November 04, 2015

Boyle Adds to Ridgeway Office Holdings

Boyle Adds to Ridgeway Office Holdings

The Commercial Appeal

October 16, 2015

Boyle Investment Company said it has bought a major office building in the Ridgeway Center complex in East Memphis.  Memphis-based Boyle said 775 Ridge Lake Boulevard was bought for $16.3 million from Maryland investor Hub Properties Trust.  The six-story office building, located in one of the city’s premier office districts, changed hands at an upper-middle-range price of about $136 per square foot despite the strong demand for office space in East Memphis following limited construction in recent years.

Office vacancy rates in the best East Memphis buildings eased to 3.9 percent in the third quarter, real estate broker CBRE Memphis reported Thursday, compared to an 11.3 percent vacancy in Class A space throughout the metropolitan area.  Hub’s sale of 775 Ridge Lake reflects the firm’s new strategic direction rather than any issues with the East Memphis market, said Mark Halperin, Boyle chief operating officer.

The Maryland firm has been selling buildings in second and third tier cities after its acquisition by Commonwealth Equity, a Chicago firm led by prominent real estate investor Sam Zell.

“We think the purchase shows our faith in the Memphis market,” Halperin said, noting Boyle now owns 2.2 million square feet of Ridgeway office space.  “We think it’s a very competitive price for us.”

The purchase price was held down slightly by 775 Ridge Lake’s 20 percent vacancy rate, Halperin said.  Boyle plans a moderate upgrade of the building.  The purchase was made by an arm of Boyle named 775 Midsouth Investments L.P.

Boyle developed the 120,000-suqare-foot building in 2001 to house the office of Vining Sparks, a Memphis investment firm.  Vining Sparks currently occupied half of the building.  Other tenants are Informa Economics, Dickens Commodities and Financial Resource Management.

The Ridgeway complex at Poplar and Interstate 240 is on land purchased by Boyle in 1968 from Ridgeway Country Club.  it is now the largest single office development in the commercial center of metropolitan Memphis.  Although there have been rumblings about a new office building going up in East Memphis for nearly a year, CBRE Memphis’ real estate market report says “developers may be holding decisions until a majority of the building has been pre-leased in order to justify the initial cost of construction.”

CBRE points out meanwhile “space will tighten and rates are expected to slightly increase.  This will cause tenants looking to upgrade their space to gravitate toward nicer Class Bbuildings with better amenities.”

About 13 percent of the office space in Class B buildings in East Memphis was vacant in the third quarter, compared to 15 percent throughout the metro area.  The region contains about 8.5 million square feet of Class A space and 14 million square feet of B space.  In particular areas, office vacancy rates for both types of buildings totaled 10.2 percent in East Memphis and 10.8 percent in the Tenn. 385 corridor.  They are the No. 1 and No. 2 office markets in the region.

Elsewhere, the vacancy rate was 17.1 percent in Downtown, 20 percent Northeast and 22.9 percent near the airport.

CBRE said 56 tenants signed new leases in the quarter throughout the metro area and 33 tenants vacated space, primarily to move to larger offices.

“Generally speaking, more companies are deciding to relocate due to increased space needs, rather than for other reasons,” the report says.

775 Ridge Lake Boulevard in Ridgeway Center

775 Ridge Lake Boulevard in Ridgeway Center