Commercial & Industrial REAL ESTATE Special Edition September 2010
Commercial & Industrial The Daily News takes a year-long look at an industry in transition Real Estate – and in turmoil. SPECIAL EDITION
Looking Strong In The East Solid performance in the East Memphis submarket keeps CRE afloat. Page 17
Photo: Lance Murphey East Memphis’ busy Poplar Avenue corridor made plenty of commercial real estate news this year highlighted by the Crescent Center (back) selling for $52.6 million, the largest CRE deal in five years. Other buildings in the submarket performed well as the recession toiled on.
Memphis and Glankler Brown’s City’s Robust Olive Branch Go Move to East Industrial Market Head to Head for Memphis a Works to Weather New Business. “Huge” Deal. Economic Storm Page 4 Page 6 Page 10 2 Commercial & Industrial REAL ESTATE Special Edition September 2010
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Contents Commercial & Industrial REAL ESTATE Special Edition 6 Opportunity Abounds Andy Cates of Colliers International says “act now” on all the commercial real estate deals out there.
11 Rollin’ ‘Round the Bend Come in and try some A new intermodal yard in Fayette County has brought commercial real estate dreams to neighboring areas. of our newest menu items
13 Class A Transaction The Crescent Center fetched $52.6 million this past summer, the biggest CRE sale in five years.
21 Cloudy with a Chance of Default Economist Mark Dotzour predicts a long, painful recovery for the commercial real estate market.
• Real Estate IN THE NEWS
the board as immediate past president. be affected by the construction or new ing its supermarket just up the street at MAAR Commercial Council Also returning as officers and direc- store. 1150 N. Germantown Parkway. Economic Welcomes Board Members tors for 2011 will be Scott Barton of CBRE; The footprint of the new store is about decisions were similarly behind that deci- Tanis Hackmeyer of Hackmeyer Proper- 87,000 square feet, compared to the less sion to close. The Memphis Area Association of Re- ties/Hackmeyer Realty; Dawn Barber of than 60,000 square feet of the current Samuels is selling its entire Cordova altors Commercial Council held its annual Makowsky Ringel Greenberg LLC; Bob store. Bell said 30 new jobs will be created inventory. “Everything from our Cordova board of directors recently, approving Turner of Southern Properties LLC; Steve for the larger new store. location must go,” the letter to customers three new members for its 2011 board. Guinn of Highwoods Properties; Eric The Delta Division of Kroger covers reads. Greg deWitt of Grubb & Ellis Co. Fuhrman of Investec Realty Services LLC; West Tennessee, Arkansas, Mississippi will take over one of the council’s direc- and J. Hickman of Colliers International and parts of Kentucky and Missouri. The tor seats next year before becoming the Management Services. division operates 111 stores. Galloway Gardens Complex council’s vice president in 2012. He will The Kroger Co. is publicly traded on Sells for $1.1 Million inherit the seat occupied by John Mercer the New York Stock Exchange. Kroger of Highwoods Properties in 2011. Kroger Files Permit For employs 334,000 people across the com- Galloway Gardens LLC has bought Also joining the board are Jim Beaty of Poplar/Highland Store pany, which includes everything from su- the 45-unit Galloway Gardens Apart- CBRE’s Capital Markets group and Brad- permarket and warehouse grocery stores ments from California-based Steve Benetti ley Wilford of Boyle Investment Co., each The Kroger Co. has filed a $10 million to jewelry stores and convenience stores. and Virginia Benetti for $1.1 million. The of whom will take on two-year director building permit application for its store at complex, which was built in 1970, sits in the positions. The new positions are effective 3444 Plaza Ave. near the corner of Poplar Evergreen Historic District in Midtown, on Jan. 1. Avenue and Highland Street in Poplar Samuels Furniture to Close the south side of Galloway Avenue between Commercial real estate’s struggles of Plaza. G’town Parkway Store North Willett Street to the west and North late have underscored the importance of The company plans to build a new Avalon Street to the east. MAAR’s Commercial Council, an organi- store on the west side of the shopping Samuels Furniture and Interiors at The sale was financed with two zation that helps members navigate the center where it is located, said Joe Bell, 1615 N. Germantown Parkway is closing $200,000 loans through Regions Bank – market’s tricky landscape, deWitt said. manager of marketing and public affairs soon, the store informed customers and with one due next year and one in 2015 “The Commercial Council is an for Kroger-Delta Division. neighbors via a letter. – and an assumption of a $916,937 loan important organization highlighting the The start date for construction is “Samuels Furniture and Interiors has that matures in 2013. The listing agent for commercial side of our business,” he said. tentative because the building is currently served the good people of Tennessee, the sale was Steve Woodyard of Woodyard “Sometimes the much larger residential occupied and some tenants’ leases run out Arkansas and beyond with their premier Realty Corp. side of MAAR can overshadow the needs next year. home furnishing needs for over 94 years,” The property features two-bedroom, and concerns of the commercial side. We “We just know kind of a drop-dead the letter reads. “Unfortunately, because one-and-a-half-bath floor plans with an on- hope to bring some recognition to these date when the latest is that we could get of circumstance and the economy in gen- site laundry, according to a statement from groups.” started. Our guess is we’ll get started eral, we have made the very difficult deci- Woodyard.. Other changes to the council in 2011 sometime mid-year next year,” Bell said, sion to close our Cordova location only.” The new owner, which plans to lease will include president-elect Ron Riley of adding construction of a store takes nine A store employee said an exact date the units for $650 to $750 a month, will In-Rel Management Inc. taking over for months to a year. for the closure was not yet known. manage the property through the company 2010 president Wyatt Aiken of Commer- The current store will close when the The news comes a week after Sch- that manages Gramercy Park Apartments cial Advisors LLC. Aiken will remain on new store opens. The fuel center will not nucks Markets Inc. announced it is clos- near Bartlett, according to the statement. 4 Commercial & Industrial REAL ESTATE Special Edition September 2010
The Hard Sell Memphis and DeSoto County duke it out for jobs
ANDY MEEK | The Daily News
o understand how Northwest Mississippi’s small boomtowns like Olive Branch keep one-upping Memphis and reeling in jobs and taxpayers with the promise of greenerT pastures, an Internet video is one place to start. It’s posted on the DeSoto County Eco- nomic Development Council’s website. And its opening frame gets right to the point. It doesn’t win over the viewer with images of Hernando’s town square or wow business leaders with DeSoto County’s plentiful supply of land for everything from distribution centers to retail devel- opment. In fact, one of the first shots of the nearly eight-minute video doesn’t depict anywhere in DeSoto County at all. It’s a sweeping view of the Downtown Memphis skyline. The advantage of DeSoto’s proximity A worker takes a break on the site where McKesson Corp. is building a $115 million distribution facility in Olive Branch. to Memphis – without actually being part Photos: Lance Murphey of Memphis – is touted frequently during the film. There are scenes of FedEx planes and references to the “convergence of air, Swoope said. “I really don’t worry too nounced in July it’s moving a Memphis The Center City Commission devel- water, rail and highway” found in Mem- much about what the competition is do- distribution center – and 125 jobs – to 1.2 oped a video presentation for Pinnacle phis. ing.” million square feet in Olive Branch. Ham- comprised of testimonials from Down- “By locating in DeSoto County, busi- ilton Beach makes and distributes small town employees and stakeholders who nesses gain the advantages of Memphis’ Promised land electric household appliances, as well as a can talk up the virtues of locating in the transportation assets, while enjoying In Memphis, on the other hand, busi- variety of commercial products. heart of the city. Within a day or so of Northwest Mississippi’s tax advantages, ness and civic leaders have a keen interest There could be even more Memphis word getting out about Mississippi’s over- skilled workforce and abundant land,” a in what the competition in Mississippi is businesses heading south. As of press ture to Pinnacle, conversations were held narrator intones. doing. This past summer provided almost time, Pinnacle Airlines was considering among an array of private sector leaders in Some Mississippi officials aren’t that 1,000 fresh reasons for that interest. That’s an offer from Olive Branch backed with Memphis including Tennessee Economic overt in their comments about DeSoto’s the number of new jobs Olive Branch incentives from the state of Mississippi as Development Commissioner Matt Kisber. big city neighbor north of the state line. announced it’s creating with a trio of eco- it weighs a new location for its Memphis Memphis Mayor A C Wharton Jr. sug- Gray Swoope, executive director of the nomic development projects. headquarters. Business and civic leaders gested federal incentives and participation Mississippi Development Authority, said The projects involve the creation of in Memphis have mounted a full-court from the state might be a requested part his group concentrates on its own game two new plants and a hospital facility. And press in lobbying Pinnacle to keep its of the effort to keep Pinnacle here. That plan and lets the chips fall where they some of that growth is coming at Mem- headquarters in the city – and, hopefully, reaction was arguably a testament to the may. phis’ expense. move it into One Commerce Square at 40 powerful lure of DeSoto. “We always sell to our strengths,” Hamilton Beach Brands Inc. an- S. Main St. Downtown. “You’ve got a county and state that are very nimble in the way they work and un- derstand the importance of jobs, especially in an economy like we’re in,” said Chuck Roberts, of the Southaven-based firm Chuck Roberts Commercial Real Estate. Like the economic development ver- sion of an avalanche, the arrival of each new business, warehouse, distribution facility and resident feeds future growth. Another of the recent Olive Branch devel- opments concerned Soladigm Inc., a green technology company from California’s Silicon Valley. It’s moving into the Olive Branch Industrial Park with a plant that employs more than 300 people. “Because of Soladigm coming here, there’s now interest from other compa- nies that might never have considered us before,” said Olive Branch Mayor Sam Rikard. “Because of that, other companies were probably opening up their atlases last week and putting us on their radar.” Memphis in the past few weeks and months has lost some high-profile economic development battles to Olive Branch, which even A TV reporter asked Rikard after the touts its proximity to Memphis when luring businesses. City leaders here say more needs to be done to entice companies to set up shop or move their businesses to Memphis instead. recent flurry of news whether “there’s September 2010 Commercial & Industrial REAL ESTATE Special Edition 5
anything else” to announce soon. Rikard surrounding commercial area on Elvis “We tend, with our existing employers chuckled as he recalled the question. By locating in DeSoto Presley Boulevard. – it’s like a marriage, and it’s gotten some “There’s always something else,” he “Let’s just face it: in business affairs, age to it: ‘Oh, we’ve got them here. They’re said, a reply that may have sounded like a County, businesses gain the protocol means a lot,” Wharton said. “You not going anywhere.’ But there are people humorous quip but is actually a theme of can have the best chamber, but still you bringing them roses, perfume and sweet economic development in Olive Branch – advantages of Memphis’ have to have the top level political com- music every day.” in much of DeSoto County, for that matter. mitment. (Companies) don’t want to see transportation assets, it in the form of, ‘Our mayor wanted to be ‘Open for business’ Survival of the fittest here, but he couldn’t. Here’s a little note Upon recently learning that one of Part of the secret lies in what officials while enjoying Northwest he sent.’ Memphis’ health care services companies, describe as the coordination among eco- “It’s so competitive out there, and they McKesson Corp., was pondering a reloca- nomic development players in Mississippi Mississippi’s tax advantages, want people who can speak with finality.” tion away from the city, Wharton paid its – state, county and local. The fruits of that On the home front, Wharton said what local executives a visit. And he encour- teamwork are increasingly presenting a skilled workforce and he’s doing is akin to a partner rekindling aged the Memphis City Council to alter tempting alternative to outside companies the marriage flame with a spouse. the structure of the city’s tax incentive that zero in on the Memphis metro area. abundant land.” “I don’t take roses home as often as I program to pave the way for McKesson to Some of the Mississippi and DeSoto – Desoto County Economic used to,” Wharton said. “But you’ve got to stay. County incentives for new and expanding Development Council Promotional Video take something home. Don’t take anything industry include state income tax credits for granted. HARD SELL Continued on Page 22 for five years of 2.5 percent of payroll with the creation of 20 or more jobs and five- year state income tax credits of $1,000 for each new research and development job created. Companies creating or relocating regional or national headquarters in Mis- sissippi may be eligible for five-year state income tax credits of $1,000 for each new job created and full sales tax exemptions for direct purchases of construction mate- rial, machinery and equipment, according to the DeSoto County Economic Develop- ment Council. One reason Memphis has trouble com- peting with those kinds of incentives is the nature of one of the city’s most prominent incentives – tax freezes. When a local en- tity like the Memphis and Shelby County Industrial Development Board freezes taxes on the value of a piece of land before it’s developed or redeveloped, the actual, full effect of the savings isn’t felt for years. It’s a necessary tool, but local economic development officials say the city needs to add to it to be successful. Memphis’ competitors, in effect, are stepping into the breach with promises of “Here’s what we can do for you today.” This is part of the reason Wharton quickly found himself operating as a veri- table one-man chamber of commerce soon after settling in behind the big desk on the seventh floor of City Hall. Wharton had decided the city’s corporate community needed more tending to from its top politi- cal leadership. It’s a Darwinian fight for survival among cities to attract and keep their businesses large and small, so the mayor almost immediately hit the road as Memphis’ new self-appointed salesman- in-chief. Wharton set about to do what comes naturally to him. He mounted a charm offensive with the goal of luring new busi- ness investment to the city. Earlier this year, the mayor accompa- nied a delegation from the Greater Mem- phis Chamber to New York City and met with Daisuke Koshima, the chairman and CEO of Sharp Electronics Corp. Sharp has a manufacturing facility in Memphis, and Wharton helped encourage the company to keep Memphis on its radar. Wharton also spent time with officials from the Japan External Trade Organiza- tion, or JETRO, a group that promotes Japanese exports and fosters ties with trading partners. And Wharton met with billionaire entertainment mogul Rob- ert Sillerman about Graceland and the 6 Commercial & Industrial REAL ESTATE Special Edition September 2010
