VOL. 130 | NO. 1 | Thursday, January 1, 2015
Big Deals Highlight 2014 Real Estate
By Amos Maki
In Inked, we like to highlight local real estate transactions and the often-interesting companies leasing or buying commercial real estate space in the Memphis market. We also like to keep you informed about major deals before they happen and track companies that are critical to the local economy. Here are some important items that appeared in Inked in 2014.
• In December, Cummins Inc. sought tax freezes to remain in Memphis and expand. We previewed this positive news in a September Inked entry.
Cummins Inc. is eyeing a Memphis property for a planned expansion of the company’s distribution operations, a move that would be welcome news for Memphis officials.
Cummins is considering expanding its current distribution operations into a 400,000-square-foot building at 5800 Challenge Drive, according to four people familiar with the situation.
The building, which is currently occupied by Stein World, is just across Challenge Drive from the existing Cummins distribution facility at 4155 Quest Way. Both are inside Memphis Distribution Center in Southeast Memphis.
A Cummins representative did not confirm the 5800 Challenge Drive site was a possibility, but did say no deal of any kind had been reached yet.
“We are still evaluating our options at this point,” said spokesman Jon Mullins.
If Cummins and ProLogis can ink a deal, Memphis would retain hundreds of jobs that could have slipped south across the state line to Mississippi.
Cummins officials have acknowledged that the diesel engine manufacturer was considering an expansion of distribution operations, a project that would create around 50 jobs.
But the state of Mississippi and industrial developers and landlords with holdings there have been aggressively courting the Indiana-based company to move most of its Memphis operations and around 700 jobs to the Magnolia State. Cummins has seven local manufacturing, distribution and warehouse facilities totaling roughly 1.3 million square feet, according to the company.
Cummins’ options in Mississippi include locations in DeSoto County and Marshall County, a growing industrial center that is home to Panattoni Development Co.’s Gateway Global Logistics Center, a 1,500-acre industrial development inside the broader Chickasaw Trail Industrial Park area.
But Memphis officials, who are reeling from recent news that Cargill Inc. would be shutting down its Memphis corn mill and eliminating around 400 jobs, aren’t going down without a fight, making the Cummins deal one of the most high-profile cross-border economic development battles in recent years.
Memphis Mayor A C Wharton Jr. and Shelby County Mayor Mark Luttrell have focused on the project, and the staff at the city-county Economic Development Growth Engine is preparing a tax incentive offer to compete with Mississippi, which has been aggressive in recruiting companies with operations in Memphis and Shelby County.
Wharton and Luttrell have asked the state of Tennessee, which historically has not supported retention incentives, to assist in efforts to keep the Cummins jobs in Memphis. Wharton and Luttrell met with Gov. Bill Haslam in Nashville last month and discussed the need for retention incentives in Memphis and Shelby County, which, because of their geographic location, must sometimes square off against lower-cost alternatives in Arkansas and Mississippi to retain or grow existing businesses.
• Throughout 2014 the Memphis area’s largest private employer, FedEx, significantly restructured its external real estate operations and Inked covered each move. This September 2014 entry provides significant news and a handy review.
FedEx has decided not to renew a lease at a prominent East Memphis office building.
FedEx Services is not renewing a roughly 11,000-square-foot lease at the 189,644-square-foot Renaissance Center office building at 1715 Aaron Brenner Drive that expires Oct. 1. Employees affected by the decision will be moved to FedEx facilities, part of a broader consolidation and efficiency plan the company has been pursuing.
“FedEx continuously evaluates opportunities that can enhance our ability to serve our customers,” said FedEx spokesman Scott Fiedler. “I can confirm that an 11,000-square-foot lease in the Renaissance Center will expire on Oct. 1, and it does not affect our remaining footprint in the building. This will allow us to consolidate staff into our major Memphis locations.”
FedEx, the Memphis area’s largest private employer and one of the city’s biggest office tenants, has been re-evaluating its local real estate presence.
So far this year, FedEx has decided to vacate roughly 86,000 square feet of office space and shift another 22,000 square feet to another location. Before deciding not to renew leases totaling 86,000 square feet, FedEx occupied around 328,896 square feet of office space in the Memphis area, according to figures compiled by commercial real estate brokers.
In May, FedEx decided against extending a roughly 75,000-square-foot lease in Building B at the Lenox Park office complex. Employees impacted by that decision are being moved to company facilities.
In August, FedEx Trade Networks inked a lease for 22,000 square feet at the Primacy II office building, at 6055 Primacy Parkway near Ridgeway Road. FedEx Trade Networks will be relocating from space it occupied at Thousand Oaks.
• In October, The Horizon, the long-stalled condominium tower overlooking the Mississippi River, was acquired for $13.5 million by Dawn Properties Inc., which plans to complete the building. Inked reported the property was under contract in August.
The Horizon, an uncompleted 16-story residential tower overlooking the Mississippi River on the southern end of Downtown, could change hands soon.
A yet-to-be-identified buyer is under contract to purchase the tower, according to sources familiar with the effort.
After clearing up a legal quagmire that resulted from foreclosure, a consortium of banks led by Capital One that owns the building, which was originally intended to be an amenity-packed condominium tower, put the unfinished property up for sale.
Offers on the property were due in July and the capital asset services team at Cushman & Wakefield/Commercial Advisors has been poring over the offers from a mix of local and national investors looking for the most qualified buyers and the development plan that has the most chance for success.
A spokesman for Capital One declined to identify the potential buyer.
“The bank still owns the property and we are working towards a sale,” said Capital One’s Michael Bulger.
After completing most of the first phase of the project, the original developer, the Bryan Co., defaulted on a $58.6 million loan in 2009. Since then, the 155-unit tower has served as a large and painful reminder on the Downtown skyline of the real estate crash.
Plans to complete the tower remain unclear, but real estate experts have said that with apartment occupancy rates in Downtown Memphis almost at capacity a rental tower would make sense, and so would a mixed-use project featuring units for sale and a retirement community for baby boomers looking to downsize and live in an urban atmosphere.