Main Street building work revives as bank lending comes back

Main Street building work revives as bank lending comes back

January 26th, 2013 by Shelly Bradbury in Business Around the Region

Ken Pritchard speaks about his new commercial and residential space as construction continues on renovating the old warehouse off of Esst Main Street.

Photo by Dan Henry /Times Free Press.

Standing in a cavernous empty room in the old Office Coordinators Inc. warehouse on East Main Street, Ken Pritchard surveyed the high ceilings, tall windows, exposed beams and sighed.

"It's painful," he said, crossing his arms over his chest and shifting his weight from leg to leg.

The plan was to develop the downtown Chattanooga space into loft-style condominiums five years ago. But those plans, and the rest of the building, are still empty.

"The whole economic downturn -- I suppose we were victim to that," Pritchard, of Pritchard Properties LLC, said. "The funding institutions in town weren't willing to look at anything that wasn't fully leased. Anything that had any hint of speculation involved, they had no interest in."

Pritchard and his wife Carla spent $550,000 on the 30,000-square-foot building in December 2007. They dubbed it "Clearstory" and made plans to develop an energy-efficient mix of office and residential space.

They promised 10 condos featuring 15-foot ceilings, exposed roof trusses and 8-foot windows. They drew plans for a rainwater irrigation system, a geothermal HVAC system, reflective roofing, sunshading and solar energy.

Everyone wanted to be on Main Street, and the Pritchards could feel the energy.

"I think everyone who jumped in there, we were all a little naive to think that that momentum would follow through the downturn, and unfortunately it didn't and we got stuck in our tracks here," Pritchard said.

But that's starting to change -- workers are now putting up new walls, running wires and pounding nails. Pritchard -- and other developers planning work on Main Street -- are finally finding funding.

Banks are starting to give loans again.

"I have seen more movement recently than we have in the last two or three years," Kim White, head of the River City Company, said. "Things had just stalled and for about three years it was almost impossible to do anything."

Pritchard hasn't found all the funding he needs, but he's moving forward with what he has secured.

"I think we'll get the same result, but we'll get there a different way," he said, walking through the new construction this week.

Instead of tackling the project in one go, the Pritchards are making changes in stages. Phase one is to create six commercial office units on the ground floor facing East Main Street. It's just a sliver of the building -- 2,000 square feet -- but it's a start, Pritchard said.

"I started seeing the ice thaw this time around in mid-2012," he explained. "Even though it's still more conservative than they were in 2006, I think lending institutions are starting to get out there. I've had several banks approach me now -- whereas when two years ago I'd approach banks and be turned down by each one."

Spa adds vigor to Southside

And it's not just Pritchard who's breaking ground and making progress on Main Street. Terry and Dr. Jeffrey Jump are building a new $2.8 million facility at 320 East Main Street to host the Center for Integrative Medicine, which will include a spa and physical therapy space.

"This has been in the works for a long time," practice manager Terry Jump said.

The Jumps too had trouble finding financing, she said. They signed the contract with their architect in 2010, but didn't secure the money until November 2012.

"We could get financing, but it wasn't desirable financing," she said. "So we were being selective about that. And that process was really grueling."

Ultimately, Cornerstone Bank agreed to finance the project "and we're thrilled to be banking with them," Jump said.

Construction on the new building started this week and should be finished by the end of the year, she said.

Tommy Knix, small business specialist at the Tennessee Small Business Development Center, said most banks in their nine-county coverage area are more able to give loans today than they were a couple years ago.

"I've definitely seen an increase in the banks' at least desire to try to make loans," he said. "It's moving in the right direction, but I'm not sure we're where we should be."

Grocer to open

Enzo's Market, a $4.5 million, 16,000-square-foot grocery store opening at the corner West Main and Long Streets, has been in the works for several years and should open in early March, grocer Sam Turner said.

He said it took about two years of searching to find the financing for Enzo's.

"When you look at the banking environment and what they went through in 2008, 2009 and part of 2010, a lot of the banks were struggling to keep their doors open," he said. "They were having difficulties. So I don't know whether you put it on the banks, or the overall housing bubble, or interest rates hitting practically zero. It was a very unusual world."

White said Enzo's was made possible by local funding after being stalled for three years.

"It really took a lot of local investors coming together to make that happen," she said. "Now I think Main Street has finally reached that critical mass that makes the banks feel like developments are more viable."

At Clearstory, Pritchard plans to have several tenants moved in by mid-February. Chattanooga Presents -- his wife's company -- and the Chattanooga Engineering Group are two of the tenants already committed.

"With all this stuff that's going on at once now on Main Street, it's almost like we took a breather there and we're jumping back in at the same pace we saw back a few years ago."

He's now focusing on creating apartments instead of condos, with units ranging from 850 to 1,500 square feet and rent at $1 per square foot per month. He hopes to secure the funding for the residential part of the building in the next six months.

"You've got to be optimistic," he said with a laugh.