Weak Economy Deal ‘Huge’ For Office Presents Myriad Real Estate Market Opportunities ERIC SMITH | The Daily News ANDY CATES Special to The Daily News
You might say I’m bullish on the in- he lease that sent Glankler our average tenant is about 5,000 6070 Poplar. The latter was re- dustrial real estate market in Memphis. Brown PLLC from Down- square feet. To have a transaction cently completed and landed the That’s because every economic cycle town to East Memphis was seven times our average, it’s huge.” law firm of Apperson Crump PLC, brings with it some kind of opportunity one of the most significant Tracy Speake, managing part- which has building signage rights. that should be leveraged in terms of a company’s real commercial real estate ner at Paradigm Realty Advisors Highwoods had some lease estate. dealsT inked all year, even in a city LLC who represented Glankler expirations and some other In the case of today’s sluggish economy, where known for its abundance of large Brown in its move to Triad Centre available space to accommodate property values continue to be in flux, a major opportu- industrial transactions. I, said the firm’s new home will Glankler Brown’s arrival at Triad nity lies in lease renewals. The law firm signed a 10-year provide the perfect balance of Centre I, whose occupancy is a Regardless of whether or not your lease is expiring lease for 32,528 square feet in cost, efficiency and location. moving target, because it’s impos- in the near term, now is the ideal time to assess your Triad Centre I, 6000 Poplar Ave., “We looked at all the major sible to tell what new deals might lease situation and determine if there are opportunities near the bustling intersection of buildings Downtown, all the happen between now and fourth to save money. Poplar and Interstate 240. The major buildings out east,” he said. quarter. Considerations will include renegotiating your lease early, relocating or consolidating space, or expanding your space to better meet current and future needs. Motivated landlords want committed, long-term ten- ants and are offering rent concessions and tenant improvements to keep or attract them. Obviously the expiration of a lease offers the oppor- tunity to negotiate a more cost-effective deal. But even if your lease isn’t set to expire for a couple of years and you’ve stayed current on rent payments, you may be able to negotiate a new lease that offers some savings. From the landlord’s perspective, the ability to extend a lease that isn’t expiring for a couple of years can be of value in ensuring the space stays occupied. Offering to renegotiate and extend your lease may give you the leverage you need to request needed improvements. Consider things like more energy-efficient light- ing, expanded office space/break rooms or painting warehouse walls white, just to name a few. Or you may simply want to negotiate savings on your overall rental rate. If you have more than one location, consolidating into a single facility can offer tremendous benefits. In today’s economy, many companies are consolidating in response to the need to downsize. But consolidation isn’t just for downsizing. TRIAD CENTRE I Bringing all operations together under a single roof Photo: Lance Murphey can offer tremendous economies of scale and more efficient workflows. There will be a number of things lease begins in the fourth quarter, “Two things made Triad stand But Mercer said if occupancy to consider when determining whether to stay in your with Glankler Brown hoping to out. One is, it’s a very large floor with the Glankler deal were existing space or relocate, including any “make good” occupy its new space by Christ- plate, almost 33,000 square feet. counted today the building would commitments contained in your current lease that mas. They don’t build buildings like be at 92.5 percent. could require you to return the property to its original Glankler Brown, whose main that anymore. Glankler Brown, which had condition before vacating. office is at One Commerce Square “Two, when you look at the ef- been looking to consolidate its of- One of the biggest tips I can offer anyone with a Downtown, has had a satellite ficiencies that brings to Glankler, fices into one location for the past commercial real estate lease is to act now – regardless office in Triad Centre I for more it was a no-brainer. At the end of two years, aimed to find a space of where you are in your current lease. Having open and than 20 years, occupying 6,768 the day, there are great synergies that offered both efficiency and frequent communication with your agent and landlord square feet on the first floor. Two for the firm – they have all their economic benefits. Being close to is the key to any transaction. years ago the law firm expanded partners on one floor and the its customer base, much of which By getting on the same side of the table, both par- that lease by about 2,000 square space efficiency is tremendous is in East Memphis, made Triad ties can understand each other’s motivations for the feet. in comparison to operating two Centre I a perfect fit. transaction, whether that is a maturing loan for the Now the firm will take over offices.” “Being at Poplar and 240 – landlord or rent concessions for the tenant. Without the entire fourth floor of Triad Triad Centre I is a what we think is the business solid communication between both sides, opportunities Centre I, serving as an anchor of 132,495-square-foot building for- CBD (central business district) – are lost. sorts for the building – and giv- merly known by its address only is just another testimonial to that,” The most common misconception in a negotiation ing property owner Highwoods until Highwoods began develop- Mercer said. “Our goal is to own is that it has to be confrontational. In this market, we Properties another stellar addition ing a third office tower – dubbed the best buildings and the best need to bring both sides of the table together to sur- to a tenant roll that includes Re- Triad Centre III – at the north- locations. We feel like an existing vive. We are seeing some unprecedented deals in the gions Insurance and Wunderlich west corner of Poplar and Shady customer expanding and want- market right now, but they won’t last forever. Securities. Grove. When that building came ing to stay with Highwoods when “It’s a big deal,” said John online Highwoods decided to they had other options, we’re Andy Cates is vice president of brokerage services at Mercer, Highwoods director of rebrand all three office properties excited and we feel like we’ve Colliers International Memphis. To contact him, visit leasing and the broker who repre- with the Triad moniker. done a good job. We strive to keep www.MemphisIndustrialRealEstate.com sented Highwoods. “I’d say in our Triad Centre II is at 6060 our existing customer base happy Highwoods portfolio in Memphis, Poplar, and Triad Centre III is at and growing.” September 2010 Commercial & Industrial REAL ESTATE Special Edition 7
Local Investors to Buy Facility Design • Civil Engineering • Surveying • One Commerce Square Transportation • Natural / Water Resources
ERIC SMITH | The Daily News - Since 1946 - U.S. Bancorp in August accepted the Stewart Calhoun, executive director Service and Good Work, bid from a local investment group to buy of the southeast capital markets group for One Commerce Square at 40 S. Main St. Cushman & Wakefield of Georgia Inc. in The group, which includes Southland Atlanta, the group working with the bank, Our Foundation, Our Future. Capital president Terry Lynch, his partner said they received numerous bids and had Karl Schledwitz and also Gary Proster- a “strong response.” man, submitted its bid in late July. The acquisition begins a new chap- Lynch on Aug. 4 confirmed the group’s ter for the landmark tower. And landing bid was tentatively accepted. It will Pinnacle would be a much-needed boost commit $25 million to $30 million on the for One Commerce, which has seen two www.pickeringfirm.com building, which includes the purchase high-profile large tenants leave within the price and improvements to the building in last two years. the coming months. The biggest departure occurred when He wasn’t able to disclose the for- SunTrust Banks Inc. – whose logo once mal purchase price, but One Commerce adorned the building – vacated 155,000 Square was listed for $12 million. square feet and moved to East Memphis. The new ownership group’s first goal That sparked financial troubles for the 6775 Lenox Center Court, Suite 300 will be trying to land Pinnacle Airlines previous owner and sent the building into Memphis, TN 38115 Phone: 901.726.0810 Corp.’s corporate headquarters for its foreclosure. anchor tenant. Then, just two months ago, the law “We’re excited about it,” Lynch said firm Glankler Brown PLLC decided to end Offices in Southaven, Jackson, by phone from Denver. “This lets us move its 39,000-square-foot lease at the tower Pearl, and Biloxi, MS forward with our efforts to get Pinnacle also for a move east. Downtown as well as keep them in Mem- Originally developed and built by Na- phis. We certainly wouldn’t want them to tional Bank of Commerce, One Commerce go to Mississippi.” Square, contains 507,568 square feet and Lynch said the group is talking to sits on the southeast corner of South Main other potential big users for space in the Street and Monroe Avenue. The Shelby building, but that comes second to talks County Assessor of Property’s 2010 ap- with Pinnacle, which the investors expect praisal is $13.8 million. to occupy a third of the 500,000-square- The building is owned by Forty South foot building. Main Street Corp., an affiliate of U.S. Ban- Pinnacle, the Memphis-based parent corp, which acquired the original lender, Buried of three regional airlines, plans to move Park National Bank, last year through an its corporate headquarters and is enter- FDIC transaction. in taining an enticing offer from the state of Prior to that deal, in June 2009, Park Mississippi to move to Olive Branch. National had bought the building for $20 Credit Card Debt? But Memphis has stepped up to million on the Shelby County Courthouse match, with Mayor A C Wharton Jr. and steps following a foreclosure. The bank the Center City Commission employing was the sole bidder on the property after an “all hands on deck” campaign to lure the previous owner defaulted on its loan. Over $10,000 in credit card bills? the company Downtown. One Commerce Square’s new owner- Only making the minimum payments? ship group “fast-tracked” a proposal to Pinnacle, including an incentive package One Commerce Square from the CCC and the city. (Formerly known as NBC Building and SunTrust Building) We can get you out of debt quickly Although the building is now leased and managed by Commercial Alliance 40 S. Main St. We can save you thousands of dollars 31 stories Management LLC, Lynch said there will 507,568 square feet be a competitive process for a leasing and We can help you avoid bankruptcy management company moving forward. 1972: “In the next 30 days a lot will happen,” Built by National Bank of Commerce said Lynch, who added that the ownership group will form a single-purpose limited 1984: Not a high-priced consolidation loan or one of liability company for the acquisition. Sold for $46.1 million those consumer credit counseling programs Also, while U.S. Bank and Commercial 1996: Alliance have performed some upgrades, Sold out of foreclosurefor the new owners will make some improve- $21.7 million Call ments to the property, including tenant finishes. 1999: Credit Card relief Sold for $31 million U.S. Bank confirmed it had approved an offer to buy the 500,000-square- 2009: for your FREE consultation foot building at Main Street and Union Sold out of foreclosure for Avenue. Lisa Clark, a spokeswoman for $20 million Minneapolis-based U.S. Bank, said more 2010: 888-534-0344 work on the arrangement still has to be To be sold to local ownership for finished before the deal is final and the estimated $12 million Ad provided by MediaBids.com. 1-866-236-2259. Not available in all states bank can comment. 8 Commercial & Industrial REAL ESTATE Special Edition September 2010
Midtown Target Land intended for retail rebirth is in the crosshairs of city code enforcement
ANDY MEEK | The Daily News
