commercial & industrial real estate special …2 commercial & industrial real estate special...

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Memphis and Olive Branch Go Head to Head for New Business. PAGE 4 Glankler Brown’s Move to East Memphis a “Huge” Deal. PAGE 6 City’s Robust Industrial Market Works to Weather Economic Storm PAGE 10 Solid performance in the East Memphis submarket keeps CRE afloat. Page 17 Looking Strong In The East 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. Photo: Lance Murphey Commercial & Industrial REAL ESTATE The Daily News takes a year-long look at an industry in transition – and in turmoil. Commercial & Industrial REAL ESTATE Special Edition September 2010 SPECIAL EDITION

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Page 1: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Memphis and Olive Branch Go Head to Head for New Business. Page 4

Glankler Brown’s Move to East Memphis a “Huge” Deal. Page 6

City’s Robust Industrial Market Works to Weather Economic Storm Page 10

Solid performance in the East Memphis submarket keeps CRE afloat. Page 17

Looking Strong In The East

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.

Photo: Lance Murphey

Commercial & Industrial

Real estate The Daily News takes a year-long look at an industry in transition – and in turmoil.

Commercial & Industrial REAL ESTATE Special Edition September 2010

SPECIALEDITION

Page 2: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition2 September 2010

Published by: THE DAILY NEWS PUBLISHING COMPANY

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Page 3: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition 3September 2010

ContentsCommercial & Industrial REAL ESTATE Special Edition

11Rollin’ ‘Round the BendA new intermodal yard in Fayette County has brought commercial real estate dreams to neighboring areas.

6Opportunity AboundsAndy Cates of Colliers International says “act now” on all the commercial real estate deals out there.

13Class A Transaction The Crescent Center fetched $52.6 million this past summer, the biggest CRE sale in five years.

21Cloudy with a Chance of Default Economist Mark Dotzour predicts a long, painful recovery for the commercial real estate market.

MAAR Commercial CouncilWelcomes Board Members

The Memphis Area Association of Re-altors Commercial Council held its annual board of directors recently, approving three new members for its 2011 board.

Greg deWitt of Grubb & Ellis Co. will take over one of the council’s direc-tor seats next year before becoming the council’s vice president in 2012. He will inherit the seat occupied by John Mercer of Highwoods Properties in 2011.

Also joining the board are Jim Beaty of CBRE’s Capital Markets group and Brad-ley Wilford of Boyle Investment Co., each of whom will take on two-year director positions. The new positions are effective Jan. 1.

Commercial real estate’s struggles of late have underscored the importance of MAAR’s Commercial Council, an organi-zation that helps members navigate the market’s tricky landscape, deWitt said.

“The Commercial Council is an important organization highlighting the commercial side of our business,” he said. “Sometimes the much larger residential side of MAAR can overshadow the needs and concerns of the commercial side. We hope to bring some recognition to these groups.”

Other changes to the council in 2011 will include president-elect Ron Riley of In-Rel Management Inc. taking over for 2010 president Wyatt Aiken of Commer-cial Advisors LLC. Aiken will remain on

the board as immediate past president.Also returning as officers and direc-

tors for 2011 will be Scott Barton of CBRE; Tanis Hackmeyer of Hackmeyer Proper-ties/Hackmeyer Realty; Dawn Barber of Makowsky Ringel Greenberg LLC; Bob Turner of Southern Properties LLC; Steve Guinn of Highwoods Properties; Eric Fuhrman of Investec Realty Services LLC; and J. Hickman of Colliers International Management Services.

Kroger Files Permit ForPoplar/Highland Store

The Kroger Co. has filed a $10 million building permit application for its store at 3444 Plaza Ave. near the corner of Poplar Avenue and Highland Street in Poplar Plaza.

The company plans to build a new store on the west side of the shopping center where it is located, said Joe Bell, manager of marketing and public affairs for Kroger-Delta Division.

The start date for construction is tentative because the building is currently occupied and some tenants’ leases run out next year.

“We just know kind of a drop-dead date when the latest is that we could get started. Our guess is we’ll get started sometime mid-year next year,” Bell said, adding construction of a store takes nine months to a year.

The current store will close when the new store opens. The fuel center will not

be affected by the construction or new store.

The footprint of the new store is about 87,000 square feet, compared to the less than 60,000 square feet of the current store. Bell said 30 new jobs will be created for the larger new store.

The Delta Division of Kroger covers West Tennessee, Arkansas, Mississippi and parts of Kentucky and Missouri. The division operates 111 stores.

The Kroger Co. is publicly traded on the New York Stock Exchange. Kroger employs 334,000 people across the com-pany, which includes everything from su-permarket and warehouse grocery stores to jewelry stores and convenience stores.

Samuels Furniture to CloseG’town Parkway Store

Samuels Furniture and Interiors at 1615 N. Germantown Parkway is closing soon, the store informed customers and neighbors via a letter.

“Samuels Furniture and Interiors has served the good people of Tennessee, Arkansas and beyond with their premier home furnishing needs for over 94 years,” the letter reads. “Unfortunately, because of circumstance and the economy in gen-eral, we have made the very difficult deci-sion to close our Cordova location only.”

A store employee said an exact date for the closure was not yet known.

The news comes a week after Sch-nucks Markets Inc. announced it is clos-

ing its supermarket just up the street at 1150 N. Germantown Parkway. Economic decisions were similarly behind that deci-sion to close.

Samuels is selling its entire Cordova inventory. “Everything from our Cordova location must go,” the letter to customers reads.

Galloway Gardens Complex Sells for $1.1 Million

Galloway Gardens LLC has bought the 45-unit Galloway Gardens Apart-ments from California-based Steve Benetti and Virginia Benetti for $1.1 million. The complex, which was built in 1970, sits in the Evergreen Historic District in Midtown, on the south side of Galloway Avenue between North Willett Street to the west and North Avalon Street to the east.

The sale was financed with two $200,000 loans through Regions Bank – with one due next year and one in 2015 – and an assumption of a $916,937 loan that matures in 2013. The listing agent for the sale was Steve Woodyard of Woodyard Realty Corp.

The property features two-bedroom, one-and-a-half-bath floor plans with an on-site laundry, according to a statement from Woodyard..

The new owner, which plans to lease the units for $650 to $750 a month, will manage the property through the company that manages Gramercy Park Apartments near Bartlett, according to the statement.

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Page 4: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition4 September 2010

The Hard SellMemphis and DeSoto County duke it out for jobs

ANDY MEEK | The Daily News

To understand how Northwest Mississippi’s small boomtowns like Olive Branch keep one-upping Memphis and reeling in jobs and taxpayers with the promise of

greener 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 to Memphis – without actually being part of Memphis – is touted frequently during the film. There are scenes of FedEx planes and references to the “convergence of air, water, rail and highway” found in Mem-phis.

“By locating in DeSoto County, busi-nesses gain the advantages of Memphis’ transportation assets, while enjoying Northwest Mississippi’s tax advantages, skilled workforce and abundant land,” a narrator intones.

Some Mississippi officials aren’t that overt in their comments about DeSoto’s big city neighbor north of the state line. Gray Swoope, executive director of the Mississippi Development Authority, said his group concentrates on its own game plan and lets the chips fall where they may.

“We always sell to our strengths,”

Swoope said. “I really don’t worry too much about what the competition is do-ing.”

PRoMiSed lAndIn Memphis, on the other hand, busi-

ness and civic leaders have a keen interest in what the competition in Mississippi is doing. This past summer provided almost 1,000 fresh reasons for that interest. That’s the number of new jobs Olive Branch announced it’s creating with a trio of eco-nomic development projects.

The projects involve the creation of two new plants and a hospital facility. And some of that growth is coming at Mem-phis’ expense.

Hamilton Beach Brands Inc. an-

nounced in July it’s moving a Memphis distribution center – and 125 jobs – to 1.2 million square feet in Olive Branch. Ham-ilton Beach makes and distributes small electric household appliances, as well as a variety of commercial products.

There could be even more Memphis businesses heading south. As of press time, Pinnacle Airlines was considering an offer from Olive Branch backed with incentives from the state of Mississippi as it weighs a new location for its Memphis headquarters. Business and civic leaders in Memphis have mounted a full-court press in lobbying Pinnacle to keep its headquarters in the city – and, hopefully, move it into One Commerce Square at 40 S. Main St. Downtown.

The Center City Commission devel-oped a video presentation for Pinnacle comprised of testimonials from Down-town employees and stakeholders who can talk up the virtues of locating in the heart of the city. Within a day or so of word getting out about Mississippi’s over-ture to Pinnacle, conversations were held among an array of private sector leaders in Memphis including Tennessee Economic Development Commissioner Matt Kisber.

Memphis Mayor A C Wharton Jr. sug-gested federal incentives and participation from the state might be a requested part of the effort to keep Pinnacle here. That reaction was arguably a testament to the powerful lure of DeSoto.

“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.”

A TV reporter asked Rikard after the recent flurry of news whether “there’s

A worker takes a break on the site where McKesson Corp. is building a $115 million distribution facility in Olive Branch.

Photos: Lance Murphey

Memphis in the past few weeks and months has lost some high-profile economic development battles to Olive Branch, which even 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.

Page 5: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition 5September 2010

anything else” to announce soon. Rikard chuckled as he recalled the question.

“There’s always something else,” he said, a reply that may have sounded like a humorous quip but is actually a theme of economic development in Olive Branch – in much of DeSoto County, for that matter.

SuRvivAl oF tHe FitteStPart of the secret lies in what officials

describe as the coordination among eco-nomic development players in Mississippi – state, county and local. The fruits of that teamwork are increasingly presenting a tempting alternative to outside companies that zero in on the Memphis metro area.

Some of the Mississippi and DeSoto County incentives for new and expanding industry include state income tax credits 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

surrounding commercial area on Elvis Presley Boulevard.

“Let’s just face it: in business affairs, protocol means a lot,” Wharton said. “You can have the best chamber, but still you have to have the top level political com-mitment. (Companies) don’t want to see it in the form of, ‘Our mayor wanted to be here, but he couldn’t. Here’s a little note he sent.’

“It’s so competitive out there, and they want people who can speak with finality.”

On the home front, Wharton said what he’s doing is akin to a partner rekindling the marriage flame with a spouse.

“I don’t take roses home as often as I used to,” Wharton said. “But you’ve got to take something home. Don’t take anything for granted.

“We tend, with our existing employers – it’s like a marriage, and it’s gotten some age to it: ‘Oh, we’ve got them here. They’re not going anywhere.’ But there are people bringing them roses, perfume and sweet music every day.”

‘oPen FoR BuSineSS’Upon recently learning that one of

Memphis’ health care services companies, McKesson Corp., was pondering a reloca-tion away from the city, Wharton paid its local executives a visit. And he encour-aged the Memphis City Council to alter the structure of the city’s tax incentive program to pave the way for McKesson to stay.

