Gobbled Up

"You've got to go out on a limb sometimes because that's where the fruit is."
- 20th century humorist Will Rogers

About 11 years ago, a group of investors and real estate developers crawled out on a limb in search of the biggest, juiciest apple that West Knox County's rapidly growing economy had to offer - Turkey Creek.

Turkey Creek Land Partners' plan: Transform 410 acres of partially wooded, undeveloped land south of Interstate 40/75 between Lovell and Campbell Station roads into a commercial stronghold.

The investors pooled their money and bought the property in 1995 for $7 million. It has proven to be the best land deal in Knox County since pioneer leader Gen. James White sold half-acre lots in what would become downtown Knoxville for $8 apiece in 1791.

Knoxville Mayor Bill Haslam dubbed Turkey Creek a "retail mecca."

Whatever it's called, Turkey Creek is the single largest commercial development in the Knox County region.

Getting there was expensive for TCLP and taxpayers. The partners spent $30 million on infrastructure improvements, environmental remediation and other expenses, and taxpayers kicked in another $50 million to build new surface streets for the project, widen I-40/75 and Lovell Road and redesign the interstate interchange at Lovell.

A lot of money to be sure, but the return on the public-private investment has been staggering.

# Commercial development: TCLP projects a minimum $500 million total development investment when the project is completed. Total assessed value of land and improvements in Turkey Creek rose a sizzling 3,263 percent to approximately $154.7 million in 2005, up from about $4.6 million ten years earlier, according to an analysis of tax parcels by appraiser Jeff Fletcher.

# Windfall taxes: Knoxville and Knox County collected just more than $3 million in property taxes from Turkey Creek property owners in 2005, according to city and county tax records. The same land generated a comparatively paltry $6,014 in 1995, Fletcher said.

A little more than $1 million in city sales taxes was generated by Turkey Creek retailers in 2005, of which about 72 percent went directly to Knox County schools, according to Knoxville Finance Director Jim York.

Business license fees, personal property taxes, hotel-motel, liquor-by-the- drink and other taxes pump even more money into the public coffers annually.

# Premium land prices: Land in the Turkey Creek development brings top dollar from real estate investors. For example, Carmax Auto Superstores bought 10 acres on Parkside Drive from TCLP for $5.2 million 2001. A New York real estate investment trust paid $11,414,777 for the land and improvements in 2004, according to the Knox County Property Assessor's Office.

# Major job creation: Some 3,000 full- and part-time workers are employed in Turkey Creek shops, restaurants, hotels, banks and offices, the developers estimate. In addition, thousands of construction workers have labored at Turkey Creek job sites over the past five or six years.

# Ripple effect: Spurred by the success of Turkey Creek and attracted by the thousands of shoppers who head there every day, other developers are investing millions of dollars in commercial projects near the entrances to Turkey Creek, including the Shops at Lovell Road, a $1.3 million retail center on Lovell Road, and Parkside Retail Center, a $1.2 million project on Parkside Drive.

Developers in Lenoir City recently announced a $250 million commercial-office-residential development along I-75, a 10-minute drive from Turkey Creek.

Although local governments love Turkey Creek's tax-generating power, the development has not been without controversy. Environmentalists have railed against potential damage to one of the last wetlands in the county, homeowners associations have demanded protection from encroaching urban sprawl, and a handful of elected officials has questioned spending tax dollars to benefit private developers.

Below the radar Controversy aside, Turkey Creek has "been a win for everybody," said TCLP chief manager John Turley, a principal of First Commercial Real Estate.

"The people who have really benefited from this are the taxpayers. We're creating a half-billion (dollars) in value for the tax base," Turley said during a recent interview at the Atlanta Bread Co., one of his favorite Turkey Creek morning meeting spots.

The public perception is that TCLP investors have done well, too. That perception is premature, Turley and other members of the partnership said.

TCLP still carries about $15 million in debt on the project, said Turley, a real estate veteran who looks a little like actor Kurt Russell, but unlike many celebrities desperately avoids the spotlight.

"I like to stay below the radar," Turley said.

Other TCLP principals are just as publicity shy as Turley. They share a collective concern that everyone believes they are rich as kings, walking around the city with money falling out of their pockets

TCLP investors who agreed to be interviewed for this report chose their words carefully.

"I consider it an investment for the future," Knoxville attorney Joseph Congleton said.

Jim Bush, chairman and CEO of Johnson & Galyon Inc., one of the biggest general contractors in the Knoxville area, said Turkey Creek's success has surprised even the most optimistic among the original investors.

