The mixed-use Northshore Town Center is on its way, for a second time, to becoming a shopping-living hub for Knoxville, Tennessee.
By Lynn Peisner
Northshore Town Center was going to be a thriving, high-end, lifestyle community with a variety of homes, retail and office space serving an area that has been riding a cresting wave in population and annual household income growth over the past few years.
This was the plan The James Doran Company announced in 2004. But under the impact of the recession, the development stalled mid-stride. One office building had been constructed but never occupied. Twenty-two single-family residential houses had been built, and most were occupied. For approximately 6 years, virtually nothing happened at the site, which was once farmland that was parceled together for a large mixed-use community.
Until 2009, when three Tennessee-based developers assembled a group of local investors and purchased the notes to the Northshore project at an online auction for 50 percent of its original value.
Once awarded the bid, Budd Cullom, Jim Harrison and Mike McGuffin of CHM, LLC, had one week to raise the money from local Knoxville investors to purchase the bank notes for the site, which sits at Pellissippi Parkway and Northshore Drive, a major interstate interchange.
"We submitted our offer and fortunately were the highest bidder to purchase the notes," McGuffin says. "We quickly had to bring in local investors who knew the property, understood the value of the real estate and had faith in us as developers. We all believed we were buying it at an attractive price and could somehow make it work."
In lieu of the tony lifestyle center that was first envisioned, CHM had a slightly different vision. They saw the project as a hybrid-type center with lifestyle qualities but anchor tenants to drive customers. On July 24, 2012, Target opened its doors, and less than 1 month later, the first Publix in the Knoxville market opened to much fanfare. At 56,000 square feet, it is among the grocer's larger stores.
"Doran's vision was for a high-end, very dense, town center concept with lifestyle tenants," McGuffin says. "But competition in that market from nearby Turkey Creek shopping center really took the wind out of their sails. We recognized that the world and retail development in general had changed after 2008 and that this project needed to be repositioned to reflect the times. We rezoned a portion of the property to accommodate regional economic drivers such as Target and Publix to attract people to the project on a daily basis. Our goal was to continue down the path of a mixed-use community, but to incorporate some proven retail disciplines."
The development is complemented by a 5-acre lake, parks and greenspace. In addition, CHM sold a tract of the development to Knox County, which is constructing a 1,100-student elementary school within the planned community that is scheduled to open in 2013.
"Residents bought homes based on a concept of a mixed-use town center," McGuffin says. "And while our plan wasn't exactly what they expected, they were excited that we were there to complete the project and bring new life to their community."
Total investment over the next 5 years is $98.7 million and includes approximately 430,000 square feet of retail developed in three phases; 75,000 square feet of office; 240 apartments or condominiums; 75 townhouses and 150 single-family homes.
Phase I consists of Target, Publix, 23,000 square feet of shop space and four outparcels. Phase II is in its predevelopment phase but contains multiple restaurant pad sites along a lake area with an outdoor amphitheater. "The great demographics and natural lake feature provide us with a unique opportunity to develop a true restaurant-entertainment destination. We have significant interest from national, regional and local restaurant operators who desire to locate in this submarket and take part in this concept," McGuffin says. Phase III will contain national junior anchors, restaurants, office, a fitness operator and more.
When the developers came onboard, they renegotiated an expired TIF that was provided by the city and county and used it to fund infrastructure costs. A new dedicated exit ramp recently opened, providing immediate access off I-140/Pellissippi Parkway and additional on and off-site road improvements, including the widening of Northshore Drive and multiple traffic signals.
As Northshore is starting to come back to life, it seems poised for a stronger second start, this time slightly more fine-tuned to the area. "The demographics here are probably the best in the city of Knoxville," McGuffin says. "It's an area of high incomes and dense population. It's really a submarket that's under retailed and has barriers to entry."
The Knoxville MSA is approximately 750,000, and the west Knoxville submarket is growing. The numerous technology companies in nearby Oak Ridge, Tennessee, are a large economic driver for the region. The average and median household incomes within a 3-mile radius of the project are $109,334 and $92,109 respectfully.
Retailers already committed to Northshore, include Barre3 Fitness Studio, The Nail Spa, Froyoz Yogurt, Fusion Tanning Studios, Five Guys Burgers and Fries, Uncle Maddio's Pizza Joint, Great Clips and more.
Concurrently, the developers are also working on another Publix-anchored deal. CHM is developing University Commons, co-anchored by Walmart. The 210,000-square-foot project is being developed on a brownfield site adjacent to the University of Tennessee. The $65 million development is an urban style project that is scheduled to open summer of 2014.
"Timing has definitely played a role in the success of this project," McGuffin says of Northshore Town Center. "However, patient partners and solid real estate fundamentals have also contributed significantly."
— Lynn Peisner