By locating in DeSoto County, businesses gain the

advantages of Memphis’ transportation assets,

while enjoying Northwest Mississippi’s tax advantages,

skilled workforce and abundant land.”

– Desoto County Economic Development Council Promotional Video

HARd Sell Continued on Page 22

Page 6: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition6 September 2010

The lease that sent Glankler Brown PLLC from Down-town to East Memphis was one of the most significant commercial real estate

deals inked all year, even in a city known for its abundance of large industrial transactions.

The law firm signed a 10-year lease for 32,528 square feet in Triad Centre I, 6000 Poplar Ave., near the bustling intersection of Poplar and Interstate 240. The

lease begins in the fourth quarter, with Glankler Brown hoping to occupy its new space by Christ-mas.

Glankler Brown, whose main office is at One Commerce Square Downtown, has had a satellite office in Triad Centre I for more than 20 years, occupying 6,768 square feet on the first floor. Two years ago the law firm expanded that lease by about 2,000 square feet.

Now the firm will take over the entire fourth floor of Triad Centre I, serving as an anchor of sorts for the building – and giv-ing property owner Highwoods Properties another stellar addition to a tenant roll that includes Re-gions Insurance and Wunderlich Securities.

“It’s a big deal,” said John Mercer, Highwoods director of leasing and the broker who repre-sented Highwoods. “I’d say in our Highwoods portfolio in Memphis,

our average tenant is about 5,000 square feet. To have a transaction seven times our average, it’s huge.”

Tracy Speake, managing part-ner at Paradigm Realty Advisors LLC who represented Glankler Brown in its move to Triad Centre I, said the firm’s new home will provide the perfect balance of cost, efficiency and location.

“We looked at all the major buildings Downtown, all the major buildings out east,” he said.

“Two things made Triad stand out. One is, it’s a very large floor plate, almost 33,000 square feet. They don’t build buildings like that anymore.

“Two, when you look at the ef-ficiencies that brings to Glankler, it was a no-brainer. At the end of the day, there are great synergies for the firm – they have all their partners on one floor and the space efficiency is tremendous in comparison to operating two offices.”

Triad Centre I is a 132,495-square-foot building for-merly known by its address only until Highwoods began develop-ing a third office tower – dubbed Triad Centre III – at the north-west corner of Poplar and Shady Grove. When that building came online Highwoods decided to rebrand all three office properties with the Triad moniker.

Triad Centre II is at 6060 Poplar, and Triad Centre III is at

6070 Poplar. The latter was re-cently completed and landed the law firm of Apperson Crump PLC, which has building signage rights.

Highwoods had some lease expirations and some other available space to accommodate Glankler Brown’s arrival at Triad Centre I, whose occupancy is a moving target, because it’s impos-sible to tell what new deals might happen between now and fourth quarter.

But Mercer said if occupancy with the Glankler deal were counted today the building would be at 92.5 percent.

Glankler Brown, which had been looking to consolidate its of-fices into one location for the past two years, aimed to find a space that offered both efficiency and economic benefits. Being close to its customer base, much of which is in East Memphis, made Triad Centre I a perfect fit.

“Being at Poplar and 240 – what we think is the business CBD (central business district) – is just another testimonial to that,” Mercer said. “Our goal is to own the best buildings and the best locations. We feel like an existing customer expanding and want-ing to stay with Highwoods when they had other options, we’re excited and we feel like we’ve done a good job. We strive to keep our existing customer base happy and growing.”

Deal ‘Huge’ For Office Real Estate MarketERIC SMITH | The Daily News

Weak Economy Presents Myriad Opportunities ANDY CATES Special to The Daily News

You might say I’m bullish on the in-dustrial real estate market in Memphis. That’s because every economic cycle brings with it some kind of opportunity that should be leveraged in terms of a company’s real estate.

In the case of today’s sluggish economy, where property values continue to be in flux, a major opportu-nity lies in lease renewals.

Regardless of whether or not your lease is expiring in the near term, now is the ideal time to assess your lease situation and determine if there are opportunities to save money.

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.

Bringing all operations together under a single roof can offer tremendous economies of scale and more efficient workflows. There will be a number of things to consider when determining whether to stay in your existing space or relocate, including any “make good” commitments contained in your current lease that could require you to return the property to its original condition before vacating.

One of the biggest tips I can offer anyone with a commercial real estate lease is to act now – regardless of where you are in your current lease. Having open and frequent communication with your agent and landlord is the key to any transaction.

By getting on the same side of the table, both par-ties can understand each other’s motivations for the transaction, whether that is a maturing loan for the landlord or rent concessions for the tenant. Without solid communication between both sides, opportunities are lost.

The most common misconception in a negotiation is that it has to be confrontational. In this market, we need to bring both sides of the table together to sur-vive. We are seeing some unprecedented deals in the market right now, but they won’t last forever.

Andy Cates is vice president of brokerage services at Colliers International Memphis. To contact him, visit

www.MemphisIndustrialRealEstate.com

TRIAD CENTRE I

Photo: Lance Murphey

Page 7: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition 7September 2010

U.S. Bancorp in August accepted the bid from a local investment group to buy One Commerce Square at 40 S. Main St.

The group, which includes Southland Capital president Terry Lynch, his partner Karl Schledwitz and also Gary Proster-man, submitted its bid in late July.

Lynch on Aug. 4 confirmed the group’s bid was tentatively accepted. It will commit $25 million to $30 million on the building, which includes the purchase price and improvements to the building in the coming months.

He wasn’t able to disclose the for-mal purchase price, but One Commerce Square was listed for $12 million.

The new ownership group’s first goal will be trying to land Pinnacle Airlines Corp.’s corporate headquarters for its anchor tenant.

“We’re excited about it,” Lynch said by phone from Denver. “This lets us move forward with our efforts to get Pinnacle Downtown as well as keep them in Mem-phis. We certainly wouldn’t want them to go to Mississippi.”

Lynch said the group is talking to other potential big users for space in the building, but that comes second to talks with Pinnacle, which the investors expect to occupy a third of the 500,000-square-foot building.

Pinnacle, the Memphis-based parent of three regional airlines, plans to move its corporate headquarters and is enter-taining an enticing offer from the state of Mississippi to move to Olive Branch.

But Memphis has stepped up to match, with Mayor A C Wharton Jr. and the Center City Commission employing an “all hands on deck” campaign to lure the company Downtown.

One Commerce Square’s new owner-ship group “fast-tracked” a proposal to Pinnacle, including an incentive package from the CCC and the city.

Although the building is now leased and managed by Commercial Alliance Management LLC, Lynch said there will be a competitive process for a leasing and management company moving forward.

“In the next 30 days a lot will happen,” said Lynch, who added that the ownership group will form a single-purpose limited liability company for the acquisition.

Also, while U.S. Bank and Commercial Alliance have performed some upgrades, the new owners will make some improve-ments to the property, including tenant finishes.

U.S. Bank confirmed it had approved an offer to buy the 500,000-square-foot building at Main Street and Union Avenue. Lisa Clark, a spokeswoman for Minneapolis-based U.S. Bank, said more work on the arrangement still has to be finished before the deal is final and the bank can comment.

Stewart Calhoun, executive director of the southeast capital markets group for Cushman & Wakefield of Georgia Inc. in Atlanta, the group working with the bank, said they received numerous bids and had a “strong response.”

The acquisition begins a new chap-ter for the landmark tower. And landing Pinnacle would be a much-needed boost for One Commerce, which has seen two high-profile large tenants leave within the last two years.

The biggest departure occurred when SunTrust Banks Inc. – whose logo once adorned the building – vacated 155,000 square feet and moved to East Memphis. That sparked financial troubles for the previous owner and sent the building into foreclosure.

Then, just two months ago, the law firm Glankler Brown PLLC decided to end its 39,000-square-foot lease at the tower also for a move east.

Originally developed and built by Na-tional Bank of Commerce, One Commerce Square, contains 507,568 square feet and sits on the southeast corner of South Main Street and Monroe Avenue. The Shelby County Assessor of Property’s 2010 ap-praisal is $13.8 million.

The building is owned by Forty South Main Street Corp., an affiliate of U.S. Ban-corp, which acquired the original lender, Park National Bank, last year through an FDIC transaction.

Prior to that deal, in June 2009, Park National had bought the building for $20 million on the Shelby County Courthouse steps following a foreclosure. The bank was the sole bidder on the property after the previous owner defaulted on its loan.

Local Investors to Buy One Commerce SquareERIC SMITH | The Daily News

OnE COMMERCE SquaRE (Formerly known as NBC Building

and SunTrust Building)

40 S. MAIN ST.31 STORIES

507,568 SquARE fEET

1972: Built by National Bank of Commerce

1984: Sold for $46.1 million

1996: Sold out of foreclosurefor

$21.7 million

1999: Sold for $31 million

2009: Sold out of foreclosure for

$20 million

2010: To be sold to local ownership for

estimated $12 million

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Page 8: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition8 September 2010

Midtown TargetLand intended for retail rebirth is in the crosshairs of city code enforcement

ANDY MEEK | The Daily News

Two 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.

That 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.

“I’d love to do something like this in Memphis,” Marsh said, letting the Canyon Ranch imagery sink in.

Then he slyly added, “But we just couldn’t get that ocean view.”

Fast forward to the same month in 2010.

Today, the once well-received project remains little more than an idea on paper. Its land is home to hazard-prone, graffiti-painted buildings with broken windows and crumbling brickwork.

And one city official has lost patience.Ernest Dobbins, Memphis’ community

enhancement director, earlier this month began talking about possibly using a legal tool to force the property’s new owner to make demolition a priority.

Soon after the Memphis City Coun-cil’s capital improvement committee set aside money a few weeks ago to pay for the city tearing down buildings at the site, Dobbins told The Memphis News how he’d like to do it: by filing a lawsuit under a Tennessee statute called the Neighbor-hood Preservation Act.

enFoRCeMent ACtion For the past few years, that law has

served as the basis for court actions filed on behalf of frustrated tenants and neigh-borhood residents. They use the suits to force landlords to clean up what in many cases are properties that have fallen into disrepair.

That’s what Memphis homeowner Jan Rowe did in 2008. She lived on the outer edge of Eastview – a dilapidated collec-tion of homes more than 60 years old with trash-strewn, overgrown yards.

Rowe filed a Neighborhood Preserva-tion Act suit in Shelby County Chancery Court against the landlords and out-of-

town interests who own Eastview’s homes and duplexes that sit behind East High School.

One of the tenets of the Neighborhood Preservation Act is that if a homeowner’s property loses value because of the blight, they can sue to recover the difference – as well as force the owner to clean up.

Rowe’s property slipped in value after she bought it in 2004, despite making pricey renovations.

The Neighborhood Preservation Act reads, in part: “The owner of residential rental property or an unoccupied resi-dence shall be required to maintain the exterior of such property and the lot on which the residential rental property or unoccupied residence is located at a level

which is no less than the community standards of the residential property in the area.”

