intimate spaces that are human sized and have a safe feeling. Away from the threat and noise of cars and trucks.

Good examples are Pearl St in Boulder, and just about any downtown in Western Europe, see the pics:

Downtown Boulder’s Pearl St Mall
Stavanger Norway
Dublin Ireland

You can see that in each of these cases you could get a car – or firetruck – down these streets if required but that the streets would be primarily for people and bicycles.

Another idea was regarding the design in general – and one I have wondered about in all the new buildings since moving to this city – is that the architecture does not embrace the basic environmental facts of the city. Most notably this is the South, it is hot in the summer and it rains more than Portland Oregon.

I would suggest a design for the retail, the buildings first floors, to protect people from the inevitable conditions and provide a refuge. This will encourage people to be out and about regardless of the conditions.

While all of the following pics are all from Bologna, Italy, there are similar walkways in Florida, Louisiana and throughout the South.

Bologna Covered Walkway
Bologna Covered Walkway

Building the streets like this from the get go would provide not only a very unique experience it will keep the streets activated regardless of the environmental conditions. As a potential development benefit, depending on the agreement with the city regarding the sidewalk the area above any such covered walkway can be utilized for additional office or residential spaces.

A couple other thoughts I had while digging into the site design are to create a riverfront that allows the average person to interact with the river. Because of the steep banks along the river it is not easy or inviting for people to interact with it. Which is a shame as it is one of the defining features of the city. By example the area that integrates this best is in front of the aquarium. The grandstand style concrete steps and pathway that fronts the river allows people to get close and even touch it. This can can be invaluable in stitching the river into the everyday for people.

Additionally I would suggest that the road parallelling the river be designated a pedestrian focused right of way; boardwalk or even something like what the Dutch have called ‘woonerf’ streets. Places where all modes of transport are given equal priority. Meaning all traffic is at a walking pace or below. This helps weave the neighborhood into the greenspace fronting the river and makes it a natural extension for everyone to access without difficulty.

Lastly as the blocks and streets are laid out I would encourage the design of the majority of retail spaces to be on the smaller side – under 2,000sf. This has a tremendous benefit in enlivening the area by creating a varied and intricate fabric of diversified retail. In the last decade retail has had to admit that the only way it competes with online is via experience. Creating entire districts with tens and even hundreds of different shops provides a tremendously engaging area that people will want to visit even if they’re not planning to shop.

I had thought it could be cool to expand the canal idea into something like a Venice of the South but the corresponding development issues this raises may not be worth the cost.

Overall I have a great deal of enthusiasm for the future of this project. It’s easy to see this project evolving into one of the most interesting developments anywhere in the South and it will certainly increase Chattanooga’s visibility and desirability as a place to live, work and play.

ULI: Is Membership Worth It?

The Urban Land Institute (ULI) is the oldest group of land use professionals in the world. It has a long history of advising on specific development projects and pulling together groups of experts to provide guidance on complex development issues.

Membership has two levels: ‘Associate’ and ‘Full’ with the Associate level running $492 per year and the Full running $1220. So, not cheap.

So, is it worth it?

I’d say that depends on your focus. If you work for a public entity (think city planning and zoning office) that deals in land use ULI can prove invaluable in exposing you to solutions and people that can advise on difficult urban issues.

If you work for yourself and are flipping houses but have an interest in getting into larger development deals I’d say maybe try it for a year and see what value you get from it.

If you are a private developer of any volume I would suggest that it is nearly obligatory. For networking, sourcing new and innovative solutions and helping to keep tabs on the changing demands and issues with the market.

If you are a budding developer look to their extensive bookstore and educational offerings that can provide the foundation for successful projects. These are not cheap but they’re of a very high quality and one educational course alone can prove worth your membership.

I believe the key to the value however is that it’s not a transactional one. You will reap the true value of the membership over a longer period of time in the relationships and access to knowledge that are provided by the group.

The yearly Fall Meeting starts tomorrow in Washington DC and is a huge gathering with piles of workshops and lectures on numerous topics.

So, is membership in ULI worth it? Yes, if you work in development / land use. The connections and ideas are invaluable.

ULI Americas Website: https://americas.uli.org/

Chattanooga Big Time – Updated 10/1/19

I just got wind this morning that the 111,000 office building at 1301 Riverfront Parkway has traded and if the rumor is true it sold for $200,000 above it’s $17,800,000 asking price.

