By Scott Robertson
It was only a matter of time. When Johnson Commercial Development built the Pinnacle retail development on the Tennessee side of the Virginia state line in 2013, principal Steve Johnson had already bought 350 acres on the Virginia side abutting the Tennessee property. Because Johnson is not known for leaving money on the table, it was assumed by most observers that he’d develop the Virginia land at some point.
That point, Johnson says, has arrived.
The Pinnacle Adventure Park, the Pinnacle Amphitheater and the Pinnacle Hotel and Waterpark Resort
The Pinnacle retail development in Tennessee hosted more than 6 million shoppers in 2018, grossing more than $180 million in sales, according to Johnson. On the surface, that would seem to be great news. But it created a dilemma for the developer. There’s not much more retail money that can be captured in this market. Thus, even if the Virginia side were developed as retail space, the returns would diminish quickly.
So, what to do with all that land?
Johnson says he plans to “provide the region with a multitude of entertainment and amusement opportunities.”
The Pinnacle Adventure Park will, according to Johnson, be a first-class amusement park consisting of more than 20 rides, activities, dining and retail. The project will require a $60+ million investment of private capital and is expected to draw just under 500,000 visitors in its first year. Johnson estimates the park alone will gross around $30 million a year.
The Pinnacle Amphitheater, the Virginia feature closest to the Tennessee development, will have 5,000 seats with space for 10,000 more on the grass behind. There are no similar sized venues nearby, allowing the Pinnacle to fill a void between Nashville, Charlotte, Atlanta and Bristow, Va. The amphitheater represents a $17 million investment and is expected to generate roughly $5.5 million per year. “If you’re going to have a venue like this, you have to partner with operators and artists,” Johnson says, “and we’re partnering with the best.”
The Pinnacle Hotel and Waterpark Resort is slated to cost $160 million with annual gross revenues of around $40 million. Johnson anticipates more than 350,000 visitors in its first year of operation. Johnson uses the Wilderness at the Smokies Hotel in Sevierville, Tenn., as a comp. That resort opened in 2008 with 234 and has grown to more than 700 rooms since.
“These types of projects have thrived in the Poconos; Dell, Wisconsin; Sandusky, Ohio; and Concord, N.C.,” Johnson says. “Whether it’s Kalahari, Great Wolf Lodge, The Wilderness or Camelback, those concepts work well with mixed use facilities like The Pinnacle.
“My location off I-81, and essentially I-26 too, gives me great access to 50 percent of the U.S. population in a day’s drive. Add in our proximity to I-75, I-40 and I-77, and that opens the gate to the midwest, southeast and eastern regions,” Johnson says. “These benefits, along with a lack of expansion ability due to a shortage of developable land in Gatlinburg and Pigeon Forge, equals a superior location and great timing for The Pinnacle.”
Between the adventure park, the amphitheater and the resort, Johnson estimates the Virginia Pinnacle projects will eventually employ 2,600 people. And, Johnson says he won’t use all 350 Virginia acres in developing the three new projects. He’s leaving open the possibility of not only developing more hotels, retail stores and service providers, but also office and residential space on the far east side of the Virginia property.
Inside the numbers
The gaudy numbers in Johnson’s pitch for the adventure park are found in a feasibility study by Tampa consultants Themed Future Concepts (TFC). Based on visitor data from the Pinnacle retail development and other factors, TFC determined the park’s resident market to be an area stretching from Greenville/Spartanburg, S.C., in the south, past Oak Ridge, Tenn., in the west, past Beckley, W.Va., in the north and just beyond Roanoke, Va., and Winston-Salem, N.C. in the east. That makes the resident population about 5.8 million.
TFC estimates the tourist market for the Virginia Pinnacle development at around 750,000 tourists per year based on Tennessee tourism annual reports and economic impact reports and the most recent Virginia Tourism Economic Impact Report.
Put those figures together, and the total market is estimated to be a little short of 6.6 million persons on an annual basis. So, what does that mean for attendance? TFC uses its own copyrighted formula to estimate that number at around 495,000 visitors in the first year. So, around 10 acres will be required for parking for the adventure park alone.