To the naked eye, the Midtown site – concentrated near the intersection of Poplar Avenue and Cleveland Street – is the epitome of what that legislation was meant to combat.

Along Watkins, the hodgepodge of buildings greets passersby with broken windows, tall grass and “Keep Out” painted on several doors. Boards are scat-tered haphazardly, some leaning against buildings they presumably came from.

The piles of trash and seemingly bombed-out shells of buildings give the area a seedy vibe. All of that is why Dobbins’ consideration of the Neighbor-

hood Preservation Act as a remedy for conditions at the site shouldn’t come as a surprise.

It’s the latest in a string of setbacks for the project, once rumored to have caught the attention of Target as a potential big-box anchor.

luCK oF tHe dRAW Dobbins’ plan is also a dramatic ex-

ample of the property’s reversal from the site of a wow-inducing real estate deal to one that may require a lawsuit to clean up.

“We can’t wait a few more months,” Dobbins said. “We’ll force them into court and let the courts force their hand.

“I need something on paper, in writing and a timeline of when they’re going to do such-and-such, so we can maybe work together. Every time you look up there’s a fire over there – just problems. They told us they’d demolish the buildings after the foreclosure.”

By foreclosure, he was referring to yet another recent setback for the project. Lehman Brothers Holdings foreclosed on WSG at the end of March, reclaiming the property.

After three rounds of a bidding war on the Shelby County Courthouse steps, Leh-man took back the collection of residential and commercial parcels comprising about five city blocks for $3.15 million.

A fire inspector watched the auction unfold. So did a few area residents like John Buffaloe, eager to see someone turn a page on the development and finally make something happen.

Mark Adams, an inspector from the Fire Prevention Bureau in the city’s Fire Services Division, recently issued a cita-

An alley leads to apartment buildings east of Cleveland Street between Jefferson and Court.

Photos: Lance Murphey

Michael Nguyen, Tyler Tran and Calvin Mai play along Court near North Watkins Street, where a number of Hispanic and Vietnamese immigrants live.

Page 9: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition 9September 2010

Welshinvest Buys two Sitesin 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.

The city/county Industrial Develop-ment Board quitclaimed both sites to Principal Life Insurance Co. in 2006.

WelshInvest is an affiliate of Welsh Cos. LLC. Founded in 1977, the parent company handles many aspects of com-mercial real estate, including brokerage, property management, development and financing, among other things. WelshIn-vest doesn’t own any other properties in Tennessee, according to a property map on the company’s website.

Welsh Property Trust Inc. announced July 1 it was withdrawing plans for an initial public offering, citing unfavorable market conditions. The company filed registration in March for a proposed IPO “in an effort to source lower-priced capital to finance the purchase of additional real estate,” according to a statement on Welsh’s website.

Shops at Rock CreekSell for $4.4 Million

The Shops at Rock Creek, a two-build-ing, 61,000-square-foot strip shopping center built on two parcels in 2006, has sold for $4.4 million.

The buyers are Southstar Holdings UNCC LLC, with 65 percent interest, and RC Memphis LLC, with 35 percent interest. The seller is Wells Fargo Bank NA, acting as trustee for Morgan Stanley Capital I Inc. The buyers financed the purchase with a $3.4 million loan through First Tennessee Bank NA.

The center sits on 5.5 acres at the southwest corner of North Germantown Parkway and Rockcreek Parkway. The Shelby County Assessor’s combined 2010 appraisal of the two parcels is $6.8 million.

The center was one of several retail sites sold at a foreclosure sale in October. That sale was because the owners of The Shops at Rock Creek, Kapree Rock Creek LLC and Memphis Rock Creek LLC, defaulted on an $11.7 million loan dated November 2006. Following that sale, Centerline Servicing Inc., the properties’ receiver, contracted the Memphis office of Colliers International to lease, manage and sell the properties.

Real EstateI N T H E N E WS

tion to WSG for code violations at the site.

After the foreclosure, he mailed Lehman’s local representative, Glankler Brown attorney Randall Womack, a copy of the inspection report with a court date for earlier this month.

Around the same time, Adams e-

mailed a few officials in the community enhancement division: “Representatives from Lehman Brothers Holdings Inc. are to visit Memphis in the near future, and Mr. Womack will arrange for me to meet with them. It is also their intention to meet with other city officials while they are here.”

At press time, there was still no indi-cation when that meeting would happen. And for now, the project is more or less on life support.

WSG is out of the picture, apparently a result of Lehman exerting pressure on WSG elsewhere in the country.

As Lehman’s remaining corporate entity works to shrink and ultimately get rid of assets in the company’s giant loan book, some borrowers are effectively being told time has run out for their projects.

Lehman has filed several foreclosure actions against WSG in multiple states.

Lehman itself filed for Chapter 11 bankruptcy protection in September 2008. That one act was responsible for a panic that exploded through world mar-

kets and arguably worsened what already was a painful recession.

And it happened only four months after Marsh walked the Central Gardens residents through his slide presentation.

At that point, the Midtown Memphis Planned Development had already been years in the making. Land assembly had been under way for about four years.

WSG bought most of its parcels, all of which are south of Poplar and on both sides of Watkins, in May 2007 in an $11.6 million deal that comprised several transactions.

A few months before the Central Gardens meeting, the developers filed an official plan for the project that showed small and large retail shops, restaurants and medical offices.

They wanted approval to permit apartments or condominiums above the retail stores.

Area residents probed Marsh for details. He was as specific as he could be in describing what the tenant mix at the finished retail center might look like.

“Go out to the Wolfchase mall and look across the street at the shopping center that has Best Buy and some other major tenants,” he told the crowd, refer-ring to the Wolf Creek retail center that includes Sports Authority and Target, among other retailers. “Some of those will be here.”

Marsh said he expected the develop-ment to have an economic impact on the area of about $150 million.

A lot, of course, has happened since then.

The state and local economies are only now recovering from a recession that was still months away from hitting its peak when the Central Gardens resi-dents got a taste of what was supposedly on the way to Midtown.

In the recent past, Target cut its new store openings by as much as 70 percent, said Danny Buring, a partner at The Shopping Center Group.

Credit dried up. Commercial real estate became the hot potato no bank

wanted to be stuck holding.Lehman was already stuck with

plenty of it. A loan portfolio stuffed to the gills with real estate debt – much of which probably shouldn’t have been originated in the first place – had a hand in sinking the company.

All of those factors added up to trans-form any tailwinds behind the Midtown project into stiff, paralyzing headwinds. The kind that make it seem almost im-possible to take a step forward.

Midtown resident and real estate agent Joe Spake said his biggest disap-pointment about the project is the same one bugging Dobbins – that the land still has not been cleared.

“I think a cleared and grassy site would be more aesthetically pleasing, and much more attractive to potential developers and/or buyers, than the cur-rent blighted mess,” Spake said. “To me, dealing with blight issues in general is more important to Midtown than having a big box department store.”

Shawn Massey, also a partner at The Shopping Center Group, said the typical rent paid in the Midtown area will make it hard to justify new construction for a while.

And he said whoever ultimately de-velops the site needs to “understand the real demographics of the area” for any project to work.

One of the most relevant symbols of the Midtown project’s history can be found in the form of an advertisement posted along Cleveland near a conve-nience store where a crowd of people loitered during a recent afternoon.

The sign stands a few yards away from the blight where a development team once saw dollar signs and a bank-rupt lender now holds the keys to the future.

It’s an advertisement promoting the Tennessee lottery.

That sign’s theme, of course, is luck – the one thing that’s eluded the project until now, and the thing it needs most of all to survive.

A vacant, boarded up apartment building near Jefferson and North Watkins is one of numerous abandoned buildings in the area.

“Every time you look up there’s a fire over there – just problems. They told us they’d

demolish the buildings after the foreclosure.”

– Ernest Dobbins, Community enhancement director, City of Memphis

Page 10: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition10 September 2010

Cautious OptimismIndustrial leaders hopeful for market turnaround

ERIC SMITH | The Daily News

Industrial 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.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 that, according to the latest data from real estate information company Chandler Reports, www.chandlerreports.com.

(For this report, industrial sales mean any transaction involving a warehouse, office showroom, sales and service center, truck terminal, aircraft hangar or airport.)

On the sales side, deals in that same 12-month period averaged $1 million, up 32 percent from $758,554 in the previous period but down 41 percent from $1.7 mil-lion the period before that.

Also, the total sales volume of $69.3 million marked a 6 percent improvement from $65.2 million in the previous period but a 70 percent decline from $234.2 mil-lion the period before that.

The largest industrial deal of the past year occurred in December when American Snuff Co. LLC – then known as Conwood Co. LLC – bought the 787,500-square-foot building at 5106 Tradeport Drive for $19.3 million.

The next biggest deal occurred when Freehold, N.J.-based Monmouth Real Estate Investment Corp. bought the 449,262-square-foot, Class A warehouse at 5025 Tuggle Road for $14.6 million. The facility, which recently underwent a $1 million expansion, is 100 percent leased by FedEx Global Supply Chain Services Inc.

A pair of limited liability companies

affiliated with Minnesota-based WelshIn-vest bought property in Airport Industrial Park from Principal Life Insurance Co. for a combined $20.6 million.

Exeter 4460 Holmes LLC bought property at 4460 E. Holmes Road for $11.5 million. And Exeter 4495 Citation LLC bought property at 4495 Citation Drive for $9.1 million.

Anther notable transaction in-cludes Genuine Parts Co. buying the 128,481-square-foot auto parts distribution center at 7415 U.S. 64 for $10.2 million. Its auto distributor brand NAPA Auto Parts already was housed there.

Sherry Taylor walks by a vacant industrial warehouse in the Southridge complex at 6269 Shelby Drive.

Photos: Lance Murphey

Chickasaw Distribution Center at Hickory Hill Road and freeport Drive is home to a number of large industrial warehouses.

nOTaBLE LEaSES TECHNICOlOR SA

Summit I: 580,131 square feet Summit II: 789,291 square feet

SIEMENS AG Airways Distribution Center

619,000 square feet

SOlAE INC.Deltapoint Business Park

472,000 square feet

fISKARS CORp.Southaven Distribution Center

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

Page 11: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition 11September 2010

On the leasing side, the local market saw a handful of small and large deals, highlighted by Technicolor SA signing 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 619,000-square-foot lease in Airways Distribution Center and Solae Inc. signed a 472,000-square-foot lease in Deltapoint Business Park.

Andy Cates, vice president of broker-age services for Colliers International; see story Page 14), said he is pleased with what he is seeing in light of the ongoing economic slump.

“The market is very active right now,” he said. “I can’t say there’s been a ton of growth in the rental rates, but there’s been a lot of activity in clients looking for space and some deals are actually starting to get signed.”

Those deals, many of which happened in second quarter, are a breath of fresh air following the previous quarter’s leasing statistics, which saw a negative absorp-tion of 186,810 square feet, according to CB Richard Ellis Memphis’ most recent industrial “MarketView.”

