VOL. 6 | NO. 27 | Saturday, June 29, 2013
The Business of Law
Real Estate Rebound
By Michael Waddell
The residential and commercial real estate markets are slowly coming back, and residential and commercial real estate attorneys are seeing increased activity thanks to the surge.
Michael Hewgley, chief executive manager and attorney of Mid-South Title, and son Taylor Hewgley talk with Pryor Lott while signing closing documents on her Memphis home. Companies like Mid-South Title have seen business improve along with real estate.
(Daily News/Brian Johnson)
Mid-South Title handles both residential and commercial matters, and the company is seeing a spike in activity, especially in residential, over the past 18 months.
“In February 2012 our orders picked up, and they have not dropped off since,” said Taylor Hewgley, owner and chief operations manager of Mid-South Title. “In fact, 2012 turned out to be one of the best years we’ve had, even when compared to the bonanza of 2004 through 2006.”
Last year the company opened nearly 1,300 files for an increase of 30 percent to 40 percent over two years prior. The increased activity was due in part to refinancing brought on by interest rates falling to historic lows.
“As the rates fell, we actually refinanced some people three times. Typically if you can improve your rate by a point to a point and a quarter, people are encouraged to refinance,” said Hewgley, who expects some of that activity to lessen as rates begin to creep back up.
To accommodate some of the new business, the company opened a new satellite closing office at the renovated Candy Factory building Downtown in January.
“It’s showing some healthy signs and healthy returns,” Hewgley said. “It’s a minimal investment, and it’s working out well for us so far.”
The company last opened a new office in Fayette County in October 2006 as business was booming. The anticipation was for its builder clients to head into the submarket.
“Unfortunately, October 2006 is the exact time that our orders began to tail off from a really high volume,” he said. Demand began to drop off, and many builders were left holding lots and unable to secure spec loans.
The downturn forced Mid-South Title to be more nimble in its marketing approach.
“During the downturn, the power that the buyer had over the seller was tremendous, almost to an unhealthy stage.”
–Taylor Hewgley, Owner, Mid-South Title
“At the end of 2007, we had 30 to 35 builders and developers as clients and now we only have five to 10,” he said. “As those orders dwindled, we had to readjust our efforts to attract more Realtors and mortgage origination lenders.”
Over the past five years after the abruptness of the economic downturn, the cyclical nature of the business has been “off” thanks to falling interest rates and other factors like the first-time homebuyer credit, according to Hewgley. The drastic drop in home values in 2009 and 2010 diminished the value of the falling rates for some sellers.
“People were afraid to jump into the market or they couldn’t put their house onto the market because they did not want to have to bring money to closing,” Hewgley said. “It was a very strange, herky-jerky environment. For about 36 months, we really had no idea what the next month was going to bring us.”
Now he thinks buyers who have been on the sidelines for the past few years might have a nest egg saved up to put down significant money for the purchase of a new home.
“During the downturn, the power that the buyer had over the seller was tremendous, almost to an unhealthy stage,” he said. “We are starting to see that pendulum come back to the middle.”
Jim Warner of Martin, Tate, Morrow & Marston PC has represented commercial lenders, landlords and tenants over the past several years and throughout his career. He works primarily with national companies that have a presence in Memphis, particularly in retail shopping centers.
“We’ve seen some large expansions continuing to happen,” said Warner, who cites the redevelopment of the space for anchor tenant Kroger in the Poplar Plaza Shopping Center. “So selectively there have been projects happening that make great economic sense.”
Martin Tate did have to make some adjustment when the economy went in the tank a few years ago.
“The level of real estate activity dropped off, but our business picked up in other areas,” said Warner, who has been with the firm for 51 years and has specialized in commercial real estate for the past 30 years.
To make up for the constriction in the market, Warner supplemented his workload with general corporate work, including some nonprofit cases. He feels his firm was fortunate to not have to reduce staff during the downturn.
“The types of things we were dealing with several years ago were reflective of the recession, including tenants that were having difficulty staying current on their leases and the refinancing of loans,” Warner said. “While activity has not come back to the levels prior to 2007, it is beginning to turn, and we are very optimistic about the future.”