VOL. 9 | NO. 44 | Saturday, October 29, 2016
SPECIAL EDITION: Commercial Real Estate
McNeill Commercial Real Estate Thrives By Focusing on Flexibility
By LANCE WIEDOWER
McNeill Commercial Real Estate doesn’t focus on one discipline, location or product type.
Rather than one property type, McNeill Commercial Real Estate operates as "opportunity developers," the firm's vice president Spence Ray says.
(Memphis News/Andrew J. Breig)
While some developers focus on multifamily, retail or industrial properties, for example, McNeill dabbles in it all. That includes a hospitality group that started in 2014 to expand on its already present hotel focus.
“I’d characterize us as opportunity developers rather than a certain product type or geographic market,” said Spence Ray, vice president of McNeill Commercial Real Estate and a part of the company since 1984. “More often than not, we find a good site or large development and then try to place the best product type within the commercial segment on that development.”
That might be warehouse, retail, office, flex space, multifamily or hotels. At one time or another in its history, McNeill has done pretty much every kind of commercial development except mobile home parks and mini-storage facilities. Spence said the company has even considered looking at mini-storage development as of late.
Hospitality properties have been part of the company’s portfolio throughout its history, thanks in part to the location of Promus Hotel Corp. in Memphis. When it launched the Hampton brand in the early 1980s, McNeill came alongside to develop those properties.
Company founder Phil McNeill Sr.’s commercial real estate experience began in the 1960s in the mortgage industry. Part of his job was placing multifamily financing through Freddie Mac.
Through the years he also concentrated on financing of single-family properties and builder financing. But when his employer had a change of ownership in the early ’80s, McNeill made the move into real estate development, launching his eponymous company in 1981.
McNeill went from the mortgage lending industry to hotel development, along with development of offices, retail and flex warehouse space. Today the company’s footprint ranges from retail properties in the Wolfchase area to Germantown’s mixed-use Thornwood, which includes a range of upscale apartments, restaurants, retail and a hotel at the corner of Germantown and Neshoba roads.
Other developers focus on specific segments; yes, there are plenty of companies that work in multifamily, for example. But some drill down deeper to focus only on metro areas of a certain population or only high-rise buildings for seniors within the multifamily sphere.
Spence said that while there are advantages for developers who focus on specific types of work, McNeill finds plenty of success with its way of doing things. An openness to looking at the possibilities of a piece of land allows for more options compared to a developer who only has one property type in mind.
Spence used the example of a piece of land in a downtown area, where one developer might want to place a high-rise senior living facility. A similar user is across the street and doesn’t allow senior living facilities nearby. So that particular developer moves on, while McNeill considers other options – anything from retail to multifamily to a hotel property.
“We think the flexibility not only opens up a tremendous more number of sites but also gives us ability to go into more geographical areas that are already saturated with a product type,” Spence said. “We try to acknowledge the weaknesses but maximize the strengths. There are companies very reputable nationally that take that one slice of the market and target that and stick with it. They don’t veer outside it.”
Of course the downside to that came during the recession.
“Everyone in this industry found out in 2009 to 2013 that the market is volatile,” Spence said, “and when it turns – especially to the degree it turned in those years – it leaves you with an inability to continue developing what you had in your pipeline, and what do you do in the interim?”
McNeill was able to make it through the storm without layoffs. What the company did before the recession hit in 2009 helped.
At that time, the company didn’t have a substantial amount of new developments under construction. It had just sold off a couple of portfolios. Phil McNeill’s Equity Inns had just sold a portfolio of hotels. It just so happened that the best sales in the company’s history occurred in 2007 and 2008.
McNeill held off on new developments for a few years, slowly getting back in the game in 2012 and ramping back up fully in 2015.
“We didn’t close our doors and we focused on the product we have,” Spence said. “Because we’re a small company we were able to get through it. It made us grateful to have projects to work on.”
McNeill isn’t shy to work with competitors. In fact, Spence said partnerships with other developers in the Memphis area have been important to the company’s sustainability.
Steve Sutton, executive vice president and chief credit officer at Financial Federal, said his organization has worked with McNeill from the beginning. That includes financing phase five of Thornwood with McNeill and other partners.
“That whole Thornwood development will be the crown jewel of Germantown,” Sutton said. “Those guys are well-seasoned, very experienced and professional. They know what they need to do in terms of obtaining financing and working with lending. They’re on top of their game all the way through.”