Tom Martin Q&A: New owner of Chase Tower says downtown Lexington 'in early innings of a renaissance'

Contributing columnistMarch 10, 2014 

Mukang Cho is CEO of In-Rel Properties, a privately held Lake Worth, Fla., real estate investment firm founded in 1985 with approximately $500 million in assets under management.

Chase Tower in downtown Lexington is the firm's first Kentucky acquisition. It is among more than 6 million square feet of office and retail properties throughout the United States owned by In-Rel.

Born in South Korea, Cho lived in eight countries while growing up as the son of a diplomat.

Since coming to the United States to attend Cornell University and then Harvard Law, he has leveraged his interest in architecture, business and law into a successful real estate career.

With transactions holding an aggregate value of more than $100 billion to his credit, Cho is an expert on real estate financing.

Tom Martin: Why did you consider Lexington an attractive market?

Mukang Cho: When we underwrite properties to acquire, we start with the underlying investment potential of the property that we are looking at. We spend a great deal of time assessing whether or not this is a quality asset that has just underperformed and whether we believe that it has the right structural makeup, location, etc. that would give us confidence to turn around the underperformance. Once we go through that analysis then we focus on the market.

We spend a great deal of time studying the underpinnings of the local environment, at the city, regional and state level. We are attracted to markets that have a diversity of industries, and Lexington certainly qualifies. The Bluegrass region is a fairly large and robust economy, about $20 billion per annum. Population trends have always been favorable, above national trends as far as population growth. And the unemployment rate is just below the national average. And last but not least, over the last few years there's been a big focus on reviving U.S. manufacturing and Lexington and the Bluegrass are in proximity to a lot of the manufacturing hubs within the United States, I think it's going to be a very positive driver of growth in Lexington. It's just going to be a matter of time.

Martin: What criteria does a property have to meet to give you confidence that it can be turned around?

Cho: That it's got the right bones and the right structural makeup and that its location within the submarket is favorable. In the case of Chase Tower the answer to those questions was a resounding yes. We believe that the relative underperformance of the asset was not a function of problems or issues at the property level. In fact, it's anchored by two leading tenants, JP Morgan Chase, whose name appears at the top of the building and in various signs around the asset. And McBrayer Law Firm, which is one of the leading law firms in the state of Kentucky. Those two tenants provided the foundation that we needed to acquire the asset, get comfortable with the stability of the asset and use them as the launch pad to further lease the building.

Martin: This particular property is located almost in the heart of downtown Lexington and there's been much discussion in recent years about revitalizing our downtown, the central core of the city. What are some common traits of downtowns that have become successful?

Cho: I think it's three things. For it to be viable and for success to be sustainable over the long term, a downtown needs to be a place where people want to live, work and play. Or at a minimum, live, work and shop. So when I look at downtown Lexington — and I believe that it is very much in the early innings of a renaissance — there has to be a view toward maintaining a balance between the availability of housing and apartment stock and office space and retail venues. I think it's very challenging for any downtown to be successful if it does not maintain those three interests in relative balance. People like the convenience and the amenities and the availability of the amenities that come with suburban living. Whether it's to be able to get in your car and in five minutes be at a grocery store or be at a hair salon or a nail salon or a dry cleaners. Those amenities really need to be intact along with plentiful and affordable housing, along with an ample amount of office space in order for a downtown to work. It needs to be its own sustainable ecosystem.

Martin: Any cautionary tales for downtown planners?

Cho: Especially in the last few years, we have seen very ambitious projects that are not well balanced get put on hold. I think that downtown planners, if they commence a revitalization project with a focus on just one of the three areas that I mentioned, I think it's a lot harder to get off the ground because they are going to constantly be grappling with the chicken and the egg problem. One can construct a large office project but without the confidence of knowing that there's also going to be an equal amount of focus on retail outlets as well as the availability of housing, those projects tend to be stymied. I think a very carefully planned and balanced and staged development is what is critical for long-term success.

Martin: How important is live entertainment, music, theater, access to the arts to the life of a downtown? What can a city do to make them thrive?

Cho: I think live entertainment or any type of culture offerings outside of let's say a restaurant, they certainly enhance the appeal of a downtown district, without a doubt. I would think that they would embellish an already viable downtown that already offers available and affordable housing stock and plentiful office space, as well as retail venues that allow a resident to shop without leaving downtown. I think once you have those core amenities provided for you have the ability to be successful. Live entertainment and any other type of cultural offerings certainly will help from the standpoint of drawing more visitors. But you also do have to keep in mind that live entertainment venues, if they're successful, create transportation or parking issues. So I think again the availability of parking spaces and municipal lots or private lots that are affordable. Downtown Lexington is already accessible. So I don't think there has to be any massive investment in infrastructure to get people in and out of downtown. I think it matters even more to the extent that there's a broader plan to focus on the cultural aspects of a downtown.

Tom Martin's Q&A appears every two weeks in the Herald-Leader's Business Monday section. This is an edited version of the interview. To listen to the interview, find the podcast on The interview also will air on WEKU-88.9 FM on Mondays at 7:35 a.m. during Morning Edition and at 5:45 p.m. during All Things Considered.

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