Jim Mercer, executive vice president of industrial brokerage services for CBRE, said the local market is “faring pretty well” thanks to those large leases.

“Since the beginning of the year, we’ve seen 4.5 million square feet of leasing ac-tivity and currently, there’s approximately 5 million square feet of active deals in the marketplace looking for space,” Mer-cer said. “Some of this activity has been renewals and tenants moving within the market but a significant amount has been new business to the area.”

Dick Faulk, broker at Crump Com-mercial LLC, is one of many practitioners who used the term “cautious optimism” when describing the industrial sector. He likened the market to the Tour de France bicycle race, which is filled with easy legs and challenging legs, mountainous climbs and sprints.

“We’re kind of in the bottom portion of the course and we’re in the smooth track,” he said. “We’ve still got all the uphill.”

Faulk pointed out that the large deals have been tempered by a void in the 50,000- and 200,000-square-foot range– the “stuff in between the ears,” Faulk said – where activity hasn’t been strong.

On top of that, he added, lending is tight as companies struggled to get financ-ing and often don’t have the equity needed for a purchase or move.

“I think we’ve been fortunate as a mar-ket. There were some major deals made the latter part of last year, which took a lot of inventory off the table, and that helped the numbers tremendously,” Faulk said.

“But still we have that unsettling feel-ing. This recession has gone so deep and so long, that you just can’t turn on a light switch and all of a sudden everything’s fine. We’re in better shape than we were 12 months ago, but we’re not out of the woods yet.”

But Faulk, like most brokers, believes Memphis will rebound in due time, even if no one knows for sure when that happens.

Simply put, the city’s natural distribu-tion capabilities coupled with its myriad transportation assets bode well for the industrial market.

Don Culbreath has about 200 acres for sale in Chickasaw Trails In-dustrial Park, a 2,600-acre site in Marshall County, Miss., but so far no one has shown any interest in

buying the land.“My phone isn’t ringing; it hasn’t

rang all year,” said Culbreath, who lives in Germantown. “I haven’t got a single prospect right now and my land is ready to sell.”

With the news last summer that Norfolk Southern Corp. will build a $112 million, 570-acre intermodal terminal across the Tennessee state line in Fayette County to the north, Culbreath hopes that will change.

He’s hopeful because Chickasaw Trails is bounded by U.S. 72, the highway that runs east out of Collierville through North Mississippi. An access road from the Norfolk South-ern yard – where containers of cargo will be transferred between trucks and trains – is slated to connect with 72, bringing thousands of trucks past the park and perhaps bringing a windfall to area real estate.

Specifically, the rail yard, set to open in 2012, might ben-efit Chickasaw Trails much the same way that FedEx helps real estate in the airport area as busi-nesses look to set up shop close to the company’s hub.

“I hope it will really help us,” Culbreath said of the intermodal yard. “Marshall County is real excited about it, and the landowners around me are real excited about it. We feel like it’s going to help some.

“I don’t know how much, for sure, I guess a lot of it depends on the activity it’s going to create there.”

WAit And See As a consultant for the Marshall

County Industrial Development Author-ity, Del Stover is firmly in Culbreath’s camp about Chickasaw Trails. Not only is the park close to the Norfolk Southern site, but it is zoned industrial with a full infrastructure of utilities. Also, it will have direct access to what will soon be Interstates 269 and 22.

Stover envisions the park drawing in-

dustrial or light industrial users, whether it’s to build a warehouse or showroom or manufacturing plant. Citing the recently built 700,000-square-foot Exel distribu-tion center in Chickasaw Trails as an example of how the park already has attracted such users, Stover said the rail facility can spark additional ancillary activity.

“It ought to generate some distribu-tion-type projects and other facilities that support the intermodal yard,” Stover said.

But Jim Mercer, senior vice presi-dent at CB Richard Ellis Memphis, is leery of saying industrial real estate will

immediately benefit from the Norfolk Southern news because of one factor – the economy.

“It would have been a different answer 18 months ago or 24 months ago than it is today,” Mercer said. “Any spec developer out there now, it’s so difficult for them to get projects approved and financed, so for a developer to go out and buy a bunch of acreage right now, it’s very difficult, if not impossible, for them to do.”

He did say, however, that once the financial climate improves, places like Chickasaw Trails stand to benefit. He also projects that the asking prices likely will increase, although what land actu-ally sells for might fall short of that mark.

“There’s going to be a need for northern Mississippi industrial sites,” Mercer said. “So, I think Chickasaw Trails and Marshall County … will grow

industrially.“Clearly it’s a huge bonanza for Fay-

ette County, Shelby County and Marshall County.”

A PlACe At tHe tABle In light of the coming yard, Cul-

breath said he will ramp up the market-ing of his land, offering to sell it in tracts from two to 200 acres for a variety of us-ers. When the economy picks up, he even plans on building a couple of speculative buildings from 10,000 square feet and up.

Culbreath also has built a road through the middle of his land, which ultimately will continue north and meet

72 where it intersects with Tenn. 196, which should help connect users on his property with points everywhere.

“I think it’s going to help everybody,” Culbreath said.

Plenty of others remain hopeful the yard will aid real estate development, from Chickasaw Trails north to the Piperton business park, and elsewhere in Fayette County and nearby Memphis.

“When we get this intermodal yard completed, it’s going to attract, I believe, other business and other commercial facilities to the area – light commercial and light industrial,” said state Rep. Barrett Rich, R-Somerville. “During this time, when we’ve been in this economic downturn, this sort of stalemate, it’s go-ing to bring jobs to the area, naturally. It’s kind of like lighting a fire to dried grass. It’s going to catch everything else on fire around it. That is a very good thing.”

Fayette Rail Yard Expected to Spark Real Estate activityERIC SMITH | The Daily News

WCA Development Co. works on a heavy industrial road that will link the Norfolk Southern intermodal yard to the outlying area. Commercial real estate in the entire region stands to benefit from the yard.

Photo: Lance Murphey

Page 12: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition12 September 2010

u of M-Area Highland RowProject Still in the Works

Lifestyle center developer Poag & McEwen remains committed to Highland Row, the mixed-use development the company is pursuing next to the Univer-sity of Memphis, company representatives said recently.

Poag & McEwen president and CEO Josh Poag said the company is still getting financing in place but anticipates starting construction around the end of the year or early 2011, with a grand opening in 2012.

Poag representatives also said the company would like to put its corporate headquarters there.

The company has pursued the project for a few years, though progress stalled amid the recession. Some features of the development also have changed.

As of now, for example, Barnes & Noble will not be operating the Univer-sity of Memphis bookstore that will be an anchor of the development. The U of M has put out a request for proposals from companies that could operate the store, and Poag said Barnes & Noble could still end up a successful re-bidder if it chose.

Poag said the company has been in discussion with a variety of local Memphis retailers for space in the development, and it’s also offered space for the city to use as a police substation.

Cost is the reason another planned Poag & McEwen project, an expansion of Saddle Creek in Germantown, has stalled.

“That one (at Saddle Creek) is five years away, at the earliest,” Poag said.

Methodist le BonheurBuys Sutherland Clinic

Methodist Le Bonheur Healthcare has bought Sutherland Cardiology Clinic’s property at 7460 Wolf River Blvd. in Ger-mantown in conjunction with Sutherland becoming a part of Methodist Le Bonheur.

Methodist, working under the name Methodist Healthcare-Memphis Hospi-tals, bought the site for $13.3 million from The Sutherland Cardiology Clinic Rental Co. LLC. Though the transaction is dated July 1 – the same day Sutherland officially became a part of Methodist – papers were filed with the Shelby County Register of Deeds’ office in August.

The property is a 50,534-square-foot medical office building built in 2007 on 4.3 acres on the north side of Wolf River Bou-levard between the dead end of Riverdale Road to the west and South Germantown Road to the east. Sutherland bought the property – at the time just vacant land – for $2.5 million in April 2006. The Shelby County Assessor’s 2010 appraisal is $9.4 million.

Though Sutherland’s 17 doctors and nearly 100 employees are now Methodist employees, Sutherland will continue to operate out of the Wolf River Boulevard facility and satellite clinics throughout the region, and will continue to work with other Memphis hospitals, according to a statement from Methodist Le Bonheur Healthcare.

Real EstateI N T H E N E WS

The store’s motto is “e-squared – eat and enjoy.”

Its look and feel will be that of an Old World market offering cus-tomers freshly prepared food with

a local and international flair, as well as grocery staples such as milk and eggs.

And thanks to a $40,000 retail forgiv-able loan awarded by the Center City Development Corp. earlier this year, the way is now paved for City Market Groceries & Deli to open Downtown. The most recent plans call for the store to open in November.

The grocery is being built on the ground floor of Radio Center Flats, the apartment development at 66 S. Main St., where it will be in a position to capture strong business from Downtown resi-dents and workers.

It’s also not far from major land-marks like The Peabody hotel, so the owners have positioned it to be a hit among tourists and Downtown visitors too. The market signed a five-year lease in August for the 2,880-square-foot space at Radio Center Flats.

“It’s a much-needed store, and there’s great potential,” said Hamida Pirani Mandani, who will be a managing part-ner of the store along with her husband, Sunny.

neiGHBoRHood niCHeThey’ve drawn up extensive and

detailed plans for what looks to be a small, boutique venture that provides the convenience of a major grocery. An outdoor patio and limited menu for

breakfast, lunch and dinner featuring items prepared each morning will offer a reasonably priced restaurant experience.

And the look of the store – which will feature exposed bricks, tall ceiling beams and concrete floors – will contribute to a cozy, neighborhood feel.

Like Miss Cordelia’s, another similarly sized grocery Downtown, the partners behind City Market likely will rely to some degree on social media like Facebook as a low-cost promotional tool. Harbor Town’s Miss Cordelia’s – named after its developer, Henry Turley’s, late mother – has been touting soups and other specials of the day to the grocery’s Facebook friends as a magnet to draw customers into the store.

And the very existence of that Mud Island competitor is one reason City Market may have found a sweet spot.

“They’ll offer different products that Downtown folks may have to otherwise drive to Whole Foods or Miss Cordelia’s for,” said Lisa Brumleve, the Center City Commission’s manager of business recruitment and retention.

The City Market partners also are planning to apply for a $30,000 façade grant from the CCC to make improve-ments to the space.

ConvenienCe APPRovedThanks to a plan the CCC’s business

consultant reviewed and found to be appropriately conservative, the partners anticipate turning a profit starting in year one and never dipping into the red after that. One way they’ll hold the line

on expenses is by having the managing partners put in plenty of elbow grease to cut down on labor costs.

City Market will serve coffee, tea, juice and soda throughout the day. A rotating menu will feature sandwiches, soups, salads, drinks and desserts.

Prices for the deli and prepared food items will range from $7 to $9 for sandwiches, $4 to $6 for breakfast items and $3 to $5 for spe-cialty coffee drinks and smoothies.

