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VOL. 125 | NO. 250 | Monday, December 27, 2010

Moving Forward

Commercial market struggles, but year closes on high note

By Sarah Baker

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As the commercial real estate market remained soft in 2010, a handful of major deals – including some to close the year – indicated light at the end of the tunnel.

Loeb Properties Inc. has bought the 175,000-square-foot Park Place Centre from Belz Enterprises Inc. for $10.3 million. (Photo: Lance Murphey)

The year ended with the top retail investment sale of the year when Loeb Properties Inc. bought Park Place Centre from Belz Enterprises Inc. for $10.3 million.

Loeb affiliate Park Place Memphis LLC acquired the 175,000-square-foot Park Place Centre from Belz Park Place GP, an entity of Belz.

The shopping center was built in 1981 and sits on 13.86 acres at the southwest corner of Park Avenue and Ridgeway Road. The Shelby County Assessor of Property’s 2010 appraisal of the property was $16.9 million.

The deal more than doubled the year’s second highest retail purchase, when the Shops at Rock Creek sold for $4.4 million following a foreclosure. Ending the year with a bang perhaps signals brighter days for the Memphis market.

“In an economy like this, if you’re not going backwards, you’re really moving forwards,” said Kemp Conrad, senior vice president of Commercial Advisors.

The top commercial sale of 2010 also marked Shelby County’s largest commercial real estate deal in five years. That occurred in July when Raleigh, N.C.-based Highwoods Properties Inc. bought the nine-story, 336,000-square-foot Crescent Center for $52.6 million.

IPC Crescent Center LLC, an affiliate of Behringer Harvard, had paid $63 million for the same building in 2005, which had been the previous high mark for the county. The center’s 2010 appraised value is $58.5 million, according to the assessor.

Highwoods also secured one of the most noteworthy office leases of 2010 when Glankler Brown PLLC left One Commerce Square and moved to the Triad Centre in East Memphis.

But as Glankler navigated its move to East Memphis, the hole it left in One Commerce was more than filled when Pinnacle Airlines Corp. signed a 13-year lease at the tower. The Memphis-based airline’s move will bring 600-plus employees to Downtown.

Other Downtown highlights for 2010 include the signing of Le Bonheur Community Health and Well Being’s 21,476-square-foot lease at 50 Peabody Place and ServiceMaster by Stratos’ 7,400-square-foot lease in the historic Lowenstein Building.

Another notable investment sale occurred in July, when two limited liability companies affiliated with WelshInvest bought property in Airport Industrial Park from Principal Life Insurance Co. for $20.6 million.

Then in December, Minnesota-based WelshInvest sold its dual purchase to BRE/EX TN Properties LLC, a limited liability company affiliated with New York City-based Blackstone Group.

The 449,600-square-foot warehouse at 4460 E. Holmes Road was sold for $12.8 million, after WelshInvest bought it for $11.5 million. The 366,800-square-foot warehouse at 4495 Citation Drive was sold for $9.9 million, after its previous purchase of $9.1 million.

WelshInvest’s transactions are a prime example of larger deals occurring in Memphis submarkets, especially in the industrial sector.

But during the last 10 to 15 years, Memphis’ neighbor to the south, DeSoto Country, is where all of the new construction has taken place. It’s also where a considerable amount of industrial absorption has occurred.

“That’s been the trend in Memphis for years – the larger deals are done in those submarkets,” said Andy Cates, vice president of brokerage services at Colliers International. “You may see some more spread out into Marshall County (Miss.) some.”

Examples of 2010’s DeSoto industrial deals were Hamilton Beach Brand Inc.’s 1.2 million-square-foot lease, Siemens Building Technologies Inc.’s 619,000-square-foot lease and McKesson Corp.’s 645,000-square-foot lease.

But perhaps the biggest announcement – in commercial real estate and economic development circles – all year happened earlier this month in Memphis.

Swedish manufacturer Electrolux said it will build a $190 million manufacturing plant on 800 acres of land in the Frank C. Pidgeon Industrial Park, bringing about 1,200 jobs to town.

Construction on the 700,000-square-foot, LEED-certified Memphis plant will begin in early 2011, and the completion date is the fourth quarter of 2013.

Meanwhile, North Memphis saw a pair of big deals. Mitsubishi Chemical Corp. announced it is investing $13.1 million on Fite Road to manufacture and sell electrolyte for lithium batteries.

While the company has not yet released the amount of jobs the operation will create, it will retain 200 jobs at the current facility and has the potential capital investment of $135 million.

PROPERTY SALES 57 280 1,209
MORTGAGES 55 244 916
BUILDING PERMITS 158 699 2,751