wo years ago, awed silence greeted real estate developer Tom Marsh as he clicked through slides and walked a neighborhood group through his team’s plan. TThat plan was a multimillion-dollar bet on the potential of a large, mixed-use retail center in Midtown Memphis at the site of a blighted, crime-ridden patchwork of run-down homes and apartment build- ings. One slide that particularly pleased the crowd at the Central Gardens As- sociation neighborhood meeting in 2008 showed Canyon Ranch. It was a sprawling beachfront condominium and mixed-use development in Miami Beach, Fla. And it was the product of WSG De- velopment, the same Florida-based team working with Marsh on the Midtown project. Together, they envisioned a simi- larly top-notch retail center for a Mem- phis neighborhood whose residents tire of driving Downtown or farther east for their shopping needs. An alley leads to apartment buildings east of Cleveland Street between Jefferson and Court. “I’d love to do something like this in Photos: Lance Murphey Memphis,” Marsh said, letting the Canyon Ranch imagery sink in. hood Preservation Act as a remedy for Then he slyly added, “But we just conditions at the site shouldn’t come as a couldn’t get that ocean view.” surprise. Fast forward to the same month in It’s the latest in a string of setbacks for 2010. the project, once rumored to have caught Today, the once well-received project the attention of Target as a potential big- remains little more than an idea on paper. box anchor. Its land is home to hazard-prone, graffiti- painted buildings with broken windows Luck of the draw and crumbling brickwork. Dobbins’ plan is also a dramatic ex- And one city official has lost patience. ample of the property’s reversal from the Ernest Dobbins, Memphis’ community site of a wow-inducing real estate deal to enhancement director, earlier this month one that may require a lawsuit to clean up. began talking about possibly using a legal “We can’t wait a few more months,” tool to force the property’s new owner to Dobbins said. “We’ll force them into court make demolition a priority. and let the courts force their hand. Soon after the Memphis City Coun- “I need something on paper, in writing cil’s capital improvement committee set and a timeline of when they’re going to aside money a few weeks ago to pay for do such-and-such, so we can maybe work the city tearing down buildings at the site, together. Every time you look up there’s a Dobbins told The Memphis News how Michael Nguyen, Tyler Tran and Calvin Mai play along Court near North Watkins fire over there – just problems. They told he’d like to do it: by filing a lawsuit under Street, where a number of Hispanic and Vietnamese immigrants live. us they’d demolish the buildings after the a Tennessee statute called the Neighbor- foreclosure.” hood Preservation Act. town interests who own Eastview’s homes which is no less than the community By foreclosure, he was referring to yet and duplexes that sit behind East High standards of the residential property in another recent setback for the project. Enforcement action School. the area.” Lehman Brothers Holdings foreclosed on For the past few years, that law has One of the tenets of the Neighborhood To the naked eye, the Midtown site WSG at the end of March, reclaiming the served as the basis for court actions filed Preservation Act is that if a homeowner’s – concentrated near the intersection of property. on behalf of frustrated tenants and neigh- property loses value because of the blight, Poplar Avenue and Cleveland Street – is After three rounds of a bidding war on borhood residents. They use the suits to they can sue to recover the difference – as the epitome of what that legislation was the Shelby County Courthouse steps, Leh- force landlords to clean up what in many well as force the owner to clean up. meant to combat. man took back the collection of residential cases are properties that have fallen into Rowe’s property slipped in value after Along Watkins, the hodgepodge of and commercial parcels comprising about disrepair. she bought it in 2004, despite making buildings greets passersby with broken five city blocks for $3.15 million. That’s what Memphis homeowner Jan pricey renovations. windows, tall grass and “Keep Out” A fire inspector watched the auction Rowe did in 2008. She lived on the outer The Neighborhood Preservation Act painted on several doors. Boards are scat- unfold. So did a few area residents like edge of Eastview – a dilapidated collec- reads, in part: “The owner of residential tered haphazardly, some leaning against John Buffaloe, eager to see someone turn a tion of homes more than 60 years old with rental property or an unoccupied resi- buildings they presumably came from. page on the development and finally make trash-strewn, overgrown yards. dence shall be required to maintain the The piles of trash and seemingly something happen. Rowe filed a Neighborhood Preserva- exterior of such property and the lot on bombed-out shells of buildings give Mark Adams, an inspector from the tion Act suit in Shelby County Chancery which the residential rental property or the area a seedy vibe. All of that is why Fire Prevention Bureau in the city’s Fire Court against the landlords and out-of- unoccupied residence is located at a level Dobbins’ consideration of the Neighbor- Services Division, recently issued a cita- September 2010 Commercial & Industrial REAL ESTATE Special Edition 9
Real Estate IN THE NEWS
WelshInvest Buys Two Sites In Airport Industrial Park
Two limited liability companies affili- ated with Minnesota-based WelshInvest have bought property in Airport Industrial Park from Principal Life Insurance Co. for $20.6 million. Exeter 4460 Holmes LLC bought property at 4460 E. Holmes Road for $11.5 million. That site includes a 449,600-square-foot warehouse built in 1998 on 21 acres on the north side of East Holmes east of Malone Road, according to the Shelby County Assessor of Property, whose 2010 appraisal is $14.6 million. Exeter 4495 Citation LLC bought property at 4495 Citation Drive for $9.1 million. That property includes a 366,800-square-foot warehouse built in 1997 on 33.4 acres northeast of the 4460 E. Holmes site, according to the assessor. The 2010 appraisal is $11.9 million. A vacant, boarded up apartment building near Jefferson and North Watkins is one of numerous abandoned buildings in the area. The city/county Industrial Develop- ment Board quitclaimed both sites to Principal Life Insurance Co. in 2006. tion to WSG for code violations at the kets and arguably worsened what already wanted to be stuck holding. WelshInvest is an affiliate of Welsh site. was a painful recession. Lehman was already stuck with Cos. LLC. Founded in 1977, the parent After the foreclosure, he mailed And it happened only four months plenty of it. A loan portfolio stuffed to company handles many aspects of com- Lehman’s local representative, Glankler after Marsh walked the Central Gardens the gills with real estate debt – much mercial real estate, including brokerage, Brown attorney Randall Womack, a copy residents through his slide presentation. of which probably shouldn’t have been property management, development and of the inspection report with a court date At that point, the Midtown Memphis originated in the first place – had a hand financing, among other things. WelshIn- for earlier this month. Planned Development had already been in sinking the company. vest doesn’t own any other properties in Around the same time, Adams e- years in the making. Land assembly had All of those factors added up to trans- Tennessee, according to a property map been under way for about four years. form any tailwinds behind the Midtown on the company’s website. WSG bought most of its parcels, project into stiff, paralyzing headwinds. Welsh Property Trust Inc. announced all of which are south of Poplar and on The kind that make it seem almost im- July 1 it was withdrawing plans for an “Every time you look up both sides of Watkins, in May 2007 in an possible to take a step forward. initial public offering, citing unfavorable $11.6 million deal that comprised several Midtown resident and real estate market conditions. The company filed there’s a fire over there – just transactions. agent Joe Spake said his biggest disap- registration in March for a proposed IPO A few months before the Central pointment about the project is the same “in an effort to source lower-priced capital problems. They told us they’d Gardens meeting, the developers filed an one bugging Dobbins – that the land still to finance the purchase of additional demolish the buildings after the official plan for the project that showed has not been cleared. real estate,” according to a statement on small and large retail shops, restaurants “I think a cleared and grassy site Welsh’s website. foreclosure.” and medical offices. would be more aesthetically pleasing, They wanted approval to permit and much more attractive to potential – Ernest Dobbins, Community enhancement apartments or condominiums above the developers and/or buyers, than the cur- Shops at Rock Creek director, City of Memphis retail stores. rent blighted mess,” Spake said. “To me, Sell for $4.4 Million Area residents probed Marsh for dealing with blight issues in general is details. He was as specific as he could be more important to Midtown than having The Shops at Rock Creek, a two-build- mailed a few officials in the community in describing what the tenant mix at the a big box department store.” ing, 61,000-square-foot strip shopping enhancement division: “Representatives finished retail center might look like. Shawn Massey, also a partner at The center built on two parcels in 2006, has from Lehman Brothers Holdings Inc. are “Go out to the Wolfchase mall and Shopping Center Group, said the typical sold for $4.4 million. to visit Memphis in the near future, and look across the street at the shopping rent paid in the Midtown area will make The buyers are Southstar Holdings Mr. Womack will arrange for me to meet center that has Best Buy and some other it hard to justify new construction for a UNCC LLC, with 65 percent interest, with them. It is also their intention to major tenants,” he told the crowd, refer- while. and RC Memphis LLC, with 35 percent meet with other city officials while they ring to the Wolf Creek retail center that And he said whoever ultimately de- interest. The seller is Wells Fargo Bank are here.” includes Sports Authority and Target, velops the site needs to “understand the NA, acting as trustee for Morgan Stanley At press time, there was still no indi- among other retailers. “Some of those real demographics of the area” for any Capital I Inc. The buyers financed the cation when that meeting would happen. will be here.” project to work. purchase with a $3.4 million loan through And for now, the project is more or less Marsh said he expected the develop- One of the most relevant symbols First Tennessee Bank NA. on life support. ment to have an economic impact on the of the Midtown project’s history can be The center sits on 5.5 acres at the WSG is out of the picture, apparently area of about $150 million. found in the form of an advertisement southwest corner of North Germantown a result of Lehman exerting pressure on A lot, of course, has happened since posted along Cleveland near a conve- Parkway and Rockcreek Parkway. The WSG elsewhere in the country. then. nience store where a crowd of people Shelby County Assessor’s combined 2010 As Lehman’s remaining corporate The state and local economies are loitered during a recent afternoon. appraisal of the two parcels is $6.8 million. entity works to shrink and ultimately get only now recovering from a recession The sign stands a few yards away The center was one of several retail rid of assets in the company’s giant loan that was still months away from hitting from the blight where a development sites sold at a foreclosure sale in October. book, some borrowers are effectively its peak when the Central Gardens resi- team once saw dollar signs and a bank- That sale was because the owners of The being told time has run out for their dents got a taste of what was supposedly rupt lender now holds the keys to the Shops at Rock Creek, Kapree Rock Creek projects. on the way to Midtown. future. LLC and Memphis Rock Creek LLC, Lehman has filed several foreclosure In the recent past, Target cut its new It’s an advertisement promoting the defaulted on an $11.7 million loan dated actions against WSG in multiple states. store openings by as much as 70 percent, Tennessee lottery. November 2006. Following that sale, Lehman itself filed for Chapter 11 said Danny Buring, a partner at The That sign’s theme, of course, is luck Centerline Servicing Inc., the properties’ bankruptcy protection in September Shopping Center Group. – the one thing that’s eluded the project receiver, contracted the Memphis office 2008. That one act was responsible for a Credit dried up. Commercial real until now, and the thing it needs most of of Colliers International to lease, manage panic that exploded through world mar- estate became the hot potato no bank all to survive. and sell the properties. 10 Commercial & Industrial REAL ESTATE Special Edition September 2010
Cautious Optimism Industrial leaders hopeful for market turnaround
ERIC SMITH | The Daily News
