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JULY 24, 2015 13

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Insights intoDOWNTOWN

REVITALIZATION

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The Discussion

The Experts

Hurston Raley EGS

Hurston Raley joined Cushman & Wakefield | EGS Commercial Real Estate in 2000. He currently serves as a Vice President in the firm’s office division and is responsible for the marketing and leasing of the company’s 1.2 million-square-foot office portfolio. Hurston has experience in all segments of commercial real estate including office, industrial, retail and medical. He is an active member of NAIOP Commercial Real Estate Development Association, where he currently serves as President of the Alabama Chapter.

Q: Of all the projects going on downtown, which one are you most excited about?

Rodney Barstein: The one I’m most excited about is one we just recently announced, which is Central City, a redevelopment of the Waite’s Bakery property on Seventh Avenue and 21st Street South. It’s going to be a mixed-use development with retail on the ground floor and 45 apartments above that will open in summer / fall of 2016. We’re getting tremendous response for the retail, and we’re already seeing people interested in the apartments. But just in general, a kind of wild answer is the Rotary Trail, because this trail is going to link a lot of the entertainment districts in the city. I’ve heard the term “Cross to Sloss,” meaning it will go from the Crossplex Arena in Five Points West all the way to Sloss Furnace. It’s just going to link a lot of different entertainment and residential areas, and bring the city together as one larger venue as opposed to having all these individual pockets. Long-term, I think that’s going to be a big asset for the city.

Martin Brown: As long as I can remember, the talk has been about getting a major downtown grocer. Many people thought that would be the catalyst for downtown development. Now that it’s going to happen, looking back on it, I think most people see that it didn’t happen previously because there just wasn’t enough critical mass and rooftops. But with Regions Field, Good People Brewery,

the Westin and Uptown, and all the other development going on downtown, it’s finally happening. I’m excited to see that come to fruition.

Chad Hagwood: It’s hard for me to pick just one because there are so many great projects going on. It’s hard to narrow it down to a single favorite. I have three or four that are my favorites for different reasons. Instead, look at everything in its totality, with all the synergy and what’s going on now versus what was not going on 10 years ago, and everything as a whole feeding off each other. That’s what we should get really excited about.

David L. Silverstein: There are a number of downtown projects to be excited about that are happening right now, although we are most excited about the redevelopment of the Pizitz building. Jeffrey Bayer and I acquired the building in 2000, believing it was right for future redevelopment and that it would have a positive impact on downtown. With the redevelopment of the Thomas Jefferson building, growth of UAB, and success of new downtown destinations such as Regions Field, Railroad Park, Uptown and the Rotary Trail, the time is right for Pizitz. The Pizitz redevelopment will help continue the transformation of Second Avenue North.

John N. Lauriello: The mixed-use, three-phase, $110-million project that Scott Bryant and Dick Smaltz are developing called 20 Midtown. In addition to bringing a much-needed grocery store,

Publix, to downtown, the project will also add several other retail users that will be new to the downtown area. When finished, the project will contain 100,000 square feet of retail plus 350 apartment units.

Hurston Raley: There are several great projects under construction downtown, but the one I am most excited about is the renovation of the Redmont Hotel because of the impact it will have on the city center. The hotel is located just one block away from the high-profile intersection of Fifth Avenue North and 20th Street, which is surrounded by some of Birmingham’s largest office towers. You have Financial Center, Wells Fargo Tower, The Plaza, Regions Harbert Plaza, Renasant Place, AT&T Center, Concord Center and One Federal Place all together in a small radius with a large concentration of office space. As companies compete for new hires and the best talent, being located in a vibrant downtown area is crucial. This project will add several new amenities to the area such as a restaurant, café and rooftop bar, adding more value to the companies and employees who already work in the central business district.

Q: Which future project do you think

offers the most potential to be a catalyst for additional development?

Brown: One that is not yet on the horizon – at least that I’m aware of – is a larger regional / national corporation moving their headquarters to downtown

Birmingham. That would just continue to enhance the perception over the last few years that Birmingham has an up-and-coming vibrant downtown, and help spur development going into the future. To me, that’s kind of the missing part in the cog of where we are right now. How do we continue this momentum? Ultimately the answer is we have to have job growth, and a new headquarters in downtown would be a big part of making that happen.

Hagwood: For downtown to continue to grow, more and more companies have to be here. That unfortunately is not happening in mass yet. We have a lot of multi-family housing coming on line. When people move in, they have to have somewhere to work. A lot of what’s going on is about convenience. It’s about big-news employers coming in more than just a development in and of itself. We have a lot of development activity that we still have to see become successful first. There is a tremendous amount going on out there that doesn’t have the track record behind it yet. I believe it will be successful, but let’s take it one step at a time. I think now it’s more about employment attracting additional development long-term.

