Jonathan Blue and his partners in The Landmark Building at 304 W. Liberty are on a tear.

They landed The University of Louisville Physicians Group a few weeks ago. They’re in negotiations with Greater Louisville Inc., which is leaving its headquarters at 614 W. Main St.

Blue and partner Gant Hill plan to invest $4 million in a transformation of the Molee Building at 425 W. Muhammad Ali Blvd., between Fourth and Fifth streets, a building they bought back in 2007 for $625,000.

Tentative plans call for 20 to 30 rental units in the five-story building just west of Fourth Street Live. Blue has interests in about eight downtown properties, which makes him one of the larger local real estate investors by value of properties owned, along with Mary Moseley, Sandy Metz, Jim Fox, David Fenley, Mendel Hertz and George Stinson.

But Blue, who runs Louisville-based venture capital firm Blue Equity, has a global view, with investment ties to Jamaica and Mexico. In 2010,  Blue Equity sold Blue Entertainment Sports Television to Paris-based multinational Lagardere.

So, how does he see his hometown, especially the fragile future of downtown?

Well, let’s put it this way – we think you’ll be very interested to know which issue most  concerns Jonathan Blue. (This interview was recorded on February 17.)

 Inside Louisville: Where are we in the evolution of downtown? What do we need more of?

Jonathan Blue: Terry, I think everybody thought we build this arena and we would be done. We’re not done. Actually now is when the work begins, as crazy as that sounds. Of course we are worlds ahead of where we were. But the number one thing we still need more of downtown … is residential.

And we’re trying to do our part in that with the Molee Building.

But to talk about the landscape without us for a second, condos obviously have proven they do not work.

They do not work for reasons of financing in 2012. Because of the financing climate. In addition to that, for what you can buy in the suburbs on the city, it’s very difficult to own a downtown condo because you get so much more in Louisville than in any other city in the suburbs.

So, what we need really is downtown rental units. Although the city doesn’t have any money, anything they can do to assist with that would come in very handy … in growing this core. That’s the single biggest thing. Retail follows residential.

 IL: So what you’re saying is suburban prices make downtown tough. You’re saying, “If I’m thinking about Prospect or a downtown condo, I’m going to go with Prospect?”

 JB: I’m saying if you spend $450,000 on a condo in downtown Louisville, you could get a massive house with massive amounts of land anywhere from Brownsboro Road east. Okay? Or the Westport Road area. In Nashville and other cities, you get much less (in the suburbs). Your dollar buys more bang for your buck here.

It’s a wonderful thing.

In other cities, you don’t get that. (Suburbia) costs so much more. You’re not even going to think about New York. So the reason I’m telling you that is, that’s where the struggle has been. And more importantly, Terry, there is no financing for those kinds of (downtown) units. And who knows when it will come back … if it will come back.

IL: Retail – that’s our biggest failing as far as I can see. Do you agree?

JB – I think Fourth Street Live was a major accomplishment. But we see there have been failures. We know (The Cordish Cos.) lost another product the other day with Hotel closing. And Borders.

You are seeing some bright stars. I don’t have any interest in these, but I want to point them out. No financial interest. Rye on Market Street. The old Hausman Jeep. A cool place across many demographics. Right? Good food. And in a part of town where no one is going to go. They speed by on the way home. But that stops the traffic there. It’s good!

Wiltshire on Market! I was there for the first time in my life last Friday night. Went into the bar with my wife. Had drinks and great little appetizers and it was packed. That’s what we need. by the way. Some of the people were downtown residents, but some weren’t. Point being, there was no event that night downtown. We were there because there was a destination. You have to have places like that.

I’m not sure national franchises – it’s going to be hard to get them to come downtown.

 IL : Do we need them?

 JB: Some. Some. But it’s going to be hard to get a national dry goods franchise.

ILLike a Gap and the obvious apparel companies …

JB: Right.

IL: Well, T.J. Maxx was interested. T.J. Maxx appeals across a lot of demographics. But when you have no downtown retail …  if you mess up your tie at lunch, where are you going to get another one?

 JB: You can’t.

IL: You go to downtown Cincy, downtown Indy, they have all these things. I know those are bigger cities and I get obsessed with this, but it’s pretty sad. Pretty sad.

JB: Well, the only way we’re going to get something like that is with critical mass, and unfortunately, with someone saying, “Look We’re going to take a loss on this.” Or the city is going to make up some kind of gap. Again, It’s going to be awful hard to see that in this climate … this economic climate.

IL: How many buildings do you own downtown?

JB: We have an interest in five. Eight if you count the strip centers.

IL: You’re here to make money. You see the prospects.

JB: It’s very hard in Louisville because Louisville is a mid-teens rent for downtown at best for (Class) B/A space, and prices are hard to push northward. But a good product hopefully will come in at a higher price. A good product with good service, I should say. Service is important.

IL: But you’re saying the Class A space, the B space downtown is solid. The demand is still solid.

