By: Eric Ferreri Issue: Rebuilding Our Infrastructure Section: Academia
A Successful, Collaborative City Development by Duke University and McKinney
Moments after Chairman and CEO Brad Brinegar told the staff of his advertising agency that it would be moving from Raleigh to Durham, six employees wary of Durham’s high-crime reputation asked him some version of, “Why are you giving me a death sentence?” He understood the concern. Durham didn’t have a stellar reputation, and huge swaths of downtown had fallen into disrepair.
But Brinegar saw promise on the horizon. In response to his staff’s concerns, he pointed to Duke University, the anchor tenant in a fledgling redevelopment project that Brinegar’s McKinney was joining. “Duke can’t afford it being unsafe for its own people,” he told his workers. “They have to make it safe, or they have a big problem.”
In that moment, Duke was providing emotional security for Brinegar and his desire to move his hugely successful company to Durham. In subsequent years, Duke would provide other sorts of security to McKinney and the other businesses that made the leap and set up shop in the American Tobacco Campus. As the huge university down the street, Duke provided the credit with which the American Tobacco project, the centerpiece of a series of downtown revitalization efforts, was able to blossom. Seven years after its opening, the sprawling complex is a resounding success, as are a series of other revitalization efforts in the area. But it didn’t come easy.
In the late 1990’s, downtown Durham was a shell of its former self. This small, southern city’s inner core once bustled with activity, fueled by the manufacture of Pall-Mall, Lucky Strike and Chesterfield cigarettes in a series of red brick warehouses clustered within a couple of square miles. The city literally smelled of the tobacco that wafted through downtown; but as the industry’s economic tides shifted, so too did the city’s fortunes. The tobacco industry, chiefly the American Tobacco Company and Liggett & Myers, stopped making cigarettes in Durham in 1987 and 2000, respectively. And following the industry’s demise, the huge, ornate brick warehouses dotting the downtown landscape sat dormant and fell into disrepair, a huge, very visible blot on the city.
The notion of redevelopment was kicked around from time to time, but little took hold until the early 2000’s, when broadcasting magnate Jim Goodmon, who owned several local media outlets, began rustling up tenants willing to gamble on downtown. While Duke had very few employees there, university officials, weary of the eyesore downtown had become, looked long and hard at investing in the space. But there were warning signs.
“Initially, nobody thought it could be done,” recalled Tallman Trask, Duke’s executive vice-president. “There was a lot of inertia. There were these large structures that had just sat empty.” Because Duke didn’t want to exist in a bubble, and a healthier downtown would make it easier for the university to recruit students and faculty, it first leased some space in West Village, a residential project championed by former Duke basketball players Christian Laettner and Brian Davis. Furthermore, some medical school facilities moved to Diamond View, a new office building Goodmon built overlooking the Durham Bulls ballpark.
But the big splash would be American Tobacco, the ragged collection of brick warehouses with the Lucky Strike water tower looming in the center. Goodmon was lining up potential tenants, including Duke. “We finally realized this was the one good shot to get something going at American Tobacco – the big, ugly eyesore,” Trask said. “Duke isn’t going anywhere, and the deterioration of downtown was not beneficial to us.”
Duke was an integral cog in the plan, promising stability and commitment on a huge scale. Unlike a for-profit company, Duke would never go out of business or relocate its headquarters. But Duke couldn’t do it alone either, nor did it want to. The university didn’t want to buy property downtown. Because Duke is a nonprofit, buying downtown property would remove it from the tax rolls, eliminating revenue needed to support the roads and other infrastructure in the area. And the university, while wanting to help downtown improve, wasn’t in the development business itself, nor did it want to simply build a new campus. “We don’t want downtown Durham to be downtown Duke,” said Scott Selig, Duke’s associate vice-president for capital assets. “That wouldn’t be interesting. We wanted an eclectic place with a broad economic base.”