Silverstein: First, a multi-purpose facility across from Uptown, next to Legacy Arena at the BJCC, would be a transformative project. We believe the timing is right to build a facility that will allow us to attract additional events that are not supported at the current facilities.

Rodney Barstein Retail Specialists

Rodney Barstein joined Retail Specialists in May 2014 as Executive Vice President to lead a team to develop commercial and multi-family real estate throughout the United States. Prior to joining Retail Specialists, Rodney was President/ CEO of Simply Fashion Stores, a ladies clothing store which peaked at over 300 stores with over $130,000,000 in sales in 22 states. The company was sold in 2013. Prior to founding Simply Fashion Stores in 1993, Rodney had started Barstein & Associates, a full service real estate development, leasing and management firm.

John Lauriello Southpace Properties Inc.

John Lauriello, CCIM, SIOR, CPM is a founding Principal at Southpace Properties Inc. He has redeveloped over 50 historic properties in Birmingham, totaling more than $250 million - including historic homes, apartments and office buildings. John, also, has brokered more than $400 million in sales and leasing transactions during his42-year commercial real estate career in the Birmingham metro area. He has been a voice for progress and change in Birmingham and has led the revitalization of downtown for more than 30 years.

Chad Hagwood Capital One

Chad Thomas Hagwood serves as Senior Vice President and Southeast Manager for Capital One Multifamily Finance. Hagwood is actively involved in the origination of multifamily, manufactured home community and commercial real estate debt throughout the nation and focuses on loan originations through Fannie Mae, Freddie Mac, CMBS and FHA programs. In addition, he manages all of Capital One’s Southeast production staff located in 4 offices.

Martin Brown IBERIABANK

Martin joined the IBERIA team in February 2013 and has over 18 years of banking and commercial real estate experience primarily as a lender. He has a vast amount of commercial real estate lending experience including residential construction lending, land acquisition and development, and capital markets but has spent the better part of his career focused on income producing commercial real estate with the top developers in the market.

David Silverstein Bayer Properties

David Silverstein manages Bayer’s relationship with governmental entities around the country. Before joining Bayer Properties in 1994, he was a Partner in the law firm of Berkowitz, Lefkovits, Isom, and Kushner, serving as outside counsel to Bayer for seven years. His legal practice concentrated in the acquisition, financing, leasing, management, and development of commercial real estate projects. In addition he frequently acted as local counsel to out-of-state lenders in connection with the financing of commercial real estate projects in Alabama.

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Not just NFL or NBA teams, but SEC events and new conventions. Jeffrey and I feel that a smaller facility is appropriate, but the size can be debated, whether that be 50,000 or 70,000 seats. The multi-purpose facility would be a fabulous venue for UAB football, students and fans. Coming to the multi-purpose facility and celebrating at Uptown Entertainment District before and after games is a natural. This has to happen. Another transformative need is an improved transportation system, which is crucial for regional growth. It’s time for public and private sectors to come together, further evaluate the expressway system and inner-city transportation, while working with the Alabama Department of Transportation to determine the best approach for I-20/59, so the area can reach its maximum potential. Finally, the development of the Rotary Trail and reopening of the Lyric Theatre are both important for growth. The Rotary Trail has the ability to create a better quality of life that attracts businesses and builds community, generating growth throughout the region. The Theatre District rebirth and Pizitz are strong anchors for the city and will help spur development in the western portion of downtown.

Lauriello: The Pizitz project. This wonderful building has been vacant since 1987. This project will benefit the immediate area of downtown that has several vacant buildings available for

redevelopment.Raley: The re-development of the

former steam plant site owned by Alabama Power into a mixed-use facility, in addition to the Pizitz Building project, will help connect Parkside to Birmingham Green to the Cultural District to Uptown. Connectivity creates additional foot traffic, which will positively impact the many small businesses and restaurants located between these districts. As these companies thrive, the smaller pockets of empty buildings will fill in behind.

Barstein: There’s still talk of a multi-use facility. There’s hopefully talk of a UAB football stadium. Look at what Regions Field has done to bring people to that area. People are now coming early and eating in the area before the game. They’re not shopping because there are no shops. But those type of facilities could bring a lot more restaurants and entertainment, which is what the people living and working downtown are looking for. The other thing that excites me is that while there has been a lot of activity south of Morris Avenue, there’s been very little north. So the Pizitz building coming on line and the new hotels that were announced, I think we’re going to start seeing a lot more activity from Morris Avenue north. I think those projects can help do to the north side what has happened on the south side.