ndustrial real estate, which thrives whenever companies choose one of the city’s numerous warehouses and dis- tribution centers to store their goods, plays a significant role in Memphis’ economy.I So as the recession improves and con- sumerism rebounds, the industrial sector is bound to show improvement as will the city’s financial climate. Already, the city is seeing its fortunes change as highway access improves, as railroads beef up their operations here and as Memphis International Airport – thanks to FedEx – continues to rank as the world’s busiest cargo airport. But while the most recent industrial figures show an uptick in leasing and sales activity as businesses prepare for the economy to regain its health, Memphis has a long way to go before the market is fully recovered. On the sales side, Shelby County saw just 69 industrial sales during a recent 12-month period, a 20 percent decline from 86 the previous period and a 51 per- cent decline from 140 the period before Sherry Taylor walks by a vacant industrial warehouse in the Southridge complex at 6269 Shelby Drive. that, according to the latest data from real Photos: Lance Murphey estate information company Chandler Reports, www.chandlerreports.com. The largest industrial deal of the affiliated with Minnesota-based WelshIn- (For this report, industrial sales mean past year occurred in December when vest bought property in Airport Industrial any transaction involving a warehouse, American Snuff Co. LLC – then known Park from Principal Life Insurance Co. for Notable Leases office showroom, sales and service center, as Conwood Co. LLC – bought the a combined $20.6 million. Technicolor SA Exeter 4460 Holmes LLC bought truck terminal, aircraft hangar or airport.) 787,500-square-foot building at 5106 Summit I: 580,131 square feet On the sales side, deals in that same Tradeport Drive for $19.3 million. property at 4460 E. Holmes Road for $11.5 Summit II: 789,291 square feet 12-month period averaged $1 million, up The next biggest deal occurred when million. And Exeter 4495 Citation LLC Siemens AG 32 percent from $758,554 in the previous Freehold, N.J.-based Monmouth Real bought property at 4495 Citation Drive for Airways Distribution Center period but down 41 percent from $1.7 mil- Estate Investment Corp. bought the $9.1 million. 619,000 square feet lion the period before that. 449,262-square-foot, Class A warehouse Anther notable transaction in- Solae Inc. Also, the total sales volume of $69.3 at 5025 Tuggle Road for $14.6 million. The cludes Genuine Parts Co. buying the Deltapoint Business Park million marked a 6 percent improvement facility, which recently underwent a $1 128,481-square-foot auto parts distribution 472,000 square feet from $65.2 million in the previous period million expansion, is 100 percent leased by center at 7415 U.S. 64 for $10.2 million. Its but a 70 percent decline from $234.2 mil- FedEx Global Supply Chain Services Inc. auto distributor brand NAPA Auto Parts Fiskars Corp. Southaven Distribution Center lion the period before that. A pair of limited liability companies already was housed there. 260,000 square feet Notable Sales American Snuff Co. 5106 Tradeport Drive 787,500 square feet $19.3 million Monmouth Real Estate 5025 Tuggle Road 619,000 square feet $14.6 million Welshinvest 4460 E. Holmes Road 449,600 square feet $11.5 million Genuine Parts Co. 7415 U.S. 64 128,481 square feet $10.2 million Welshinvest 4495 Citation Drive 366,800 Square Feet $9.1 million Chickasaw Distribution Center at Hickory Hill Road and Freeport Drive is home to a number of large industrial warehouses. September 2010 Commercial & Industrial REAL ESTATE Special Edition 11
On the leasing side, the local market saw a handful of small and large deals, highlighted by Technicolor SA signing Fayette Rail Yard Expected to a pair of leases, one for 580,131 square feet in Summit I and another for 789,291 square feet in Summit II. Also, Siemens AG signed a Spark Real Estate Activity 619,000-square-foot lease in Airways Distribution Center and Solae Inc. signed a 472,000-square-foot lease in Deltapoint ERIC SMITH | The Daily News Business Park. Andy Cates, vice president of broker- age services for Colliers International; see story Page 14), said he is pleased with on Culbreath has about 200 acres dustrial or light industrial users, whether industrially. what he is seeing in light of the ongoing for sale in Chickasaw Trails In- it’s to build a warehouse or showroom or “Clearly it’s a huge bonanza for Fay- economic slump. dustrial Park, a 2,600-acre site in manufacturing plant. Citing the recently ette County, Shelby County and Marshall “The market is very active right now,” Marshall County, Miss., but so far built 700,000-square-foot Exel distribu- County.” he said. “I can’t say there’s been a ton of no one has shown any interest in tion center in Chickasaw Trails as an growth in the rental rates, but there’s been buyingD the land. example of how the park already has A place at the table a lot of activity in clients looking for space “My phone isn’t ringing; it hasn’t attracted such users, Stover said the rail In light of the coming yard, Cul- and some deals are actually starting to get rang all year,” said Culbreath, who lives facility can spark additional ancillary breath said he will ramp up the market- signed.” in Germantown. “I haven’t got a single activity. ing of his land, offering to sell it in tracts Those deals, many of which happened prospect right now and my land is ready “It ought to generate some distribu- from two to 200 acres for a variety of us- in second quarter, are a breath of fresh air to sell.” tion-type projects and other facilities ers. When the economy picks up, he even following the previous quarter’s leasing With the news last summer that that support the intermodal yard,” Stover plans on building a couple of speculative statistics, which saw a negative absorp- Norfolk Southern Corp. will build a $112 said. buildings from 10,000 square feet and up. tion of 186,810 square feet, according to million, 570-acre intermodal terminal But Jim Mercer, senior vice presi- Culbreath also has built a road CB Richard Ellis Memphis’ most recent across the Tennessee state line in Fayette dent at CB Richard Ellis Memphis, is through the middle of his land, which industrial “MarketView.” County to the north, Culbreath hopes leery of saying industrial real estate will ultimately will continue north and meet Jim Mercer, executive vice president that will change. of industrial brokerage services for CBRE, He’s hopeful said the local market is “faring pretty well” because Chickasaw thanks to those large leases. Trails is bounded by “Since the beginning of the year, we’ve U.S. 72, the highway seen 4.5 million square feet of leasing ac- that runs east out of tivity and currently, there’s approximately Collierville through 5 million square feet of active deals in the North Mississippi. marketplace looking for space,” Mer- An access road from cer said. “Some of this activity has been the Norfolk South- renewals and tenants moving within the ern yard – where market but a significant amount has been containers of cargo new business to the area.” will be transferred Dick Faulk, broker at Crump Com- between trucks and mercial LLC, is one of many practitioners trains – is slated to who used the term “cautious optimism” connect with 72, when describing the industrial sector. He bringing thousands likened the market to the Tour de France of trucks past the bicycle race, which is filled with easy legs park and perhaps and challenging legs, mountainous climbs bringing a windfall and sprints. to area real estate. “We’re kind of in the bottom portion of Specifically, the the course and we’re in the smooth track,” rail yard, set to open he said. “We’ve still got all the uphill.” in 2012, might ben- Faulk pointed out that the large deals efit Chickasaw Trails have been tempered by a void in the much the same way 50,000- and 200,000-square-foot range– that FedEx helps WCA Development Co. works on a heavy industrial road that will link the Norfolk Southern intermodal yard the “stuff in between the ears,” Faulk said real estate in the to the outlying area. Commercial real estate in the entire region stands to benefit from the yard. – where activity hasn’t been strong. airport area as busi- Photo: Lance Murphey On top of that, he added, lending is nesses look to set up tight as companies struggled to get financ- shop close to the company’s hub. immediately benefit from the Norfolk 72 where it intersects with Tenn. 196, ing and often don’t have the equity needed “I hope it will really help us,” Southern news because of one factor – which should help connect users on his for a purchase or move. Culbreath said of the intermodal yard. the economy. property with points everywhere. “I think we’ve been fortunate as a mar- “Marshall County is real excited about it, “It would have been a different “I think it’s going to help everybody,” ket. There were some major deals made and the landowners around me are real answer 18 months ago or 24 months ago Culbreath said. the latter part of last year, which took a lot excited about it. We feel like it’s going to than it is today,” Mercer said. “Any spec Plenty of others remain hopeful the of inventory off the table, and that helped help some. developer out there now, it’s so difficult yard will aid real estate development, the numbers tremendously,” Faulk said. “I don’t know how much, for sure, I for them to get projects approved and from Chickasaw Trails north to the “But still we have that unsettling feel- guess a lot of it depends on the activity financed, so for a developer to go out and Piperton business park, and elsewhere in ing. This recession has gone so deep and it’s going to create there.” buy a bunch of acreage right now, it’s Fayette County and nearby Memphis. so long, that you just can’t turn on a light very difficult, if not impossible, for them “When we get this intermodal yard switch and all of a sudden everything’s Wait and see to do.” completed, it’s going to attract, I believe, fine. We’re in better shape than we were As a consultant for the Marshall He did say, however, that once the other business and other commercial 12 months ago, but we’re not out of the County Industrial Development Author- financial climate improves, places like facilities to the area – light commercial woods yet.” ity, Del Stover is firmly in Culbreath’s Chickasaw Trails stand to benefit. He and light industrial,” said state Rep. But Faulk, like most brokers, believes camp about Chickasaw Trails. Not only also projects that the asking prices likely Barrett Rich, R-Somerville. “During this Memphis will rebound in due time, even if is the park close to the Norfolk Southern will increase, although what land actu- time, when we’ve been in this economic no one knows for sure when that happens. site, but it is zoned industrial with a full ally sells for might fall short of that mark. downturn, this sort of stalemate, it’s go- Simply put, the city’s natural distribu- infrastructure of utilities. Also, it will “There’s going to be a need for ing to bring jobs to the area, naturally. It’s tion capabilities coupled with its myriad have direct access to what will soon be northern Mississippi industrial sites,” kind of like lighting a fire to dried grass. transportation assets bode well for the Interstates 269 and 22. Mercer said. “So, I think Chickasaw It’s going to catch everything else on fire industrial market. Stover envisions the park drawing in- Trails and Marshall County … will grow around it. That is a very good thing.” 12 Commercial & Industrial REAL ESTATE Special Edition September 2010
Real Estate Downtown’s City Market Only IN THE NEWS U of M-Area Highland Row Months Away from Opening Project Still in the Works Lifestyle center developer Poag & McEwen remains committed to Highland ANDY MEEK | The Daily News Row, the mixed-use development the company is pursuing next to the Univer- sity of Memphis, company representatives said recently. he store’s motto is “e-squared – eat breakfast, lunch and dinner featuring on expenses is by having the managing Poag & McEwen president and CEO and enjoy.” items prepared each morning will offer a partners put in plenty of elbow grease to Josh Poag said the company is still getting Its look and feel will be that of reasonably priced restaurant experience. cut down on labor costs. financing in place but anticipates starting an Old World market offering cus- And the look of the store – which will City Market will serve coffee, tea, construction around the end of the year or tomers freshly prepared food with feature exposed bricks, tall ceiling beams juice and soda throughout the day. A early 2011, with a grand opening in 2012. aT local and international flair, as well as and concrete floors – will contribute to a rotating menu will feature sandwiches, Poag representatives also said the grocery staples such as milk and eggs. cozy, neighborhood feel. soups, salads, drinks and desserts. company would like to put its corporate Prices for the headquarters there. deli and prepared The company has pursued the project food items will range for a few years, though progress stalled from $7 to $9 for amid the recession. Some features of the sandwiches, $4 to $6 development also have changed. for breakfast items As of now, for example, Barnes & and $3 to $5 for spe- Noble will not be operating the Univer- cialty coffee drinks sity of Memphis bookstore that will be an and smoothies. anchor of the development. The U of M A coffee sta- has put out a request for proposals from tion will include a companies that could operate the store, mix of local brands and Poag said Barnes & Noble could still such as Ugly Mug. end up a successful re-bidder if it chose. And grocery items Poag said the company has been in will include oils discussion with a variety of local Memphis and sauces, spreads, retailers for space in the development, and cheeses, meats, it’s also offered space for the city to use as pasta, drinks, choco- a police substation. lates and more. Cost is the reason another planned The grocery’s Poag & McEwen project, an expansion of intent to serve up a Saddle Creek in Germantown, has stalled. daily special of con- “That one (at Saddle Creek) is five venience and quality years away, at the earliest,” Poag said. Pedestrians pass the empty windows on the ground floor of Radio Center Flats, the apartment develop- at a key intersection ment at 66 S. Main St., where City Market Groceries & Deli, an upscale grocery and deli, is planned. The Downtown drove grocery has signed a five-year lease for about 2,880 square feet plus an outdoor patio, according to the the CCDC to sign off Methodist Le Bonheur Center City Commission. on the loan. Buys Sutherland Clinic Photos: Lance Murphey And the partners are now ready to put Methodist Le Bonheur Healthcare has And thanks to a $40,000 retail forgiv- Like Miss Cordelia’s, another their skill sets to work getting it off the bought Sutherland Cardiology Clinic’s able loan awarded by the Center City similarly sized grocery Downtown, the ground. property at 7460 Wolf River Blvd. in Ger- Development Corp. earlier this year, partners behind City Market likely will Hamida Mandani recently got her mantown in conjunction with Sutherland the way is now paved for City Market rely to some degree on social media like master’s in business administration becoming a part of Methodist Le Bonheur. Groceries & Deli to open Downtown. Facebook as a low-cost promotional tool. degree from the University of North Methodist, working under the name The most recent plans call for the store Harbor Town’s Miss Cordelia’s – named Alabama in Florence. Methodist Healthcare-Memphis Hospi- to open in November. after its developer, Henry Turley’s, late “We think we’ll bring a quality shop- tals, bought the