A coffee sta-tion will include a mix of local brands such as Ugly Mug. And grocery items will include oils and sauces, spreads, cheeses, meats, pasta, drinks, choco-lates and more.

The grocery’s intent to serve up a daily special of con-venience and quality at a key intersection Downtown drove the CCDC to sign off on the loan.

And the partners are now ready to put

their skill sets to work getting it off the ground.

Hamida Mandani recently got her master’s in business administration degree from the University of North Alabama in Florence.

“We think we’ll bring a quality shop-ping and restaurant experience,” she said.

Downtown’s City Market Only Months away from OpeningANDY MEEK | The Daily News

pedestrians pass the empty windows on the ground floor of Radio Center flats, the apartment develop-ment at 66 S. Main St., where City Market Groceries & Deli, an upscale grocery and deli, is planned. The grocery has signed a five-year lease for about 2,880 square feet plus an outdoor patio, according to the Center City Commission.

Photos: Lance Murphey

Page 13: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition 13September 2010

Highwoods Buys Crescent Center for $52.6MERIC SMITH | The Daily News

Female CRE Pros Have Local HomeTOM WIlEMON | The Daily News

Highwoods Properties Inc. bolstered its already strong position along the Poplar Avenue office corridor by adding an impressive asset.

The Raleigh, N.C.-based com-pany paid $52.6 million for the Crescent Center, a landmark office building at 6075 Poplar Ave. in East Memphis.

Highwoods bought the Class A, 336,000-square-foot office tower from IPC Crescent Center LLC, an affiliate of Behringer Harvard.

Built in 1986, the nine-story Crescent Center sits on 10.18 acres at the southwest corner of Poplar Avenue and Ridgeway Road, near Interstate 240. Its 2010 ap-praised value is $58.5 million, according to the Shelby County Assessor of Property.

The Crescent Center purchase increas-es Highwoods’ East Memphis portfolio to 10 office buildings and 1.3 million square feet, and its total local portfolio to 20 of-fice buildings and 2.1 million square feet.

“It fits into our portfolio very nicely,” said Steve Guinn, vice president of High-woods Properties and the company’s top ranking Memphis official. “We’re concen-trated on the Poplar corridor, east of 240. Crescent Center obviously is a significant building. It’s one of the more iconic build-ings in Memphis.”

The sale also marked the largest com-mercial real estate transaction in Shelby County since 2005 when Behringer Har-

vard paid $63 million for the same building.

The only other sale to exceed $50 million in the past decade also occurred in 2005 when Lakha Properties–Memphis LLC paid $57 million for Cross Creek shopping center on Riverdale Road.

As for the Crescent Center, the building is 89.5 percent leased with what Guinn called a “great roster of compa-nies.”

“It’s a stable asset,” he said. “It adds to our port-folio both in Memphis and corporate.”

Guinn called the Crescent Center a “diamond that needs a little bit of polish-ing,” including some “near-term improve-ments” to the building.

Most of the enhancements won’t be dramatic but more cosmetic, he said, with an emphasis on small improvements to the property’s three-level garage, elevator lobbies, and landscaping.

Highwoods plans to perform such improvements as a “lighting retrofit” and garage rewiring to green the building and improve its energy efficiency. The com-pany also plans to freshen up the lobby

and institute a recycling program in the building.

Highwoods will handle management of the facility as well.

The purchase comes after Highwoods opened the Class A office building Triad Centre III, a LEED-certified facility, at the northwest corner of Poplar and Shady Grove.

“We’ve made a pretty big investment in that corner in the last 24 months,” Guinn said.

Tabitha Zane, vice president of inves-tor relations and corporate communi-

cations for Highwoods, said called the acquisition a big step for Highwoods to solidify its position in the area.

“Long term we’re bullish on Mem-phis,” she said. “This is a great building and a great location. It enhances our position in Memphis and on the Poplar corridor.”

Highwoods has 10 offices, including Memphis and Nashville. The local division employs 18 and expects to hire three more people as a result of this latest portfolio addition, said company spokesperson Kelly Maicon.

Crescent Center

Photo: Lance Murphey

Carol Slone knows it takes network-ing to secure new clients and to close deals.

That’s why she and a handful of other Memphis businesswomen

formed the state’s first Commercial Real Estate Women chapter.

“This is the only organization out there that is devoted to women in commercial real estate,” said Slone, president of the CREW chapter in Memphis. “Our whole cause is to offer women an opportunity to be all they can be to their fullest potential.”

CREW has 71 chapters across the United States and Canada. Its members include brokers, lawyers, engineers, insur-ance agents, appraisers and other profes-sionals who derive their incomes from commercial real estate.

Chapters in larger cities typically have hundreds of members, but right now Memphis has about 15.

“We expect to do nothing but grow from this point forward,” said Slone.

The chapter was formed in 2007 and had a membership of 25 before the severe economic downturn.

Slone, who works as a vice president of First American Title National Commer-cial Services in Memphis, said she knows the $280 membership is a good return investment. She was an at-large member of the organization before Memphis had a chapter.

“There were times when a CREW member from another part of the country needed work done here in this market,” she said. “Because I was a CREW member

at-large, they contacted me.”Gail Ayers, the chief executive officer

of CREW Network, is a Tennessee native from Greenville. She’s looking to Memphis to inspire chapters in Nashville, Knoxville and other areas of the state.

“There is never a cold call in CREW,” Ayers said. “We can do the deal from A to Z, including zoning and appraising. We even have a subset of members who are specialists in appraising salt domes and railroad right-of-ways. There is probably nothing that touches commercial real estate that we don’t have.”

Total membership in the organization, which was founded in 1979, has surpassed 8,000. The closest chapters to Memphis are in St. Louis and Birmingham, Ala. Members of the Birmingham chapter have

helped the Memphis group get started.The Memphis chapter helped co-

sponsor a recent seminar at the Clark Tower in East Memphis. “When Great Women Come Together, Great Things Can Happen” was held in conjunction with the Memphis chapter of the National Association of Women Business Owners and Women’s Business Enterprise Council South.

Memphis CREW has launched a web-site, www.crewmemphis.org, with details about the organization and membership requirements.

The chapter is also open to accoun-tants, public relations experts, lenders and publishers, as long as they have substantial involvement in commercial real estate. And men are also welcome.

Page 14: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition14 September 2010

Dollar Signs Follow Dollar StoresERIC SMITH | The Daily News

Colliers Firm Rebrands after Joint Venture, Remains localERIC SMITH | The Daily News

Perhaps the most telling CRE trend that has emerged of late was underscored by Scott Barton of CB Richard Ellis-Memphis at this year’s Commercial Property

Forecast Summit.As he noted, stores with “dollar” in

their names – e.g., Dollar General, Dollar Tree, Family Dollar – are thriving. Despite a dearth of overall construction throughout town, those stores are being erected at an impressive clip.

In a single month of early 2010, builders have filed permits for a new Dollar General near the University of Memphis and a new Family Dollar near Bartlett, two of the only retail offerings being brought to market.

“Consumer down-shifting is alive and well,” Barton said. “People really are adjusting their habits and trying to be a little bit more effective with their retail dollar.”

That means people who used to shop at Neiman Mar-cus are shopping at Macy’s. The people who used to shop at Macy’s are shopping at Target. The people who used to shop at Target are shop-ping at Walmart. And so on, down the line.

“Dollar stores are viewed as the pinnacle for stretch-ing your dollar,” Barton said. “They have branched

out too. Dollar stores aren’t just selling tape and party supplies. They sell food and drinks, health and beauty supplies. Some people are spending more and more of their grocery budgets in the dol-lar stores to get as much as they can for their money.”

Barton said the retail market has

seen lease rates sink to $10.70 per foot while vacancy sits at 12.6 percent. The market appears at or near the bottom, and plenty of questions remain about when recovery will begin.

The city’s biggest problem, Barton said, is it is “over-retailed,” meaning Memphians have too much retail space

per capita. The national average is 23 square feet of retail per person, while in Memphis the average is 35 square feet.

That can be blamed on the way Memphis has grown. With the popula-tion remaining about the same, but spread out to the outlying areas, retail square footage has increased in the newly developed areas while serving roughly the same number of people.

“That model, I think, is broken,” Barton said. “And it’s not just broken

in Shelby County, it’s broken everywhere, at least for a while. I’m not saying it didn’t work well, even here, for a period of time. But not any longer.”

If the retail market hopes to rebound, there can’t be any new construction, and landlords must be willing to offer lower rents to improve cash flow. And all retailers will need to be wary of the discount stores whose for-tunes are inversely related to the overall economy.

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 Wilkinson continuing to serve as principal stakeholders.

(Snowden is the son of company co-founder Bob Snowden and Wilkinson is the nephew of company co-founder Rus-sell Wilkinson.)

Formally, the Memphis branch of Colliers International will be Wilkinson and Snowden Inc., doing business as Col-liers International, said Woods, company president.

And the rebrand will allow the firm to better tap into the resources of its parent company, the third-largest CRE firm in the world with 15,000 professionals operating out of more than 480 offices in 61 coun-tries.

“I think what you’re going to see is more of a seamless organization through-out the country and internationally – Europe and Southeast Asia,” Woods said. “That will not detract from the fact that the Memphis office of Colliers Interna-tional is still locally owned and very en-trepreneurial. We will continue to operate that way, as we’ve always done. Our goal and our aim is to create a very positive and very memorable experience with every client and customer with whom we come in contact.”

And being affiliated more closely with the Colliers International brand will let the local branch better compete with other large CRE firms in town.

Julie Lunn, managing partner with the marketing and PR firm RedRover, which handles some of Colliers’ communications duties, said having additional platforms for the firm’s brokers will be critical in the ever-changing world of real estate.

Colliers will have the “resources of a global company while keeping the entre-preneurial spirit and making decisions at the local level,” she said.

“That’s a great message that we want to have out there,” Lunn said.

A Dollar Tree store is located at 3430 plaza in poplar plaza.

Photos: Lance Murphey

Marketplace Development llC has paid $350,000 for a 0.93-acre parcel at 1745 Sycamore View Road near Bartlett, where it developed a family Dollar store. Here, a car wash at the site was demolished.

A Dollar General store under construction at 1324 Getwell Road.

Page 15: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition 15September 2010

Raleigh-Bartlett Strip Center Fills Back upERIC SMITH | The Daily News

ORIX Capital Markets, a Dallas-based company operating as the special servicer for a North Memphis retail center, is working to quickly turn around a property

once headed for foreclosure.Village on the Pike at 2974 Covington

Pike between Raleigh and Bartlett already is on the upswing thanks to a new owner in ORIX and new leasing and management agent in CB Richard Ellis Memphis.

Built in 1987, the 37,606-square-foot Village on the Pike sits on the southeast corner of Covington Pike and Stage Road.

The center suffered when Walgreens left the anchor space and moved across the street, and also when the Dixie Queen closed its restaurant on an outparcel.

ORIX in early March formally took ownership of the center in a $500,000 substitute trustee’s deed. The center has an appraised value of $2.7 million, ac-cording to the Shelby County Assessor of Property’s 2009 information.

