VOL. 126 | NO. 49 | Friday, March 11, 2011
Memphis Defense Depot Slated for Sale
By Sarah Baker
Memphis Defense Depot – the 4.2 million-square-foot industrial park and former Army base just north of Memphis International Airport – is back on the market.
Once sold, the property will return to the city and county tax base and deliver anticipated tax revenue of approximately $1 million annually, making it one of the more successful national Army base closures.
The plan was always to put the property back on tax rolls at some point, but it’s been a work in progress for the Memphis Depot Redevelopment Corp. to take over the deed from the U.S. Army in 1997. When it did gain control, market conditions weren’t favorable for a sale, said Tommy Farnsworth III, current chairman of the MDRC.
“The world had sort of turned, and we think the world is turning back, and it’s a good opportunity for us to put a quality project like the depot back on the market for a private investor to come in and purchase,” he said. “Hopefully that will get done before the end of this year and folks can look at it as one of those successful government-private partnerships that’s been good for the community.”
It was 14 years ago that MDRC community activists and real estate professionals first assembled to purchase, renovate, lease and make the depot profitable. Now, with the offering of this property for sale, the project will fulfill the Defense Base Realignment and Closure Act plan instituted in 1996.
Since the 1940s, the depot served as a major area employer with a labor force as many as 1,500. Devastating economic effects occurred after the 1996 closing, particularly to the neighborhood surrounding the property.
“It was a very difficult period for our community,” said Mike Ritz, former chairman of MDRC. “We worked hard to rebuild the project intelligently with the smallest noticeable impact to the region.”
With the help of MDRC president Jim Covington, Ritz arranged for more than $25 million in capital improvements to renovate and upgrade the facilities – all funded out of the project’s cash flow with no expenditures on the part of city or county governments.
Today, the 642-acre Depot is thriving with an occupancy level of more than 80 percent, including local, regional and national tenants such as Cargill Inc., Allenburg Cotton and UPS Supply Chain Solutions.
CB Richard Ellis Memphis and Boyle Investment Co. have been retained as the exclusive brokers for the marketing and disposition of the Depot.
Joel Fulmer, senior vice president with Boyle, has been involved with the MDRC since its inception, working on the original purchase and leasing plan, including determination of rental rates and lease structures.
Fulmer then brought in John Robinson, executive vice president with CBRE in Austin, Texas, to leverage a national platform and maximize exposure for the Depot.
Earlier this week, Fulmer and Robinson sent out an offering memorandum to more than 1,200 potential investment entities that at some point or another have expressed interest in buying real estate in the CBRE/Boyle database.
“It could very well be someone from outside of Memphis that’ll be a buyer for this kind of thing,” Farnsworth said. “You’ve got groups that are out there that have got cash that are looking to invest in good-quality real estate, and you’ve got lenders that are willing to lend money to developers and buyers that are buying quality real estate, so I just think the timing for selling this is right.”
Interest in the property has been strong. With offers on the property due at the end of March, anticipated closing on the property is early fall 2011.
“(They) have the responsibility of sifting through the real prospects that emerge from that stellar list of potential prospects,” Farnsworth said. “They’ve been busy fielding calls, it’s been a busy week.”
The idea of job growth and economic development on the horizon is exciting for everyone involved, said Larry Cox, president and CEO of the Memphis-Shelby County Airport Authority and MDRC board member.
“I would assume that purchasers would want to continue to use it for warehousing and logistics,” Cox said. “The Aerotropolis benefits, the airport benefits and the neighborhoods benefit – it’s a win-win deal for everybody.”