Development Magazine Spring 2012

Development - Ownership

Reimagined Potential Leads to Redevelopment Success

Pro formas at One Hundred Oaks have been exceeded by at least 25 percent.

One Hundred Oaks is a 40-year old, 880,000-square-foot retail mall that was renovated into a mixed-use development with Vanderbilt University Medical Center as the major tenant. Located on 56 acres in a strategically located but under-utilized area of Nashville, the development was led by ATR & Associates, Inc. and Corinth Properties.

The project showcases an innovative, sustainable approach to rehabilitating an existing building and creating a unique mix of uses, including healthcare, to enhance the economic vitality of the area.

Finding a Diamond in the Rough

One Hundred Oaks, which opened its doors in 1968, was Nashville’s first significant enclosed, air-conditioned mall. Named for the farming plantation and majestic oak trees that once occupied the site, it had a great run of prosperity in its youth. Located in Berry Hill, just five miles from Nashville’s central business district, the retail space comprised two levels due to the site’s location on a hillside. The second level of retail was organized around a single common mall and was anchored by three-story department stores at each end. A six-level office tower was located at the southern end of the building, and a bank and automotive service center were also part of the original concept. Surface parking surrounded the mall and two retail outparcels.

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Before: The project’s proximity to large, established neighborhoods and interstate access enticed developers Tony Ruggeri and Frank Mihalopoulos to revitalize the mall into an office/retail development.

The following decades proved to be a series of ups and downs for One Hundred Oaks. By the late 1970s, new suburbs were popping up farther away from Nashville and new malls were developed to serve these emerging neighborhoods. One Hundred Oaks fell into decline as suburban retail opportunities boomed. In the early 1990s, the property was renovated into a discount mall and a 27-screen movie theater was added. It enjoyed a brief revival but quickly began another decline, which was attributed to renovation quality issues and deterioration of the surrounding neighborhood.

By 2005, the mall was more than half-empty, and the area immediately around One Hundred Oaks was in rough shape. Berry Hill, though benefiting from some gentrification and upgrades, still suffered from a negative reputation. However, two Dallas-based developers saw the neighborhood’s growing potential and a tremendous opportunity for One Hundred Oaks as a mixed-use retail and office development. The project’s proximity to large, established neighborhoods and interstate access was also enticing to the developers. In December 2006, the old mall was purchased by 100 Oaks Plaza, LLC, and M&R Investors, LLC, a joint venture by the two developers – Tony Ruggeri and Frank Mihalopoulos. The new owners envisioned a transformation to a mixed office/retail development and hoped to truly revitalize the entire site.

Medical Office Paves the Way

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Before: The retail area of One Hundred Oaks, while renovated in the early 90s, was in need of a sleek new look and décor with more modern signage.

When purchased in 2006, the grade-level retail space was prospering but the 370,000-square-foot upper level enclosed mall was virtually empty. The developers immediately created a plan for converting some of the existing property to office space and reconfiguring the existing retail space to accommodate contemporary retailer formats. Eventually, Vanderbilt University Medical Center (VUMC), whose campus is only three miles from the site, got wind of the redevelopment plan.

The medical center had been searching for ways to physically expand its rapidly growing research, education and healthcare programs. One scenario — expanding and relocating outpatient programs to a remote campus for greater patient access and convenience — was a perfect fit for a redeveloped One Hundred Oaks location. But before VUMC could make a decision, the developers were faced with the challenge of obtaining consent agreements from all current retail tenants to allow the addition of a non-traditional retail use (medical offices) and to make the significant site and building renovations. After consent was obtained and VUMC conducted patient focus groups to confirm that the aging One Hundred Oaks development still had a strong, positive name recognition, VUMC decided to lease 450,000 square feet — nearly half of the mall.

The Hunt For Non-Retail Tenants

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A series of rain gardens throughout the site controls stormwater runoff. Increased green space allowed for the planting of 300 oak trees, thus allowing the site to recover the spirit of its name.

