With a vision of realizing a truly unique mixed-use property for downtown Phoenix, leading owner, developer and property manager Lincoln Property Company (LPC) has sold the historic Luhrs Building to Provo-based PEG Companies (PEG) and Dallas-based A.G. Hill Partners for $14 million. An industry expert with an extensive track record in hotel development, PEG plans to renovate 92,000 square feet of the 108,000-square-foot Luhrs Building into a stylish upscale hotel.
LPC will maintain ownership of the balance of Luhrs City Center, which includes the 14-story Luhrs Tower office building at 45 W. Jefferson St., an adjacent six-story, Class A parking garage and 15,995 square feet of fully renovated ground-floor retail space called the Arcade – home to La Madeline, Serafina Coffee Bar and Monroe’s Chicken.
Since purchasing Luhrs City Center in late 2015, LPC and partner Invesco have completed a multi-million-dollar renovation that improved lobbies, common areas, streetscapes and the Luhrs garage while protecting and improving historic brick interiors, exposed beams and ornamentation. The work earned the company a “2017 Redevelopment Project of the Year” award from NAIOP Arizona.
“Redeveloping and leasing Luhrs has been a gratifying experience, but fully realizing our vision means incorporating a hotel use,” said Lincoln Property Company Executive Vice President David Krumwiede. “Since hospitality is not one of our primary business lines, we chose to market the building to hoteliers who could complete that circle. Passing this property on to PEG will do that, bringing the downtown submarket an iconic, truly ‘Phoenix’ mixed-use destination.”
“Our goal is to preserve the historical integrity of the Luhrs Building as much as possible. The classic exterior facade will remain virtually untouched. The antique mail system that runs from the first to the tenth floor will remain intact. Even the building’s windows will maintain the architectural renaissance characteristic of the early 20th century,” said PEG Companies Development Manager Trevor Ellis. “At the same time, we will infuse new energy and new life into the building, cultivating a fresh and exciting space where people of all ages and walks of life will want to be.”
The PEG redevelopment will convert floors one through nine into hotel rooms. The top floor will remain occupied by Hagens Berman Law Firm. The nationally renowned Bitter & Twisted Cocktail Parlour, located on the ground floor, will also remain open during construction and a part of the building’s tenant mix.
Located at the east end of Luhrs City Center at 11 W. Jefferson St., the Luhrs Building was delivered in 1924 as Phoenix’s first 10-story high-rise. The 14-story Luhrs Tower was delivered five years later, in 1929. The buildings now sit within a Qualified Opportunity Zone (QOZ), making the Luhrs Building conversion one of the first QOZ projects in the Phoenix area to start construction.
A leader in the QOZ space with several U.S. projects underway, PEG is working through the permitting process now and plans to begin construction on the Luhrs Building conversion this summer.
“This is our second investment in an Opportunity Zone since the start of 2019,” said A.G. Hill Partners President Joseph O’Brien. “In both instances, we were attracted by the ability to deploy capital profitably while creating permanent jobs and transforming neighborhoods. PEG’s experience in the hotel industry and our prior success in the Phoenix market were important factors in our decision to fund this venture.”
“This project is a prime example of everything a Qualified Opportunity Zone project should be,” said PEG Companies CEO Cameron Gunter. “George Luhrs had unparalleled vision when he constructed the building nearly 100 years ago. Now, PEG is excited to restore the vibrancy of this iconic piece of Phoenix’s history.”
Major office tenant Maricopa County will move out of the Luhrs Building during the first quarter of 2020. It will relocate to 225 Madison, a renovation project recently completed by the County that converted the former Madison Street Jail into a modern downtown office building and new home to the Maricopa County Attorney’s Office.
“That the County will move into its own successful downtown adaptive reuse project just as PEG kicks off redevelopment of the Luhrs Building is indicative of the kind of energy and creativity happening in the downtown commercial real estate market,” said Lincoln Property Company Vice President of Real Estate John Orsak. “It is an exciting place to be.”
Bill Murney of Hospitality Real Estate Counselors (HREC) served as the broker in the sale transaction. A.G. Hill Partners serves as PEG’s main investment partner.
Located at the southwest corner of First Avenue and Jefferson Street, Luhrs City Center offers direct access to Phoenix Light Rail and is minutes from Interstate 10 and the many shopping, dining, sports and entertainment attractions of downtown Phoenix. LPC manages Luhrs City Center as part of the firm’s approximately 10 million-square-foot Phoenix property management portfolio.
For more on Luhrs City Center, visit the property website at www.luhrscitycenter.com. To discuss leasing, investment or property management opportunities with Lincoln Property Company in the Desert West region, please call David Krumwiede or John Orsak at (602) 912-8888.