For those not familiar with the property 1301 is a large, multistory, multi-tenant office property whose anchor tenant, The State of Tennessee, had 11 years remaining on ~58% of the building. Aesthetically it is fairly typical office park type property, however, the seller kept it in excellent condition. It’s proximity to downtown and to the future redeveloping Alston / West End site make it very attractive.

Trading at $18m would put it at only $162 per square foot, seemingly a very fair price for a high quality property. With a claimed Cap Rate of 8.5% at asking it also represented an excellent income opportunity.

The trick for Chattanooga, of course, was that this property was an outlier. An anomaly. Where else in the city is there a similar property? This made it harder for buyers to make any sort of comparison to validate the value proposition. If you are considering buying one of many it’s much easier to get comfortable because you can point to all the others and say “see those have a similar value”. When you have one there can be a bit of a feeling of vertigo when trying to confirm valuation.

With only a vague rumor to go on we have no way to determine the buyer and their motivation. My suspicion is that this will turn out to be an out of town and likely out of state buyer. The commercial market nationally is being squeezed hard for any yield. So just posting this property on a national level would bring interested buyers to the city. Again this is good news for Chattanooga. People who may never have looked at the city before are now aware of its potential and will want to find a way into the market. Bad news is we had only one.

I will update as details are made public.

Update 10/1/19:

Looks like it was actually sold at asking. While not as impressive as if it was sold above asking the buyers enthusiasm for the city is the real news. This kind of enthusiasm will move Chattanooga a long ways.

https://www.timesfreepress.com/news/business/aroundregion/story/2019/sep/30/riverfront-parkway-building-sells-178-million/504776/

5 Tips for Vetting a Contractor

**This is the first Guest Post provided by real estate professionals from across Chattanooga and around the country**

No matter what specific type of real estate investing you pursue, it will inevitably involve hiring contractors to maintain or improve the property at some point. There will come a time to bring on PROFESSIONAL contractors to add value or secure the existing value. Whether the investment strategy is a quick turnaround or longterm, the profitability of them will largely depend on the effectiveness of the contractors selected.    

As property owners, you’ll know that the major costs typically come in the form of unwanted gifts from Mother Nature—Rain. Moisture problems are typically the most common, beyond major destruction from fire or vandalism. This can cause mold, making the property inhabitable, and accelerate the decay of building materials. Hopefully it stops there, but Mother Nature can also shift causing structural problem. 

Equally as common, investors are simply faced with property that is in desperate need of a cosmetic facelift. Whether it’s outdated décor, decaying paint or wood, overgrown greenery, crumbling parking lots, etc. getting the right contractors to advise and execute can make or break an investment. Here’s a list of a few preliminary vetting strategies to ensure you’re dealing with a PROFESSIONAL contractor:

Contractor’s License:  It doesn’t take much in regards to barriers of entry to become a small residential contractor. This is not the case for commercial projects. A contractor’s license is required to bid or execute on any project $25,000 and above. Request a copy of the license to ensure you, as the property owner, do not subject yourself to legal ramifications. Check out this link to ensure they have the correct license for the project. 

Equipment & Plan: Ask the contractor what type of equipment will be used for the job. This will require them to explain how they’ll approach the job and ensure they have a strategy for completing on time and on budget. This is especially important when minimizing disruption to the flow of the property or other contractors’ schedules is a priority. 

Insurance: Protect your investment at all costs. You’ll want to request a certificate of insurance from the contractor to be attached with the proposal. If selected, ask to have your name/company be put as the certificate holder and as additionally insured on the policy.  Ensure the limits are adequate for the project size. 

References: Ask for at least three addresses and contact information for RECENTLY completed projects for similar scopes of work. Talk is cheap, double check they have the experience and expertise necessary to complete your project. The lowest bidder should not always be the winner. 

Have a written Statement of Work or Statement of Objectives: Underbidding a job to get a contractor’s foot in the door on a large project is common. If the work to be completed is not written down in detail, you’re exposing yourself to large change orders.  

Nick Murray is the owner of the local CertaPro Painting Business and available for all your painting needs. Give him a call to get a great – and fast – paint job.   Direct: 859-512-7464  Office: 423-414-1252  Website: https://chattanooga.certapro.com/