site for $13.3 million from The grocery is being built on the mother – has been touting soups and ping and restaurant experience,” she The Sutherland Cardiology Clinic Rental ground floor of Radio Center Flats, the other specials of the day to the grocery’s said. Co. LLC. Though the transaction is dated apartment development at 66 S. Main St., Facebook friends as a magnet to draw July 1 – the same day Sutherland officially where it will be in a position to capture customers into the store. became a part of Methodist – papers were strong business from Downtown resi- And the very existence of that Mud filed with the Shelby County Register of dents and workers. Island competitor is one reason City Deeds’ office in August. It’s also not far from major land- Market may have found a sweet spot. The property is a 50,534-square-foot marks like The Peabody hotel, so the “They’ll offer different products that medical office building built in 2007 on 4.3 owners have positioned it to be a hit Downtown folks may have to otherwise acres on the north side of Wolf River Bou- among tourists and Downtown visitors drive to Whole Foods or Miss Cordelia’s levard between the dead end of Riverdale too. The market signed a five-year lease for,” said Lisa Brumleve, the Center Road to the west and South Germantown in August for the 2,880-square-foot space City Commission’s manager of business Road to the east. Sutherland bought the at Radio Center Flats. recruitment and retention. property – at the time just vacant land – “It’s a much-needed store, and there’s The City Market partners also are for $2.5 million in April 2006. The Shelby great potential,” said Hamida Pirani planning to apply for a $30,000 façade County Assessor’s 2010 appraisal is $9.4 Mandani, who will be a managing part- grant from the CCC to make improve- million. ner of the store along with her husband, ments to the space. Though Sutherland’s 17 doctors and Sunny. nearly 100 employees are now Methodist Convenience approved employees, Sutherland will continue to Neighborhood niche Thanks to a plan the CCC’s business operate out of the Wolf River Boulevard They’ve drawn up extensive and consultant reviewed and found to be facility and satellite clinics throughout detailed plans for what looks to be a appropriately conservative, the partners the region, and will continue to work with small, boutique venture that provides anticipate turning a profit starting in other Memphis hospitals, according to a the convenience of a major grocery. year one and never dipping into the red statement from Methodist Le Bonheur An outdoor patio and limited menu for after that. One way they’ll hold the line Healthcare. September 2010 Commercial & Industrial REAL ESTATE Special Edition 13
Highwoods Buys Crescent Center for $52.6M
ERIC SMITH | The Daily News
ighwoods Properties Inc. bolstered vard paid $63 million for its already strong position along the same building. the Poplar Avenue office corridor The only other sale to by adding an impressive asset. exceed $50 million in the The Raleigh, N.C.-based com- past decade also occurred Hpany paid $52.6 million for the Crescent in 2005 when Lakha Center, a landmark office building at 6075 Properties–Memphis Poplar Ave. in East Memphis. LLC paid $57 million for Highwoods bought the Class A, Cross Creek shopping 336,000-square-foot office tower from center on Riverdale Road. IPC Crescent Center LLC, an affiliate of As for the Crescent Behringer Harvard. Center, the building is Built in 1986, the nine-story Crescent 89.5 percent leased with Center sits on 10.18 acres at the southwest what Guinn called a corner of Poplar Avenue and Ridgeway “great roster of compa- Road, near Interstate 240. Its 2010 ap- nies.” praised value is $58.5 million, according to “It’s a stable asset,” he the Shelby County Assessor of Property. said. “It adds to our port- Crescent Center The Crescent Center purchase increas- folio both in Memphis Photo: Lance Murphey es Highwoods’ East Memphis portfolio to and corporate.” 10 office buildings and 1.3 million square Guinn called the Crescent Center a and institute a recycling program in the cations for Highwoods, said called the feet, and its total local portfolio to 20 of- “diamond that needs a little bit of polish- building. acquisition a big step for Highwoods to fice buildings and 2.1 million square feet. ing,” including some “near-term improve- Highwoods will handle management solidify its position in the area. “It fits into our portfolio very nicely,” ments” to the building. of the facility as well. “Long term we’re bullish on Mem- said Steve Guinn, vice president of High- Most of the enhancements won’t be The purchase comes after Highwoods phis,” she said. “This is a great building woods Properties and the company’s top dramatic but more cosmetic, he said, with opened the Class A office building Triad and a great location. It enhances our ranking Memphis official. “We’re concen- an emphasis on small improvements to Centre III, a LEED-certified facility, at position in Memphis and on the Poplar trated on the Poplar corridor, east of 240. the property’s three-level garage, elevator the northwest corner of Poplar and Shady corridor.” Crescent Center obviously is a significant lobbies, and landscaping. Grove. Highwoods has 10 offices, including building. It’s one of the more iconic build- Highwoods plans to perform such “We’ve made a pretty big investment in Memphis and Nashville. The local division ings in Memphis.” improvements as a “lighting retrofit” and that corner in the last 24 months,” Guinn employs 18 and expects to hire three more The sale also marked the largest com- garage rewiring to green the building and said. people as a result of this latest portfolio mercial real estate transaction in Shelby improve its energy efficiency. The com- Tabitha Zane, vice president of inves- addition, said company spokesperson County since 2005 when Behringer Har- pany also plans to freshen up the lobby tor relations and corporate communi- Kelly Maicon.
Female CRE Pros Have Local Home
TOM WILEMON | The Daily News
arol Slone knows it takes network- Chapters in larger cities typically have at-large, they contacted me.” helped the Memphis group get started. ing to secure new clients and to hundreds of members, but right now Gail Ayers, the chief executive officer The Memphis chapter helped co- close deals. Memphis has about 15. of CREW Network, is a Tennessee native sponsor a recent seminar at the Clark That’s why she and a handful “We expect to do nothing but grow from Greenville. She’s looking to Memphis Tower in East Memphis. “When Great of other Memphis businesswomen from this point forward,” said Slone. to inspire chapters in Nashville, Knoxville Women Come Together, Great Things formedC the state’s first Commercial Real The chapter was formed in 2007 and and other areas of the state. Can Happen” was held in conjunction Estate Women chapter. had a membership of 25 before the severe “There is never a cold call in CREW,” with the Memphis chapter of the National “This is the only organization out there economic downturn. Ayers said. “We can do the deal from A to Association of Women Business Owners that is devoted to women in commercial Slone, who works as a vice president Z, including zoning and appraising. We and Women’s Business Enterprise Council real estate,” said Slone, president of the of First American Title National Commer- even have a subset of members who are South. CREW chapter in Memphis. “Our whole cial Services in Memphis, said she knows specialists in appraising salt domes and Memphis CREW has launched a web- cause is to offer women an opportunity to the $280 membership is a good return railroad right-of-ways. There is probably site, www.crewmemphis.org, with details be all they can be to their fullest potential.” investment. She was an at-large member nothing that touches commercial real about the organization and membership CREW has 71 chapters across the of the organization before Memphis had a estate that we don’t have.” requirements. United States and Canada. Its members chapter. Total membership in the organization, The chapter is also open to accoun- include brokers, lawyers, engineers, insur- “There were times when a CREW which was founded in 1979, has surpassed tants, public relations experts, lenders and ance agents, appraisers and other profes- member from another part of the country 8,000. The closest chapters to Memphis publishers, as long as they have substantial sionals who derive their incomes from needed work done here in this market,” are in St. Louis and Birmingham, Ala. involvement in commercial real estate. commercial real estate. she said. “Because I was a CREW member Members of the Birmingham chapter have And men are also welcome. 14 Commercial & Industrial REAL ESTATE Special Edition September 2010
Colliers Firm Dollar Signs Follow Dollar Stores Rebrands After ERIC SMITH | The Daily News Joint Venture, Remains Local
ERIC SMITH | The Daily News
One of the oldest and most respected commercial and industrial real estate firms in town saw a name change this past summer. Colliers Wilkinson Snowden, the bro- kerage services company founded in 1946 by Bob Snowden and Russell Wilkinson, is now known simply as Colliers Interna- tional. And its subsidiary real estate manage- ment firm, Colliers Management, has become Colliers Management Services– Memphis LLC. The name change derives from the companies’ parent, Seattle-based Col- liers International, and First Service Real Estate Advisors joining forces earlier this year. The branch still will be locally owned with Gene Woods, Andy Cates, Brad Kornegay, Bayard Snowden and Dan A Dollar Tree store is located at 3430 Plaza in Poplar Plaza. Wilkinson continuing to serve as principal Photos: Lance Murphey stakeholders. (Snowden is the son of company co- erhaps the most telling CRE out too. Dollar stores aren’t just selling seen lease rates sink to $10.70 per foot founder Bob Snowden and Wilkinson is trend that has emerged of late tape and party supplies. They sell food while vacancy sits at 12.6 percent. The the nephew of company co-founder Rus- was underscored by Scott Barton and drinks, health and beauty supplies. market appears at or near the bottom, sell Wilkinson.) of CB Richard Ellis-Memphis at Some people are spending more and and plenty of questions remain about Formally, the Memphis branch of this year’s Commercial Property more of their grocery budgets in the dol- when recovery will begin. Colliers International will be Wilkinson ForecastP Summit. lar stores to get as much as they can for The city’s biggest problem, Barton and Snowden Inc., doing business as Col- As he noted, stores with “dollar” in their money.” said, is it is “over-retailed,” meaning liers International, said Woods, company their names – e.g., Dollar General, Dollar Barton said the retail market has Memphians have too much retail space president. Tree, Family Dollar – are per capita. The national And the rebrand will allow the firm to thriving. Despite a dearth average is 23 square better tap into the resources of its parent of overall construction feet of retail per person, company, the third-largest CRE firm in the throughout town, those while in Memphis the world with 15,000 professionals operating stores are being erected average is 35 square feet. out of more than 480 offices in 61 coun- at an impressive clip. That can be blamed tries. In a single month of on the way Memphis has “I think what you’re going to see is early 2010, builders have grown. With the popula- more of a seamless organization through- filed permits for a new tion remaining about out the country and internationally – Dollar General near the the same, but spread out Europe and Southeast Asia,” Woods said. University of Memphis to the outlying areas, “That will not detract from the fact that and a new Family Dollar retail square footage has the Memphis office of Colliers Interna- near Bartlett, two of the increased in the newly tional is still locally owned and very en- only retail offerings being developed areas while trepreneurial. We will continue to operate brought to market. serving roughly the same that way, as we’ve always done. Our goal “Consumer down- number of people. and our aim is to create a very positive and shifting is alive and well,” “That model, I think, very memorable experience with every Barton said. “People A Dollar General store under construction at 1324 Getwell Road. is broken,” Barton said. client and customer with whom we come really are adjusting their “And it’s not just broken in contact.” habits and trying to be a little in Shelby County, it’s broken And being affiliated more closely with bit more effective with their everywhere, at least for a the Colliers International brand will let retail dollar.” while. I’m not saying it didn’t the local branch better compete with That means people who work well, even here, for a other large CRE firms in town. used to shop at Neiman Mar- period of time. But not any Julie Lunn, managing partner with the cus are shopping at Macy’s. longer.” marketing and PR firm RedRover, which The people who used to shop If the retail market hopes handles some of Colliers’ communications at Macy’s are shopping at to rebound, there can’t be duties, said having additional platforms Target. The people who used any new construction, and for the firm’s brokers will be critical in the to shop at Target are shop- landlords must be willing to ever-changing world of real estate. ping at Walmart. And so on, offer lower rents to improve Colliers will have the “resources of a down the line. cash flow. And all retailers global company while keeping the entre- “Dollar stores are viewed will need to be wary of the preneurial spirit and making decisions at as the pinnacle for stretch- Marketplace Development LLC has paid $350,000 for a 0.93- discount stores whose for- the local level,” she said. acre parcel at 1745 Sycamore View Road near Bartlett, where ing your dollar,” Barton it developed a Family Dollar store. Here, a car wash at the site tunes are inversely related to “That’s a great message that we want said. “They have branched was demolished. the overall economy. to have out there,” Lunn said. September 2010 Commercial & Industrial REAL ESTATE Special Edition 15
Raleigh-Bartlett Strip Center Fills Back Up
ERIC SMITH | The Daily News
