Pinnacle Airlines Corp. is eyeing the landmark One Commerce Square tower Downtown for its headquarters, a possible coup for an area stung recently by another corporate giant announcing its departure.
Memphis-based Pinnacle, which is scattered among multiple office buildings at Nonconnah Corporate Park near Memphis International Airport, is considering leasing about 150,000 square feet at One Commerce Square, a 31-story, 411,852-square foot building at Main and Monroe.
"This move could make sense for us in many ways," says Philip H. Trenary, Pinnacle president and CEO. "We would be interested in a move that would allow us to cut our operating and occupancy costs in a big way and improve our bottom line for years to come."
Relocating would require approval from Pinnacle's board and would be contingent upon an economic feasibility study. It would also require cooperation from a number of state and local offices, most likely on economic incentives.
"It is instrumental and critical that this deal be structured properly and that all agencies work in concert to produce such an important step for our city," Memphis Mayor Willie Herenton said in a statement.
If Pinnacle does relocate, it will take much of the sting away from Atlanta-based SunTrust Banks Inc.'s announcement in March that it was vacating 170,000 square feet in One Commerce Square.
In 2009, SunTrust, which bought National Commerce Financial Corp. - the parent of National Bank of Commerce in 2004 - is moving to 50,000 square feet in a new Boyle Investment Co. office building at 999 Shady Grove in Boyle's Ridgeway Center office park.
The bank's lease for 155,000 square feet at One Commerce Square was signed in 1999, although NBC had been there since it opened in 1972.
Downtown has sustained similar losses over the years as business shifted away from the center city and towards the Poplar corridor and East Memphis.
"This is without question one of the most important deals we could hope for on many levels," said Kevin Adams, CB Richard Ellis Memphis chief executive and a part owner of One Commerce Square. "If done right, this would be a huge financial win for Pinnacle, for Downtown and for our community as a whole."
The Downtown office market has been struggling recently, prompting the creation of Downtown Works, a partnership between the Center City Commission, Memphis Regional Chamber, Belz Enterprises Inc., Parkway Realty Services Inc. and CBRE that focuses on bringing office workers back to the area.
"This would be great news for Downtown, and for our efforts to attract a fair share of the local office market," CCC president Jeff Sanford said. "Pinnacle is a growing, visionary company. Just perfect for Downtown and vice versa."
Trenary said it is too soon to know a timeline for moving - or even if a deal is possible.
"So many pieces haven't fallen into place," he said. "The bottom line is it would have to result in lower costs for the airline. A lot of people have to work together to make it happen."
Pinnacle is looking for every way to save money after revenue in its contract with Northwest Airlines was cut nearly in half late last year, costing it $82.4 million in operating revenue in the third quarter alone, the company said last week in an earnings call with analysts.
The saving grace in the new contract was that Northwest agreed to let Pinnacle seek other customers. Wall Street recognized the coup immediately. By the close of business Dec. 27, 2006, Pinnacle's stock was up 57 percent after trading around $6 for much of the year.
With $280 million as its claim in Northwest's bankruptcy, Pinnacle went to work diversifying its platform and courting business.
Within weeks, it announced it was buying Colgan Air, the family-owned commuter line that serves US Airways and other major carriers in the Northeast. A month later, in early February, Pinnacle announced it was buying 15 74-seat Bombardier Q400s for a 10-year contract it had just signed with Continental Airlines.
In early May of this year, it made another announcement, saying it had a 10-year deal to fly regional routes for Delta Air Lines with 16 76-seat regional jets Pinnacle was in the process of purchasing.
Analysts are mostly buoyant about Pinnacle, even though third quarter earnings were down $2.7 million. What pleases them is that Pinnacle has a plan for growing when many of regional airlines are standing still, said Bob McAdoo of Avondale Partners in Nashville.
And industry observers say that moving where lease costs are lower is plain smart.
"These guys are trying to save money and that's what they are supposed to do," said Darryl Jenkins, independent aviation consultant outside Washington. "I can tell you that there is someone at Pinnacle going over every account as closely as they can right now, looking at everything, where they spend every bit of money."
- Amos Maki: 529-2351
- Jane Roberts: 529-2512
--------------------
"This would be great news for Downtown, and for our efforts to attract a fair share of the local office market."
Jeff Sanford
Center City Commission president
--------------------