Q: How is your organization

contributing to downtown’s growth?Silverstein: Certainly we are excited

about Pizitz and our work with Uptown. We are also working on plans to build adjacent to Pizitz where the New Ideal building currently stands. While these are major investments, we are committed to these projects to help position the city for further economic growth.

Raley: As the leasing and management agent for Financial Center, we are proud to have worked with Allegiance Realty Corporation out of Charlotte on the acquisition of Financial Center and subsequent $3 million renovation project that was completed at the end of 2014. This prominent Class A office tower has completely been transformed and now provides a sophisticated, corporate setting for businesses, which we feel is a perfect example of the kinds of renovation and revitalization going on all over downtown. The addition of Edgar’s Bakery and Café and construction of the outdoor dining patio facing 20th Street has created a space with the kind of urban feel that people wan,t and has added to the much-needed energy for this area. With the space in the Financial Center that we currently have available for lease, we welcome the opportunity to bring more businesses to downtown.

Barstein: First, our office is downtown. We think that helps a little bit by bringing 40 people to downtown on a daily basis. Then we were the catalyst in developing

the 29 Seven project in Lakeview, with retail on the bottom floor and apartments above. Some nice restaurants like Babalu have opened up there and brought some activity. There is now another apartment complex announced that is going to be built next to 29 Seven, and we think we helped contribute to some of that growth. Central City is going to be a similar project. We think that’s a great model, and there are other pockets in the city of Birmingham where we can take that model. Because they’re not large projects. They are 45 to 55 apartments units. So it can work in areas like Avondale and downtown. We’re honing in on that and trying to become experts in that mixed-use field.

Brown: We just opened our second branch office downtown. Of our nine branches in the Birmingham metro area, two of those are downtown. So we obviously have a big commitment to downtown. We have been involved in the financing for the Pizitz building and the Publix project. We’ve financed numerous other restaurants and small office deals in downtown Birmingham. And on top of that, we’re extremely civic-minded. We’ve provided financial support to the Rotary Trail and Railroad Park, and we continue to actively look for areas like that where we can invest in downtown.

Hagwood: It’s no secret that I’m a fan of Birmingham and our community. I was a fan and proponent



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of Birmingham before it was popular in the permanent debt markets. It all comes down to fundamentals. We have great fundamentals, and I am very, very committed to this city and its commercial real estate community.

Lauriello: We have renovated more buildings in downtown Birmingham than all other real estate developers combined. We have redeveloped over 24 buildings downtown for clients. We now are selling several buildings to new developers/users. It has been wonderful watching all of these new buildings being developed and/or redeveloped.

Q: Many companies are moving their offices downtown. How is that impacting the office market?

Hagwood: You hear a lot more about folks moving their offices downtown, which is the opposite of the trends we’ve had for so long of moving farther out. A lot of people want to be back downtown. Those are things we’re adjusting to. I don’t think the bulk office as a whole has dramatically improved, but it’s marginally better today than it was, and I think that trend probably continues.

Raley: As more companies move downtown, overall vacancy will continue to decline. However, we still have a significant amount of office space downtown that needs to be absorbed in order to create a really strong office market. We need new corporate jobs relocating to our metro area. This will

happen in due time. In the past five to seven years, we have seen an increase in the number of outside investors looking for opportunities in the downtown area, signaling increased confidence in the market as a whole. We now have new building owners from other cities, spreading the word about Birmingham to a broader audience.

Lauriello: Many of the companies moving to downtown are buying vacant buildings which has helped reduce the inventory of vacant properties. We are also seeing occupancy rates in multi-tenant A&B buildings going up. We sometimes forget the amount of space that became vacant downtown after the 2008 economic crash. Losing the headquarters for Southtrust, the merger of Amsouth/Regions as major office tenants downtown left over 400,000 square feet of A&B space available. Some of that space – not all – is now occupied by new office tenants. New downtown businesses like Viva Health Care, Infinity Insurance, and Lewis Communications are helping our downtown grow. Who would have believed that businesses that moved out of downtown many years ago are returning to downtown? Who would have thought they would live long enough to witness that ever happening in Birmingham? Now we need to insist that all the local governments – 35 different municipalities in Jefferson County alone – start working together. It is insane that there is not more regional cooperation

and cost savings by working together. Too many of these government leaders act like children and do not want to discuss any cooperative efforts or sharing of services. Who gets hurt? Our tax payers. Our citizens. Competing cities use this stupidity against us. We are recruiting against them for business. Even with all this foolishness, I am more positive about the future of downtown and the entire metro area now than at any time in my 42-year real estate career in Birmingham.

