August 7th article from the NYTimes about Birmingham’s booming downtown real estate market.
A Return to Downtown Birmingham
The lobby of Railroad Square in Birmingham, Ala. The office building resulted in part from a local developer’s rethinking of a downtown investment.
By JOE GOSE
Published: August 6, 2013
Long scarred as the site of brutal civil rights struggles and decades of industrial collapse, downtown Birmingham, Ala., has struggled to attract new business or visitors, even from its own region.
Gary Tramontina for The New York Times
The exterior of the Pizitz building, a former department store that is to be remade into 150 apartment units and retail space.
But some recent efforts give the city a bit of hope.
The centrally located $25 million Railroad Park, 19 acres with lakes, an amphitheater and lots of green space, opened three years ago and has become a symbol for reviving the downtown district. Not only do thousands of tourists visit the park, but former city residents are also venturing downtown again after years of suburban life.
As evidence of continued growth, Regions Field, an 8,500-seat minor-league baseball stadium, opened in April just south of Railroad Park, another downtown attraction for the city’s roster. Other noteworthy projects include a heavily subsidized $70 million Westin Hotel and entertainment district in the city’s convention area, and a $7 million renovation of the Lyric, a former vaudeville theater nearly 100 years old and barely used since 1958.
While the downtown area somehow escaped the failed urban renewal efforts that razed buildings of historical significance in other cities, the district is home to an estimated 1.6 million square feet of largely vacant buildings constructed before World War II.
To help encourage more renovation, Alabama lawmakers in May approved a bill offering developers up to $5 million in state historical tax credits to help pay for projects. Other incentives, like federal historical tax credits and low-interest loans, are available, too.
“The momentum downtown is palpable,” said Derek R. Waltchack, a principal of Shannon Waltchack, a Birmingham-based property brokerage and investment firm. “You have all the pieces in place for it to be really hot for the next 10 years.”
That activity and other developments have created a buzz that downtown’s resurgence is permanent, said David Fleming, chief executive of REV Birmingham, an economic development organization focused on revitalizing the city’s urban areas. To him, that is the most critical transformation of all.
“The one thing that has changed a lot is the public’s general attitude toward downtown,” he said. “There’s a feeling that it is back, and that wasn’t true 10 years ago.”
The city still faces a potential hurdle in persuading companies outside the area to relocate or expand downtown. Birmingham is the seat of Jefferson County, which in 2008 began wrestling with a daunting fiscal crisis when interest rates on a $3.2 billion sewer bond issue ballooned to 10 percent from 3 percent during the financial crisis. Unable to meet debt payments, the county eventually made a $4.2 billion bankruptcy filing in 2011 — the largest government bankruptcy in United States history until Detroit’s filing last month — and residents and businesses are certain to face a big sewer rate increase as the case winds it way to settlement.
The bankruptcy may be keeping businesses outside Jefferson County from moving in, Mr. Fleming conceded, but he maintains that it has not dampened the optimism about downtown or hampered the ability of Birmingham to foster growth in the district.
“I know that my sewer rates are going to go up,” he said. “But for everybody that’s here, it’s business as usual.”
REV Birmingham estimates that around 9,400 people lived downtown and in neighborhoods immediately surrounding it at the end of 2010, an increase of 36 percent from 2000. While the organization does not have a firm number on how many people have moved downtown since then, more than 1,000 housing units are under construction or are in the planning stages. That would take the total residential stock in the city center to more than 4,000 units.
Among other projects, Bayer Properties of Birmingham next year intends to begin rehabilitating the Pizitz building, a former eight-story department store. The firm plans to gut the 90-year-old, terra cotta-clad structure and create 150 apartment units as well as 20,000 square feet of ground floor retail space.
State and federal historical tax credits and other incentives are important to the project’s financing, representing some 20 percent or more of the $60 million cost, said David L. Silverstein, a principal of Bayer Properties. Mr. Silverstein and a business partner bought the building and an adjacent parking deck in 2000 with plans to redo it into offices and retail space. But the financial crisis delayed the development and gave the partners a chance to reassess.
“There has been a tremendous amount of movement toward people living and working and shopping in downtown,” he said. “So when we bring this project online, we believe it will be well received by the market.”
Meanwhile, law firms, architects, accountants and other professionals are repositioning old buildings, too, said John Lauriello, a principal of Southpace, a Birmingham-based property brokerage firm. The law firm Hollis Wright Clay & Vail, for example, bought an 8,250-square-foot building in June and plans to move into it this fall after a renovation.
Downtown also is attracting suburban companies that until recently would have never dreamed of moving to the district, said Mr. Lauriello, a longtime downtown proponent and business owner. Like others, he credits Railroad Park for changing attitudes, particularly among younger people who are not carrying the town’s 1960s baggage.
“People that don’t live here used to say with pride, ‘I haven’t been to downtown Birmingham for 10 or 15 years,’ ” he said. “They wore it as a badge of honor.”
Mr. Waltchack, who operated his business in the suburbs for years, could have counted himself among them. But a trip to Railroad Park with his children soon after it opened helped change his mind about an investment opportunity in two buildings near the park that he had turned down a few months before. Eventually he and other investors bought the century-old structures and completed a $4 million renovation to turn them into 42,000 square feet of offices known as Railroad Square. Shannon Waltchack moved its offices into the project along with a handful of other tenants.
Now Shannon Waltchack is spearheading a similar redevelopment for a two-story warehouse and surrounding buildings totaling 40,000 square feet near Regions Field. Plans for the warehouse call for first-floor commercial space, second-floor apartments, and a rooftop deck overlooking center field.
“If you would have called me four years ago and asked, ‘Derek, would you consider moving your office downtown?’ I would have said, ‘Never,’ ” Mr. Waltchack said. “We’re a good case study in how much things have changed here.”