The much-rumored move of Regal Entertainment Group’s Corporate Offices to the south waterfront was officially announced this past Friday in a press conference on top of the Baptist Hospital parking garage. Governor Haslam, Commissioner of Economic and Community Development Randy Boyd, Knox County Mayor Burchett, Knoxville Mayor Rogero and Regal Entertainment CEO Amy Miles joined to address an assembled group of media representatives, government officials and interested citizens about the move.
Courted by other cities and states, the implication was that the company was moving from Halls in any case and local officials were intent on keeping them here. They will bring 325 employees downtown and intend to add another 75 to bring their total workforce to 400. It should impact local restaurants and businesses, as well as continue to fuel downtown housing demand. It’s been widely documented that young professionals are demanding an urban work environment and this should help Regal with employee recruiting and retention.
They will occupy the nine-story, 178,000 square foot office building at the south end of the Gay Street Bridge. The company, founded in Knox County in 1989, is the largest theater chain in the country and one of the top 1,000 U.S. companies by revenue, so it’s an important step for the city to keep them and to have them downtown accomplishes that goal as well as that of continuing to build our city from the center out.
It’s a complicated deal which technically, as everyone made clear, could fail to come to fruition, though the fact they held a press conference makes it clear they expect it to happen. Both City Council and County Commission have to vote to go ahead, but judging from those who were present for the formal announcement, that would appear to be a formality. A letter of intent has been signed between the parties which details the commitments each will make to seeing the proposal through.
Blanchard and Calhoun purchased the twenty-three acre site in 2013 with intentions of developing the entire site, including the office tower, which they initially wanted to be a hotel. Later the company changed its name to Southeastern Development Associates and determined the building would likely become office space. The City of Knoxville’s Industrial Development Board will purchase the building back from SEDA at a price of $6 million which seems like a pretty sweet deal for the company since they paid only $6.5 million for the entire site. It will remove the property from the TIF agreement.
The city will then invest another $3 million in renovations and improvements. The county and the state will each add another $1.5 million to the project. In a strange twist, at least it seems to me, SEDA will invest $500,000 for exterior improvements of the building they will no longer own, following their receipt of $6 million from the city. TVA will add $80,000 and Regal will invest another $4 million to $5 million for a total of around $11 million dollars.
The Industrial Development Board, as a city representative, will lease the building to Regal for ten years initially, with two ten-year extensions available. The rent will be waived for the first ten years, according to the city press release, “it will make payments in lieu of taxes to the IDB in an amount equivalent to the combined assessed City and County property taxes on the building.” If extended, the rent is set at $1 per square foot for the second decade and $2 per square foot for the third decade.
Regal also has an option to purchase the building from the city. Prior to improvements, they could purchase it for $6 million, though after improvements, the price rises to $9 million. The price would be reduced by $300,000 for each year Regal fulfills of the lease, meaning they could, for example, purchase it after ten years for the price of $6 million.
Regal can’t extend the lease or purchase the building unless it continues to house its corporate headquarters there and employs at least 275 people on site. If at any point they don’t meet those conditions, their rent escalates to $10 per square foot in the first ten years, $11 in the second and $12 in the third. The city also has the right to terminate the lease altogether if those conditions aren’t met at any given time. Regal has the responsibility for all building maintenance and repair while leasing it from the city.
Parking will be provided in the garage in which the press conference was held. 450 spaces in the garage is included in the $6 million dollar purchase by the city. Regal will pay $180 per space, per year for their use. SEDA will retain ownership of the remainder of the garage, but the city-owned portion will be removed from the TIF. The garage will be open to the public nights and weekends.
The city’s portion of the financing will come from available revenue in the Industrial Development Board budget, money from the Hall tax revenues, savings in operating budget and the majority will come from the city’s fund balance. If Regal purchases the building at any point, the city would have its investment back. If they don’t purchase the building, the city will own a Class A office building valued at an estimated $16 million after improvements.
So, it’s a very complicated deal and there are parts of it, like the $500,000 SEDA will invest and TVA’s involvement, which I don’t understand. To have a major corporate headquarters downtown seems smart for the city as well as for the company. Here’s hoping the deal works out well for everyone and that the development of this building and the rest of the site begins in earnest in the very near future.
A final note: As you can see in the photograph above, there was a protest of the governor’s controversial proposal to out-source public jobs to private companies. The young man pictured about and a female companion waved signs and shouted, “Tennessee is not for sale,” when the governor started his speech. They were both removed.