RIX Capital Markets, a Dallas- on its loan, the company was contracted “All of a sudden, people are calling now. based company operating as by the lender, U.S. Bank, to reposition the Everybody wants to be there now that the special servicer for a North property. “It already looks so much the center looks better and has a lot more Memphis retail center, is working Now ORIX is hoping to improve on the activity. We’re pleased.” to quickly turn around a property Village on the Pike’s 79 percent occupancy better than it did before. It’s Barton called ORIX a “great landlord” Oonce headed for foreclosure. with hopes of selling to a long-term owner. to work with, citing CBRE’s partnering remarkable.” Village on the Pike at 2974 Covington “We try to maximize the recovery with the firm on the Summer Oaks center Pike between Raleigh and Bartlett already of the trust relative to the value of the – Scott Barton, senior vice president for at Summer and Waring roads, where a big is on the upswing thanks to a new owner loan that it had,” Moran said. “Our plan CBRE Memphis’ retail division box was converted to a well-performing in ORIX and new leasing and management is to lease it up, and once we think we’ve asset. agent in CB Richard Ellis Memphis. maximized value it would be to sell the One advantage for Village on the Pike Built in 1987, the 37,606-square-foot property.” is its location on a hard corner and its Village on the Pike sits on the southeast The company has gotten off to a good Only a few bays remain in the center, proximity to a pair of competing retail corner of Covington Pike and Stage Road. start now that CBRE has landed Dollar ranging from 1,400 to 8,193 square feet. drug stores. Walgreens is on the northeast The center suffered when Walgreens General to fill the old Walgreens space. Scott Barton, senior vice president for corner and CVS is building a pharmacy on left the anchor space and moved across The discount retailer, which is occupy- CBRE Memphis’ retail services division, the southwest corner. the street, and also when the Dixie Queen ing 11,132 square feet, opened in spring. called Village on the Pike a “success story” Those factors, coupled with the new closed its restaurant on an outparcel. It joined Gentle Care Animal Hospital, because of how quickly leasing has picked owner upgrades, should help the intersec- ORIX in early March formally took Bob’s Tropicals (a tropical fish store) and up since ORIX took over. tion’s traffic and therefore the center’s ownership of the center in a $500,000 Subway in the center. Also, a local chicken One advantage has been ORIX’s com- occupancy moving forward. substitute trustee’s deed. The center has and fish restaurant will soon occupy the mitment to making improvements to the “It is a strong commercial location, al- an appraised value of $2.7 million, ac- old Dixie Queen. property, from replacing the roof to paint- ways has been,” Barton said. “It may have cording to the Shelby County Assessor of DSI Renal Inc., a Nashville-based ing the building. Moran said the company experienced some level of decline over the Property’s 2009 information. provider of dialysis clinics, has signed a will begin upgrading the parking lot this last five to 10 years, but really all it took Mike Moran, CEO of ORIX Capital 4,400-square foot lease for the center and month. was a little TLC and couple of dominoes Markets, said that when the previous own- should be in place this summer. It will be “It already looks so much better than to fall in the right direction and now we’ve er, CCM #1 Ltd. of Memphis, defaulted the company’s eighth Memphis location. it did before. It’s remarkable,” Barton said. been able to turn things around.” 16 Commercial & Industrial REAL ESTATE Special Edition September 2010
Real Estate IN THE NEWS
Two More Tenants Testa Buys Appling Land Join Ridgeway Trace For Strayer Campus
Weingarten Realty Investors has Testa Cos. has closed on the land in announced the addition of two tenants – Appling Farms Business Park where it will Yogurt Mountain and SportClips – to its build a campus for Strayer University. Ridgeway Trace retail center at Poplar Operating in the transaction as Se $1,000 Avenue and Interstate 240. Testa Memphis LLC, the Cuyahoga Falls, Yogurt Mountain will lease 1,500 Ohio-based commercial builder paid One business trip (airfare, car rental and hotel) square feet and SportClips will lease 1,125 $603,788 for the parcel from Belz Invest- square feet, officials with Houston-based ment Co. LP. Weingarten said in a release. The land is part of a 31.45-acre vacant This will be the first location in Mem- lot that Belz subdivided when it devel- phis and third location overall for Yogurt oped Appling Farms, a mixed-use de- Mountain, whose other two yogurt shops velopment along Interstate 40 between are in Birmingham and Tuscaloosa, Ala. Whitten and Appling roads. Justin Robertson handled lease ne- The formal address of the entire parcel gotiations on behalf of Weingarten, and is 2209 Appling Road, and it has an ap- Danny Buring of The Shopping Center praised value of $3 million, according to Group LLC represented Yogurt Mountain. the Shelby County Assessor of Property. This will be Sport Clips’ 10th Mem- Testa has filed a $2.8 million permit phis-area barber shop, including two in application with the city-county Office of DeSoto County. Construction Code Enforcement to build Robertson handled lease negotia- a two-story, 15,625-square-foot campus for tions on behalf of Weingarten, and Shawn Strayer University. The contractor is listed $49 Massey of The Shopping Center Group as Belz Investco GP. represented Sport Clips. Strayer operates campuses in 20 states Unlimited online meetings per month The 300,000-square-foot Ridgeway and also offers an online degree program. Trace is anchored by Target, Best Buy, In Tennessee, the university has campuses Sports Authority and PetSmart. in Knoxville and Nashville, as well as two Tenants that have recently inked in Memphis, according to the school’s leases at the center, whose outparcels are website. still being developed and built, include The Memphis sites include the Shelby Logan’s Roadhouse, Genghis Grill, Panera Oaks campus at 6211 Shelby Oaks Drive Bread and Mattress Firm. near Sycamore View Road, and the Thou- Do the math. With GoToMeeting you could hold a month’s worth of online sand Oaks campus at 2620 Thousand Oaks meetings for less than one in-person meeting. Host as many meetings as CVS Closes On Land Blvd. south of the I-240 Perkins exit. you want for one flat rate – free VoIP and phone conferencing included. For Cordova Pharmacy New York Company Buys Do more and travel less with GoToMeeting. Try it free for 30 days. CVS paid $2.2 million for the 1.8-acre Brooks Road Hotel parcel of land on Germantown Parkway in Cordova where it is building its next area New York-based MP Memphis Airport pharmacy. Hotel LLC has bought a hotel at 1471 E. The Daily News first reported in June Brooks Road for $1.3 million. The seller is that Woonsocket, R.I.-based CVS, the Hometown 2007-1 Real Estate LLC. retail division of CVS Caremark, would The property is branded the Memphis buy the land from Gill Properties and Airport Plaza Hotel, a 75,700-square-foot, bring a retail store to the site of the former 249-unit, one-story hotel built in 1974 and Memphis Area Home Builders Associa- previously branded as a Clarion Hotel. FREE 30-DAY TRIAL tion headquarters at 776 N. Germantown It sits on 4.7 acres at the southwest Parkway. corner of East Brooks Road and One Place, gotomeeting.com | promo code: AB11 The company planned to buy half of east of Interstate 55. the 3.6-acre parcel at the southeast corner The Shelby County Assessor’s 2010 of Germantown and Walnut Run Road appraisal is $2.1 million. The seller, Home- for its store, whose address will be 786 N. town 2007-1 Real Estate LLC bought the Germantown Parkway. property at a foreclosure sale in December Gill Properties president Ray Gill has 2008 for $2.5 million. razed the former 17,000-square-foot struc- ture and is widening the right-turn lane on Germantown. Chick-fil-A Buys Millington CVS’s regional developer, Redd Realty Property for $775,000 Services Inc., an affiliate of A.M. Redd Jr. Inc., earlier this year filed a $501,000 Chick-fil-A Inc. has bought a 1.9-acre permit with the city-county Office of parcel on U.S. Highway 51 in Millington Construction Code Enforcement to build from Hwy 51 LLC for $775,000. the store. The property is an outparcel of Lowe’s CVS is building a 13,225-square-foot, Home Improvement store. Lowe’s sold 24-hour, drive-through pharmacy, which the property to Hwy 51 LLC in 2006 for is set to open in early 2011. $555,860. Gill bought the property in December The vacant site, which is zoned for for $1.8 million, with financing provided commercial use, is on the southeast side by Rick Wood and Jon Van Hoozer of of Highway 51 northeast of Wilkinsville Financial Federal Savings Bank. Road. MAHBA sold the building to Gill The Shelby County Assessor of Prop- because it wanted to downsize. With CVS erty’s 2010 appraisal of the lot is $472,400. buying half of the land, Gill plans to de- The Chick-fil-A currently closest to velop the other half. Those plans are still Millington is near Wolfchase Galleria, in the works. more than 12 miles away. September 2010 Commercial & Industrial REAL ESTATE Special Edition 17
CRE Shows Faint Pulse
MICHAEL WADDELL | Special to The Daily News
ockets of the Memphis commercial real estate market appear poised for a possible rebound despite warnings of a potential double-dip recession in the making. PAs the collection of articles in this special edition of The Daily News will show, cautious optimism could best de- scribe the general feeling about the local CRE market. But only time will tell if the economy, and the sector, can fully recover anytime soon. The most recent data clearly reveal a stagnant to declining market: Shelby County recorded 45 commercial sales during July, almost even with the 43 commercial sales during May, but also a 24 percent decrease from July 2009, according to real estate information com- pany Chandler Reports, www.chandler- reports.com. However, thanks to the sale of the Crescent Center to Highwoods Proper- The SunTrust Building, left, the Triad Centre and the Crescent Center all sit near the intersection of Poplar and Ridgeway. ties Inc. for $52.6 million at the end of Photos: Lance Murphey July – the biggest CRE transaction in five years – Shelby County’s total sales in various parts of the city. The rental volume rose 274 percent and the average rate per square foot in Germantown is sale price rose 391 percent to $2.1 million. currently $16.69, while in the Southeast That deal, however, has proven to submarket it is only $7.42. be the exception rather than the rule in “A fair amount of the properties in ar- Memphis’ office sector, which has been eas that are struggling might not be viable soft everywhere but in East Memphis. for retail use anymore,” said Barton, who “We expect to see limited growth in cites the 90,000-square-foot Old Time 2011 due to minimal construction and Pottery building on Winchester that was the economy not moving forward quick demolished after the tenant left and the enough. We need more job growth and building could not be re-leased. “Having job creation,” said Steve Guinn, VP at the spot as raw land lowered the owner’s Highwoods Properties. “Many busi- property tax issues, and it eliminated nesses’ hands are tied with the upcoming maintenance fees along with the potential health care changes, and they are staying for vandalism. Many junior anchor boxes conservative for now.” are not useful now.” Overall average rents in Shelby County dipped to their lowest level since Industrial encouragement the end of 2007, falling from nearly $18 The industrial sector – traditionally Triad Centre per square foot at the end of 2008 to Memphis’ bread-and-butter market – is $17.24, according to the latest CB Richard working its way back up after hitting bot- Ellis data. Concessions are increasing, tom with historic market lows over the especially with Class B rental properties. Retail woes “The flight to quality we have seen has last 12 to 18 months. The area’s healthiest office market With a slew of high-profile closures, kept the historically strong retail corridors “We’re encouraged by the activity in is the Tenn. 385 corridor, where the the retail market sector perhaps been hit strong despite the recession,” said Barton. the market. Aggressive owners are getting vacancy rate for Class A space sits at 9.7 hardest by the poor economy. Local bro- The area’s worst performing submar- deals done with lower rental rates and percent and Class B rates are 15.7 percent. kers hopeful that buyers are making their ket was North Memphis, whose vacancy concessions when necessary,” said Brad Despite extremely low interest rates, way back to the marketplace, giving retail rate plummeted to 29 percent during the Kornegay, president of asset services at Guinn said his company would not build a fighting chance for a turnaround. second quarter. Colliers International. “We anticipate the a 100 percent speculative building at this “We could be finally rounding the New developments aren’t expected to market holding steady in the third quarter, time, but it might consider build-to-suit corner after the downturn, and this could flourish because lenders are offering only and it should pick up considerably in the projects with strong anchor tenants in be the beginning of a slow climb back,” 60 percent to 70 percent loan-to-value, late fourth quarter or early next year.” place. said Scott Barton, vice president of retail down from 80 percent to 90 percent in Leasing activity, especially with Class “Expect many businesses to focus on services at CBRE. “We are seeing more the past. New projects must be partially A warehouses, has picked up over the past expense control, keeping their buildings interest now than six months ago. Rents leased up on the front end, with anchor eight to 12 months. The result is a drop full and filling vacancies,” said Guinn, and vacancies are falling, and the market tenants in place to draw in traffic. in the area’s vacancy rate to 15.8 percent, who noted that companies are mak- is tightening up.” “Going forward, there will be much down from 17 percent in the first quarter. ing strides to be more cost and energy Overall retail vacancy rates have fallen less unbridled suburban growth. Banks Several large move-outs near the end of efficient. “At our new Crescent Center for three straight quarters, with the rate are not lending and demand is weak for last year pushed the rate as high as 19 acquisition, we plan capital improve- for Shelby County now at 13.6 percent. new space,” said Barton. “The majority of percent. Leasing rates have held steady ments that will help with energy savings. The Poplar corridor remains very strong new development is likely to be tenant- for the past two quarters, and the general We will also focus on leasing our new for retail with a low 5.7 percent vacancy driven infill projects in areas with denser feeling is that rates will slowly climb going 155,000-square-foot Triad Centre III rate, making it hard to find space between population.” forward. building, where construction wrapped up 20,000 square feet and 30,000 square feet Another trend in the retail sector is at the end of 2009.” along Memphis’ busiest avenue. the growing chasm between rental rates CRE PULSE Continued on Page 22 18 Commercial & Industrial REAL ESTATE Special Edition September 2010
