Local industrial brokers are well aware of the city’s taxes and its impact on putting together a competitive proposal for a potential user.
But occasionally, developers are able to snatch up property for such a value that helps offset some of those tax issues.
Johnson Development Associates Inc. closed last week on more than 100 acres at the former Mall of Memphis site for just $2.7 million – more than $1 million less than the site had been listed for a year ago.
“You’ve got to be competitive, and the development world is very competitive, especially when we have the taxes that we have in Memphis and Shelby County as compared to not very far south of here,” said Jeb Fields, vice president with Cushman & Wakefield/Commercial Advisors LLC who represented Johnson Development in the deal. “We hope that what they bought that site at will help offset some of that. With the infrastructure that’s already in place and the location it is, they believe they’ll be very competitive.”
Spartanburg, S.C.-based Johnson Development plans to develop the space on the northeast corner of Cherry Road and American Way Boulevard near Perkins Road and Interstate 240 into a 1.2 million-square-foot industrial park.
Fields said Johnson is the first developer to come to Memphis and show interest in doing business in “a long time.”
“Any time you have someone coming to town that’s new to the city saying they want to invest upwards of $65 million and put in place what could be a significant job creator is a great thing,” Fields said. “Memphis should be proud of that. The environment is changing here and now we’re starting to play to our strengths.”
The development will include three office/warehouse and distribution buildings for build-to-suit users that are yet to be determined, said Garrett Scott, president of Johnson’s Industrial Division.
“We plan to market it to a wide array of users and our plan at this point is to not go speculative,” Scott said. “It would be our hopes that we land one of the larger build-to-suits, but we do not have a deal in hand that would take the site right now. It would be our thoughts that it would be for someone there to take advantage of the logistical advantages that that location offers.”
A typical Johnson cross-dock facility consists of tilt-wall concrete panels, a glass office feature with mezzanine capability, 32 feet by 6 inches of clear height, a 50-foot-by-52-foot column spacing with 60-foot interior staging bays, and 150-foot deep truck courts with 50 feet of opposing trailer storage.
“We’ve branded ourselves as the provider of institutional-grade, Class A distribution space and it would be our thought that that’s what we would provide there,” Scott said. “Those specifications are kind of the base line of what we build.”
Memphis will be the farthest industrial market west for Johnson with the exception of Houston. Scott said compared to peer markets, Memphis was an attractive one to enter due to the logistical advantages that the city maintains – listing proximity to the FedEx Super Hub and BNSF Railway Co. line and intermodal yard as prime examples.
“We think we’ve got a great site, great access, proximity to the transportation infrastructure on which our development schemes and our client’s needs revolve,” Scott said. “We don’t take going into any community lightly and have felt very comfortable working in Memphis and look forward to the successes which we are sure will follow.”
The dominant land use in the former Mall of Memphis area is small retail commercial establishments, but Fields said the access roads from the mall that were already in place are “perfect” for the use of the site as an industrial park.
“Because of the way that the site is isolated by its northern border being Nonconnah (Creek) and then it’s immediate east border is Perkins with a large interchange, the west interchange would be Getwell – I don’t see that there’s going to be a significant increase in traffic that’s not already there,” Fields said. “Now, there is some talk of maybe putting in some longer turn lanes or deceleration along American Way and improving some of the entrances, but other than that, the infrastructure of what’s there from the mall is really well-suited.”