A Canadian real estate investment group has bought a distressed South Memphis industrial park with plans to re-absorb the space and bring it back to life.
Richard Stern, principal with Quebec, Canada-based Olymbec purchased the 1.1 million-square-foot Space Center, 3051-3133 Tranquility Drive, for $7.25 million.
Olymbec is a family-run, private real estate investment company with the majority of its properties in Quebec. The firm’s current portfolio contains more than 140 properties totaling about 15 million square feet.
Olymbec specializes in buying distressed properties, renovating and filling the space, and seeking long-term financing.
“We don’t generally buy and sell, we buy to hold, keeping them in our portfolio for long-term investments,” Stern said. “Our first objective is to lease it up to at least the market occupancy levels, and in doing that we intend to be aggressive with our rental rates.”
Built from 1966 to 1969, each of the Space Center’s eight buildings is set up as multi-tenant buildings. Current tenants of the center are: 30,000-square-foot Bakery Feeds, 45,000-square-foot International Paper Co., 22,500-square-foot Howard Blankenship (doing business as 61 Cabinet Shop), 350,000-aggregate-square-foot Nickey Warehouses Inc., and 80,000-square-foot C W South Inc.
Colliers International’s landlord and tenant representative Andrew Phillips and vice president of brokerage services Andy Cates represented the seller, a Trammell Crow Co. partnership.
Space Center was previously managed and leased by CB Richard Ellis Memphis, and Olymbec intends to give up the leasing mandate to Cates and Gene Woods, Colliers president and manager.
“This is a great value-add opportunity for Richard and an amazing coincidence with all of the great things that are happening within the southwest submarket of Memphis,” Cates said.
Olymbec’s purchase comes after recent announcements of Swedish manufacturer Electrolux, which plans to build a $190 million manufacturing plant in Frank C. Pidgeon Industrial Park, and Mitsubishi Chemical Corp.’s investment of $13.1 million in North Memphis to manufacture and sell electrolyte for lithium batteries.
Meanwhile, Riviana Foods Inc.’s departure from the Space Center dropped its occupancy levels substantially. The center’s current occupancy is 49 percent, compared to historic levels averaging 85 percent occupancy. A few tenants have been in negotiations with the previous owner, and Cates is working on negotiations with several tenants.
“At this time, we’re not disclosing the names of those tenants, but we do have a pipeline already of at least probably four or five qualified tenants who want to take big chunks of the portfolio,” Stern said. “We’re excited that there already is, a day after we closed, a bunch of tenants that we’re currently working on to fill up some of the empty spaces.”
With no new projects on the horizon, as the economy turns around, tenants will gradually occupy existing space. And the Space Center offers a handful of incentives, including its location – about 10 minutes from the Mississippi and Arkansas state lines, minutes from the Interstate 55/240 exchange.
The industrial park is in move-in condition – including new roofs and recently renovated exteriors with asphalt around the buildings. Stern also touted the ceiling heights, column bay sizes, truck court areas, and the amount of dock level doors.
“Although they’re older buildings, they’re not what I would say obsolete, given what today’s standards are,” Stern said.
With the Space Center acquisition, Olymbec is close to 1.6 million square feet of properties in Memphis.
About seven years ago, Olymbec entered the Memphis market with its purchase of a 500,000-square-foot property in Southaven, Miss., on Rostin Road. The self-contained building – formerly occupied by a JC Penny distribution center – is currently occupied by Terex Corp., a heavy equipment company.
“Although we are interested to continue to grow anywhere where we find an opportunity in the U.S., obviously to have an existing base somewhere gives us a competitive edge,” Stern said. “We’ll have an opportunity to understand the market, have relationships with brokers and tenants, and we’ll be able to build up even more of a portfolio with the snowball effect of us already having a presence and a critical mass there.”
The firm also plans to eventually set up a satellite office in Memphis, after it has some more acquisitions under its belt.
“In the mean time, we will rely on third-party management to do some of the day-to-day operations, but all the accounting management will be done out of our head office in Montreal,” Stern said.