So Duke didn’t agree to lease 100,000 square feet at American Tobacco until three for-profit companies agreed to lease, collectively at least that much space as well. Duke officials knew the project needed more than Duke; it needed large, healthy firms with large workforces. Meanwhile, those for-profit companies, like McKinney, took the leap in part because of Duke’s involvement. “Duke became that credit-worthy client that let us get so many other projects going,” said Bill Kalkhof, president of Downtown Durham, Inc., a nonprofit that promotes area revitalization. “Duke has easily been one of the most influential players downtown, and in terms of leasing office space, the most influential.”
McKinney was an early tenant along with Glaxo, the drug company, and Compuware, the software firm run by Peter Karmanos, who also owns the Carolina Hurricanes hockey team. Glaxo has since left, but McKinney and Compuware are still there along with about 60 other ventures. Another sign of the mutually-beneficial relationship—as McKinney was negotiating its lease at American Tobacco, Duke was close to signing its own lease on office space there. “Duke stood with us to make sure we were happy with our lease before they signed theirs,” Brinegar said. “A lot of what we got wouldn’t have happened without Duke standing behind us.”
In its downtown Raleigh location, the McKinney ad agency occupied 42,000 square feet of clunky, inconvenient real estate on five floors which accommodates 147 people. But the space in Durham, by comparison, was the same square footage but accommodated up to 217 people on 1.5 floors. The firm had one conference room in Raleigh; in Durham, it has 12, making it easier to create ad campaigns for heavy-hitting national companies like Nationwide Insurance and Sherwin Williams, and which gave the world the Travelocity gnome.
The addition of more creative space was just the right style so for our, “Left-brain and right-brain people to collaborate,” Brinegar said. “And we could configure it any way we wanted to.” What’s more, when Brinegar proposed his plan to move to American Tobacco, he was the sole employee living in Durham. Now, 100 McKinney employees and their families live in Durham, Brinegar said.
The American Tobacco redevelopment could have failed for many reasons. It required strong partnership with city and county governments, each of which ponied up one of the two downtown parking decks upon which local businesses and the steady stream of patrons to the four-year-old Durham Performing Arts Center are reliant. It required a flexible landlord. Selig, Duke’s real estate expert, credits Goodmon for working with individual tenants to make the best possible deals. And, the economy cooperated. Had the project come along in a rockier economic climate, like today, “It couldn’t have happened,” Selig said.
The buildings themselves played a crucial role. American Tobacco is a complex of more than a dozen century-old buildings, all used at first to manufacture and store cigarettes. Flush with money at the turn of last century, American Tobacco built them to last, with strong construction and distinctive detailing. They’re huge, wide and for the most part, rectangular—perfect spaces for a myriad of businesses. “These buildings worked 100 years ago, they work now and they’ll probably work 100 years from now because they’re big, open boxes,” Selig said.
While the largest and most visible downtown revitalization effort, American Tobacco is one of several success stories there. Duke claims space in West Village, an office, retail and housing project just off the downtown loop, as well as 50,000 square feet in Brightleaf Square, another funky retail/office complex nearby. Moreover, the university has 500 employees on six floors of the Durham Centre, where Duke runs the world’s largest academic clinical research organization. In all, Duke now has at least 1,800 employees from 15 or more campus units occupying more than 500,000 square feet of downtown space. Duke recently contracted to purchase its first downtown facility, the 114,000 square-foot Carmichael Building, where tobacco was once dried and stored.
At American Tobacco, there are nine Duke units among the 60 or so businesses occupying space in 14 gleaming buildings. Once decrepit and dreary, this complex now buzzes with activity, life and energy. A person can get a haircut, have a slice of pizza, throw back a brew at the sports bar, or learn to make a soufflé at the art and cooking institute.
Durham is both idyllic and urban, densely populated and serene. During the mid-day bustle, some employees and visitors stop to catch their breath and watch the lazy river built into the center of the complex as it meanders from one end to the other. Overhead, the stark, white water tower, still emblazoned “Lucky Strike,” keeps watch. Many of the visitors to Durham stop at Tyler’s Taproom for a beer or a burger. This restaurant, too, has Duke to thank for some of its success. “Duke made a commitment to the area,” said Rusty Privett, general manager of the restaurant, which opened its American Tobacco location in 2005. “With the amount of space it took up, it was a signal to other business that this will be lasting.”