July 22, 2015

ServiceMaster to Stay Put

By Amos Maki
– The Commercial Appeal –

ServiceMaster Co. announced Monday that it would not build a $122 million headquarters campus, opting instead to keep its East Memphis offices.

ServiceMaster, which recently relocated its headquarters from the Chicago area to Memphis, signed a long-term lease Monday with Boyle Investment Co. to remain at the Ridgeway Center office complex near Poplar and Interstate 240.

ServiceMaster occupies about 290,000 square feet of office space at Ridgeway Center, making the lease one of the largest ever in Memphis.

ServiceMaster has renewed its leases at four buildings in Boyle’s Ridgeway Center development: 850, 860, 889 and 855 Ridge Lake Boulevard.

Boyle and several partners own the first three buildings; the fourth building is owned by Ezon Investment Co. of Naples, Fla.

Mark Halperin and Kathy Pampuro of Boyle represented the building owners. ServiceMaster real estate executives Lane Johnson and Glenn Chambers managed the transaction for ServiceMaster.

"Our new deal will continue to provide a first-class work environment for our employees," Johnson said.

ServiceMaster, which owns TruGreen Lawn Care, Terminix pest control and Merry Maids cleaning service, is already well into its relocation to Memphis, where most of its divisions are based.

ServiceMaster officials said the new deal with Boyle will allow the home services firm to continue to expand.

"We have recently completed the move of our corporate headquarters from Chicago to Memphis, and this lease extension will allow us adequate space to accommodate our current and anticipated growth," said ServiceMaster CEO Pat Spainhour.

Boyle officials were elated.

"ServiceMaster is a key Memphis employer, and so their decision to renew their lease with Boyle validates the strength and importance of our strategic location at Poplar and I-240," Halperin said. "Because ServiceMaster is one of the larger users of office space in the Memphis area, this lease renewal represents one of the largest office leasing deals in the Memphis community."

ServiceMaster, which accepted a $5.5 billion buyout offer from the New York-based private-equity firm Clayton Dubilier & Rice in March, has been exploring its real estate options for several months.

At one point, ServiceMaster considered building a $122 million office campus for its new headquarters on a 100-acre site at Forest Hill-Irene Road and Tenn. 385.

ServiceMaster was also considering expanding its office campus at Boyle’s office park in East Memphis. That location is the primary site for the company’s Memphis operations and would require $10.5 million to $12 million to expand.

The Memphis and Shelby County Industrial Development Board granted ServiceMaster a 15-year payment-in-lieu-of-tax freeze that would save the company $18 million for the campus project. The IDB also awarded the company a 12-year PILOT that would save it $8 million for the Ridgeway Center option.

As part of the PILOT deal, ServiceMaster officials said the company would create 500 jobs in Memphis through the end of 2011.

"We had planned for every contingency," said Mark Herbison, senior vice president for economic development at the Memphis Regional Chamber, which assisted ServiceMaster in its relocation. "I’m not surprised; we knew they were looking at both options."

Real estate observers said ServiceMaster’s decision to stay at Ridgeway Center, where it occupies mostly Class B space, is good news for Boyle, which would have faced huge vacancies there, but it also bodes well for the office real estate market in general.

"I’d say that ServiceMaster renewing their lease at Ridgeway center is good for the overall office market, given that the bulk of vacancy in the suburban office market has been among the class B sector recently, and getting another (large) vacancy could offset all the progress we’ve been seeing in what has been the most competitive class of office property," said Ron Kastner, senior vice president at CB Richard Ellis Memphis.

"Class B vacancy in suburban Memphis just recently fell below 14 percent for the first time in a long while and is showing signs of further reducing to below 12 percent, we predict, by this time next year."