By Josh Brown
NORFOLK
Developers Eric Menden and George Hranowskyj bought the former Clarion Hotel James Madison on Granby Street two years ago with a plan to turn the building into dozens of modern condominiums.
But as the downtown housing market started to slow in the past year, the developers faced a choice between introducing condos in a market where other residential projects have stalled or changing course.
"We noticed the condo market was getting pretty saturated," Menden said.
Late last year, they offered the hotel to the city as a new home for the Kirn Memorial Library, but the city found other accommodations. Now, the two are going forward with a plan to turn the century-old structure into an office building.
The co-owners of Norfolk Property Development, which also owns the Wainwright Building at 229 W. Bute St., purchased the hotel for $5.1 million and will spend $11 million turning it into office spaces that Menden describes as Class A, or top-of-the-line.
The developers plan to charge between $23 and $25 per square foot, a bit higher than the downtown average of $22.76 for Class A office space, as computed in the most recent annual report from Old Dominion University's Center for Real Estate and Economic Development. But, Hranowskyj said, the price is somewhat lower than much of newer Class A space in the area.
The developers are planning to complete construction by April and hope to have the building's 82,000 square feet fully leased between six and 12 months after that.
They have their work cut out for them, said Deborah Stearns, managing director of real estate brokerage and leasing firm GVA Advantis.
"Downtown Norfolk doesn't absorb a tremendous amount of office space annually," she said.
Last year, Stearns said, the area didn't absorb any of the new office space.
She estimated it would take three to six years for the current supply of vacant office space downtown to be rented.
Meanwhile, the Wachovia Center, a complex that will include a 21-story tower, 175 apartments and retail space, will add 250,000 square feet of office space. That project is set for completion in summer 2010. While the Wachovia project is 70 percent leased, it will create vacancies in other buildings downtown.
Stearns also said the former hotel's location, about five blocks north of the Main Street business corridor, makes it less attractive for tenants who need to be more centrally located.
But Hranowskyj brushed off those concerns. The conversion work already has begun, and the developers plan to have the building ready long before the Wachovia Center is complete.
Parking around Main Street also is a hassle, he said.
"We've had a lot of success with the Wainwright," Hranowskyj said of the building located a few blocks farther away from downtown's business core.
The developers said they will have to spend about $1.5 million more than they had planned to convert the hotel from residential to office.
"We still talk about doing condos, because it would have been a very good condo project," Hranowskyj said. "But we're too far along to change."
Josh Brown, (757) 446-2318, josh.brown@pilotonline.com
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Duh
Dumb and dumber!!!
Hmm
Barney, the city of Norfolk doesn't need overpriced office space. Last time I had to visit the office over in the city hall I quickly identified how many of the jobs could be removed and space freed up with the use of kiosks. Heck, the whole reason I was there was due to poor integreation of information between DMV and the city of Norfolk. They wasted 4+ hours of my time between them, instead of telling me what was up on the website. How about the city quits wasting taxpayer money. They are here to serve us efficiently, not waste money building a empire in their name. The current library is fine.
interest on loan!!!!!!!
what interest r they paying on $16 million?????if they can borrow $ in this market...they have 2 pay 10-15% interest on the loan.....maybe the bank will give them an interst free loan....and life goes on.....GOOD LUCK.....
HAY Eric and George
Ask the City of Norfolk if they would like a long term lease for the bldg...They could use it for the new court house...It could be a win win situation for every one...The inprovments being made could be done to accomidate a court setting
BeachBill
BeachBill, when they say $22 a square foot, in commercial space it's annual. 1000sqt @ $22/sqft is $22,000 a year, or $1833 a month.
good job
A beautiful building in a great location...and a great alternative to a new skyscraper. This is a good project.
Parking and Office space need
First off they really need to solve the parking problem in that area if they expect to attract class A renters, and second I personally don't care what they build as long as my taxes don't have to pay for it, but I really can't see the need for another vacant office building.
Ethan - check your math...
82 * 22.76 = 1,866,320 is correct; however,
$1.86 million x 12 months per year = $22.4 million per year (rent)
If one assumes 60% occupancy, $22.4 x 60% = $13.4 million per year (rent)
$13.4 million x 8 years = $107 million in revenues
bank of the commonwealth....check book!!!!!!
i hope this is not another GRANBY TOWERS....bank of the commonwealth can have another bad loan 2 write off......bad loans can really make a stock go down in price......but it is a good piece of property.....("ed woodard")...good luck.....hope the bank can write the check for the loans..
Closed door decision?
And why, exactly, pray tell, did the city turn this building down as a replacement for the Kirn Library? It appears to be bigger than the old building, as well as the temporary home they have chosen.
The negative nellies come out quick
This will be a tremendous addition to Granby Street and downtown Norfolk. It is a beautiful old building being converted into quality office space, so at least the historical preservationist complainers are not upset. The people behind this did not fall off a turnip truck yesterday. Thank goodness there are people with the money and courage to take on a high quality project like this. Given all the benefits of a location downtown, I predict success.
hmm
Fully rented, they are looking to pay off the 16.1 million in purchase and renovation in 8 years (82000 * 22.76 = 1866320, or 1.86 mil a year in rent). Is that normal for commercial property?
Cool building
I have to admit, it's a cool building. Why not ditch the glamor of class A inside, and turn it into a normal office building that can be rented? Everything in downtown Norfolk is for sale as all the investors try to dump their investments (oops, too late.) What is class A anyways? Granite countertops and stainless steel sinks in the bathrooms? Fancy wallpaper? Everyone in downtown Norfolk wants to be class A to jack up the rents. Don't run away the employers.
It's a great building on a great corner!
I wish you all luck with this project. It's a great corner in a great part of town. The nay-sayers will get you every time. Good move to stay away from the condos. The Wainwright is another great building in a great part of town. The old James Madison sits right next to a brand new parking garage. Perfect location for medical or business. Freemason is a gem of a street.
Sadly they are going to
loose their shirt--or more.