With Vanderbilt committed to coming on board, the new owners and their consultants conducted meetings with all government agencies holding any control of the property. Discussions with the Nashville Mayor’s office centered around improvements for the site entrances and traffic signalization, with the City agreeing to pay for the offsite improvements. Meetings with the planning commission, public works, utilities, building codes and Fire Marshall office were held to address entitlements, capacities, building safety, stormwater detention and other issues. By working with these various groups upfront, no zoning or codes changes were required.

The new owners also participated in a series of open public meetings and talked with city council members about partnerships with surrounding neighborhoods. Vanderbilt sent several direct mail updates to 20,000 households and invited neighbors to a series of community meetings to inform and involve the residents of the project and progress.

The initial financing plans projected an internal rate of return (IRR) of approximately 14 percent over a three-to-five year hold period. The interest rate was initially a Libor-based rate with a 200 BPS and initial funding was based on a 1.0 debt service coverage. Loan-to-value was a factor as funds were being used to complete the new facade, site work improvements and tenant finish out. Public financing provided $550,000 to move traffic lights to the surface roads.

The initial $37.7 million acquisition loan was provided by a syndication of lenders led by JP Morgan Chase. Three partners provided $14 million in equity which totaled 50 percent of the equity stakes. The partners were led by Thackeray Partners and provided oversight and advisement. The loans were full recourse notes.

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Before: Redevelopment included a plan for converting upper level office space and reconfiguring grade-level retail space to accommodate contemporary retailer formats. 

The second and third levels of the mall space were only partially viable for retail tenants. The risk was whether non-retail users could be found to occupy the area at reasonable rental rates and costs that were in line with the economics of the project.

The Redevelopment Reality

Once construction and renovations were complete, the project’s anchor tenant, Vanderbilt University Medical Center, opened its doors in February 2009. More new retailers have moved in including: PetsMart, Guitar Center, Reebok, TJ Maxx, Ross, HH Gregg, Regal Cinema and Burlington Coat Factory, to name a few. Restaurants onsite, including Logan’s Roadhouse, Cheeseburger Charley’s, Panera Bread and Panda Express, have signed new leases. All site maintenance including landscaping, cleaning and traffic control are held to the highest standards, and the “look” of all tenants is consistent and indicative of a major Class A project. Tenants are also enjoying improved parking lots and the addition of 300 new oak trees.

Success has been measured in several ways. The first: project perception. Since completion of the redevelopment, the neighborhood has a decidedly healthier, more active and secure atmosphere. The building serves as a source of community pride rather than an eyesore. The exterior design features the addition of windows to the second and third floors and a timeless palette of soft, natural tones. New, sophisticated signage graphics were implemented, entrances to the mall were realigned into signalized intersections with the existing street grid, and sidewalks were integrated into the parking lots and connected to pedestrian entrances. The vibrancy of the neighborhood and the safety of the area have created an environment that has drawn people back to the One Hundred Oaks area.

The second measurement of success is the financial performance of the redevelopment. The pro formas have been exceeded by at least 25 percent. Despite the current economy, the One Hundred Oaks project has surpassed expectations and is operating at full capacity. Though retail sales are confidential, every retailer has reported strong sales since the redevelopment was completed. All are outperforming the national results of their chain with dramatic sales increases noted once the Vanderbilt Health Clinics opened in February 2009. 

Fight the Blight

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Original skylights in the old mall were replaced and enlarged to introduce more light to the building’s interior. Vanderbilt University Medical Center, looking for space to expand their research, education and healthcare programs, leased 450,000 square feet.

Hundreds of retail grey fields dot the nation, occupying thousands of acres of valuable real estate. Often situated in areas that have experienced population increases, these tired retail centers contribute to a sense of blight. The redevelopment of One Hundred Oaks focuses on returning value to the property by reimagining its potential. By avoiding wholesale demolition, reusing the existing structure and site development, and pursuing targeted design interventions, the useful life of the resources invested in the property is significantly extended and entire neighborhoods can be revitalized.

When Vanderbilt University became involved in the project, they inquired about the long-range potential of the site. Everyone acknowledged that the future would not look like “a mall in a sea of asphalt.” A long-term plan for transformation was developed after an extensive study to determine if the existing structures could be converted into a development based on current urban design principals. One Hundred Oaks, always evolving, is now ready for the future and will continue to improve over the years as a mixed-use, highly livable community.

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