August 03, 2015

Depot Property Ready for Buyer

By:  Andy Ashby
Memphis Business Journal
The time is right for Memphis Depot Business Park to hit the market, with Memphis and Shelby County economic development and taxpayers being the ultimate beneficiaries.
Joel Fulmer, senior vice president at Boyle investment Co., is working with John Robinson, executive vice president with CB Richard Ellis Austin, to market part of the 400-acre property for sale.

Depot Redevelopment Corp., which owns the property on behalf of the city and county governments, is looking to sell 275 acres of the property just north of Memphis International Airport.

This land includes 4.2 million square feet of improved second- and third-generation industrial property that is 80 percent leased.

The property’s remaining 125 acres consist of undeveloped land which will be retained by the city and county for future development or economic growth.
Jim Covington, vice president of logistics and aerotropolis development for the Greater Memphis Chamber, has been president of the Depot Redevelopment Corp. since its beginning.
“Our goal from 1997 was to renovate, rent the property up, get a good cash flow up through our tenants and then sell it,” he says. “Our business plan was to go out of business.”
The organization had planned to put the property on the market in 2009, but the recession slowed that plan down.
“Now, as it appears the economy is better, it brought us back to our goal, which is to sell the property,” Covington says
The property isn’t being marketed at a set price, according to Tommy Farnsworth III, president of Farnsworth Holdings and chairman of the Depot Redevelopment Corp.

“It’s sort of like an auction,” he says. “You go to contract with the group that you think has the best opportunity to perform and offers the highest price.”
Farnsworth says the past few years have been a terrible time to sell real estate, not just in Memphis but nationally.
“We’re starting to come out of that,” he says. “There is pent-up demand from funds that are looking to acquire quality real estate and this certainly is that. There are also many more lenders looking to make loans to qualified buyers.”
Opened in January 1942 as the Memphis General Depot, the property was used as a supply point for the U.S. Army in World War II.
Over the years, various military agencies used it for everything from logistics to a prisoner of war camp. It was closed in September 1997 as a casualty of the U.S. Army’s Base Realignment and Closure program. At one time, it employed 1,500 people.
“The Depot had been a productive presence in Memphis since the 1940s,” Fulmer says. “It went through a couple of generations of people whose lives were centered around working at the Depot.”
In 1997, the city, county and the local economic development community formed the Depot Redevelopment Corp. to purchase the property from the Army and return it to productivity.

Shelby County commissioner Mike Ritz was the first chairman of a diverse board of directors, which runs the gamut from real estate professionals to community activists. Fulmer did the appraisal work for the purchase from the Army.
The board took advantage of economic development grants to take out rail service, convert some buildings and tear down others. All of this work was done to make it economically viable.
The Depot Redevelopment Corp. is a nonprofit organization and the U.S. Army doesn’t pay property taxes, so the property hasn’t been on the tax rolls since the 1940s. If an investor or end user buys the property, it could produce $1 million in annual taxes for the city and county, according to Fulmer. That’s in addition to the proceeds of the sale, which the city and county would split evenly.
“The other payoff is that this property will go forward in a renovated state and be a working piece of the Memphis economy for another 50 years,” Covington says. “We took it from a state of disrepair to a modern industrial park. We’ve given it another 50 years of good, quality life.”
The property has perimeter fencing, 24-hour security and is adjacent to a police precinct.
“It’s one of the most secure pieces of property in Shelby County,” Fulmer says. “It’s become a real selling point.”

The property has 2 million square feet of cotton storage. These buildings have 14-foot clearance, the tallest height allowable for cotton storage. The buildings also have high density sprinkler systems and firewalls, which are government and industry requirements for storing cotton.
Once the property is sold, the Depot Redevelopment Corp. could continue while there is still property left in the Depot. It could also eventually be assimilated into the city and county’s new joint economic development entity, the Economic Development and Growth Engine, or EDGE.
Either way, it will have served its purpose.
“We all see, hear and read about government programs and how wasteful they are and how poorly managed they are,” Fulmer says. “Well, this is one that actually worked. It’s an incredible success story.”