Ethiopian Review

University of Louisville officials have tapped NTS Corp. to develop a new office building on the former Shelby Campus — an initial step in a long-range plan to transform part of the property into a business and research park.

NTS was selected for the project by the University of Louisville Foundation after a request for qualifications process. The Louisville company has developed and/or operated more than 7 million square feet of commercial and residential space across the Midwest and Southeast.

NTS was scheduled to be introduced as the initial developer in what has been renamed the ShelbyHurst Research and Office Park during a Thursday, Sept. 17, news conference. The news conference was set at the campus, located at Hurstbourne Parkway and Shelbyville Road, after Business First’s press deadline.
Developer calls project ‘dynamic’

Seven companies responded to the RFQ, which was initiated in December, according to university officials. The firms that were not selected were not identified.

The U of L Foundation leases the campus from the university and created an affiliate, U of L Development Co. LLC, to be the master developer of the commercial part of ShelbyHurst.
Financial strength ‘guaranteed’

U of L president James Ramsey said NTS was chosen “because of experience, because of their track record” and because the firm guaranteed it could provide financing for the project.

“We wanted to make sure that the financial strength of our partner was guaranteed,” he explained.

Ramsey, who also is president of the U of L Foundation, added that NTS has “a great vision” for the ShelbyHurst initiative.

Ed Glasscock, chairman emeritus of Frost Brown Todd LLC law firm and a consultant to Ramsey on economic development matters, praised NTS as “one of the outstanding developers in this country.”

NTS president and CEO Brian Lavin said the company looks forward to participating in ShelbyHurst, which he called “a dynamic and exciting project.”
Joint venture
to develop property

U of L Development Co. has formed a joint venture with NTS to develop the first ShelbyHurst building. The two companies have agreed to split all development costs 50-50.

U of L Development holds a 51 percent ownership stake in the joint venture, and NTS has 49 percent. All revenue from leases also will be split 51 percent to 49 percent.

The U of L Foundation intends to use the income from the leases to pay for a number of real estate and economic development initiatives, both on the former Shelby Campus and downtown where the former Haymarket property is being redeveloped into a business, research and health sciences campus, Glasscock said.

The proceeds also will be used to help fund the commercialization of U of L research.
Building to be about 100,000 square feet

Under terms of its agreement with the U of L Foundation, NTS must build an office building of about 100,000 square feet on about half of an 8.3-acre tract at Hurstbourne Parkway and Porter Place, north of Shelbyville Road.

Lavin said the size of the building could range from 80,000 to 120,000 square feet, depending on market demand.

Work must begin by May 1, 2010, and the building’s shell must be finished by April 1, 2011, according to U of L officials. Completion of the entire building is estimated for the third quarter of 2011.

Ramsey acknowledged that it’s “a hard time in the marketplace” for developers but said, “we want to get going” on the project.
Rezoning of land necessary

NTS would be responsible for taking the ShelbyHurst property through the zoning process to change its designation from residential to commercial office use.

The firm also would select its general contractor and architect. That process has not yet started, Lavin said.

In addition, the developer would market the building and act as leasing agent.

NTS has pledged to make an initial investment of as much as $5 million in the project, according to Lavin and Glasscock.

U of L Development Co.’s initial contribution also would total $5 million, including the value of a land lease, Glasscock said.

The U of L Foundation affiliate is providing a 40-year land lease on 4.15 acres to the joint venture, with an option to renew for 25 years. The land lease will be valued at the greater of $325,000 per acre or the amount for which the property is appraised after being rezoned, according to Glasscock.

U of L Development Co. and NTS would match additional investments on a dollar-for-dollar basis, Glasscock said, and could pursue bank financing to secure more funding for the project.
Other developers could participate

Although the U of L Development Co.-NTS joint venture calls for only one building, plans for additional development are expected.

The university’s long-range plan for the 240-acre campus includes the development of 108 acres as office and research space, according to Burt Deutsch, vice chairman of the U of L Foundation.

The first phase of the project calls for developing about 20 acres in four tracts along Hurstbourne Parkway, including the site NTS will develop. About 300,000 square feet of office space is planned, Deutsch said.

Ramsey said he hopes to have that 20 acres completed by 2020. He called the NTS building “a historic first step.”

Lavin said NTS might be interested in developing additional buildings at ShelbyHurst.

And Glasscock said “there may be opportunities” for other developers or other potential tenants that might want to build their own buildings.

‘Campus-like’ atmosphere to be retained

U of L has been studying revenue-generating uses for its underutilized former Shelby Campus for years.

The property, which once was home to Kentucky Southern College, now has only two classroom buildings — Burhans Hall and the Founders Union Building — and the $34.6 million U of L Center for Predictive Medicine, a biosafety laboratory that will open this fall.

The academic focus will remain, Ramsey said. The 40-acre campus core will be reserved for educational purposes, and plans call for the addition of two more classroom buildings at a later time.

Much of the rest of the campus property is open space, and plans call for it to remain that way.

Ramsey said the university has pledged to be a “good neighbor” in its development of the business park, adding that it will retain “a campus-like atmosphere.”

“Clearly, our goal … is to look at underperforming assets,” he said. “We believe Shelby Campus was an underperforming asset. This is (an) economic development (project.)”

$10 million invested in infrastructure

To prepare for its conversion to an office and research park, the state and U of L invested $10 million in new roads, entrances and infrastructure work on the ShelbyHurst property. That work was completed in the spring.

The state contributed $5.7 million to the improvements, and U of L paid $4.3 million.

Work included adding green space and irrigated landscaping, installation of environmentally friendly lighting and the creation of an improved drainage system. Sidewalks and biking lanes are planned in the near future.
Back in the development game

Glasscock called ShelbyHurst “a premier piece of land” that would be suitable for a variety of office uses.

Lavin said his firm will pursue traditional, research, technology and medical office tenants.

NTS created some of Louisville’s first suburban office parks, including developments in Plainview and Jeffersontown, but the firm hasn’t been an active local developer in nearly a decade.

Lavin said he is excited to get back into the development game and believes the local market will have largely recovered from the recession by the time the ShelbyHurst building is completed. He said he expects “some pent-up demand coming out of the economic downturn.”

NTS recently sold several office properties in its portfolio, giving the company “an opportunity to redeploy” resources on the coming project, Lavin explained.

“We feel that we have a great platform … and great experience,” he said. “We view this as a natural evolution.”

- by John R. Karman III | Business First of Louisville

-- Naiomi Solomon