Barstein: Twenty to 30 years ago you had a lot of people leaving downtown and moving to Riverchase and down the 280 corridor. Now a lot of people want to start moving back. My office was in Irondale for 23 years. I love being downtown now. There’s a lot more energy, the convenience of getting pretty much anywhere in the city, there are more food choices, the walkability of downtown. The problem is, we still don’t have enough major employers in downtown Birmingham. Hopefully as people start moving back downtown, employers will start to see it as a vibrant economy and they’ll want to come back into Birmingham. Because we have office space, we have buildings available.

Hagwood: Also, for the first time in a long time, there certainly is much of a public-private cooperation. I believe we have a mayor with a vision who promotes business and is a strong advocate for the city. There are a lot more synergies here than we’ve had in years. That

philosophy has played a pivotal role in getting business to want to move back downtown. No matter how great things are, if it’s impossible to do business here, you’re not going to move. It’s just that simple.

Brown: And the economic environment that the city leadership has been able to do that in has been pretty incredible. Not only were we coming out of the recession, but with Regions and AmSouth merging we lost a complete office tower. It took several years to get things moving, but the pendulum has started to swing back the other way and we’re really making a lot of progress. Now if we can just attract a large office tenant downtown, it will really set things into motion.

Q: What strategic advantages does downtown Birmingham have compared to other Southeastern metros?

Lauriello: Inventory. When Birmingham, like most cities, experienced the major moves to the suburbs from late 1960s to late 1980s, the people left but the buildings remained. Many other cities demolished all or most of their downtown buildings for many reasons, federally funded urban renewal projects being one major reason. Most of these projects did more harm than good. Birmingham property owners just boarded up the vacant buildings. Our downtown has a larger historic building inventory than Atlanta, Nashville, Charlotte, or any other southern city we compete with except

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New Orleans.Silverstein: Positive inertia. Birmingham

is in a growth mode with tremendous momentum and upside potential. While other southeastern metros still are developing, they are in the mature life cycle stage whereas Birmingham is in a new growth mode with room to expand. A low cost of living, a vibrant downtown and a positive business environment will continue to attract private investment and growth.

Raley: There are plenty of real estate opportunities available right now that provide individuals and businesses the chance to contribute in a meaningful way to the growth of our city. We have a great quality of life and the overall perception of our city has drastically changed. On a national level, our story is being told as a positive, which is attracting exciting attention for our city. Collaboration in the community will be key moving forward.

Brown: The obvious answer is that Birmingham is just a great city with great people. When you bring somebody in from out of town who has never been here, they’re always completely blown away by the scenic beauty of Birmingham, the people and the warm hospitality that they get here. I’ve seen that happen on numerous occasions. That confirms to me that Birmingham has something that a lot of metro areas might not have. It’s kind of difficult to put your finger on it. Birmingham is also a very philanthropic city, which creates a nice corporate culture for people.

Hagwood: When I have visitors here, their impression walking in and walking out are two totally different things. I hear “polite” and “harmony” a lot. I don’t think we talk about that enough. We’re very blessed as a community today. There is a good feel to it in my opinion versus a lot of other cities I travel to. We’re a community as a whole. I think we do one of the best jobs in the nation of cities our size in that regard. That’s the part you can’t really put in a report. You can’t necessarily sell that in a power point presentation. But people can feel it when they walk around and spend some time here. Certainly you can say that we’re centrally located and have good infrastructure and all that. But there are some intrinsic things that are very important that give us a strategic advantage over some cities.

Barstein: I agree that we’re a very philanthropic city. We have great weather. We have four seasons. I’ve been to other parts of the country where they don’t have trees, they don’t have green. Places where it’s either hot most of the year or cold most of the year. So our weather and seasons offer a lot. One thing we don’t have, though, is water. If you look at some of our competitive-type Southern cities – Montgomery, Chattanooga, Nashville, Memphis – water tends to be a really big focal point to try to bring in development. But one thing we do have that is a big advantage is UAB. We’ve seen a lot of buildings that were big-time in their heyday that are empty today. Development happened around those buildings, and then over time offices moved out and it became a blighted area. I don’t think that’s ever going to happen with UAB. So the development that happens around

UAB will stay strong, and you don’t have to worry about that major tenant leaving and all of a sudden you have an empty building. That’s why I think we have a big advantage for development as UAB continues to grow.

Q: The historic renovation tax credit has had a major effect on sparking development. If the credit was extended and/or expanded, how will that affect Birmingham moving forward?