Wolfchase Owner Files New Appraisal Challenge
ANDY MEEK | The Daily News
he owner of the most expensive $130 million. The mall piece of real estate in Shelby County argued an 15 percent isn’t finished challenging its 2009 increase wasn’t realistic appraisal. during a recession, say- Indianapolis-based Simon ing Wolfchase ought to TProperty Group, the owner of Wolfchase be worth closer to $124 Galleria, has filed another appeal of the million. mall’s price tag, which the Shelby County The assessor’s Board of Equalization in March pegged at arguments more or less $150 million. carried the day at the The new appeal – the mall’s second hearing before the county since last year’s reappraisal – sets up an- board of equalization. other high-stakes tax showdown betweem Now it’s on to the the Shelby County assessor of property next stage of the dispute and representatives of the nation’s largest process: an appeal to the public real estate firm. state board of equaliza- The ownership group of Wolfchase Galleria isn’t backing down on efforts to reduce the mall’s appraised Wolfchase’s size means Simon writes tion. value – and lower its taxes in the process. the biggest check to the taxman in Shelby Wolfchase’s tax attor- Photo: Lance Murphey County. In 2009, Simon paid $4.46 million ney declined to comment in property taxes for Wolfchase, which on the status of the ap- sits on 45 acres at the corner of U.S. 64 peal, other than to confirm one had been during the March hearing. Shelby County once every four years. and Germantown Parkway. filed. A representative of the assessor’s of- But not only has the mall survived – After the last one, in 2005, Simon did the Whenever property owners like Simon fice did not return a call seeking comment. it’s thrived, counters the assessor’s staff. same thing it’s doing now about Wolf- find fault with their new tax values, they Both sides clearly staked out their po- Stroll down the rows of shops on both chase’s value. can always try to work something out sitions during the March hearing. And ap- of Wolfchase’s floors, from Macy’s on Back then, Simon lost at the local administratively. If that doesn’t work, an peals to the state board of equalization are one end to Dillard’s on the other, and one board of equalization as well as the state appeal to the local board of equalization almost always carry the same arguments thing that’s almost nonexistent is vacant board. Simon dropped its challenge after is filed. already laid before the county board. storefronts. that. Simon, also the owner of Oak Court For Wolfchase, it’s about the hard-hit Greg Moody, director of reappraisals If the company had been successful, Mall, tried both of those avenues for Wolf- retail environment, which has battered for the assessor’s office, said Wolfchase’s then-county assessor Rita Clark said other chase and was unsuccessful. chains and corporate icons of all stripes. price tag ought to be even higher – that big-box property owners would have lined The assessor’s office first tagged the 1.1 “And Wolfchase has to operate in that $154 million was “on the lower side of up before the county and state boards to million-square-foot mall with an appraisal environment,” said Memphis tax attorney correct.” take their chances on whittling down their of $154 million, up from 2008’s value of Andy Raines, Wolfchase’s representative, Property reappraisals happen in own tax values.
Inman Construction Acquired by Chattanooga-based EMJ Corp.
ERIC SMITH | The Daily News
he longtime Memphis-based com- a national general contractor whose foot- Inman and EMJ are based in Tennessee, share the same values and have a very mercial construction firm Inman print includes branches in Dallas, Boston, date back about 40 years and share a simi- similar approach to doing business. We Construction has been acquired Sacramento, Calif., and Tulsa, Okla. lar corporate culture. intend to build upon the unique strengths by Chattanooga, Tenn.-based EMJ Moreover, Inman said EMJ was look- Inman even traveled to all of EMJ’s and market position of Inman and of EMJ Corp., the companies announced ing to enhance its health care construc- branch offices to meet with executives to make for a stronger combined company Tearlier this year. tion, a sector in which Inman has a strong and make sure this was the right move for for our customers.” Although Inman sold its assets to EMJ record, while Inman was looking to beef the company. Inman has 60 to 90 employees, in January, the construction firm that up its portfolio with projects in other “We complement each other because depending on the season. The company Frank Inman Jr. launched in 1970 kept its sectors from retail to distribution to muse- their experience is in things we’ve always employs 20 office staff with 15 superinten- founder’s name in its title and formally be- ums. sought to get into but never did, and our dents, and the rest are carpenters, laborers came Inman-EMJ Construction March 1. “The more I got to know them and experience is what made them contact us and foremen. Inman said all the employ- Frank Inman’s son and current com- meet with them and understand what in the first place,” Inman said. “Our cul- ees will remain with the company. pany president Page Inman called the they did, the things they’re strong in we’re tures are so similar that I think it’s going If anything, the local office could see move “great news” for the firm, which not, and the things we’re strong in they’re to be great.” growth thanks to the deal. will keep all its Memphis employees and not ... It just seemed like, ‘OK, down the The leaders of EMJ, whose portfolio “There will be no change in person- operate as an EMJ branch at its 88 Union line it’s going to open some doors for us,” includes more than 500 million square nel,” Inman said. “We’ll continue to run Ave. office. Inman said. feet of construction projects in 48 states, the operation. Inman said the deal, initiated by EMJ For Inman, a second-generation con- felt the same way about the company it “We think the combination of our more than a year ago, was too good to pass struction president, it also was important acquired. strengths and what they bring to the table up because the local office will be bol- to align the company with a similarly “Inman is an ideal fit for EMJ,” said makes a lot of sense long-term for our stered by the collective strength of EMJ, minded organization. As he noted, both EMJ CEO Jim Sattler in a statement. “We employees and for our clients.” September 2010 Commercial & Industrial REAL ESTATE Special Edition 19
Multifaceted Lamar Building Gets Push Forward
ERIC SMITH | The Daily News
building that has been home to tenants for the space. vandalized. Also, the parking lot had ing up and buffing the floors,” Vardi said. a Dixie Mart department store, “We would love a single user, but we numerous cracks with weeds growing Additional improvements would be made a Holiday Inn technical support don’t know if the market can bear that,” through them, so Vardi said the surface depending on the new tenant’s needs. facility and an IRS processing cen- Vardi said. would be resealed. Vardi said the building is perfect for a ter will have yet another purpose The first phase called for repairs to A second phase of upgrades called for company call center because of its exist- thanksA to an out-of-town investment the roof and some bathrooms that were “more detailed cleaning; painting, touch- ing technology. group. California-based investors in April bought the vacant office building at 3645 Lamar Ave. in Oakhaven for $341,000 in an absolute auction (meaning it was sold to the highest bidder regardless of price). The group, which goes by the name BRENT A. WESTBROOK 3645 Lamar LLP, was attracted to “every- VICE PRESIDENT, BUSINESS DEVELOPMENT, thing” about the property from the size of the building to the size of the parcel, ARGENT TRUST COMPANY OF TENNESSEE from the interior finish-out to the rock- bottom price, said the investors’ Tulsa, @42 Okla.-based representative Eli Vardi. The Shelby County Assessor of “When Argent Trust entered Property’s 2010 appraisal is $565,900, the Memphis market, we needed a and the previous owner, Nashville-based partner to help introduce our Commerce Center, bought the building in company to the community. We 2006 for $1.5 million, or about five times what it sold for last month. chose The Memphis News because “As compared to other properties, of its wide readership and this was a good value,” Vardi said. “And professional focus, and for its because property (values are) depressed, quality content and supportive our acquisition costs are more attractive.” Built in 1961, the 128,592-square foot, staff.” one-story office building sits on 12.72 acres at the northwest corner of Lamar Since we were essentially launching a new and Knight Arnold Road a few miles from brand in an already competitive market, it Memphis International Airport. was critical that we work with an Vardi said the building, vacant for experienced media outlet that understood the past two or three years, was built as our target audiences and could help us a Dixie Mart department store and later reach them directly. Our experience sold to Holiday Inn. The hotel chain, working with The Memphis News has which was founded in Memphis and had been both highly professional and its corporate headquarters in town for enjoyable. Our account team is decades before relocating to Atlanta, used experienced, friendly and efficient, and the facility for hotel tech support. their guidance, expertise and ability to The building later became home to a pull a plan together is all provided with a paycheck company and then a processing style and grace that only comes from center for the IRS, Vardi said. An IRS sign years of experience and a commitment still adorns the entryway. to the client. 3645 Lamar LLP bought the building in an auction held by Portland, Maine- based Tranzon LLC. If your target audiences are in the Edward Durnil of Tranzon’s Ken- Memphis business community, The Daily tucky office wrote in an e-mail that the News and The Memphis News is the auction drew three bidders, two from proven, professional way to reach them. outside of Memphis, and that the seller was a “private servicer that wanted the property off their books by the end of the quarter.” Although this was the investment group’s first Memphis acquisition, Vardi, who scouts commercial real estate for the partners, said he has always had his eye on Memphis “because of the great distribution” capabilities here. “Our expertise is in distribution. I don’t need to say more than FedEx, you a publication of The Daily News know?” Vardi said. 193 Jefferson Avenue, Memphis, TN 38103 The investors last spring began about $100,000 in improvements to the prop- www.thememphisnews.com erty with hopes of finding one to three 20 Commercial & Industrial REAL ESTATE Special Edition September 2010
Better Prospects in Market Investor optimistic about Oakhaven property
ERIC SMITH | The Daily News
eal estate investor John Bogdasar- ian might be from Ann Arbor, Mich., but it didn’t take him long to discover that the intersection of American Way and South Perkins RRoad was once infamous for its proximity to the old Mall of Memphis. With the mall long since razed, Bog- dasarian thinks the area’s worst days are behind it, which is why he moved forward with a decision to make his first Memphis investment at the intersection. Bogdasarian, operating through a single-purpose entity called Mem- phis Way LLC, paid $1.9 million for the 58,887-square-foot office building at 4775 American Way in the Oakhaven/Parkway Village area. The seller was American Way Partnership, and the sale closed Jan. 20 in a special warranty deed. Built in 1981, the Class B office build- ing sits on 5.5 acres at the southeast corner of the intersection of American Way and South Perkins, just south of the Perkins interchange with Interstate 240. Bogdasarian said that while it may not be one of the most enticing parts of town, it has nowhere to go but up. Bobby Haynes has his eyes on a set of 22-inch custom chrome rims at Wheel Workz, 4765 American Way, on Monday. An out-of- “We looked at that area and said, ‘Well, town real estate investor has bought the building, which contains Wheel Workz, and New Horizons Computer Learning Center. we think it probably hit rock bottom four Photos: Lance Murphey or five years ago, and we think that in the next five to 10 years it could experience some improvement and we will look to it that was assumable that we thought another. also an overall soft retail market – he said help do that in that area,’” he said. had pretty favorable terms to it,” he said. “Finally we found these guys that it boasts a handful of positive commercial “That was one of the compelling reasons. came up with enough cash where they assets, including the Marriott hotel and Baby steps We also spent a lot of time with the ten- could assume the existing loan,’ Califf said. Thousands Oaks Business Center across Memphis Way LLC is 100 percent ants and the owner-operators of the New “That was the whole key to this deal – as- the street owned by a private equity real estate fund Horizons Computer Learning Center and suming the existing loan and being able “It’s a tough market and lots of people called PF1 LLC, which is made up of a we really like them, and we’re comfortable to close on