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VOL. 124 | NO. 252 | Thursday, December 24, 2009

Conwood Acquisition Helps Salvage November Commercial Sales

By Eric Smith

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DECLINING SALES:  The 98-unit Shelby Grove Apartments at 6320 Gillespie Road near Bartlett sold in November for $4.7 million, ranking it as the second highest commercial sale during the month. All told, Shelby County notched just 34 commercial sales last month, a 45 percent decline from 62 commercial sales in November 2008, according to Chandler Reports, www.chandlerreports.com.

A single, high-dollar transaction helped salvage November’s commercial sales total, accounting for half of the dollar volume last month. Beyond that, the most noteworthy trend to arise from the most recent data was a dearth of activity as Shelby County nears the end of 2009 – the slowest year for commercial transactions in at least two decades.

The county saw just 34 commercial sales last month, a 45 percent decline from 62 commercial sales in November 2008 and a 37 percent decline from 54 commercial sales in October, according to the latest data from real estate information company Chandler Reports, www.chandlerreports.com.

Despite the overall slowdown, one deal stood out: Conwood Co. LLC paying $19.3 million for the 787,500-square-foot facility at 5106 Tradeport Drive in Hickory Hill South. The company bought the building to expand its manufacturing operation of the smokeless tobacco products Kodiak and Grizzly.

Conwood, which acquired the Hickory Hill building from Chickasaw and Goodman Realty Holding Co., an affiliate of JP Morgan, plans to invest $133 million in its Memphis operation. The move to the new facility is expected to add 25 employees to Conwood’s current work force of 294 people.

But that transaction did more than signal a positive economic development story for the city. It also helped boost November’s average sales price and sales volume.

Commercial sales last month averaged $1.09 million, down 4 percent from $1.14 million in November 2008 but up 36 percent from $802,523 in October. The Conwood sale also helped November’s sales total reach $37.1 million, marking a 47 percent dropoff from $70.7 million in November 2008 but only a 14 percent dropoff from $43.3 million in October.

‘Emerging market’

Other than the Conwood deal, five sales surpassed the $1 million mark last month.

Second in Shelby County for November was the sale of the 98-unit Shelby Grove Apartments at 6320 Gillespie Road near Bartlett for $4.7 million.

An entity called Flynn Realty & Development Shelby Grove LLC, whose address is listed in Syosset, N.Y., bought the Class B complex from MAC LP.

Steve Woodyard of Woodyard Realty Corp., which represented the seller, said this transaction indicates the interest out-of-town investors continue to have in Memphis’ multifamily properties, which can be snatched up at attractive prices.

“When you read about the Memphis market from a national standpoint, you can see that it’s what they call in the apartment world an ‘emerging market,’” Woodyard said. “They see our values as being somewhat lower than the norm with the opportunity to grow.”

Three other notable sales occurred in November. An investment group known as Memphat Partnership paid $2.4 million for the AT&T store at 1684 N. Germantown Parkway in Cordova. Memphat bought the 3,952-square-foot, Class A standalone building, which was completed in 2008, from Memphis-based Retail Realty Partners LLC.

Also, Solberg Properties, the local franchisee of Sonic, America’s Drive-In restaurants, bought the property at 5336 Poplar Ave. in East Memphis for $1.8 million. The 1-acre site contains a 6,713-square-foot building that was built in 1980 and formerly housed Bennigan’s Grill & Tavern and most recently the River City Bar & Grill.

And R.S. Harris sold The Goddard School building he brought to 509 E. Winchester Road in Collierville for $1.7 million. Harris’ limited liability company, R.S. Harris LLC, sold the recently completed 8,170-square-foot day care center to the school’s franchisee, Love for Learning LLC.

Multifamily leader

Of November’s 34 commercial sales, the top category for property type was multifamily. Seven apartment complexes sold last month at an average sales price of $807,000, obviously aided by the Shelby Grove Apartments deal.

Blake Pera, senior vice president for CB Richard Ellis Memphis’ multifamily division, said investments on multifamily properties are easier to finance because the “lease terms are shorter and more predictable.”

“Additionally,” he added, “agency lenders and HUD (U.S. Housing and Urban Development) are still offering financing for stabilized properties, so the better properties have some ability to refinance if the property is facing a loan maturity.”

The other top property types for November in terms of number sold were office condominiums with five sales at an average sales price of $90,499; warehouses with four sales at an average price of $5 million; neighborhood single-tenant commercial buildings with four sales at an average price of $973,750; and service garages with four sales at an average of $153,000.

Year to date, commercial sales remain far behind 2008. Just 529 commercial sales have recorded in Shelby County through Nov. 30, a 34 percent dip from 799 commercial sales during the same period of 2008.

Sales this year have averaged $625,884, down 35 percent from $961,532 in 2008; and this year’s total sales volume of $331.1 million is down 57 percent from the 2008 total sales volume of $768.3 million.

Chandler Reports is a division of The Daily News Publishing Co. Inc.

PROPERTY SALES 56 289 2,908
MORTGAGES 55 226 2,009
BUILDING PERMITS 108 1,002 6,703
BANKRUPTCIES 42 248 1,225