Raley: It will only help with the continued renovation of the older structures in downtown, which is important because downtown has a good deal of inventory of older buildings to be redeveloped. The Redmont Hotel, Lyric Theatre, Pizitz Building, Thomas Jefferson Tower and Florentine Building are all great examples of renovation projects that have taken advantage of this program. These alone give enough credibility to the program.

Silverstein: A few years ago, we saw a need to work with the Alabama Legislature on a state historic tax credit, and the legislature passed a bill allowing for these tax credits. This availability of credit played a major role in the Pizitz project. Over 30 states have historic tax credits, and it’s a major incentive for development in urban areas. Pizitz is approximately a $70-million project. You have to spend money in order to achieve a tax credit, so it makes sense to invest in job creation and new tax revenue that otherwise would not have been created. We hope the Legislature will remove the sunset provision, which will allow the timeline for credits to be extended, and eliminate the cap on credits.

Hagwood: It’s obviously a fantastic program. A lot of buildings downtown have certainly benefitted from it. It doesn’t work for every deal, for a variety of reasons, whether it’s the developer’s plans for the building itself or just simply timing needs. But there has been and always will be a place for a tax-credit program. It’s just not a one-size-fits-all program, and it’s not intended to be.

Barstein: I think we all agree that we’d much rather see older building renovated than a new building being built in place of it. I was talking with somebody recently in his office, and he had a photo of the old downtown train terminal on his wall. You could tell that – almost with a tear in his eye – he really hates that it is gone. So tax credits in general have a tremendous effect on development, but it also has a snowball effect. Because a lot of times, credits allow developers to offer lower occupancy costs for their project because they were able to get those tax incentives and make them work. It sets the level of what occupancy rates can be. If somebody can take an older building and renovate it and get the federal government to pay for half the renovation, clearly they can offer lower rents to their tenants versus somebody who has to build something brand new. Then if somebody else can’t get the tax credits and they have to put 100 percent of their funds into renovation, then they have to charge higher rents and they can’t compete with the other buildings in the market and the

project doesn’t work. So we have to be careful, because once you start doing it, it’s hard to stop giving it. If you do, development will basically stop.

Lauriello: Any tax credits are a benefit to all cities, counties and states. Historic tax credits encourage developers and/or users to invest in our wonderful inventory of great buildings. By extending these tax credits everyone wins. Contractors, sub-contractors, architects, suppliers and more. The projects create temporary and full-time jobs and will increase our tax base long term.

Brown: It’s a very important piece of the puzzle. The Pizitz building, for example, wouldn’t have happened without historical tax credits. Any time you can take a beautiful historical building and renovate it and maintain the historical richness, it’s a win-win for everybody.

Hagwood: That’s one advantage we do have in Birmingham. We have a lot of great-looking old buildings downtown. Buildings that you couldn’t build today for a billion bucks, with that kind of craftsmanship. There are a lot of buildings downtown that could be served by that program and put life into these beautiful historic buildings.

Barstein: Renovating a building can be a lot harder than building a new one. You don’t know what’s behind those walls. A lot of contractors won’t take the job because of the hidden unknown. Sometimes the electrical has to be ripped out or the water doesn’t work or there

is asbestos in the building. So you need those tax credits because your costs are going to be higher.

Q: Do you think retail will follow all of the new apartments to downtown?

Lauriello: Yes, I think retail will follow these new developments. We have already added several new bars, restaurants and coffee shops to downtown because of all the activity. We will see much more in the next 1 to 3 years.

Raley: I agree. It has already started with Publix being under construction, as well as restaurant and additional retail space.

Barstein: Yes, but in small pockets. I don’t think you’re going to see the traditional strip-center retailers following these apartments downtown. You’re not going to see sporting goods shoe stores, the national chains of women’s clothing stores, things like that. The problem is they just can’t generate the sales in a downtown market like you can in the strip centers. As a former retailer, I can attest to the fact that rents from a retailer standpoint are based on projected sales. As a developer, we want rents to be based on the cost of the land and the cost of the bricks. And a lot of times, those numbers don’t match. Saturday is a huge retail day, and in a lot of downtown areas you just don’t get any Saturday business. So now you’re relying on Monday through Friday, and after 5 p.m. you don’t do a whole lot of business either. So your sales



projections are always going to be lower in the downtown area. And as retailers are expanding and they want to do the most profitable deals and the easier deals, that makes it tougher. Since rents have to be lower in the downtown area because their sales projections are lower, a lot of times what you’ll see is some unique-type retailers will open up in these markets, retailers that are a lot more cautious. But those projects almost have to be up and open before a retailer will actually have the vision to go into a space like that. We can talk to a national retailer and show them a shopping center that’s going to have a Publix and small shops, and they can project what it’s going to look like and commit on paper. Whereas the small retailer who is ready to open today doesn’t want to wait a year for that project to be built. It will happen, it’s just a very slow process.

