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VOL. 124 | NO. 126 | Tuesday, June 30, 2009

Commercial Real Estate Takes a Beating

By Eric Smith

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SILVER LINING: The Wesley Highland Manor senior nursing facility at 3549 Norriswood Ave. near the University of Memphis sold for $7.3 million in May and was by far the top commercial deal for the month. -- PHOTO BY ERIC SMITH

Commercial real estate suffered a sharp decline in May, with sales falling dramatically from the same month a year ago and the previous month.

Shelby County saw just 35 commercial sales in May, marking a 49 percent dropoff from 69 sales in May 2008 and a 35 percent dropoff from 54 sales in April, according to the latest data from real estate information company Chandler Reports, www.chandlerreports.com.

Though the overall number dipped, the average commercial sales price held steady, thanks in part to a handful of high-dollar transactions. Sales in May averaged $669,863, just a 13 percent decrease from $768,090 in May 2008 but actually a 91 percent increase from $350,337 in April.

The total sales volume in terms of dollar amount last month was $23.4 million, down 56 percent from $53 million in May 2008 but up 24 percent from $18.9 million in April.

Jon Albright, president of Memphis Area Association of Realtors and a partner at Investec Realty Services LLC, said the economy continues to wreak havoc on the commercial sector. Also, the unavailability of loans remains an issue.

“Financing is still a significant part of what may or may not be happening on the sale side,” Albright said. “That part of it is still being looked at pretty heavily, both locally and (nationally). We’re trying to figure out how we can get more money into the commercial area for financing.”

Mid-city market

The Midtown ZIP code of 38104 was the top market for commercial sales in May, with seven deals averaging $397,143. Midtown was followed by Arlington/Lakeland’s 38002 with four sales averaging $631,625, Oakhaven/Parkway Village’s 38118 with three sales averaging $320,933 and Millington’s 38053 with three sales averaging $208,333.

With Memphis being a warehouse town, it’s no surprise that the warehouse sector led all categories in number of sales for commercial property types. May saw seven warehouse sales averaging $253,514.

That sector was followed by single-tenant commercial stores, of which there were three sales averaging $1.1 million, and apartments, of which there were three sales averaging $756,667.

Year to date, the picture is equally bleak. Shelby County has seen just 242 commercial sales from January through May, marking a 44 percent decline from 432 sales the same period of 2008 and a 53.6 percent decline from 521 sales the same period of 2007.

Commercial sales this year have averaged $491,124, down 49 percent from $955,208 in 2008 and down 80.4 percent from $2.5 million in 2007. And the total sales volume this year, through May, is $118.9 million, a 71 percent decrease from $412.6 million in 2008 and a 90.8 percent decrease from $1.29 billion in 2007.

Year to date, the top ZIP in terms of number of sales has been Midtown’s 38104. The area has seen 21 sales averaging $221,576 and totaling $4.7 million. The top ZIP for dollar amount has been Whitehaven’s 38116, with 16 sales totaling $12.6 million.

A silver opportunity

The top sale from May was the Wesley Highland Manor senior nursing facility at 3549 Norriswood Ave. near the University of Memphis. It sold for $7.3 million to FC Highlands LLC, a single-purpose entity related to Alpharetta, Ga.-based Formation Capital. The sale closed May 11 with Wesley Highland Nursing Homes Inc. as seller.

The 56,913-square-foot facility sits on 1.37 acres at the southeast corner of South Highland Street and Norriswood Avenue, just west of the U of M campus. Michael Jones, chief operating officer for Formation Capital, said the company would spend money to “upgrade aesthetically” the property.

That sale was followed by the Jared the Galleria of Jewelry store adjacent to Collierville’s The Avenue Carriage Crossing outdoor mall. It sold for $2.8 million in a special warranty deed to Philip Brabyn of Naples, Fla. Brabyn bought the outparcel property, at 4615 Merchants Park Circle, from Carriage Avenue LLC, which developed the open-air mall. The sale date was May 6.

The jewelry store sits on a 1-acre parcel that was subdivided from a 2.49-acre parcel in the Price Farm Planned Development Phase 2G, which is part of Parcel 4 of the Carriage Avenue LLC property. It sits between Houston Levee Road and Merchants Park Circle, a road that loops around the mall.

Third, a BP gas station and convenience store at 15 Humphreys Blvd. in the River Oaks area of East Memphis sold for $1.6 million to an entity called MAC-HTA Holdings LLC. The sale closed May 5 and the seller was Kelley-Rasch Enterprises LLC.

The property houses a BP gas station, deli and convenience store. It was built in 1995 and sits on about one acre at the southwest corner of the intersection of Humphreys and Walnut Grove Road in the Humphreys Boulevard Planned Development.

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

PROPERTY SALES 56 94 12,852
MORTGAGES 23 50 8,053
BUILDING PERMITS 285 422 30,356
BANKRUPTCIES 23 67 6,131