Mike Moran, CEO of ORIX Capital Markets, said that when the previous own-er, CCM #1 Ltd. of Memphis, defaulted

on its loan, the company was contracted by the lender, U.S. Bank, to reposition the property.

Now ORIX is hoping to improve on the Village on the Pike’s 79 percent occupancy with hopes of selling to a long-term owner.

“We try to maximize the recovery of the trust relative to the value of the loan that it had,” Moran said. “Our plan is to lease it up, and once we think we’ve maximized value it would be to sell the property.”

The company has gotten off to a good start now that CBRE has landed Dollar General to fill the old Walgreens space.

The discount retailer, which is occupy-ing 11,132 square feet, opened in spring. It joined Gentle Care Animal Hospital, Bob’s Tropicals (a tropical fish store) and Subway in the center. Also, a local chicken and fish restaurant will soon occupy the old Dixie Queen.

DSI Renal Inc., a Nashville-based provider of dialysis clinics, has signed a 4,400-square foot lease for the center and should be in place this summer. It will be the company’s eighth Memphis location.

Only a few bays remain in the center, ranging from 1,400 to 8,193 square feet.

Scott Barton, senior vice president for CBRE Memphis’ retail services division, called Village on the Pike a “success story” because of how quickly leasing has picked up since ORIX took over.

One advantage has been ORIX’s com-mitment to making improvements to the property, from replacing the roof to paint-ing the building. Moran said the company will begin upgrading the parking lot this month.

“It already looks so much better than it did before. It’s remarkable,” Barton said.

“All of a sudden, people are calling now. Everybody wants to be there now that the center looks better and has a lot more activity. We’re pleased.”

Barton called ORIX a “great landlord” to work with, citing CBRE’s partnering with the firm on the Summer Oaks center at Summer and Waring roads, where a big box was converted to a well-performing asset.

One advantage for Village on the Pike is its location on a hard corner and its proximity to a pair of competing retail drug stores. Walgreens is on the northeast corner and CVS is building a pharmacy on the southwest corner.

Those factors, coupled with the new owner upgrades, should help the intersec-tion’s traffic and therefore the center’s occupancy moving forward.

“It is a strong commercial location, al-ways has been,” Barton said. “It may have experienced some level of decline over the last five to 10 years, but really all it took was a little TLC and couple of dominoes to fall in the right direction and now we’ve been able to turn things around.”

“It already looks so much better than it did before. It’s

remarkable.”– Scott Barton, senior vice president for

CBRE Memphis’ retail division

Page 16: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition16 September 2010

two More tenantsJoin Ridgeway trace

Weingarten Realty Investors has announced the addition of two tenants – Yogurt Mountain and SportClips – to its Ridgeway Trace retail center at Poplar Avenue and Interstate 240.

Yogurt Mountain will lease 1,500 square feet and SportClips will lease 1,125 square feet, officials with Houston-based Weingarten said in a release.

This will be the first location in Mem-phis and third location overall for Yogurt Mountain, whose other two yogurt shops are in Birmingham and Tuscaloosa, Ala.

Justin Robertson handled lease ne-gotiations on behalf of Weingarten, and Danny Buring of The Shopping Center Group LLC represented Yogurt Mountain.

This will be Sport Clips’ 10th Mem-phis-area barber shop, including two in DeSoto County.

Robertson handled lease negotia-tions on behalf of Weingarten, and Shawn Massey of The Shopping Center Group represented Sport Clips.

The 300,000-square-foot Ridgeway Trace is anchored by Target, Best Buy, Sports Authority and PetSmart.

Tenants that have recently inked leases at the center, whose outparcels are still being developed and built, include Logan’s Roadhouse, Genghis Grill, Panera Bread and Mattress Firm.

CvS Closes on landFor Cordova Pharmacy

CVS paid $2.2 million for the 1.8-acre parcel of land on Germantown Parkway in Cordova where it is building its next area pharmacy.

The Daily News first reported in June that Woonsocket, R.I.-based CVS, the retail division of CVS Caremark, would buy the land from Gill Properties and bring a retail store to the site of the former Memphis Area Home Builders Associa-tion headquarters at 776 N. Germantown Parkway.

The company planned to buy half of the 3.6-acre parcel at the southeast corner of Germantown and Walnut Run Road for its store, whose address will be 786 N. Germantown Parkway.

Gill Properties president Ray Gill has razed the former 17,000-square-foot struc-ture and is widening the right-turn lane on Germantown.

CVS’s regional developer, Redd Realty Services Inc., an affiliate of A.M. Redd Jr. Inc., earlier this year filed a $501,000 permit with the city-county Office of Construction Code Enforcement to build the store.

CVS is building a 13,225-square-foot, 24-hour, drive-through pharmacy, which is set to open in early 2011.

Gill bought the property in December for $1.8 million, with financing provided by Rick Wood and Jon Van Hoozer of Financial Federal Savings Bank.

MAHBA sold the building to Gill because it wanted to downsize. With CVS buying half of the land, Gill plans to de-velop the other half. Those plans are still in the works.

testa Buys Appling landFor Strayer Campus

Testa Cos. has closed on the land in Appling Farms Business Park where it will build a campus for Strayer University.

Operating in the transaction as Se Testa Memphis LLC, the Cuyahoga Falls, Ohio-based commercial builder paid $603,788 for the parcel from Belz Invest-ment Co. LP.

The land is part of a 31.45-acre vacant lot that Belz subdivided when it devel-oped Appling Farms, a mixed-use de-velopment along Interstate 40 between Whitten and Appling roads.

The formal address of the entire parcel is 2209 Appling Road, and it has an ap-praised value of $3 million, according to the Shelby County Assessor of Property.

Testa has filed a $2.8 million permit application with the city-county Office of Construction Code Enforcement to build a two-story, 15,625-square-foot campus for Strayer University. The contractor is listed as Belz Investco GP.

Strayer operates campuses in 20 states and also offers an online degree program. In Tennessee, the university has campuses in Knoxville and Nashville, as well as two in Memphis, according to the school’s website.

The Memphis sites include the Shelby Oaks campus at 6211 Shelby Oaks Drive near Sycamore View Road, and the Thou-sand Oaks campus at 2620 Thousand Oaks Blvd. south of the I-240 Perkins exit.

new York Company BuysBrooks Road Hotel

New York-based MP Memphis Airport Hotel LLC has bought a hotel at 1471 E. Brooks Road for $1.3 million. The seller is Hometown 2007-1 Real Estate LLC.

The property is branded the Memphis Airport Plaza Hotel, a 75,700-square-foot, 249-unit, one-story hotel built in 1974 and previously branded as a Clarion Hotel.

It sits on 4.7 acres at the southwest corner of East Brooks Road and One Place, east of Interstate 55.

The Shelby County Assessor’s 2010 appraisal is $2.1 million. The seller, Home-town 2007-1 Real Estate LLC bought the property at a foreclosure sale in December 2008 for $2.5 million.

Chick-fil-A Buys Millington Property for $775,000

Chick-fil-A Inc. has bought a 1.9-acre parcel on U.S. Highway 51 in Millington from Hwy 51 LLC for $775,000.

The property is an outparcel of Lowe’s Home Improvement store. Lowe’s sold the property to Hwy 51 LLC in 2006 for $555,860.

The vacant site, which is zoned for commercial use, is on the southeast side of Highway 51 northeast of Wilkinsville Road.

The Shelby County Assessor of Prop-erty’s 2010 appraisal of the lot is $472,400.

The Chick-fil-A currently closest to Millington is near Wolfchase Galleria, more than 12 miles away.

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Page 17: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition 17September 2010

Pockets of the Memphis commercial real estate market appear poised for a possible rebound despite warnings of a potential double-dip recession in the making.

As 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-ties Inc. for $52.6 million at the end of July – the biggest CRE transaction in five years – Shelby County’s total sales volume rose 274 percent and the average sale price rose 391 percent to $2.1 million.

That deal, however, has proven to be the exception rather than the rule in Memphis’ office sector, which has been soft everywhere but in East Memphis.

“We expect to see limited growth in 2011 due to minimal construction and the economy not moving forward quick enough. We need more job growth and job creation,” said Steve Guinn, VP at Highwoods Properties. “Many busi-nesses’ hands are tied with the upcoming health care changes, and they are staying conservative for now.”

Overall average rents in Shelby County dipped to their lowest level since the end of 2007, falling from nearly $18 per square foot at the end of 2008 to $17.24, according to the latest CB Richard Ellis data. Concessions are increasing, especially with Class B rental properties.

The area’s healthiest office market is the Tenn. 385 corridor, where the vacancy rate for Class A space sits at 9.7 percent and Class B rates are 15.7 percent.

Despite extremely low interest rates, Guinn said his company would not build a 100 percent speculative building at this time, but it might consider build-to-suit projects with strong anchor tenants in place.

“Expect many businesses to focus on expense control, keeping their buildings full and filling vacancies,” said Guinn, who noted that companies are mak-ing strides to be more cost and energy efficient. “At our new Crescent Center acquisition, we plan capital improve-ments that will help with energy savings. We will also focus on leasing our new 155,000-square-foot Triad Centre III building, where construction wrapped up at the end of 2009.”

RetAil WoeSWith a slew of high-profile closures,

the retail market sector perhaps been hit hardest by the poor economy. Local bro-kers hopeful that buyers are making their way back to the marketplace, giving retail a fighting chance for a turnaround.

“We could be finally rounding the corner after the downturn, and this could be the beginning of a slow climb back,” said Scott Barton, vice president of retail services at CBRE. “We are seeing more interest now than six months ago. Rents and vacancies are falling, and the market is tightening up.”

Overall retail vacancy rates have fallen for three straight quarters, with the rate for Shelby County now at 13.6 percent. The Poplar corridor remains very strong for retail with a low 5.7 percent vacancy rate, making it hard to find space between 20,000 square feet and 30,000 square feet along Memphis’ busiest avenue.

“The flight to quality we have seen has kept the historically strong retail corridors strong despite the recession,” said Barton.

The area’s worst performing submar-ket was North Memphis, whose vacancy rate plummeted to 29 percent during the second quarter.

New developments aren’t expected to flourish because lenders are offering only 60 percent to 70 percent loan-to-value, down from 80 percent to 90 percent in the past. New projects must be partially leased up on the front end, with anchor tenants in place to draw in traffic.

“Going forward, there will be much less unbridled suburban growth. Banks are not lending and demand is weak for new space,” said Barton. “The majority of new development is likely to be tenant-driven infill projects in areas with denser population.”

Another trend in the retail sector is the growing chasm between rental rates

in various parts of the city. The rental rate per square foot in Germantown is currently $16.69, while in the Southeast submarket it is only $7.42.