"I don't know that any of us thought it would head the direction it is heading. It goes back to the people really working on the project, like John and Jim (Nixon). They've done a good job," Bush said.

Turley shrugs off compliments and heaps praise on Nixon, TCLP's point man in crucial negotiations with homeowner associations and government road builders.

Turley agreed to a sit-down interview only when assured the topic of discussion would be Turkey Creek and not him personally.

A steady stream of customers flows through the Atlanta Bread Co. restaurant in search of a morning caffeine jolt and maybe a toasted bagel while Turley expounds on the commercial behemoth that is Turkey Creek.

It takes little to get the man with the silvery, swept-back hair and sleeveless sweater going on his favorite topic. Nixon, who is more prone to plaid shirts and comfortable shoes, sits nearby making sure Turley stays focused.

"The synergy here is tremendous. The new retail we're bringing to town hasn't been done before. The reality is we're creating a better mousetrap. This will never be done again. Not in Knoxville," Turley said.

Many local politicians and economic development officials share Turley's view. Turkey Creek has added fresh muscle to the regional economy by attracting national retailers and convincing many homegrown companies to expand their local presence, city and county business and government leaders said.

Former Knoxville mayor and current ambassador to Poland Victor Ashe said supporting Turkey Creek development was "one of the best decisions I ever made" as mayor.

"The fact is, the city has more than gotten back its investment," said Ashe, who forged a solid majority of support for the Turkey Creek project on City Council.

Only one council member - Carlene Malone - voted against the city spending about $5 million to extend Parkside Drive from Lovell Road across the Turkey Creek property west to Campbell Station Road. Knox County government kicked in about $1 million for the road extension.

Former Knox County Executive Tommy Schumpert backed building the road because he was convinced Turkey Creek would generate significant new tax revenue and the road itself was needed to ease traffic congestion on Kingston Pike.

"I thought it looked like it would have a good economic impact. There's always some risk with a development like this, but I thought it looked good there, and transportation-wise, we needed it," said Schumpert, who served as county executive from 1994 to 2002.

Extending Parkside was a must for development of the site, said Mike Edwards, CEO of the Knoxville Area Chamber Partnership.

"The roads out there were a nightmare. They had to be improved if the project was going to have any chance at all," said Edwards, who was manager of the Turkey Creek project for First Commercial Real Estate for more than a year prior to going to work for the Chamber Partnership.

Like the TCLP investors, Edwards doesn't want to be seen basking to closely in the glow of Turkey Creek's success.

"I had virtually no role in it. My role was minor for a very short period of time," Edwards said.

No matter who deserves the credit for Turkey Creek, the public is the long-term winner, Ashe said.

Turkey Creek will deliver much-needed revenue for "public safety, parks, roads and quality-of-life amenities for the people of Knoxville and for supporting the schools of Knox County," Ashe said.

Tax collections will grow even higher as the last few pieces of the Turkey Creek property are developed.

TCLP and its development partner, Colonial Properties Trust, a Birmingham, Ala.-based real estate investment trust, plan to build a $40 million third phase of Pinnacle on land west of the newly opened lifestyle center.

The focus would be opening shops and restaurants that do not now have stores in Knoxville.

"Turkey Creek is now to the point where it would be without a doubt the only place a certain number of tenants would locate if they would come to (the Knoxville) market," Turley said.

Retailers aren't the only businesses looking at Turkey Creek. Knoxville-based Partners Development is building Parkside Plaza, a Class A office campus on about 20 acres on the Farragut end of Parkside Drive.

"Our project has been very successful. We think this is the finest spot on the west side," said Ron Watkins, president and CEO of Partners Development. "We've felt very positive about Turkey Creek from the beginning."

All of the space in a 56,357-square-foot medical office building, which opened last year, was quickly snapped up by some of the leading Knoxville medical practices. Tenants include Gastrointestinal Associates, University Orthopaedic Surgeons, Amsurg Corp. and Faculty Internal Medicine.

A 103,000-square-foot building designed for corporate offices is nearing completion. Sun Coke Co., Morgan Keegan & Co. Inc. and Regions Bank already have signed leases.

"Office is always a good part of the mix, particularly if it's Class A space," Watkins said. "We're excited to be part of Turkey Creek."

Baptist Health System made the first health-care investment in Turkey Creek. Baptist built Baptist Hospital West and Baptist Hospital for Women at the east entrance of Turkey Creek on Parkside Drive near Lovell Road.

Concern for the wetlands Not everyone sees Turkey Creek in such a rosy light. Environmental advocates worry about potential damage to the wetlands, and nearby homeowners complain about having to live with a giant shopping center next door.

