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VOL. 121 | NO. 162 | Monday, August 21, 2006

Former Immigrant Among Out-of-Towners Buying Memphis Industrial Real Estate

By Andy Meek

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SELLING THEIR WARES: Industrial properties like this one appear to be increasingly attractive to outside interests. A series of recent transactions in the Memphis market have been spurred by out-of-state investment companies and individuals. -- Daily News File Photo

It's perhaps an understatement to say that Moshe Silagi, a Southern California developer who functions most of the time on less than six hours of sleep a night, loves the art of the real estate deal.

The Hungary-born man who moved to the United States in 1976 today owns a California-based firm that recently bought 241,000 square feet of warehouse space in Memphis at the corner of Latham Street and East Industrial Avenue.

In The Press Enterprise newspaper in Riverside, Calif., a local real estate broker once described Silagi as regularly keeping 27-hour workdays. His company is Silagi Development and Management, which is privately owned and has holdings in about 20 states.

SDM owns about 10 million square feet of real estate throughout the country, much of it in industrial property holdings. And at the end of June, the company bought those two one-story warehouse storage facilities in Memphis with the goal of doing some interior and exterior renovation work and revitalization. The sale price was $3.5 million.

"One reason we chose Memphis was its location, geographically, in relation to the rest of the country. Also for the work base Memphis has to offer."
- Moshe Silagi
Owner of California-based Silagi Development and Management

He came, he saw, he bought

Silagi - apparently oblivious to the continuing discussions among local politicians over the tax breaks that affect so much of local industrial real estate - says he just liked what he saw.

"And we're always looking for more across the country," Silagi said.

Why is that important? It's an example of confidence in the local industrial market, where debate over a popular-yet-controversial tax incentive program continues to send jitters through local professionals. The Memphis City Council likely will vote on what changes should be made to the payment-in-lieu-of-taxes, or PILOT, program at its Sept. 19 meeting.

But there still has been a rash of industrial real estate activity lately, despite the concern over what's become the major deal-sweetener among industrial property buyers.

In March, for example, an affiliate of the Boston-based real estate investment trust Cabot Properties Inc. bought six warehouse buildings in Memphis for $15.2 million. The unique part of the purchase was the fact that it marked Cabot's return to the Memphis market.

The company had owned several Memphis properties in the past but sold them and pulled out of Memphis in 2001.

"We like the fundamentals in the market, and we decided to start buying property there again," said Andrew Ebbott, president of Cabot Properties' investment team, in a previous interview.

A wide array

There have been other transactions large and small.

High-Profile Transactions In Brief:
241,000 square feet of warehouse space, bought in late June by Silagi Development and Management
Six warehouse buildings, bought in March by an affiliate of the Boston-based real estate investment trust Cabot Properties Inc.
41,365 square feet of warehouse and office space in Bartlett, bought in April by Gregory Realty LLC - and much more.

Gregory Realty LLC recently paid $1.2 million for 41,365 square feet of warehouse and office space on Barcrest Road in Bartlett.

Patrick Burke, managing partner of the Memphis office of The Staubach Co., recently was involved in two significant industrial deals in town. One involved Massachusetts-based sports equipment supplier Franklin Sports, which announced a few days ago it has signed a multiyear lease to occupy 300,000 square feet at ProLogis Park Stateline, an 80-acre industrial park on Stateline Road.

The other deal involved the announcement earlier this year that document imaging company Kyocera Mita America has leased 300,000 square feet at ProLogis Park Stateline.

Burke started both deals in his previous job at CB Richard Ellis, wrapping them up when he moved to become the managing partner of the Staubach Co. office. The company is the namesake of former Dallas Cowboys player Roger Staubach, who is its chairman and CEO.

"We also represented RadioShack on the sublease of their space in IDI's park in North Mississippi," said Tony Argiro, a senior associate in the local Staubach Co. office. "We were able to sublease that, but we had to sign some pretty tight confidentiality agreements, so all we can say is it's been done, which was kind of a home run for us. It was really our first notable deal."

All about PILOTs

Another notable transaction locally was the one in May where an out-of-town interest bought more than 880,000 square feet of industrial space in Southeast Memphis for $30 million. The sale involved three one-story warehouse buildings in the Memphis Distribution Center Planned Development.

The buyer was an arm of Colony Capital, an investment fund that also purchased Harrah's Tunica and Bally's Tunica in 2005 in a $1.24 billion deal.

Meanwhile, Silagi's recent purchase in Memphis is an outgrowth of the flurry of real estate acquisitions he's pursued since selling his first building in the 1980s.

Nine years after emigrating to the United States, he was running a decorative door and hardware business. He built his first building for that company, which inspired him to sell the business and go into real estate development for himself.

"One reason we chose Memphis was its location, geographically, in relation to the rest of the country," he said. "Also for the work base Memphis has to offer."

Silagi rattles off a string of other reasons that made his Memphis purchase attractive.

"There are the buildings themselves, which are designed, technically, to be easily split into multi-tenants, smaller users. Also the climate, which is not too severe in the winter. When you have a very cold part of the country, for a logistics company, it's very hard to operate."

Meanwhile, city leaders soon will weigh in with their recommendations on how best to tweak the local PILOT program - a package of incentives that, in an ideal situation, would be the icing on the cake that attracts even more buyers like Silagi.

"At this point, the uncertainty - and I guess it's becoming an old story - but the uncertainty over the PILOT program is certainly an issue," Argiro said.

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 55 55 20,821
MORTGAGES 44 44 24,405
FORECLOSURE NOTICES 0 0 8,610
BUILDING PERMITS 0 0 42,337
BANKRUPTCIES 51 51 13,953
BUSINESS LICENSES 22 22 6,423
UTILITY CONNECTIONS 0 0 13,511
MARRIAGE LICENSES 23 23 5,092

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