BusinessTN

BB&T has been in Tennessee for about three years, and already its new 10-foot-tall signage atop Knoxville’s second-highest office tower is heralding the bank’s plans to expand westward into the state.

In December 2000, BB&T acquired Knoxville-based BankFirst, which had less than $600 million in deposits. Now BB&T’s East Tennessee Region, headquartered in Knoxville, has more than $1 billion in deposits, according to Lars Anderson, the regional president, who says plans are underway to expand into the Nashville market.

But Winston-Salem, N.C.-based BB&T isn’t the only bank working to grow in Tennessee and make its mark on the Knoxville skyline. With a larger $2.6 billion in deposits, AmSouth Bank’s East Tennessee Region was vying for the same Riverview Tower anchor tenant spot BB&T eventually nabbed less than a year ago.

Keith Herron, AmSouth’s East Tennessee area executive, says options for downtown Class-A office space were limited because of AmSouth’s large size and projected growth.

“A thorough search was made over the past two years in the downtown area including Riverview Tower, the TVA property and even new construction. For our needs the right combination of space, parking, cost and access just was not available within our timeframe of late 2004 to early 2005,” Herron says.

“[AmSouth] tried very hard to do a deal here—and we tried to do a deal—but it just didn’t work out,” says Joe Petre, vice president at Knoxville’s Lawler-Wood, the real estate developer that built the Riverview Tower and serves as its managing agent. A group of individual investors affiliated with Lawler-Wood bought the building in 2001.

After Memphis-based Union Planters notified Lawler-Wood that it would not exercise its option to renew its lease for about 36,000 square feet in the tower, the real estate firm received proposals from AmSouth and BB&T for the anchor tenant opening.

“There was not a winner or a loser,” Petre says. “BB&T was a better fit to the building’s current availability.” While Petre declines to discuss financial terms of BB&T’s 10-year lease, he says AmSouth initially needed about 35,000 square feet, compared to BB&T’s 44,000 square feet. In the end, BB&T will likely occupy about 48,000 square feet, a difference of almost a whole floor in Riverview Tower.

This isn’t the first time the office tower has been a central player in a tale involving bank tenants. In the ’80s, construction of Riverview Tower was put on hold—while it was only one-third completed—during the Butcher bank fraud scandal, which resulted in the imprisonment of C.H. Butcher Jr. and his older brother Jake Butcher. C.H. Butcher had planned to move one of his banks into the building, but everything changed during the investigations that ensued. Eventually, Lawler-Wood, the building’s developers, re-started construction, but only after approval from the building’s new owner at the time—the Federal Deposit Insurance Corp.

Now the 24-story office tower stands next to the slightly taller First Tennessee Plaza and houses tenants including aluminum supplier Alcoa, IBM and Lawler-Wood. With the addition of BB&T as anchor tenant, Riverview Tower will be called BB&T Tower—perhaps by the masses, but definitely by Anderson, the bank’s regional president.

In November, after AmSouth was left without a premier downtown office building for its regional headquarters, the bank announced plans to move into a new 50,000-square-foot building on Bearden Hill in West Knoxville. The facility is expected to be complete by the first quarter of 2005. Like BB&T, AmSouth’s East Tennessee Region is in a growth mode, planning to add five new facilities in Knox County and another four elsewhere in East Tennessee. AmSouth first entered Knoxville in 1998 when the Birmingham-based bank acquired First American Bank, which was based in Nashville.

Mitch Taylor, a broker with real estate firm NAI Collins, Sharp & Koella, says, “Downtown Knoxville was sorry to lose the majority of AmSouth’s office space.” Like most cities, corporate investment in downtown is a sensitive issue. Taylor says Knoxville’s new money-losing convention center is costly to taxpayers, and because the convention center is a major focal point of downtown, the area needs more support. Efforts are underway to bolster Downtown Knoxville, and many new construction projects have sprung up in the area.

“We don’t need another major tenant leaving downtown,” Taylor says.

An AmSouth spokesperson says the bank’s specific downtown presence is still being explored, but AmSouth’s main office branch and some corporate offices will remain downtown.

Many banks are playing “musical chairs” in Knoxville. Now out of Riverview Tower, Union Planters has moved into a smaller space of about 12,000 square feet in the historic Knoxville Post Office building, which has been renovated. BB&T’s Market Street offices, the former headquarters of the old Bank of Knoxville, is set to be purchased by a partnership that involves Jim Clayton, founder of Clayton Homes, and John Trotter’s Trotter Inc.

The spark of demand among current bank tenants in Downtown Knoxville office buildings may bode well for the growing city, which would like to lure corporate headquarters relocations. While supporters are clamoring for more improvement in the downtown area, the latest competition between BB&T and AmSouth must be a sign of good things to come.