Brown: I agree that it will happen in pockets. For example, I think the Publix development downtown will be tremendous and bring in additional retail development. Preleasing for the retail space has been very strong and you’ve already seen some of the other previously existing retail space adjacent from the property benefit from the announcement and construction. I certainly don’t anticipate seeing any large strip centers or lifestyle centers in downtown. Hopefully there will eventually be enough critical mass with all the new multifamily units

coming on line, and that will bring some dry cleaners or clothing stores or basic service-type retail into downtown. That will be driven just by critical mass.

Silverstein: Apartments bring residents, which drives demand for more amenities, restaurants, grocery stores and commercial activity.

Hagwood: First, the planned multi-family has to be leased up and running. So there’s still some wait-and-see, particularly on the boutique retail side, before everybody goes all in. Frankly, I think a lot of multi-family projects in the downtown areas that have had a retail component to them have struggled to lease the retail. Folks have had to readjust some of their projects to minimize the retail. But certainly if the multi-family is successful, you’re going to see more and more retail.

Brown: It’s what you’d see in just about any urban setting in the country.

Hagwood: Sixty years ago, nobody thought about going to the suburbs to go shopping in Birmingham. It’s just a change in mindset, and that’s going to take time. It will take a generation. We have people in mass saying, “Let’s go live downtown.” That’s new and strange for us. So it’s going to take a little time to adjust how we live, eat and shop. But if something is good or easy, people will change their habits.

Barstein: Look at the 29 Seven project in Lakeview. It’s taken a while to lease out

the bottom. Some of that was a factor of, just because I have 50 families living above me, it doesn’t necessarily mean that my restaurant is going to be successful. We’re excited about our Central City project not because of the 45 units up above, but because of how successful all the other restaurants are in the general UAB area. The retail part of mixed-use works because of other retail in the area, not because of the people living above it.

Q: Aside from Parkside, what neighborhoods/parts of downtown are primed for more development?

Brown: I think the Lakeview and Clairmont areas are primed to continue the momentum that they have. That’s the area that really jumps out at me. Another is Avondale. You would be hard pressed to find an area where there has been as many successful restaurants pop up in a short period of time. I think that area will continue to expand.

Hagwood: Avondale. One day there is nothing there, and then stuff pops up. There are some pretty cool bars and restaurants there. It’s become a pretty neat little place. It’s a perfect example of people moving into an area, and then the retailers and service industry comes to them and not the other way around. That’s what’s going on in several communities right now.

Lauriello: Lakeview, the areas in and around the Rotary Trail, Southside area

west of Railroad Park, the avenues in North Downtown, First, Second and Third Avenues west of 18th street, and Avondale. We are beginning to see a lot of interest in rehabbing old houses in Norwood, Avondale, Eastlake, Woodlawn, and some of the western parts of town within 1 or 2 miles of downtown.

Silverstein: We see the northwestern portion of downtown primed for development with the opening of Pizitz in 2016 and development opportunities with the New Ideal building adjacent to Pizitz. We believe Pizitz is in the bullseye of the city, with growth already occurring to the south and east. The next opportunity is to take this growth west of the Central Business District.

Raley: Lakeview and Avondale should continue to see additional development. The Rotary Trail project will continue to attract more interest to this area due to better connectivity. Uptown has the potential for more entertainment development as well.

Barstein: I think another area that is primed for growth is the Continental Gin area (at 4500 Fifth Ave. S.). Cahaba Brewing announced that they’re moving there, and I think that’s going to be a catalyst for redeveloping that area, because there is acreage out there. So something can really happen with all the property there. It’s what Avondale was in 2007, where people were like, “Really, you want to go to Avondale?” Continental Gin

At IBERIABANK, we are deeply committed to the revitalization of Birmingham’s Downtown community. In the past few years, we have financed multiple downtown development projects that are bringing new housing, a large retail grocer, industrial businesses as well as several exciting new restaurants to our Downtown community.

We have also made a corporate commitment by opening two retail banking offices in the heart of Downtown Birmingham in the past three years – our Downtown office at 2025 3rd Avenue North and our UAB Medical Campus office at 1801 4th Avenue South.

At IBERIABANK, we believe strongly in supporting the communities we serve through lending, volunteering, and philanthropic giving. We thank Birmingham for welcoming us into the community and we will continue to do our best to make this City a great place to live, work, and play!

www.iberiabank.com | Member FDIC

Visit us at our Downtown Birmingham offices at 2025 3rd Avenue North and 1801 4th Avenue South.

