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California firm to buy historic Starks Building Hertz group pledges to invest ‘at least $10 million’ in repairs

by John R. Karman III

Half-empty and beginning to show its age, downtown Louisville’s historic Starks Building is about to get a new owner who is pledging to make significant investments and add an upscale restaurant in an effort to bring the office tower back to its former glory.

The Hertz Investment Group, a real estate investment firm based in Santa Monica, Calif., has the 14-story building under contract, and officials expect to close on the purchase at the end of the month, according to Judah Hertz, the company’s president and CEO.

Hertz declined to disclose the exact purchase price but said it is “in the $12 million range.”

The seller of the Starks Building, which is located at Fourth Street and Muhammad Ali Boulevard, is Allstate Life Insurance Co. of Northbrook, Ill.

Allstate bought the 346,000-square-foot office property two years ago for $14.3 million. The insurance company does not own the adjoining 701-space Starks Building parking garage. Title to that property is in the name of a New York City holding company, 430 South Third LLC. Allstate officials could not be reached for comment prior to

Hertz said his company will invest “at least $10 million” to make improvements to the Starks Building, which dates to 1913. An assessment of what renovations are needed will be conducted after the firm takes title to the property. Hertz intends to reserve the first two floors of the building for retail and restaurant uses. The remainder of the tower will remain office space.

The Starks Building has struggled to attract and retain tenants in recent years. Still, Hertz is optimistic that his company can restore the property and make it viable for office users of varying sizes.

The Starks Building will be Hertz Investment Group’s first property in Kentucky, and the company CEO said he is “very impressed” with Louisville and the progress of the city’s downtown core. He was particularly complimentary of Fourth Street Live, the entertainment hub located in the same block as the Starks Building, saying that he expects the complex’s presence to drive tenants to his facility.

“I just believe that this building wasn’t really properly managed and leased out in the past, and I think that it should be something that we will do well with in the future,” Hertz said.

The local commercial real estate firm CB Richard Ellis/Louisville has been handling leasing and property management duties at the Starks Building.

It will continue to be the leasing agent under the new ownership but will turn over management responsibilities to Hertz Investment Group, according to David Hardy, managing director/senior vice president and a broker for the Louisville firm.

Hardy said he expects the new ownership to bring new life and new tenants to the aging Starks Building. Currently, the office tower’s largest tenants are the law firm O’Bryan, Brown & Toner PLLC and Atria Senior Living Group.

In particular, Hardy said, Hertz and CB Richard Ellis/Louisville are targeting a “high-end” restaurant to take the first-floor space formerly occupied by Rodes, the apparel retailer that left downtown for a suburban location on Brownsboro Road in 2004.

The broker said discussions are ongoing with several prospects that would bring such a restaurant to the space. He estimated that a deal will be finalized within 120 days.

“We’re optimistic because we now have an owner of the building that is in the business of operating and owning office buildings,” Hardy said. “They will commit the resources to secure an attractive tenant for the first floor, which, we think, will give the building the momentum to attract additional office tenants.”

CB Richard Ellis/Louisville also is marketing second-floor space in the Starks Building, formerly leased by Rodes, for retail or restaurant uses and is looking for a retailer to take space available adjacent to Seng Jewelers LLC, which recently signed a five-year extension on its lease.

Seng owner Lee Davis could not be reached for comment prior to Business First’s press deadline.

Hardy declined to address the future of the basement space that currently is home to the Colonnade Cafeteria. The restaurant’s lease expires at the end of November, and Colonnade owners said they have been asked by Allstate to vacate by Sept. 30.

Chuck Krill, one of the owners of the downtown mainstay, said he has not been contacted by Hertz Investment Group about the pending change in ownership. Colonnade owners continue to look for relocation sites in the central business district, he added.

The Colonnade began operating in 1913 and has been in the Starks Building basement since 1926.

Hertz Investment Group, founded in 1979, has a 10-million-square-foot portfolio that includes office high-rises, retail centers, luxury hotels, theaters and multifamily residential properties. The firm has significant holdings in Los Angeles, New Orleans, Pittsburgh, Miami and Memphis, Tenn. It recently has expanded to St. Louis, Cincinnati, Indianapolis and Kansas City, Mo.

Hertz said buying additional properties in Louisville is part of the company’s strategic plan. “Once we come into a city, we like to expand to at least have over 1 million square feet there,” he said. “From what I can tell, downtown Louisville has a lot to offer.”

Hardy said he is impressed with Hertz and what the firm brings to the table.

“They like (central business district) properties, and they have a significant portfolio and a significant growth strategy,” he added. “They’ll be a great addition to our landlord community here in town.”