Yes, you may be saying, but what’s the bottom line? We can’t tell you. But we can put together a reasonable expectation of what the top line will be.
TFC’s report focuses on ride tickets, food service and souvenir sales. And again, these figures apply only to the adventure park, not the amphitheater or resort.
TFC envisions a single all-day pass to cover all rides. On a price-per-ride basis, a cost of $49 per pass would put the Pinnacle in the same range as similar parks in Glenwood Caverns. Co., and Mt. Hood, Ore. TFC then multiplies that $49 x the 495,000 anticipated visitors, builds in a 15 percent discount and then adds around $800,000 for ride photo sales for an admissions + ride gross of more than $21 million. TFC estimates around $5.3 million in food service revenue and somewhere in the neighborhood of $3 million in merchandise sales. That puts the top line estimated revenue for the adventure park alone at just shy of $30 million per year.
“None of this happens without the road,” Johnson says, referring to a planned new road stretching the length of the Virginia property and linking the Pinnacle Parkway in Tennessee to Miller Hill Road near the Gate City Highway in Virginia. Between the new road, planned improvements to Miller Hill Road and a new traffic signal on the Gate City Highway, the total cost of the road project is $9,996,431.79, or as Johnson says, “call it $10 million.”
That road, Johnson says, needs to be paid for by the Commonwealth of Virginia, Washington County, or some combination of funds from both. “When you consider everything Virginia gave Amazon up in Crystal City,” Johnson says, “making this infrastructure investment in Southwest Virginia, where we really need the economic development, seems like an easy decision to me. I mean, this is roads – this is the kind of thing government is actually supposed to do.”
Potential stumbling blocks in Richmond and Abingdon
A potential problem is that a $10 million Virginia budget amendment proposed by Delegate Todd Pillion and State Senator Bill Carrico to pay for that road didn’t make it out of committee into the new state budget.
But Marty Williams, a lobbyist working on behalf of Johnson Commercial Development says just because the amendment didn’t make it out of committee doesn’t necessarily mean the Commonwealth won’t come through. “I wouldn’t rate it as a great chance, but there is still a chance it could make it into the budget,” Williams says. “We’re still going to make our case. There’s still a long time before the budget’s passed and I’m not going to assume nothing’s going to happen, because a whole lot depends on the tax policy and how they come out of that. It could mean they have more or less money to spend.”
But if the general assembly doesn’t do anything to address the $10 million request, that’s when things may get interesting in Richmond. “We know it’s got the interest of the (Northam) administration,” Williams says. “The secretary of commerce and trade sees it as an extraordinarily valuable project. So, I think the administration is going to support doing something for this.”
Admittedly, “doing something” is no guarantee of anything specific. “Well, there are about 15 different avenues they could help with,” Williams says. “I think they would lean toward doing something for it. I think there’s a great chance that once the session is over the administration will get involved and we’ll see what we can do.”
Should the state fail to come through, Johnson has gently pushed the idea that Washington County might find the $10 million. That, however, seems unlikely.
The county, as of this writing, is still debating whether to approve an admission tax of up to 10 percent, which may or may not be used, in whole or in part, as an incentive for Johnson to build.
The county has to follow a legally mandated process in making that determination, says County Administrator Jason Berry. “Step one is to hold a public hearing. Then, if the board of supervisors, after the public hearing, wants to pass the ordinance and set the rate, that’s step two. Then the next step would be – Mr. Johnson has requested the whole 10 percent to help him build out the development. But, that would be a separate discussion and would necessitate a new performance agreement between the county and Mr. Johnson on what any incentives from that would be and at what percent. So, we can’t have conversations on step two or beyond until we see if the board wants to adopt the ordinance that would create the admissions tax.”
Johnson says his plan will involve more than $240 million in capital investment and will create 2,600 jobs. As of this writing, he’s placed the question of whether that happens squarely in the governments’ court.