JC Penney VS. Medical Arts: The Final Call

JC Penney Building, Gay Street, Knoxville, December 2012
JC Penney Building, Gay Street, Knoxville, December 2012
Medical Arts Building, Main and Locust, Knoxville, December 2012
Medical Arts Building, Main and Locust, Knoxville, December 2012









Yesterday marked the end of the lively discussion about how much and to whom to award a very large portion of CBID’s current money and future income. On the one hand, the JC Penney Building is a long-term eyesore on a mostly vibrant block of Gay Street. It is arguably the most prominent reminder of downtown Knoxville’s decayed recent past. On the other is a very large, prominent building on the city’s Main Street which is visible for a long distance in most directions. The former proposes retail and office space, the latter proposes to become residences.

The requests came in close proximity to one another a couple of months back: Tim Hill and partners requested $400,000 for the JC Penney Building while the Grace Brothers requested $425,000 for redevelopment of the Medical Arts Building. For perspective, consider that CBID is allocated about $500,000 each year from downtown taxes. Much of that money is already committed to other projects from development to beautification and events. Staff must be paid. There is no huge reserve to meet such requests.

Another variable which raised quite a discussion on this blog was the proposed business which would likely locate in the JC Penney Building. Altar’d State is a Christian clothing store and the primary plan is to place them on the street level with a retail store while corporate offices would fill the upper floors. One red flag the proposal immediately raised was the status of the company as a “national chain.” With fewer than thirty stores in the south and border states, it seems difficult to define them as “national.” Further, Mr. Hill originally suggested there would be 400 positions in the corporate office on Gay Street. This for a company that currently employs 375 people in all their various locations combined, borders on fantasy.

The CBID board meeting was held at noon yesterday and the recommendation on the table from the development committee encouraged using less than the $600,000 previously discussed (this is the total that could be cleared from other obligations over the next three years) and that it be distributed by granting roughly 2/3 of the total determined to the JC Penney project and 1/3 to the Medical Arts Project.

The crowd at the meeting filled the room with both applicants arriving in force. Tim Hill and the other developers also brought their primary banker as well as Aaron Walters, President and CEO of Altar’d State. Each side only spoke briefly and oddly, it seems to me, Mr. Walters pointed out that his company could easily locate in west Knoxville. I’m not sure why he felt a need to make that point and, honestly, I’m not so sure I like the fact that he went out of his way to make it.

Another strange twist, or so it seems to me, had Mr. Hill acknowledging back-up plans. He’d mentioned before that if Altar’d State didn’t occupy the space, the project would proceed with a bowling alley in the basement (already under contract) and three retailers instead of one on street level. Under this plan, the upper floors would become condos for purchase or rental. He went further in yesterday’s meeting to say he’d had some recent conversations with another possible tenant who would take all of the upper floor space for offices. It seems strange he would bring one potential client and point out that he has other suitors. Perhaps this reflects my lack of understanding of the development world.

Reportedly at this, the Grace Brothers, who have recent experience with office space rental, noted this is an impressive feat in the current environment. Meanwhile Mr. Walters acknowledged that his company would initially bring about sixty people downtown. I assume this includes the retail portion, but perhaps not. He indicated the company intends to double in size in the next year.

Kevin Grimac, who would eventually be the lone dissenter to the proposed distribution of funds, noted that the Medical Arts project hopes to secure around a million dollars in historic credits, while the JC Penney project has not pursued such credits. Mark Hines, chief architect for the project stated they might do so at a later point and was asked by Mr. Grimac if at that point the CBID money would be returned. No indication was forthcoming that any such thing might happen.

After a two hour discussion, Matt Synowiez made a motion that $220,000 be taken from the reserve fund and $80,000 be taken from each of the next three year’s budget for a total of $460,000. This will necessitate some cuts in beautification and events funding. Of the $460,000, the JC Penney project would get $305,000 over three years and the Medical Arts project would get $155,000 over the next three years, which is roughly in line with the 2/3: 1/3 ratio proposed by the development committee.

This raises some questions: While the JC Penney project got about 76% of the money they requested, the Medical Arts project only got about 36% of what they requested. If they needed the $425,000, will they be able to continue? I e-mailed Michael Grace, but did not get a response in time for this article. And what of projects that present themselves for the next three years? Josh Flory reported on the same day as the meeting that the owners of the Jackson Terminal (the long docks between Jackson and the rail yard) were requesting $165,000 to help turn that building into a winery, brewery and distiller. What will happen when someone presents plans for the Century Building, the Kress Building, the old KUB Building or even McClung Warehouses? “Sorry, see us in 2017?”