“A fair amount of the properties in ar-eas that are struggling might not be viable for retail use anymore,” said Barton, who cites the 90,000-square-foot Old Time Pottery building on Winchester that was demolished after the tenant left and the building could not be re-leased. “Having the spot as raw land lowered the owner’s property tax issues, and it eliminated maintenance fees along with the potential for vandalism. Many junior anchor boxes are not useful now.”

induStRiAl enCouRAGeMentThe industrial sector – traditionally

Memphis’ bread-and-butter market – is working its way back up after hitting bot-tom with historic market lows over the last 12 to 18 months.

“We’re encouraged by the activity in the market. Aggressive owners are getting deals done with lower rental rates and concessions when necessary,” said Brad Kornegay, president of asset services at Colliers International. “We anticipate the market holding steady in the third quarter, and it should pick up considerably in the late fourth quarter or early next year.”

Leasing activity, especially with Class A warehouses, has picked up over the past eight to 12 months. The result is a drop in the area’s vacancy rate to 15.8 percent, down from 17 percent in the first quarter. Several large move-outs near the end of last year pushed the rate as high as 19 percent. Leasing rates have held steady for the past two quarters, and the general feeling is that rates will slowly climb going forward.

CRE Shows Faint PulseMICHAEl WADDEll | Special to The Daily News

The SunTrust Building, left, the Triad Centre and the Crescent Center all sit near the intersection of poplar and Ridgeway.

Photos: Lance Murphey

Triad Centre

CRe PulSe Continued on Page 22

Page 18: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition18 September 2010

Wolfchase Owner Files new appraisal ChallengeANDY MEEK | The Daily News

The owner of the most expensive piece of real estate in Shelby County isn’t finished challenging its 2009 appraisal.

Indianapolis-based Simon Property Group, the owner of Wolfchase Galleria, has filed another appeal of the mall’s price tag, which the Shelby County Board of Equalization in March pegged at $150 million.

The new appeal – the mall’s second since last year’s reappraisal – sets up an-other high-stakes tax showdown betweem the Shelby County assessor of property and representatives of the nation’s largest public real estate firm.

Wolfchase’s size means Simon writes the biggest check to the taxman in Shelby County. In 2009, Simon paid $4.46 million in property taxes for Wolfchase, which sits on 45 acres at the corner of U.S. 64 and Germantown Parkway.

Whenever property owners like Simon find fault with their new tax values, they can always try to work something out administratively. If that doesn’t work, an appeal to the local board of equalization is filed.

Simon, also the owner of Oak Court Mall, tried both of those avenues for Wolf-chase and was unsuccessful.

The assessor’s office first tagged the 1.1 million-square-foot mall with an appraisal of $154 million, up from 2008’s value of

$130 million. The mall argued an 15 percent increase wasn’t realistic during a recession, say-ing Wolfchase ought to be worth closer to $124 million.

The assessor’s arguments more or less carried the day at the hearing before the county board of equalization.

Now it’s on to the next stage of the dispute process: an appeal to the state board of equaliza-tion.

Wolfchase’s tax attor-ney declined to comment on the status of the ap-peal, other than to confirm one had been filed. A representative of the assessor’s of-fice did not return a call seeking comment.

Both sides clearly staked out their po-sitions during the March hearing. And ap-peals to the state board of equalization are almost always carry the same arguments already laid before the county board.

For Wolfchase, it’s about the hard-hit retail environment, which has battered chains and corporate icons of all stripes.

“And Wolfchase has to operate in that environment,” said Memphis tax attorney Andy Raines, Wolfchase’s representative,

during the March hearing.But not only has the mall survived –

it’s thrived, counters the assessor’s staff.Stroll down the rows of shops on both

of Wolfchase’s floors, from Macy’s on one end to Dillard’s on the other, and one thing that’s almost nonexistent is vacant storefronts.

Greg Moody, director of reappraisals for the assessor’s office, said Wolfchase’s price tag ought to be even higher – that $154 million was “on the lower side of correct.”

Property reappraisals happen in

Shelby County once every four years. After the last one, in 2005, Simon did the same thing it’s doing now about Wolf-chase’s value.

Back then, Simon lost at the local board of equalization as well as the state board. Simon dropped its challenge after that.

If the company had been successful, then-county assessor Rita Clark said other big-box property owners would have lined up before the county and state boards to take their chances on whittling down their own tax values.

The ownership group of Wolfchase Galleria isn’t backing down on efforts to reduce the mall’s appraised value – and lower its taxes in the process.

Photo: Lance Murphey

The longtime Memphis-based com-mercial construction firm Inman Construction has been acquired by Chattanooga, Tenn.-based EMJ Corp., the companies announced

earlier this year.Although Inman sold its assets to EMJ

in January, the construction firm that Frank Inman Jr. launched in 1970 kept its founder’s name in its title and formally be-came Inman-EMJ Construction March 1.

Frank Inman’s son and current com-pany president Page Inman called the move “great news” for the firm, which will keep all its Memphis employees and operate as an EMJ branch at its 88 Union Ave. office.

Inman said the deal, initiated by EMJ more than a year ago, was too good to pass up because the local office will be bol-stered by the collective strength of EMJ,

a national general contractor whose foot-print includes branches in Dallas, Boston, Sacramento, Calif., and Tulsa, Okla.

Moreover, Inman said EMJ was look-ing to enhance its health care construc-tion, a sector in which Inman has a strong record, while Inman was looking to beef up its portfolio with projects in other sectors from retail to distribution to muse-ums.

“The more I got to know them and meet with them and understand what they did, the things they’re strong in we’re not, and the things we’re strong in they’re not ... It just seemed like, ‘OK, down the line it’s going to open some doors for us,” Inman said.

For Inman, a second-generation con-struction president, it also was important to align the company with a similarly minded organization. As he noted, both

Inman and EMJ are based in Tennessee, date back about 40 years and share a simi-lar corporate culture.

Inman even traveled to all of EMJ’s branch offices to meet with executives and make sure this was the right move for the company.

“We complement each other because their experience is in things we’ve always sought to get into but never did, and our experience is what made them contact us in the first place,” Inman said. “Our cul-tures are so similar that I think it’s going to be great.”

The leaders of EMJ, whose portfolio includes more than 500 million square feet of construction projects in 48 states, felt the same way about the company it acquired.

“Inman is an ideal fit for EMJ,” said EMJ CEO Jim Sattler in a statement. “We

share the same values and have a very similar approach to doing business. We intend to build upon the unique strengths and market position of Inman and of EMJ to make for a stronger combined company for our customers.”

Inman has 60 to 90 employees, depending on the season. The company employs 20 office staff with 15 superinten-dents, and the rest are carpenters, laborers and foremen. Inman said all the employ-ees will remain with the company.

If anything, the local office could see growth thanks to the deal.

“There will be no change in person-nel,” Inman said. “We’ll continue to run the operation.

“We think the combination of our strengths and what they bring to the table makes a lot of sense long-term for our employees and for our clients.”

Inman Construction acquired by Chattanooga-based EMJ Corp.ERIC SMITH | The Daily News

Page 19: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition 19September 2010

Multifaceted Lamar Building Gets Push ForwardERIC SMITH | The Daily News

a building that has been home to a Dixie Mart department store, a Holiday Inn technical support facility and an IRS processing cen-ter will have yet another purpose

thanks to an out-of-town investment 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 3645 Lamar LLP, was attracted to “every-thing” about the property from the size of the building to the size of the parcel, from the interior finish-out to the rock-bottom price, said the investors’ Tulsa, Okla.-based representative Eli Vardi.

The Shelby County Assessor of Property’s 2010 appraisal is $565,900, and the previous owner, Nashville-based Commerce Center, bought the building in 2006 for $1.5 million, or about five times what it sold for last month.

“As compared to other properties, this was a good value,” Vardi said. “And because property (values are) depressed, our acquisition costs are more attractive.”

Built in 1961, the 128,592-square foot, one-story office building sits on 12.72 acres at the northwest corner of Lamar and Knight Arnold Road a few miles from Memphis International Airport.

Vardi said the building, vacant for the past two or three years, was built as a Dixie Mart department store and later sold to Holiday Inn. The hotel chain, which was founded in Memphis and had its corporate headquarters in town for decades before relocating to Atlanta, used the facility for hotel tech support.

The building later became home to a paycheck company and then a processing center for the IRS, Vardi said. An IRS sign still adorns the entryway.

3645 Lamar LLP bought the building in an auction held by Portland, Maine-based Tranzon LLC.

Edward Durnil of Tranzon’s Ken-tucky office wrote in an e-mail that the auction drew three bidders, two from 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 know?” Vardi said.

The investors last spring began about $100,000 in improvements to the prop-erty with hopes of finding one to three

tenants for the space.“We would love a single user, but we

don’t know if the market can bear that,” Vardi said.

The first phase called for repairs to the roof and some bathrooms that were

vandalized. Also, the parking lot had numerous cracks with weeds growing through them, so Vardi said the surface would be resealed.

A second phase of upgrades called for “more detailed cleaning; painting, touch-

ing up and buffing the floors,” Vardi said. Additional improvements would be made depending on the new tenant’s needs.

Vardi said the building is perfect for a company call center because of its exist-ing technology.

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Page 20: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition20 September 2010

Better Prospects in MarketInvestor optimistic about Oakhaven property

ERIC SMITH | The Daily News

Real 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

Road 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.

“We looked at that area and said, ‘Well, we think it probably hit rock bottom four 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 help do that in that area,’” he said.

BABY StePS Memphis Way LLC is 100 percent

owned by a private equity real estate fund called PF1 LLC, which is made up of a number of investors through the Proma-nas Fund.

Bogdasarian said the investors were attracted to the building because of its two tenants, New Horizons Computer Learn-ing Center, which occupies about 35,000 square feet, and Wheel Workz, which occupies about 22,000 square feet. Both companies have long-term leases; New Horizons with a 10-year-lease and Wheel Workz with four.

“We look to buy buildings that we think are occupied by companies that we think provide a good benefit to society,” Bogdasarian said. “We also look for prop-erties that we can buy below replace-ment cost that have good lease terms and in areas that we think have the potential for an uptrend.”

Bogdasarian said the building needs only a few upgrades, but otherwise is in solid shape and was kept up nicely by the previous owners, who are involved with New Horizons.

Another positive for this investment, Bogdasarian said, was the assumable loan of about $1 million on the property through Shenandoah Life Insurance Co.

“It had some existing financing on

it that was assumable that we thought had pretty favorable terms to it,” he said. “That was one of the compelling reasons. We also spent a lot of time with the ten-ants and the owner-operators of the New Horizons Computer Learning Center and we really like them, and we’re comfortable with them.”