Helping Move Birmingham

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feels like that right now. By 2020, I think it’s going to be a hot area.

Q: What impact do you think the surge in property values around Parkside will have on the district moving forward? Will they limit deals/developments or be catalyst for them?

Barstein: We’re going to hit a peak with surging property values where people say, “I’m done. I have to go somewhere else.” Office development is still continuing to happen in the area, but most of the older buildings have already been redeveloped. You also have UAB as a boundary, so eventually there is going to be a standoff where it’s going to stop. Then it will eventually start moving west and north rather than south toward UAB.

Brown: Generally speaking, I think the increases in property values are a good sign because it’s indicative of good things happening in the area. However, that doesn’t mean rising property values are a catalyst for development. Ultimately an equilibrium will be found and if land prices get too high it will limit development. We’ve seen multi-family rents in Birmingham go from $1.35 a foot five years ago to touching $2 a foot now. At some point somebody is going to find the peak in rents. At that point, if land costs continue to increase then people will pass on the building/land because they can’t make the numbers work. So the equilibrium in property values will be found.

Lauriello: The values should continue

to go up. UAB will continue to grow and expand over the next several years, especially in the medical areas. We now have the private sector competing with UAB for property. Up until the last 24 to 36 months, private money would not pay the same amount for property that UAB would pay. That has all changed. Plus there is not as much property inventory available for sale today. Simple supply and demand should dictate higher property values in the future.

Silverstein: Clearly this is a catalyst for growth. And as the Parkside District develops, we believe the momentum will spread north and west as the city continues to realize its potential.

Raley: Property owners will be and should be proud of their property values around Parkside. Sellers always think their property is worth more than it is, and buyers always think it is worth less than it is. In an active area such as Parkside, parties will be reasonable at the end of the day and development will continue. This district is already a success. There may be a few parcels that remain as-is due to an inflated opinion of value, but development and redevelopment will definitely continue.

Hagwood: I think it’s good for the local guys. They’ve seen an opportunity and they’re capitalizing on it. But we’ve seen a lot of influx, and frankly ridiculously prices on some things. Not necessarily downtown Birmingham but in other sub-markets. Without the job growth and

population growth, it has to affect one market or the other, somehow someway. There is certainly going to be a lot of competition in the market. We have a lot of units coming on line. Those tenants are coming from somewhere, and if it’s not from out-of-city or out-of-state, it’s from one of our other sub-markets. So looking at it as a whole, I think downtown is going to do great. But I’m a little concerned about how that affects some of the older properties in some of Birmingham’s sub-markets.

Barstein: If you get a little blip where demand falls for properties in that area, developers will start backing off and people will start backing off from wanting to buy these properties. And people who have opportunities to sell now at a really good price are going to be kicking themselves for not doing so.

Hagwood: A lot of the development decisions were heavily dependent on very favorable interest-rates. You’re dealing with an environment that’s virtually free money. That will change someday, and if happens quicker than expected, it’s going to mess up a lot of pro formas very quickly. I suspect some of these deals that are currently on the table do not get done. And even if they do, the numbers at the end of the day are going to be entirely different from how they started out.

Q: How critical are incentives to maintaining downtown’s momentum? To

what degree have they been responsible for the area’s revival?

Silverstein: Incentives are extremely important for future growth. There are a lot of projects that would not be happening today without them.

Brown: I think they’re critical right now where we are. Because we do have a lot of positive momentum, more than I’ve ever seen in my lifetime. The ball is rolling now, and we don’t need to do anything to inhibit the positive momentum that we have. So I think the tax incentives are critical to continue right now. In a perfect world you’d want to get to the point where they’re not needed, but right now they are needed and have played a huge role in getting us to where we are.

Hagwood: You have to grease the skids somehow, and we’re still in that process. I think that will continue for some period of time. It’s still important. That’s what they’re for.

Barstein: I think they are absolutely beyond critical. In our line of business we work with a lot of municipalities to help them form public-private partnerships, dealing with incentives to show them that it’s a win-win. Again, as a retailer rents are based on sales, and as a developer rents are based on the cost of the land and the bricks. And a lot of times there is a big gap there. We work with cities to help them understand that if we can help generate an extra half-million dollars worth of sales tax, is it worth giving the developer



Commercial Real Estate Specialistswww.southpace.com

Beginning with the redevelopment of our Title Building office headquarters in 1984, Southpace Principal John Lauriello has been passionate about the revitalization of downtown Birmingham. His dedication has led to the preservation of 30 historic commercial buildings in the downtown and Southside area in the past three decades. John continues to find ways to renovate, redevelop and reinvent downtown.