 JB: I’d say pretty solid. We’ve had some hits. The Mercer hit. Philip Morris (leaving Louisville) was a big hit. It’s going to take time to have that reabsorbed. But we had on the heels of a bad recession. It’s going to take time. (Editor’s note: Business consultant Mercer signed a lease earlier this month for a much smaller space in Aegon Center, moving from Meidinger Tower.)

IL: So what does downtown Louisville look like to you in 2020. Do we finally get retail? Big new buildings?

JB: I think the No. 1 thing you should think about and all of us should think about is, “How are we going to get more content in the Yum! Center?” I know that sounds interesting because we say, ‘Oh, there’s plenty of content! We have 16 (University of Louisville) basketball games and we hear about all these great concerts. But if you divide that by 365, it’s empty! And I want to explain to you – and I haven’t seen the budget and I wasn’t on the (arena) committee – but far more nights were projected to be booked than there are now, and that arena is far too dark.

And someone needs to quickly figure that out.

That will also drive development over time.

IL: Well, the Whiskey Row project next door is in trouble and may not happen.

JB: I don’t want to talk about my sibling. I think he’s awesome. I think he would have done enough due diligence and presented it where he would been accurate … not misrepresented something. And I don’t want to start battling preservationists. Fortunately, I’m not in a war with them at all.

 ILNo, I don’t want to put it on that level. The problem is, if you have (Whiskey Row) developed and it works well with KFC Yum! Center, everyone lives happily ever after. If it just sits emtpy ….

JB: It should be developed. But if it’s economically not viable, then it’s never been economically viable. The problem is, something else should have gone there. I don’t have a dog in that fight. I don’t know what the problem is, but wasn’t construction supposed to have already started?

 IL: I don’t think they have a good idea of what they want to do. Theoretically, it was going to be a downtown distillery and entertainment complex. It was supposed to mesh with the Brown-Forman side. But I never heard anything official. Just what Steve Wilson told the WSJ  in a converation. Literally. “That sounds like something we might be interested in.”

JB: I think that would be perfect … but not the cart before the horse. It has to be developed. Let’s say it gets built tomorrow and everything is fine. You still need people down there to fill it up … where are the people going to come from? You’ve got to fill the arena up to get that to happen … 20 to 30 nights a year for basketball, let’s call it 22 if you count exhibition games and practices.

Let’s assume there are 20 to 30 concerts, because that’s all there are. So, 50 to 60 – maybe 70 nights. That place has to be lit well over 100 nights a year. But you know that! That’s only a third of the year!

IL: Well, I think of the arena in terms of debt service on the bonds.

 JB: That’s what I’m telling you … and the TIF money that flows off from people going to use the restaurants and stores. But if the arena is dark ….

IL: If the rest of Main Street gets developed, everything around it would change. Gus Goldsmith would sell his building. That porn shop would be redeveloped next to what was O’Malley’s Corner. O’Malley’s Corner. It would be this chain reaction. But what happens if that doesn’t happen? That’s a doomsday scenario.

JB: I think so. That could be huge!

IL: To get optimal use of the (arena) and service the debt, you’re saying we need 200 nights per year.

JB: For sure north of 100. Two hundred, you’re home free. Remember, Madison Square Garden is booked three hundred, sixty-five nights per year. Now that’s the biggest city in the United States, but I think sometimes they have two events in the same day.

IL: But if the arena is used to its full extent, you send out people into the surrounding area and they go out and see empty buildings ….

 JB: Never in my life in 45 years – I’ve been going downtown for 25 years since I went to high school down here – have I been able to drive down to to the (U of L) game and see people walking around this area. For 25 years! Even with the Bats. People basically just went to the Bats and that’s it. People don’t walk around this area that much. But that arena is making people walk around, go to restaurants, spend … it’s fabulous.

IL: How do we realize the potential? If you’re suddenly appointed potentate of Louisville, Kentucky, what do you do?

JB: We have to make dates (at KFC Yum! Center) for road tours far in advance. To go out and actively push to bring them in. We should reference here that U of L does control the dates. That’s the agreement. But when there’s something going on at the arena, there are all kinds of people around. Think if that were double or triple the time. That’s what I’m excited about.

IL: Why can’t we get the blocks on Fourth Street filled? Gill Holland does it in NuLu, but the Louisville Downtown Development Corp. plans. See the difference?

JB: I think it’s very hard to take an empty building, spend the money to convert it, then the Louisville rents unfortunately, unfortunately don’t warrant it. I’m talking about residential and commercial. It’s very difficult because when you do a full renovation, the rents don’t warrant the cost it takes to do it. That’s the problem.

ILBut you have to be pleased with the Landmark Building.

JB: We spent a lot of money on it. Put a lot of money into it. But we also bought it at the right price, which allows us to make the investment. It’s also in the center of the city. And it’s a beautiful, beautiful limestone building.

I treat it more as a treasure than an investment.