Brian Califf, vice president at NAI Saig Co., represented the seller. He had the property listed for “at least a year and a half” and had about five contracts on it during that time, but each deal fell through because of some financing snag or

another.“Finally we found these guys that

came up with enough cash where they could assume the existing loan,’ Califf said. “That was the whole key to this deal – as-suming the existing loan and being able to close on it because there really was no financing in the market to get a new loan.”

oPPoRtunitY KnoCKS Though Califf acknowledged the dif-

ficulty of selling real estate in that area – highlighted by not only the notoriety sur-rounding the former Mall of Memphis but

also an overall soft retail market – he said it boasts a handful of positive commercial assets, including the Marriott hotel and Thousands Oaks Business Center across the street

“It’s a tough market and lots of people are scared by American Way,” Califf said. “There’s a lot of stuff that’s closed down on American Way. But that corner of American Way and Perkins is not a bad corner. It takes a buyer to get past their initial fears of an area to go with it, and those were some of the initial fears with it. Once (Bogdasarian) looked past it, he saw

what a nice building it was and two good tenants that were going to be there.”

The Shelby County Assessor of Property’s 2009 appraisal of the build-ing is $1.9 million, and the property also is zoned as a cell tower site, which has a separate parcel number and an appraised value of $116,000. The property has an existing cell tower lease, which also was attractive for the Michigan investors.

Bogdasarian said the plan is to hold the building for at least five to 10 years before pursuing resale or perhaps even redevelopment opportunities. He also said that with one acquisition in Mem-phis under their belts, another could be coming.

“We really liked Memphis when we were down there visiting and we’d like to find more there,” he said. “We haven’t been able to find anything else yet, but we’ll keep looking.”

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-town real estate investor has bought the building, which contains Wheel Workz, and New Horizons Computer learning Center.

Photos: Lance Murphey

4765 American Way

Page 21: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition 21September 2010

The commercial real estate mar-ket will need to navigate its way through a host of landmines before it sees anything resembling recov-ery.

That was the message Mark Dotzour, chief economist and director of research for the Real Estate Center at Texas A&M University, told local brokers, bankers and appraisers at February’s Commercial Property Forecast Summit, held at the Germantown Performing Arts Centre and sponsored by the Memphis Area Asso-ciation of Real-tors Commercial Council.

Comparing the commercial mar-ket to a military vehicle on a peril-ous route through enemy terri-tory, Dotzour said everything from policy decisions made in Wash-ington to ongoing credit issues to budget crunches at all levels of government could derail a real estate rebound.

Dotzour, a renowned expert in how global and national trends impact residential and commercial real estate, spent an hour detailing the travails of the commercial market during the past two years and the pitfalls that remain before

the market gets back on track.He said every investor and business

decision-maker wants to know if their buildings are going to fill up and what’s going to happen to their values. Unfor-tunately, the answers aren’t as clear as the questions, and the overall economy, especially unemployment, will be the deciding factor.

At the same time, Dotzour remains confident the American spirit of en-trepreneurialism will prevail, noting corporate profits, manufacturing orders

and consumption all enjoyed increases to close 2009.

Dotzour projected a period of recov-ery in 2011 and 2012 if the U.S. doesn’t

questions abound For Commercial Real Estate’s FutureERIC 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

FutuRe Continued on Page 22

participants in the 2010 Commercial property forecast Summit network in the lobby of the Germantown performing Arts Centre. The program was presented by the Memphis Area Association of Realtors Commercial Council.

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Page 22: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

Commercial & Industrial REAL ESTATE Special Edition22 September 2010

A few months after that, in March, Wharton drew a crowd at Hernando’s Gale Center, where he addressed that town’s chamber of commerce. Memphis needs Hernando, Southaven and Olive Branch, Wharton told the group. And he hinted at a new era of regional coopera-tion.

Two months later, McKesson decided it needed Olive Branch – specifically, a package of incentives that made a reloca-tion to the city too good to pass up.

Among the incentives, $4 million came from the Mississippi Development Authority via the Industry Incentive Financing Revolving Fund. Olive Branch and DeSoto County also chipped in sev-eral hundred thousand dollars to pay for infrastructure improvements.

“This brand new facility will allow us to more efficiently serve our growing customer needs with the most advanced material handling systems available and will be seen as a model for McKesson’s other distribution centers,” said John Figueroa, president of McKesson U.S. Pharmaceutical.

The loss still stung Wharton months later. He referenced it with frustration as Exhibit A several weeks ago in urging the Memphis City Council to approve the cre-ation of a $5 million fund to help tilt the scales in Memphis’ favor during future deal-making.

“Right now, we’ve got one arrow in our quiver, and it’s PILOTs (payment-in-lieu-of-taxes),” Wharton said. “And when you really stop and think about how PILOTs work, you’re kind of giving with one hand and taking away with the other. It’s been my experience that if you offered a business help with their infrastructure, that they can walk right into a bank loan committee and say, ‘Here this is,’ as op-posed to, ‘Well, they’re abating my taxes over 10 years. So over a 10-year period my expenses will be lowered by this.’

“The first one stands a better chance of getting financed. This is my way of say-ing, let’s kind of pull away from PILOTs.”

The council approved the creation of that $5 million economic development fund. One council member suggested to not do so would have been to aid the eco-nomic development of Olive Branch.

“The $5 million fund, I think, is a strong signal that Memphis is open for business,” said Arnold Perl, secretary and counsel of the Greater Memphis Cham-ber. “It establishes a platform for city government to be much more aggressive in competing for expansions and new business.”

It remains to be seen what the long-term results will be. But Wharton isn’t letting his foot off the gas pedal.

Pinnacle, for example, is currently in negotiations to move its headquarters to either Olive Branch, Downtown or some-where else near the Memphis airport.

Wharton has Pinnacle’s board meeting in Memphis during the week of Aug. 9 on his schedule. His attendance, along with CCC representatives, is likely to include a pitch to the regional air carrier to keep its presence in Memphis. And it’s also likely to include the presentation from Whar-ton to Pinnacle executives of whatever proverbial “roses, perfume and sweet music” he can draw upon to convince the company to do so.

HARd Sell Continued FRoM Page 5 CRe PulSe Continued FRoM Page 17 FutuRe Continued FRoM Page 21

“During the downturn, companies re-alized they could save money in Memphis more than in other cities,” said Kornegay. “They realized they could shut down sev-eral of their distribution centers around the country and consolidate them into one box here.”

Nearly 1.6 million square feet of space was absorbed during the second quarter, the most since 2 million square feet dur-ing the third quarter of 2008. Two leases by Technicolor at The Summit I and Summit II in the Southeast submarket accounted for nearly 1.4 million square feet of the absorption.

No new industrial construction is anticipated through the end of the year, and there has been no new space brought online in Memphis in several years.

“Supply and demand should tell a developer that now is the time to build,” said Kournegay. “But unfavorable rates and the lack available financing dictate that new construction is unlikely at this time.”

MultiFAMilY ‘veRY Good RiGHt noW’Apartments continue to be a strong

point in Memphis, where the city’s hous-ing problems – namely a high foreclosure rate coupled with little building activity – has driven up multifamily demand.

“The multifamily rental market is very good right now because it’s difficult for many people to qualify to buy new homes,” said Steve Woodyard, president of multifamily brokerage firm Woodyard Realty Corp.

Overall apartment occupancy for the area sits at 91.7 percent, up substantially from 88.9 percent at the end of last year. Average street rents are also on the rise, jumping 2.6 percent since the end of 2009 to $724.

“In the next 12 months, we expect to see modest improvements in the market, as many people who are on the fence for buying a home will be renting,” said Woodyard. “Historic lows for new home construction should cause existing homes to go up in value, resulting in increases in the quality of renter as well as in occu-pancy levels and collections.”

Woodyard also expects to concessions to disappear in the coming months as the market tightens up.

Job creation will also be a major fac-tor in the sector’s growth. The local job market should improve in the next year with expansions from companies like Smith & Nephew, Technicolor, Soladigm Inc. and others.

Apartment sales totaled 15 transac-tions averaging $2.3 in Shelby County during the second quarter. The numbers were boosted by the sale of the 191-unit Arbors of River Oaks in East Memphis to Trade Street Capital LLC of Miami in June for approximately $16.3 million.

New apartment construction remains slow, with only 250 new units delivered in the first half of the year and only 107 more units coming available by the end of the year. The new apartments are the 92-unit Barbaro Flats in Downtown and the 275-unit Legends Park in Midtown, the latter of which is a mixed-income housing development.

“Financing is still hard to come by, but the demand is there for well-placed new construction,” said Woodyard.

repeat the missteps of Great Depression-era America or 1990s-2000s Japan, both of which saw problems worsen over time.

A captive audience on hand for the seventh annual forecast summit, emceed and chaired by Nick Clark, then heard lo-cal experts discuss the Memphis market.

Ron Riley of In-Rel Management Inc. gave the office overview. Memphis’ office sector in 2009 notched a negative absorp-tion rate of 169,861 square feet as vacancy rose to 18.3 percent market-wide, the highest since 1990.

One factor taking a huge toll on the office market, Riley said, was the rise of “shadow space,” the square footage that is not being used but also not being market-ed, typically because a company vacated only part of its entire leased space.

For the office market to stabilize, Memphis will need to see about 1.3 mil-lion square feet of absorption during the next year or so, coupled with no new construction.

The industrial sector also has chal-lenges, said Andy Cates of Colliers International. What is usually Memphis’ bread and butter sector saw absorption plummet and vacancy rise during 2009, the result of a few large tenants such as Hewlett-Packard and SunTrust Banks shedding space.

Memphis is well below the national average – and even that of its peer cities – in terms of average lease rates but also in terms of vacancy rates. The vacancy rate for Memphis’ industrial space, about 195 million square feet total, ended 2009 at 14.5 percent, the highest rate since 2004.

One bright spot for Memphis was companies expanding their presence in the area or setting up shop here for the first time. The city’s transportation assets, highlighted by railroads’ investments, keep the outlook positive for the indus-trial sector barring any new construction.

Scott Barton of CB Richard Ellis discussed Memphis’ retail market, which has seen lease rates sink to $10.70 per foot while vacancy sits at 12.6 percent. Although the market appears at or near the bottom, plenty of questions remain as to when recovery will begin.

The city’s biggest problem is that it is “over-retailed,” Barton said, meaning Memphians have too much retail space per capita. The national average is 23 square feet of retail per person, while in Memphis the average is 35 square feet.

For the retail market to rebound, there needs to be no new construction and landlords willing to offer lower rent to improve cash flow.

The multifamily sector has been plagued by real-estate owned (REO) and distressed sales, which accounted for more than half of all arms-length transac-tions in 2009, said Blake Pera of CBRE. Also, last year’s total sales were just $59.7 million, down 41 percent from $94.7 mil-lion in 2008, as owners who didn’t need to sell didn’t list their properties.

REO and distressed sales will con-tinue to dominate the market in 2010 and beyond, Pera said, although stabi-lized properties should come back to the market by summer. The good news is that construction will be down in 2010, mean-ing that absorption should rise while occupancy (89.3 percent) and rental rates will remain the same.

Page 23: Commercial & Industrial REAL ESTATE Special …2 Commercial & Industrial REAL ESTATE Special Edition September 2010 Published by: THE DAILY NEWS PUBLISHING COMPANY 193 Jefferson Avenue

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