If you read the New York Times and Wall Street Journal, you know the investment world is collectively wringing its hands over global asset prices.
Whether you’re considering investing in Australian residential real estate (the second most expensive in the world. Who knew!), junk bonds, stocks or 10-year T-bills, it’s hard to find an undervalued asset promising to yield anything like an exciting return on investment.
Unless you’re talking about Louisville.
As we told you in the June 30 The Closing Bell, Nashville-based real estate investment fund Priam Ventures purchased the Spindletop building at 1064 Bardstown Road near the intersection of Grinstead Drive. The Spindletop Draperies operation is moving to the former Bunton Seed property in NuLu.
The Spindletop property is in a section of the Highlands that not only has some of the highest traffic counts in the city, but with some of the most tempting infill and redevelopment opportunities. Brian Adams, Priam Ventures principal, said he sees Louisville “on a great trajectory,” with an expanding economy and affordable real estate.
Development-wise, Louisville is where Nashville was five or 10 years ago, Adams said.
The investment group will reconfigure the existing 9,000 square foot building on .55 acres into first floor retail, and second floor offices, or other potential uses, Adams said. The property also has substantial parking, he noted.
Just how far redevelopment of the site will go is undecided. Priam Ventures brings a general contractor/architecture team to projects, and zoning statues may allow for an addition to the property, Adams said.
The Spindletop building was built in segments, with front brick section dating back to the 1890s, said Andrew Stone, a partner in Priam Ventures. A second section was built in the 1920s and consists of a structural steel frame and concrete, Stone said.
A third section dates to around the 1940s, and is a steel structure with barrel vault, very similar to interior of Ditto’s Grill at 1114 Bardstown Road.
“Our focus is to use the inherent architectural features of these building to create warm and unique spaces for our tenants,” Stone said. Early renderings show a substantial addition to the center of the one-story building, with about 3,000 square feet in two stories above the original floor plan.
Priam is working with TRIO Property Group principal Justin Baker to find a national credit retail or restaurant tenant. Baker said his firm has just begun targeting clients, declining to go into details while negotiations are ongoing. But he noted Priam Ventures has extensive redevelopment experience in Nashville. “This project has just unlimited potential,” he said.
Priam Venture’s entry into the Louisville market is on a commercial corridor ripe for redevelopment, a corridor that has only recently drawn national credit tenants. Urban Outfitters, the Philadelphia-based youth clothing chain, opened in a dramatically reconfigured space at 1140 Bardstown Rd. in 2012.
Louisville developer Andy Blieden recently signed Mellow Mushroom for an infill project at 1023/1025 Bardstown Road, which was a former dry cleaner. Across Bardstown Road from the Spindletop property is 2011 Grinstead Drive strip center, which was redeveloped from an auto repair and auto body shop back in 2007.
Keeping the existing Spindletop structure is key to the project advancing quickly, and within budget, Adams said. “Timing the market is key, and the tenant mix has to be right. If we maintain what is there today, we have a truncated development schedule as opposed to ground-up construction,” which could cost as much as $250 per square foot, he said.
Adams projects Priam Ventures’ ultimate investment to be about $3 million including the purchase of the property, with the project taking less than 12 months.
Key to their formula is monitoring the project closely and staying on top of construction costs. If they can do that, “we will get – based on purchase price and conservative value – a robust return,” he said.
Priam has done, or participated in, several adaptive reuse projects in Nashville and Chattanooga. At the moment, the firm has several projects in Nashville including a project in the Germantown section that converted an old warehouse into office space, a coffee shop and a restaurant.
Adams said he and Stone like “going into cities and finding the remains, if you would, of the old agrarian economy – the warehouses and industrial buildings, then re-adapting them for retail and office space while keeping the bones.”
Louisville will be the final project for Priam Ventures’ Fund II, which has $20 million in capital. Adams and Co. now raising capital for Fund III. He added he and Stone are scheduled to come to Louisville after Labor Day to meet with potential joint-venture partners for a second Louisville project. “Were looking to (joint venture) as we plant the flag in Louisville,” Adams said.
Priam Ventures’ sweet spot is redeveloping the projects demanding more capital than an individual investor would be willing to risk, but below what regional player would consider a large enough deal, Adams said.
“It’s a nice niche to work in, and part of reason we like that price point.”
Odds and ends:
• In case you’re wondering, Priam Venture is a pun on Adams’ and Stone’s hometown of Troy, New York. In Homer’s Illiad, King Priam ruled Troy. The one in Asia Minor, not New York.
• Brian Adams has a Louisville connection. His wife’s family has lived in Louisville for more than a century. Jessie Adams’ grandfather was the late Jim Caldwell, a former Courier-Journal reporter. Her grandmother still lives in St. Matthews neighborhood.