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VOL. 123 | NO. 87 | Friday, May 2, 2008

Big Sales Keep Market Afloat

Commercial sales still show marked decline

By Eric Smith

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PICKING UP ON THE PIKE: Jim Keras recently bought the old Gwatney Chevrolet dealership on Covington Pike for $7.1 million, making it the second-most expensive commercial real estate deal in March, according to Chandler Reports. -- Photo By Eric Smith

A retail strip center, a car dealership, land for a fitness center, two cemeteries and a hotel - in that order - ranked as Shelby County's top five commercial real estate sales in terms of dollar amount for March, proving the local market's versatility.

But the strange collection of properties topping the list sold didn't signal any kind of trend, said Steve Guinn, president of the Memphis Area Association of Realtors Commercial Council and division vice president for Raleigh, N.C.-based Highwoods Properties.

"It doesn't look to be anything abnormal," Guinn said. "A lot of the big sales take months - they have half a year gestation period - so when they hit, it's not timed on anything. There's no real rhyme or reason to it."

Still, those big sales hitting in March 2008 kept Shelby County's commercial real estate afloat despite a market-wide slowdown in the number of sales and total sales dollars from the same month a year ago.

There were 97 commercial sales during March compared to 104 in March 2007, while the dollar amount was $104.5 million compared to $215.7 million in March 2007, according to the latest data from real estate information company Chandler Reports, www.chandlerreports.com.

Mixed signals

One good sign, however, was the marked improvement over sales in February, which had 79 transactions totaling $44.6 million.

The year-to-date numbers, however, didn't fare well. From Jan. 1 through March 31, there were 286 commercial sales totaling $297.3 million, a drastic dropoff from the 320 sales totaling $896.4 million through March 31, 2007.

The average sales prices for the month and the year-to-date also have dropped significantly, from $2 million per sale in March 2007 to $1 million per sale in March 2008; and from $2.8 million per sale year-to-date in 2007 to $1 million per sale year-to-date in 2008.

For Guinn, who mostly tracks the office sector with his position at Highwoods, the decrease is a sign that the bigger economic picture has taken - and continues to take - a toll on commercial deals.

"Just the fact that the attractive financing is gone is going to eliminate a part of the market," Guinn said. "Fewer people are out there. That doesn't mean it's dead by any means, but if you've got more people chasing the same amount of product, obviously the prices are going to be higher. It's your basic supply and demand formula."

Big-ticket transactions

The month was bolstered - saved, even - by the sale of Countrywood Crossing, a Cordova retail center that fetched a combined $55.2 million from Countrywood 1031 LLC, which is related to the Oak Brook, Ill.-based real estate investment trust (REIT) Inland Real Estate Group of Companies Inc.

Countrywood Crossing's $55.2 million price tag came across as three separate transactions: 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 sellers in all transactions were related to Texas-based StoneCrest Investors LLC.

The next highest deal in the county was the only one involving two Memphis companies: the $7.1 million sale of Gwatney Chevrolet on Covington Pike. Russell Gwatney sold his dealership to Jim Keras, who now owns three neighboring dealerships on the street.

It was a golden opportunity, said Keras, the self-proclaimed "Mayor of Covington Pike."

"Having the former Gwatney Chevrolet location right next door to our Nissan and Subaru dealerships will allow us to utilize sales staff and office systems to make us more efficient while streamlining the buying process for the consumer," Keras said.

Rounding out the top five sales for March were a parcel of land, two cemeteries and a hotel. LTF Real Estate, an affiliate of Chanhassen, Minn.-based Life Time Fitness Inc., bought a 9.8-acre property on Houston Levee Road north of Poplar Avenue in Collierville for $4.4 million. The company is expected to build a fitness center there.

Next, Bristol, Pa.-based StoneMor Partners LP, operating as its subsidiary Lakewood Hamilton Cemetery LLC, acquired two local cemeteries that were involved in a 2007 Federal Trade Commission mandate.
StoneMor took over the Northridge/Woodhaven Cemetery and Funeral Chapel in Millington for $2 million and Memorial Park Southwoods Cemetery in Memphis for $1.5 million via quitclaim deed from Alderwoods Inc.

Lastly, Memphis-based Splendid Hospitality LLC bought the Memphis Plaza Hotel and Suites at 6101 Shelby Oaks Drive for $2.4 million.

As for the most common property types sold during March, neighborhood single-tenant commercial properties had 13 sales, behind vacant land with 29 sales.

PROPERTY SALES 83 405 4,276
MORTGAGES 104 424 4,814
BUILDING PERMITS 148 883 10,151
BANKRUPTCIES 53 264 3,149