Although Turkey Creek has not proven to be an environmental apocalypse, environmentalists remain watchful, said Wolf Naegeli, spokesman for the Foundation for Global Sustainability in Knoxville.

"We still have concerns, but right now the Izaac Walton League is doing a good job with the wetlands," Naegeli said.

"The problem is, with wetlands it often takes a dozen years or more before you really know how it will be affected by a development like this," Naegeli said.

One of the biggest unknowns is what development above the Turkey Creek watershed will do to the boomerang-shaped area near the intersection of Lovell Road and Parkside Drive.

"We're afraid some of the bottom life in the wetlands will be smothered," Naegli said.

The Izaak Walton League agreed to monitor the wetlands, a 58-acre piece of land TCLP donated as a nature conservancy. Part of the wetlands, which includes walking trails open to the public, lies between Lovell Road and the commercial development on the north side of Parkside Drive. Another portion curves beside Baptist Hospital West along Lovell Road south of Parkside.

Mark Campen, education and membership director for the Izaak Walton League, said the health of the wetlands isn't perfect, but efforts to protect it have gone reasonably well.

"We've had some great successes out there and some really good educational activities with local schools," Campen said.

Soil erosion and litter are the biggest problems. League volunteers spend many hours every month cleaning the wetlands, Campen said.

Residents of the Stonecrest subdivision, which sits behind the Pavilion at Turkey Creek, a 600,000-square-foot retail center on the south side of Parkside Drive, complain about lights from the development, said Farragut Alderman Tom Rosseel

"It's like living near an airport. Some of the residents are not real happy with having this big shopping center in their back yard, but on the other hand, I'm sure many of them shop there," Rosseel said.

Effects on other areas Turkey Creek's influence on commercial real estate is felt throughout the Knoxville area market.

"It's kind of re-shaped the retail world of West Knoxville," said Roger Moore, president of R.M. Moore Real Estate. "It's been generally very positive, attracting a pretty wide array of new retailers. It's allowed us to work with new clients and existing clients who want to be in Turkey Creek."

The flipside is other commercial districts in the Knoxville area have suffered.

Areas like Cedar Bluff, which once were considered "home runs for retailers," have to been bypassed by retailers looking for the critical mass of shops and consumers in Turkey Creek, Moore said.

"That's maybe the negative side of it. Cedar Bluff is not as desirable as it used to be," Moore said.

Northshore Town Center, a $250 million retail-office-residential development planned at Northshore Drive and Pellissippi Parkway, also could be feeling the heat from Turkey Creek.

The James Doran Co. of Charleston, S.C., announced the project in September 2004, and company executives talked about starting retail construction by fall 2005.

Work is under way on the residential component, but there's been little apparent progress on the retail front.

"My guess is Turkey Creek has hurt those guys," said Knoxville developer Bob Talbott, president of Holrob Investments LLC and Holrob Commercial Real Estate LLC.

Partnerships led by Holrob have built four Turkey Creek retail projects with a fifth underway.

Northshore Town Center development manager Matt Grayson said Turkey Creek's impact on the Doran project is overblown.

"We're going for a different market. They are perceived by the general public in Knoxville as more competition for us than we perceive them to be. We're not really chasing the same tenant mix," Grayson said.

Construction of the town center's first commercial building should begin this summer, Grayson said.

Turkey Creek also has helped drive up retail lease rates in West Knoxville and elsewhere, which could be positive or a negative depending on one's perspective.

Parkside Station offers space at $23.50 per square-foot per year, according to Southern Commercial LLC, the center's broker. That's $1 to $7 per square-foot higher than the lease rates for retail space just outside Turkey Creek on Lovell Station and Campbell Station roads.

High lease rates haven't been a barrier to filling retail space in Turkey Creek developments. All of the various retail centers that comprise Turkey Creek are fully leased, or nearly so.

Retailers are willing to pay higher rates because they benefit from the increased consumer traffic generated by the overall development, Edwards said.

For example, sales at Cook's Corner have increased at least 10 percent since it relocated from West Town Mall, said manager Carolyn McLain.

"We were always a destination store, but this is a much more convenient for our customers. They can get in and get out and not have to deal with the mall thing," McLain said.

Cook's Corner carries a varied assortment of cooking-related products - olive oil by the ounce, chef hats and pants, pot racks, peppermills, utensils, barbeque equipment and every kitchen gadget imaginable.

"We're steady all the time, even on a so-so day," McLain said.

And that's the bottom line, Turley said - Turkey Creek has created the opportunity for many local businesses, including TCLP, to do well.

Business writer Roger Harris may be reached at 865-342-6342.

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