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VOL. 123 | NO. 60 | Wednesday, March 26, 2008

$55M Transaction Lifts Commercial RE

By Eric Smith

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BIG MONEY: The 175,000-square-foot Countrywood Crossing shopping center on North Germantown Parkway in Cordova was part of the massive portfolio that sold for $55.2 million to Oak Brook, Ill.-based Inland Real Estate Group of Companies Inc. The mega deal also included Dick's Sporting Goods and outparcels. -- Photo By Eric Smith

Shelby County's sluggish commercial real estate market got a boost when a portfolio that includes Cordova's Countrywood Crossing shopping center and Dick's Sporting Goods sold to an out-of-town real estate investor for $55.2 million.

The mammoth sale comprised three separate transactions involving Countrywood Crossing, Dick's and outparcels, all along North Germantown Parkway. The three deals closed March 17, as did assignments of leases and rents for the properties, according to the Shelby County Register of Deeds.

They were broken out as follows: The Countrywood Crossing Shopping Center at 2291 N. Germantown Parkway sold for $37.7 million; Dick's Sporting Goods at 2393 N. Germantown Parkway sold for $12.2 million; and an outparcel that includes M&F Bank, Starbucks and Verizon Wireless at 2323 N. Germantown Parkway sold for $5.2 million.

The buyer, Countrywood 1031 LLC, is the locally based limited liability company of Inland Real Estate Exchange Corp., an entity of Oak Brook, Ill.-based real estate investment trust (REIT) Inland Real Estate Group of Companies Inc.

The buying decision came down to a variety of factors, said Inland spokesman Joel Cunningham.

"We really like the location," he said. "Demographic-wise, it seemed like a good bet to be a strong, stable investment for the next five to 10 years. We like the tenant mix and the fact that it was relatively new construction."


'Power center'

Cunningham said the company had no immediate plans for the property, which opened last year and is 94 percent occupied. He said an Inland affiliate will handle management and leasing.

The 175,000-square-foot Countrywood Crossing was developed and built by Round Rock, Texas-based StoneCrest Investors LLC, whose executives, Brad Smith and Greg Herman, formerly worked in Memphis for Weston Cos.

"Inland has purchased several of our shopping centers over the years. They've been a good strategic partner in terms of a purchaser for us," said Smith, StoneCrest's CEO. "Obviously, we were very bullish on this area of Memphis when we developed the center and continue to be, but it was the appropriate time for us to look at that sale. We were able to do it, and we were pleased to complete the sale with Inland."

The multi-building retail center sits on close to 60 acres at the intersection of Germantown Parkway and Market Plaza Drive, with a list of tenants that includes Gordmans department store, Shoe Carnival, Ulta cosmetics store, Ross Dress for Less and Kirkland's Home.

"It's a Class A, institutional-grade piece of retail real estate with great tenants," said Danny Buring, managing partner of The Shopping Center Group. "It's a great piece of real estate. It feels like a huge power center - a huge power center that's basically at the southwest corner of Interstate 40 and Germantown Parkway. With all of the money and the income and the traffic coming up from East Memphis and Germantown, you're kind of cutting them off at the pass before they cross the interstate to get to the (Wolfchase Galleria) mall."

Another strength of the center lies in a shopper's ability to reach each one without getting back on congested Germantown Parkway. Buring, who represented some of the tenants that landed in Countrywood Crossing, noted that so many retail pieces being connected by side roads and parking lots makes the sum of the location greater than its parts.

"What we sold to our tenants that ended up there was - starting from the Costco coming south with Kohl's, Ashley (Furniture HomeStore), Dick's and then this center - that it's all tied together for access," Buring said. "If you're driving from one to the other, you don't realize they're all part of one center. So you put them all together and you're about 700,000 or 800,000 square feet."


A big one

The myriad selling entities involved, in which each held different portions of the Countrywood Crossing and the other parcels, include GRH Glenwood LLC, MRH Venture Capital LLC, Stephens Holdings LLC, Memtex Development No. 1 LLC, Ryan Family Ventures LLC, Smith Family Ventures III LLC, Herman Family Ventures III LLC, Ryan Family Ventures III LLC, Smith Family Lot 5 LLC, Herman Family Lot 5 LLC, and Ryan Family Ventures II LLC.

The transactions were financed with a $36.8 million loan through RBS Citizens NA doing business as Charter One.

This purchase wasn't Inland's first foray into the local real estate market. In November 2004, it bought the Winchester Commons shopping center for $13 million; in January 2006 it bought a Kroger-anchored shopping center on American Way for $10.4 million; and in April it bought 18 distribution buildings near Memphis International Airport for more than $42 million.

Inland's Memphis-area holdings now include 21 properties totaling approximately 2 million square feet of retail and industrial space, Cunningham said.

This latest deal kick started Shelby County's listless commercial sector, which began 2008 down from the previous year. Through February, there have been 189 commercial sales totaling $192.8 million, marking a 12.5 percent decrease from the 216 sales totaling $220.5 million registered through February 2007, according to real estate information company Chandler Reports, www.chandlerreports.com.

More than that, though, the deal was impressive from a historical perspective, said Johnny Lamberson, senior vice president of CB Richard Ellis Memphis.

"For retail in Memphis," he said, "that's got to be one of the biggest ones."

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 57 280 1,209
MORTGAGES 55 244 916
FORECLOSURE NOTICES 8 52 151
BUILDING PERMITS 158 699 2,751
BANKRUPTCIES 37 157 618
BUSINESS LICENSES 12 77 276
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0