Thursday, January 22, 2009

Exit Strategy

Willie Herenton and Justin Timberlake: together again on Beale?

Posted By on Thu, Jan 22, 2009 at 4:00 AM

One of the lowest moments of Willie Herenton's career as mayor came on a September morning in 2006, when he appeared on the nationally televised Good Morning America program with singer Justin Timberlake.

The program was televised live from Beale Street, and a young, mostly white crowd booed the mayor, who was at his gracious best. Such things happen in politics and have a way of evening out — last week, for instance, Herenton got a standing ovation from the Memphis Rotary Club — but the Beale Street boo-birds stung the usually thick-skinned mayor. So much so that he brought up the incident more than a year later at his victory celebration after winning an unprecedented fifth term. He criticized both the rude spectators and the subsequent lack of outrage in the white community.

In a new wrinkle to the long-running controversy over the management of Beale Street, city officials have been talking to representatives of Timberlake and a Baltimore developer about becoming part of a team to replace John Elkington and Performa Entertainment Real Estate, the firm that has managed and leased Beale Street since 1982.

E-mails show that for at least six months, representatives of the city and the Beale Street merchants have been talking with Cordish Companies (which specializes in urban entertainment districts, including Power Plant Live in Baltimore's Inner Harbor and Fourth Street Live in Louisville); Timberlake's stepfather Paul Harless; Rey Flemings, the former head of the Memphis Music Commission; and Guggenheim Partners, a financial firm. Cordish and Guggenheim representatives asked for information about Beale Street leases, rents, profit-and-loss statements, and the status of Elkington and Performa.

The e-mails came off of computers at the Beale Street Merchants Association and were sent to Onzie Horne, executive director of the association, and Robert Lipscomb, head of the Division of Housing and Community Development and the city's point man on major development projects.

"How much of the information below can you get us and how soon can we get it?" Flemings wrote to Horne in July. Flemings included a forwarded message from Chase Martin of Cordish seeking information about Beale Street leases, profit-and-loss statements, rents, and "any other similar information we can get from the city would be extremely helpful."

In another e-mail in July 2008, Barry Klarberg of Guggenheim asked Flemings and Martin of Cordish for more information about Performa and its leases.

"Have we been able to get any more information on the nature of the relationship between the city and the Proformas [sic]? What are those leases? Have we seen a P&L?"

On July 14th, Harless wrote to Martin, "Rey is scheduling a meeting with Lipscomb. Rey, let's you, I, Barry and Chase touch base prior to meeting with Robert."

On August 16th, Flemings wrote to Lipscomb, Horne, and Martin: "We would like to arrange a team meeting to discuss Beale Street."

Lipscomb responded, "Do you want to include the mayor in the discussion or is it premature?" At that time, Lipscomb was talking with Beale Street business owners about a seven-member oversight team of three merchants and four Herenton appointees, if Elkington could be persuaded to leave by mediation or negotiation.

In September, the city undertook an audit of Beale Street businesses, sending inspectors to measure square footage and check everything from lights to toilet seats. Owners also turned over financial information they thought was covered by a judge's protective order. It is not clear how much information was shared with Cordish and Guggenheim.

Lipscomb said this week that he met with Cordish one time, and the main topic was the riverfront and the possibility of Bass Pro taking over the Pyramid. He said he has heard rumors that Herenton wants to sell Beale Street out from under the owners and take the district in another direction, but he has stayed out of it.

"It's too complicated," he said.

Horne said this week that discussions of a post-Elkington Beale Street are influenced by the ongoing lawsuit involving the city and Elkington and the recent revelation that Herenton profited from an option he sold on the Greyhound Bus terminal two blocks from Beale.

"It's complicated everything that relates to city business," Horne said.

He also has heard talk of a big new development plan called "Triangle Noir" or dark triangle to improve the blighted south section of downtown and preserve African-American history. Asked who might be driving that, he said, "I think Lipscomb might be one of the principals."

In the lawsuit filed in Chancery Court, the city and Beale Street Development Corporation are suing Elkington and Performa Entertainment Real Estate. The city owns the street and hired Elkington in 1982 to lease and manage it. At issue is how much money, if any, Elkington owes the city and whether he diverted Beale Street funds to projects in other cities. During a hearing on Tuesday, attorney Ricky Wilkins, representing the city, said Elkington has used funds from Beale Street for unrelated companies and has not provided key records.

"When it comes right down to it, they don't produce anything," Wilkins said.

Elkington's attorney, Richard Carter, told special judge Donald P. Harris that Elkington has complied with the court's order.

John Candy, representing Beale Street Development Corporation, called Elkington "the most incompetent property manager in history" and said he has charged more than $2 million in improper expenses to the district while taking a salary of $180,000, plus a 10 percent management fee and a 5 percent leasing fee.

None of this was resolved Tuesday. The major ruling by Harris allowed Beale Street merchants to continue selling wristbands for club entry. The lawsuit figures to continue for at least several months. The bad blood between the three parties goes back to at least 1992, Herenton's first year as mayor, when the city undertook an audit of Beale Street that lasted until 1994 and apparently produced no reports in the permanent record.

Twenty-six years after its reopening, Beale Street has outlived the Pyramid and most of Peabody Place's retail operations. Its sales taxes help retire the bonds that built FedExForum. Sales are off in the recession, but there are some promising events on the downtown Memphis calendar in 2009, including the NCAA basketball regional Sweet Sixteen games in March.

Willie Herenton would like to leave the mayor's office and get into the real estate business. John Elkington would like to leave Beale Street and get out of the real estate business. A new Beale Street development team, including the star power of a Justin Timberlake, could be a good exit strategy for both of them, if only they can figure out a way to get there.

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