Exclusive: Sterick Building purchased by local team; full redevelopment in the works

By Stephen MacLeod – Reporter, Memphis Business Journal

Mar 31, 2023 Updated Mar 31, 2023, 10:25am CDT

The Sterick Building has towered over the corner of Third Street and Madison Avenue for nearly a century, a symbol of Memphis' changing fortunes — for good and ill. The "Queen of Memphis" was a neo-Gothic marvel uplifting the skyline and telling of the city's prosperity across the middle 20th century. But, by 1987, its final commercial tenants moved out, and the 29-story high-rise went dark.

It has stood empty since then, first as a domineering reminder of mass disinvestments Downtown, and then increasingly as an anachronism of blight that persisted despite the renaissance and revitalization going on all around it. 

Now, the Sterick is ready to join a new era in Memphis, a glowing piece of an ever-growing promise of a brighter future.

Acquiring it as Sterling Hedrick LLC, a team led by Memphis developer Stuart Harris has purchased the Sterick property at 8 N. B.B. King Blvd. and the nearby Avis car lot from the family trust that has owned the land since before the skyscraper was built. The closing documents were signed just prior to the publication of this story.

The deal also dissolves the 99-year lease that has been owned for decades by New York City-based Equitable Holdings LLC and its corporate forebears. The coordinated move to acquire the property and terminate the lease in one fell swoop sees the land and the tower united under one entity for the first time in its history.

The Sterick Building development team

The Memphian behind the complex deal, Stuart Harris, actually has redevelopment experience in the Sterick's immediate neighborhood.

Harris was co-developer of the $16 million renovation of The Commonwealth building at 240 Madison Ave. — about a minute's walk from the Sterick. In 2017, Walk-Off Properties LLC renovated The Commonwealth, a building that dates to 1926, for SouthernSun Asset Management's new headquarters. Harris led project while he was a senior associate with SouthernSun.

Harris is also co-founder of Blackbay Global Advisory, and he has almost two decades of experience in commercial and residential real estate, with firms such as Mercury Investment Management and CBRE.

Today, he runs his own real estate development firm, Constellation Properties, which is leading the Sterick project.

Joining him as principal of Constellation is Stuart Harris' father, Michael Harris. The elder Harris has nearly 50 years of experience in real estate development and corporate leadership. Currently a principal with Butler Snow Advisory Services, Michael Harris previously served as EVP and COO at Highwoods Properties Inc. He's worked on several high-profile projects throughout Tennessee, including the International Paper headquarters buildings in East Memphis and the 30-story, $200 million headquarters for Bridgestone Americas in Nashville.

Memphis-based LRK has been tapped as the Sterick project's architecture firm. The company designed many of the buildings near Sterick, including The Commonwealth renovation and AutoZone Park. LRK's own headquarters sits half a block away from the Sterick in Prospero Place, which it also designed.

Stuart Harris said that LRK created a 40-page viability plan on the Sterick during the due diligence phase. It lays out a scope narrative on how to make it work — "not what the Sterick would be but what it needs to be at a base line," Harris told MBJ.

Grinder, Taber & Grinder has served as a pre-construction consultant. Chad Stewart & Associates — another alum of The Commonwealth — is the Sterick project's structural engineer. That firm has done projects that range from the Bass Pro Shops at the Pyramid to the Soulsville Charter School. 

Louisiana-based Bernhard is set to serve as mechanical engineer, a role Harris describes as a “big piece” of the overall project’s potential success. Bernhard’s Memphis office has worked on the Kay Research and Care Center at St. Jude Children's Research Hospital and the Shorb Tower at Methodist University Hospital. Bernhard's highest-profile project: AT&T Stadium, the home of the Dallas Cowboys.

The recent past and immediate future of the Sterick

Harris has been working on the Sterick deal for years. Talks began in late 2020, and he has had the land under contract since October 2021.

The building's ownership was set to revert to the Grosvenor family when the 99-year lease expired on April 30, 2025. But a condition in the original lease loomed increasingly large as the expiration date neared: the agreement required the lease holder to return the building in "good repair and working order."

The Sterick, empty for 35 years, is in anything but that kind of condition. The clause, known as the restoration obligation, was a primary factor why nothing happened for so long, and solving it was crucial to why the deal finally was able to click into place now.

Even with a deal in place to take possession of the land sooner and the building once the lease ended in 2025, Harris was wary of the nightmare the Sterick would likely end up mired in. Wanting to preempt that legal morass when the lease expired without the building in good condition — and with the land deal in his back pocket, squared away — Harris entered into negotiations in earnest with the lease-holder, Equitable, in late 2021.

With this week's deal, Harris has closed on the land and dissolved the lease with Equitable.

The stage is now set to take the Sterick into the future. The property has a clean title under one owner, and the lease and its restoration obligation are history.

The deal will allow Harris to do as he sees fit and is able with the tower, and he has built a deeply experienced development team around him.

The project can now begin working toward getting its construction capital in order. Harris said the team will spend most of this year targeting a myriad of different federal and local incentives that could help fund a development that he sees costing in the hundreds of millions of dollars.

This is what Harris has been working toward for years. And really it's just the first step, however complicated.

As he has looked at the Sterick from his office in The Commonwealth, the lure of restoring the neo-Gothic tower has been too much to resist as the spaces around it prospered.

"I love old buildings Downtown and love the irreplaceable nature of them," Harris told MBJ. "And the Sterick is the crown jewel of historic buildings Downtown. I was and remain super nerdy on vintage things, and the Sterick is the crème de la crème."