By providing over $25M in loans for downtown redevelopment since 2005, Alliance Bank has became a major force behind the renovation of historic properties in the city's core:
Exo Roast Coffee owner Doug Smith loves his funky retro space at the Old Market Inn
that was redeveloped by Ron Schwabe of Peach Properties.
(photo: George Howard)
Eclectic urban entrepreneurs drawn to renovated retro spaces
By Roger Yohem
Inside Tucson Business
July 6, 2012
Living, working, shopping, dining and subsisting in a downtown setting doesn’t appeal to everyone. Yet there are just enough people who like and want that lifestyle to create niche business opportunities for employers, restaurateurs, retailers and other urban-oriented entrepreneurs. “In general, it’s a numbers game. Until recently, it didn’t make sense to put money into projects in downtown Tucson. There were no opportunities to invest and get any rate of return,” said developer Ross Rulney, who is pursuing some of those business niches. The recent recession changed the economics of urban real estate. When looking at the downside, builders could see the potential upside for select revitalization projects. Many of the properties under consideration were financially stressed, outdated, in disrepair, or vacant and vandalized.
“Alliance Bank got very involved in downtown when it was not cool to be downtown. They jumped in knee deep, pioneer lenders in downtown’s comeback,” Rulney said. “Downtown wouldn’t be happening without Alliance Bank.”
Rulney is one of several clients Alliance Bank of Arizona financed to rescue promising urban-area properties. Overall, Alliance Bank, 4703 E. Camp Lowell Drive, has a cluster of 12 loans totaling some $25.5 million invested in downtown’s budding renaissance. Many clients are familiar historic redevelopers such as Rulney, Ron Schawbe of Peach Properties, Rialto Block owner Scott Stiteler, and Rob Caylor of Caylor Construction. Duane Froeschle, senior executive of Alliance Bank’s Tucson division, and Joe Snapp, vice president of commercial real estate, work closely with these clients who they consider to be “visionary” redevelopers. In 2010, Rulney used a $1.7 million loan to buy and renovate the historic Lewis Hotel/Julian Drew Building at 118 S. 5th Avenue. The redeveloped commercial space is fully occupied. On the same block, he also is renovating the former Tiburon Apartments as The Flats at Julian Drew. That $2.5 million loan will put 53 market-rate units into play. “For small developers like me, these small properties make sense. Each individual success breeds a new success,” said the University of Arizona finance grad. “There have been many small successes of late and that gets the next guy that much more interested.”
In June 2005, Alliance Bank made its first downtown-area loan to Schwabe to salvage the historic Firestone Building at 439 N. 6th Ave. The Depression-era structure had been boarded up and condemned by the city. “It was in a blighted, crummy warehouse district, exactly what would cause bankers to dive under their desks when they saw it coming. It was full of surprises, even leaky underground tanks. Everything was wrong. It was the last type of deal they’d be looking for,” Schwabe said. “But Alliance had the vision and we had a good banking relationship,” he added. “When Alliance Bank started to do deals downtown, it was a real pioneering but dangerous partnership.” Undaunted, Schwabe knew there were “just enough people, a certain type of progressive entrepreneur” who would be interested in the space. For two years, crews worked to restore the building’s authentic expanse of exposed brick, concrete floors and large windows. The Firestone’s interior was configured into new 1,000 to 2,000 square-foot suites. Today, the building is nearly full with a mix of architects, artists, tech and retail tenants.
Together with Stiteler and a $6.1 million loan, the Martin Luther King Building at 1 N. 5th Avenue was saved from demolition. Vacant for three years, city police and fire crews had trained there and battered 74 of the building’s 96 units. For $700,000, the city had planned to raze it. The building had been hit by copper thieves and heavily vandalized, yet Schwabe saw potential in the fact it was structurally sound. They transformed it from public housing into market-rate and affordable apartments, plus new street-level commercial space. “It was close to a total re-do, yet we saw it as the type of urban space people would go nuts for,” Schwabe said. Alliance Bank has financed three of Peach Properties’ nine downtown-area renovations.
The Old Market Inn, 403 N. 6th Avenue, may best illustrate the premise that with the right type of redeveloped space, the niche urban-entrepreneurs will come around. Built in 1880, it was one of Tucson’s original groceries and one of the first with refrigerated food coolers. Before Schwabe bought it in 2008, Arizona Glass was in the building. Schwabe restored the interior’s original wood floors, exposed brick walls, high ceilings and windows. Major upgrades included insulation, electrical, and cooling systems. “This is perfect space for us, an up-and-coming location in a retro, industrial-style warehouse,” said Noel Trapp of the Exo Roast Co. coffee shop. “For the authentic urban feel we want, the malls just don’t make it.” Landscape architect Margaret Joplin, owner of Design Collaborations, is a tenant in back. The interior’s blend of aesthetics and functionality caught her eye. “Nothing in here is square, level or straight. When first looking at the building, I thought there was no way it would work for us. But it haunted me, it never left my mind,” she said. Husband and glass artist Michael Joplin also operates his studio out of the same 2,200-square-foot space.
The Market Inn is fully rented and Schwabe is eager for his newest tenant, Rebecca Safford, to open her Tap & Bottle craft beer and wine-tasting business. Her space has been designed and her liquor license approved in late June. “There’s really good bones in the building. Ron took the old that is now new. We don’t have to do anything to recreate the historic look,” she said. When revitalizing trashed parcels, it’s important to focus on eclectic tenants. The obvious goal is to be profitable, yet that is not achieved by “seeking out the highest rents,” Schwabe said. “You have to cultivate the type of business attracted to this type of urban space. They’re typically too small to pay high rents.”
Back at Rulney’s Lewis Hotel parcel, he plans to continue the block’s revitalization. He wants to add either a small boutique hotel or more retail/market rate housing. The structure would “cantilever” over an existing building and the city is working with him on the proposal. For urban revitalization to succeed, Rulney said the developer and bank “must share a certain vision for creativity. Often, Joe (Snapp) tells me I’m crazy but they do more than just look at numbers on a piece of paper.”
“Tucson is one of the last large cities to go through a downtown revitalization. If not for the passion Alliance Bank has for urban revival, many of these projects would not be happening,” Rulney said.
For Part I of the series: http://www.insidetucsonbusiness.com/...9bb2963f4.html
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