Come to think of it, maybe it is magic, afterall. It’s The Magic City.

Some call it magicWe call it passion.

$100,000 a year so he can help bridge the gap and make his project a go? Most cities will say that is a win-win and will participate in that. As soon as you turn the spigot off, though, and you stop offering incentives, you basically see development stop. The reason is, if I’m building a project that’s a $10-million project and I get $2 million in incentives from the city and now it’s an $8-million project, I can lower the costs to my tenants and my residents to make the project work. I’m not doing that to get a bigger return. I’m doing it to make the project work and be competitive with what rents are in the marketplace. If we turn the spigot off, if a guy wants to do a project next door, he now has to spend $10 million and his rents have to be higher. So the project isn’t going to happen.

Lauriello: Incentives have been extremely important. Birmingham is competing with other cities in the immediate area and throughout the south. We have to remain competitive. Also, the recent reduction in our business license fees and business taxes have helped retain and attract business to Birmingham. I applaud the City Council and Mayor Bell for approving these changes.

Raley: Incentives are always vital to the redevelopment and growth of an area. Business owners and investors want to feel welcome and know they are supported by the city before making an investment in the city’s future. The city of Birmingham is

doing its part to sustain and enhance the current momentum downtown.

Q: Think ahead five years. What do you think downtown Birmingham will be like? What factors will shape its future?

Hagwood: If you’re going to talk about Birmingham five years from now, you can’t help but go back in your mind and think about what it was like five years ago, or 10 years ago. It’s very exciting to see the activity and the energy that’s going on. It’s something that most people in Birmingham haven’t seen in our lifetimes. There’s just a very nice vibe. If development is done judiciously, and the “rate gods” continue to be kind to us, there could be a lot of game-changing things that happen downtown that really transform not only how we look at the city but how the city is viewed externally. Think about how much the perception of Birmingham has improved in such a short period of time. So the right ideas done the right way can be transformational. We’ve already seen that in a limited area in a pretty short period of time.

Lauriello: I believe we will not recognize downtown five years from now. Young and old people are moving into city centers in cities large and small all over the United States. Even Detroit is making a comeback in their downtown. Birmingham’s population has been declining over the last 40 years. It is projected that we will see an increase in

population by 10,000 or more within the next five years.

Silverstein: The quality of life downtown has greatly improved with developments such as Railroad Park, Regions Field, Uptown Entertainment District, UAB, the Midtown Publix, Pizitz Building and Powell Avenue Steam Plant renovation. Add the Rotary Trail and Bike Share program, and Birmingham has a vibrant energy that we believe will continue for the future. These developments will bring people, especially millennials, from the suburbs to downtown to live, work, shop, dine, and play. People now want to live in downtown Birmingham. They want to go to dinner, watch a concert, go to a baseball game, shop and participate in a yoga class. All in downtown Birmingham. Companies now more than ever want to locate in downtown Birmingham. Growth begets growth.

Raley: Our firm moved downtown from Highland Avenue in 2004. I can remember back to those first few years, and there seemed to be no reason to stay downtown after work or drive back into town later in the evening. Today, it is very much the opposite. The amount of residential, retail and entertainment development that has occurred in the last 10 years has had a drastic impact on the landscape of downtown and is the driving force behind the current positive momentum in the city center. As more people move downtown, the labor pool will expand in this area, which means employers and new jobs will follow.

This activity is what is needed in order for downtown to sustain in the long term.

Barstein: It’s interesting that developers from outside the city are coming to Birmingham and doing things here. We have our building at Second Avenue and 18th Street, and right behind us there is a big family development going on, and the developer is out of Memphis. You are starting to see more of that. We still have some blighted areas in Birmingham. We have pockets of development and pockets of blight. As that development slowly spreads we’ll see less blighted areas, but it’s going to take time for that to happen. One neat thing that I think is going to help shape Birmingham a little bit is the new bike-share program. It will help people venture out of their neighborhood and explore other areas of the city. Just exposing people to different areas of the city will help Birmingham grow.

Brown: All the things that have been talked about – Bike Share, Rotary Trail, Railroad Park – kind of combine into an interesting urban vibe that Birmingham is developing. Birmingham has always had a handful of really, really good restaurants, but just a handful. Now there are restaurants popping up all over town. There is a music scene that is developing in Birmingham. WorkPlay was kind of the pioneer in that, and now Iron City. All these things combined is just creating an interesting urban vibe that we have not seen in our lives.

insights into downtown evitalization...be a big part of making that happen. hagwood: for downtown to...

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