2007 Brings Big Deals to Memphis Market in Sales, Leasing and Development

By Andy Ashby
– Memphis Business Journal –

On the office side, 2007 started with the largest investment sale of the year and continued with big names renewing leases and familiar names starting new developments.

Right off the bat, California-based Triple Net Properties LLC bought Lenox Park’s seven office buildings and 72 acres for $90.5 million.

Though most of the work on the deal was done in 2006, the sale closed in early January. Clark & Clark developed the 683,000-square-foot office park.

“Lenox Park is similar to the asset sales we have made in the past, such as Clark Tower in 1984 and White Station Tower in 1998,” says principal Nick Clark. “From an investment sale standpoint, we tend to look for opportunities to sell properties which we develop when the national market is at its height and is looking at Memphis for investment product.”

The Lenox Park deal occurred during a strong first half for the Memphis market, according to CB Richard Ellis Memphis executive vice president John Lamberson.

“That was a deal where the timing of the market was really good for it,” Lamberson says. “Had that gone out at the same time in 2007 as it did in 2006, we probably wouldn’t have seen the same result.”

On the lease renewal side, it couldn’t get much bigger than ServiceMaster Co. signing a 10-year lease to remain at Boyle Investment Co.’s Ridgeway Center.

The Fortune 500 company occupies 290,000 square feet in four buildings: 850, 860, 889 and 855 Ridge Lake Boulevard.

Boyle representatives Mark Halperin and Kathy Pampuro worked on the deal for two years. One of the reasons the deal took so long is that ServiceMaster had looked at several possibilities, including building its own headquarters.

“They just came to the conclusion that the most efficient thing for them to do was stay put,” says Halperin, Boyle executive vice president. “It’s pretty exciting. It’s a huge tenant, one of the biggest in Memphis on the pure office side.”

ServiceMaster will make some tenant improvements, while Boyle will make improvements to the common areas. The renewal will be implemented in phases over the next two-four years.

ServiceMaster’s renewal was especially welcome news for Boyle, considering the company owns so much property in the East Memphis submarket. If the company had left Ridgeway Center, it would have left a big hole that could have taken years to fill.

“300,000 is a lot of space in a big city,” Halperin says. “It’s a whole lot of space in a city like Memphis.”

In the end, Halperin says that Ridgeway Center’s location won out.

“I think it says that this is the spot, long-term, for office space in Memphis,” he says. “It’s close to the decision makers, it’s close to services and it’s close to Main and Main, which to me is Poplar and Interstate 240. This has, in a lot of ways, become Memphis’ central business district.”

“One of the more interesting office stories of the year was the brainchild of veteran developer David C. Peck.

Peck Development Co. is developing the Legacy Center, a three-story Class A office building. The $11.7 million, 60,581-square-foot building will be fully leased before it is completed in spring 2008.

“In my 34 years in the business, I’m not aware of any speculative building that was more than 30% leased before completion,” Peck says.

Metropolitan BancGroup, Inc. signed a 10-year 8,000-square-foot lease that includes a signage option on the building. Other tenants include Linkous Construction Co., Inc.; Memphis Consumer Credit Association, Inc.; Cooper Realty Co.; Watkins & Uiberall PLLC; attorney H. Mark Beanblossom; and Cannon-Sexton Oral Maxillofacial Surgeries.

The core of the development should be completed by the end of January, with tenants moving in by May.

Peck, who developed several office buildings locally with Weston Cos., would like to re-create this latest success in the future.

“It was fun and I would like to do another, if it’s comfortable,” Peck says. “I have a couple of prospects that couldn’t get into this deal. I’ve got enough square footage that I could pre-lease to have it 50%, it’s just a matter of finding the site and duplicating it.”