A tug-of-war between two major office properties could occur in the 2013 legislative session as the Landmark Center and South Pointe vie to become the new headquarters of the Mississippi Department of Revenue.
Both buildings will lose major tenants in the next few months and look to rebound by securing a long-term lease for several hundred thousand square feet from the DOR.
Downtown’s Landmark will lose AT&T by the end of the year to the 111 Capitol Building and Clinton’s South Pointe, the former WorldCom HQ, will be minus ADP with the company’s shifting of operations to Augusta, Ga.
Legislators failed to agree last session on a new home for the DOR but key leaders have pledged to make a selection in 2013 that would get the Revenue Department out of the massive tin warehouse it has occupied in Raymond for nearly two decades. The DOR’s lease on the Springridge Road building expires at the end of 2014.
Revenue Commissioner Ed Morgan said he has not been part of any facilities reviews lately but knows the governor, lieutenant governor and House speaker are weighing options. “They are moving toward making a decision on solving the problem during the next legislative session,” Morgan said in an interview last week.
“They have assured me there is recognition of our needs out there.”
Downtown Jackson’s Landmark Center, which will go dark at the end of the year, came into the 2012 legislative session as the top choice but failed at the 11th hour to gain the backing of Speaker Philip Gunn of Clinton. International commercial real estate firm Cushman & Wakefield recommended the circa 1980s Landmark after a state-commissioned review of available buildings in the metro area.
The plan was for the state to buy the 353,898-square-foot building at 175 East Capitol Street for $14.1 million and refit it over a three-year period at a cost of about $30 million to accommodate the 400 or so employees of the Department of Revenue.
John Barton, a Parkway Properties senior vice president and leasing manager for Landmark owners Capitol Street Associates, said Landmark is still the most logical — and attractive — choice for the state, either as a purchase or lease.
“The thing that is definitive about Landmark is that Landmark works,” Barton said. “Pure and simple – it’s the best location in the Jackson MSA (Metropolitan Statistical Area) in terms of floor plate” at 50,000 square feet.
Before last year’s rejection of the Landmark, state engineers and architects fully planned out the use of the interior spaces to meet operational needs, according to Barton.
The Parkway executive recited the features Cushman & Wakefield listed in the top ranking for the Landmark Center: Big floor plate, high ceilings to accommodate printing equipment, extensive telecom capacity, tractor-trailer loading docks and easy access onto Pearl Street from Interstate 55.
He emphasized a pair of key intangibles — the importance of having a major state agency within the capital city and the economic boost of adding several hundred new workers downtown. “It’s an opportunity to confirm and ratify the importance of Jackson as the capital of Mississippi,” he said.
State officials concede a DOR headquarters would benefit downtown but emphasize the key factor is the ability of a facility to meet the agency’s day-to-day needs.
Barton said he understands the competition is between the Landmark and SouthPointe. “What I am hearing now is that they are gravitating” toward a lease, he said of the state. “I think they are looking at that space vacated by ADP at SouthPoine. Landmark Center is very much in the mix.”
One certainty, Barton said, is that the state is in a buyer’s market. “I think everybody is going to be very flexible. Everybody wants to make a deal with a 230,000-square-foot user.”
Cushman & Wakefield estimated a $48-million cost for a 20-year lease of the Landmark building.
The firm put the cost of leasing space at South Pointe at $68 million over to 20 years — a figure South Pointe leasing manager Breck Hines said badly missed the mark. “That is just crazy,” said Hines, executive vice president and principal at Duckworth Realty.
Cushman & Wakefield’s cost estimates escalated upwards through various build-out options the Department of Revenue had proposed, including construction of a new entrance, conference center and building for a printing press. “The requirements were not necessarily realistic,” he said. “It’s one of the nicest buildings in the state without putting another dollar into it.”
Today, the DOR can lease its required 250,000 square-feet of space at South Pointe for under $2 million a year, “depending on whether the print shop was there,” he said.
Hines said Duckworth Realty had recommended the DOR keep its print shop at its current nearby location in Raymond. “You’re talking about a couple million dollars to build a print shop” that could operate just as well in the metal building it is now in, he added, and offered that it does not make sense for the state to bear the cost of putting a printing shop into a top quality office building.
South Pointe can offer DOR a rate of about $15 a square foot full service, according to Hines. Some of that space is leased to Verizon but the telecom company is not using it and would willingly give it up, he said.
The space would be on four consecutive floors atop a data center. Included in the lease would be a fiber optic network built by WorldCom that few buildings around the country are offering these days, Hines said.
“The former WorldCom Center has what they use to tell was has enough fiber capacity to run the entire State of Mississippi” government, he added, referring to statements by former WorldCom engineers.
Noting the estimated build-out costs for the competing Landmark Center, Hines said: “Why in the world would they want to spend $30 million redoing a building” when this building can go as is?
DOR employees, he said, would have access to a full cafeteria, fitness center and outside walking track. The 80-acre enclosed campus just off I–20 also has 24-hour high-tech security as well as 1,800 paved parking spaces and ample room to create more, Hines noted.
Meanwhile, Revenue Commissioner Morgan is eager to depart the warehouse the state exiled the DOR to form the Woofolk building 18 years ago. But he wants a careful weighing of the pluses and minuses of all the headquarter options, he said.
“My primary consideration is making sure that whatever facility is recommended we can function efficiently out of it.”
The Landmark Center fits that requirement, Morgan said, but emphasized: “That’s not an endorsement of anything. It’s just a statement of fact.”
South Pointe’s Hines has another suggested use for the Landmark Center: “Why not rehab it into a convention hotel? With that atrium on the inside, it is perfectly suited for a convention hotel. It’s only one block away from the convention center.
“It reminds me of the Embassy Suites in Atlanta with that big atrium.”