it because there really was no are scared by American Way,” Califf said. number of investors through the Proma- with them.” financing in the market to get a new loan.” “There’s a lot of stuff that’s closed down nas Fund. Brian Califf, vice president at NAI on American Way. But that corner of Bogdasarian said the investors were Saig Co., represented the seller. He had Opportunity knocks American Way and Perkins is not a bad attracted to the building because of its two the property listed for “at least a year Though Califf acknowledged the dif- corner. It takes a buyer to get past their tenants, New Horizons Computer Learn- and a half” and had about five contracts ficulty of selling real estate in that area – initial fears of an area to go with it, and ing Center, which occupies about 35,000 on it during that time, but each deal fell highlighted by not only the notoriety sur- those were some of the initial fears with it. square feet, and Wheel Workz, which through because of some financing snag or rounding the former Mall of Memphis but Once (Bogdasarian) looked past it, he saw occupies about 22,000 square feet. Both what a nice building it was and two good companies have long-term leases; New tenants that were going to be there.” Horizons with a 10-year-lease and Wheel The Shelby County Assessor of Workz with four. Property’s 2009 appraisal of the build- “We look to buy buildings that we ing is $1.9 million, and the property also think are occupied by companies that we is zoned as a cell tower site, which has a think provide a good benefit to society,” separate parcel number and an appraised Bogdasarian said. “We also look for prop- value of $116,000. The property has an erties that we can buy below replace- existing cell tower lease, which also was ment cost that have good lease terms and attractive for the Michigan investors. in areas that we think have the potential Bogdasarian said the plan is to hold for an uptrend.” the building for at least five to 10 years Bogdasarian said the building needs before pursuing resale or perhaps even only a few upgrades, but otherwise is in redevelopment opportunities. He also solid shape and was kept up nicely by the said that with one acquisition in Mem- previous owners, who are involved with phis under their belts, another could be New Horizons. coming. Another positive for this investment, “We really liked Memphis when we Bogdasarian said, was the assumable were down there visiting and we’d like loan of about $1 million on the property to find more there,” he said. “We haven’t through Shenandoah Life Insurance Co. been able to find anything else yet, but “It had some existing financing on 4765 American Way we’ll keep looking.” September 2010 Commercial & Industrial REAL ESTATE Special Edition 21
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ERIC SMITH | The Daily News
Keynote speaker Dr. Mark Dotzour, chief economist and director of research for the Real Estate Center at Texas A&M University, spoke earlier this year about the out- look for commercial real estate at the 2010 Commercial Property Forecast Summit held at the Germantown Performing Arts Centre. Photos: Lance Murphey
he commercial real estate mar- the market gets back on track. ket will need to navigate its way He said every investor and business through a host of landmines before decision-maker wants to know if their it sees anything resembling recov- buildings are going to fill up and what’s ery. going to happen to their values. Unfor- TThat was the message Mark Dotzour, tunately, the answers aren’t as clear as chief economist and director of research the questions, and the overall economy, for the Real Estate Center at Texas A&M especially unemployment, will be the University, told local brokers, bankers deciding factor. and appraisers at February’s Commercial At the same time, Dotzour remains Property Forecast Summit, held at the confident the American spirit of en- Germantown Performing Arts Centre and trepreneurialism will prevail, noting sponsored by the Memphis Area Asso- corporate profits, manufacturing orders GoToMyPC lets you instantly work on your ciation of Real- office PC from any Internet connection, with tors Commercial Council. complete access to your email, programs and Comparing the commercial mar- files. Setup takes just minutes, and there’s no ket to a military hardware needed. vehicle on a peril- ous route through enemy terri- tory, Dotzour said FREE 30-Day Trial everything from policy decisions made in Wash- gotomypc.com | promo code: AB24 ington to ongoing credit issues to budget crunches Participants in the 2010 Commercial Property Forecast Summit network in the lobby of the Germantown Performing at all levels of Arts Centre. The program was presented by the Memphis Area government could Association of Realtors Commercial Council. derail a real estate rebound. Dotzour, a renowned expert in and consumption all enjoyed increases to how global and national trends impact close 2009. residential and commercial real estate, Dotzour projected a period of recov- spent an hour detailing the travails of the ery in 2011 and 2012 if the U.S. doesn’t commercial market during the past two years and the pitfalls that remain before FUTURE Continued on Page 22 22 Commercial & Industrial REAL ESTATE Special Edition September 2010
HARD SELL Continued FROM Page 5 CRE PULSE Continued FROM Page 17 FUTURE Continued FROM Page 21
A few months after that, in March, “During the downturn, companies re- repeat the missteps of Great Depression- Wharton drew a crowd at Hernando’s alized they could save money in Memphis era America or 1990s-2000s Japan, both Gale Center, where he addressed that more than in other cities,” said Kornegay. of which saw problems worsen over time. town’s chamber of commerce. Memphis “They realized they could shut down sev- A captive audience on hand for the needs Hernando, Southaven and Olive eral of their distribution centers around seventh annual forecast summit, emceed Branch, Wharton told the group. And he the country and consolidate them into and chaired by Nick Clark, then heard lo- hinted at a new era of regional coopera- one box here.” cal experts discuss the Memphis market. tion. Nearly 1.6 million square feet of space Ron Riley of In-Rel Management Inc. Two months later, McKesson decided was absorbed during the second quarter, gave the office overview. Memphis’ office it needed Olive Branch – specifically, a the most since 2 million square feet dur- sector in 2009 notched a negative absorp- package of incentives that made a reloca- ing the third quarter of 2008. Two leases tion rate of 169,861 square feet as vacancy tion to the city too good to pass up. by Technicolor at The Summit I and rose to 18.3 percent market-wide, the Among the incentives, $4 million Summit II in the Southeast submarket highest since 1990. came from the Mississippi Development accounted for nearly 1.4 million square One factor taking a huge toll on the Authority via the Industry Incentive feet of the absorption. office market, Riley said, was the rise of Financing Revolving Fund. Olive Branch No new industrial construction is “shadow space,” the square footage that is and DeSoto County also chipped in sev- anticipated through the end of the year, not being used but also not being market- eral hundred thousand dollars to pay for and there has been no new space brought ed, typically because a company vacated infrastructure improvements. online in Memphis in several years. only part of its entire leased space. “This brand new facility will allow “Supply and demand should tell a For the office market to stabilize, us to more efficiently serve our growing developer that now is the time to build,” Memphis will need to see about 1.3 mil- customer needs with the most advanced said Kournegay. “But unfavorable rates lion square feet of absorption during the material handling systems available and and the lack available financing dictate next year or so, coupled with no new will be seen as a model for McKesson’s that new construction is unlikely at this construction. other distribution centers,” said John time.” The industrial sector also has chal- Figueroa, president of McKesson U.S. lenges, said Andy Cates of Colliers Pharmaceutical. Multifamily ‘very good right now’ International. What is usually Memphis’ The loss still stung Wharton months Apartments continue to be a strong bread and butter sector saw absorption later. He referenced it with frustration as point in Memphis, where the city’s hous- plummet and vacancy rise during 2009, Exhibit A several weeks ago in urging the ing problems – namely a high foreclosure the result of a few large tenants such as Memphis City Council to approve the cre- rate coupled with little building activity – Hewlett-Packard and SunTrust Banks ation of a $5 million fund to help tilt the has driven up multifamily demand. shedding space. scales in Memphis’ favor during future “The multifamily rental market is Memphis is well below the national deal-making. very good right now because it’s difficult average – and even that of its peer cities – “Right now, we’ve got one arrow in for many people to qualify to buy new in terms of average lease rates but also in our quiver, and it’s PILOTs (payment- homes,” said Steve Woodyard, president terms of vacancy rates. The vacancy rate in-lieu-of-taxes),” Wharton said. “And of multifamily brokerage firm Woodyard for Memphis’ industrial space, about 195 when you really stop and think about how Realty Corp. million square feet total, ended 2009 at PILOTs work, you’re kind of giving with Overall apartment occupancy for the 14.5 percent, the highest rate since 2004. one hand and taking away with the other. area sits at 91.7 percent, up substantially One bright spot for Memphis was It’s been my experience that if you offered from 88.9 percent at the end of last year. companies expanding their presence in a business help with their infrastructure, Average street rents are also on the rise, the area or setting up shop here for the that they can walk right into a bank loan jumping 2.6 percent since the end of first time. The city’s transportation assets, committee and say, ‘Here this is,’ as op- 2009 to $724. highlighted by railroads’ investments, posed to, ‘Well, they’re abating my taxes “In the next 12 months, we expect to keep the outlook positive for the indus- over 10 years. So over a 10-year period my see modest improvements in the market, trial sector barring any new construction. expenses will be lowered by this.’ as many people who are on the fence Scott Barton of CB Richard Ellis “The first one stands a better chance for buying a home will be renting,” said discussed Memphis’ retail market, which of getting financed. This is my way of say- Woodyard. “Historic lows for new home has seen lease rates sink to $10.70 per ing, let’s kind of pull away from PILOTs.” construction should cause existing homes foot while vacancy sits at 12.6 percent. The council approved the creation of to go up in value, resulting in increases in Although the market appears at or near that $5 million economic development the quality of renter as well as in occu- the bottom, plenty of questions remain as fund. One council member suggested to pancy levels and collections.” to when recovery will begin. not do so would have been to aid the eco- Woodyard also expects to concessions The city’s biggest problem is that it nomic development of Olive Branch. to disappear in the coming months as the is “over-retailed,” Barton said, meaning “The $5 million fund, I think, is a market tightens up. Memphians have too much retail space strong signal that Memphis is open for Job creation will also be a major fac- per capita. The national average is 23 business,” said Arnold Perl, secretary and tor in the sector’s growth. The local job square feet of retail per person, while in counsel of the Greater Memphis Cham- market should improve in the next year Memphis the average is 35 square feet. ber. “It establishes a platform for city with expansions from companies like For the retail market to rebound, government to be much more aggressive Smith & Nephew, Technicolor, Soladigm there needs to be no new construction in competing for expansions and new Inc. and others. and landlords willing to offer lower rent business.” Apartment sales totaled 15 transac- to improve cash flow. It remains to be seen what the long- tions averaging $2.3 in Shelby County The multifamily sector has been term results will be. But Wharton isn’t during the second quarter. The numbers plagued by real-estate owned (REO) and letting his foot off the gas pedal. were boosted by the sale of the 191-unit distressed sales, which accounted for Pinnacle, for example, is currently in Arbors of River Oaks in East Memphis more than half of all arms-length transac- negotiations to move its headquarters to to Trade Street Capital LLC of Miami in tions in 2009, said Blake Pera of CBRE. either Olive Branch, Downtown or some- June for approximately $16.3 million. Also, last year’s total sales were just $59.7 where else near the Memphis airport. New apartment construction remains million, down 41 percent from $94.7 mil- Wharton has Pinnacle’s board meeting slow, with only 250 new units delivered lion in 2008, as owners who didn’t need in Memphis during the week of Aug. 9 on in the first half of the year and only 107 to sell didn’t list their properties. his schedule. His attendance, along with more units coming available by the end REO and distressed sales will con- CCC representatives, is likely to include a of the year. The new apartments are the tinue to dominate the market in 2010 pitch to the regional air carrier to keep its 92-unit Barbaro Flats in Downtown and and beyond, Pera said, although stabi- presence in Memphis. And it’s also likely the 275-unit Legends Park in Midtown, lized properties should come back to the to include the presentation from Whar- the latter of which is a mixed-income market by summer. The good news is that ton to Pinnacle executives of whatever housing development. construction will be down in 2010, mean- proverbial “roses, perfume and sweet “Financing is still hard to come by, ing that absorption should rise while music” he can draw upon to convince the but the demand is there for well-placed occupancy (89.3 percent) and rental rates company to do so. new construction,” said Woodyard. will remain the same. 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