Highwoods in talks to buy Crescent Center
Premier office space in coveted Poplar corridor
Memphis Business Journal - by Andy Ashby
Real estate investment trust Highwoods Properties, Inc., is in negotiations to buy the Crescent Center office building from Behringer Harvard, according to numerous real estate sources. The 336,396-square-foot building on 10.1 acres at Poplar and Ridgeway is considered one of the premier office spaces in Memphis. The building and land were appraised for $58.5 million in 2009, according to the Shelby County Assessor of Property documents. Highwoods currently owns, manages and operates 2.2 million square feet of space in Memphis, of which 1.4 million square feet is along the Poplar corridor. When completed, the sale would put a majority of the Class A office properties in the coveted East Memphis submarket into the hands of three companies: Highwoods, Boyle Investment Co. and Parkway Properties, Inc. Parkway owns 533,000 square feet of Class A space in East Memphis. Boyle owns, manages and leases 1.5 million square feet of Class A and B space in the East Memphis submarket. The company has 2 million square feet of total office space in Memphis. Officials with Highwoods declined to comment for this story.
By removing a landlord of Class A multi-tenant space from East Memphis, the remaining property owners get more control of the submarket. “It reduces tenants’ ability to leverage owners against each other to get the best deal,” says Ron Riley, executive vice president with In-Rel Management, Inc. In-Rel owns, manages and leases Clark Tower, Poplar Towers and Lynnfield Office Park, which is 1 million square feet of Class B space in East Memphis. Riley expects Highwoods to be successful with the Crescent Center. “There’s no question they’re a top-notch operator and that it’s one of the best properties in town,” he says.
Everclear Acquisition Corp., a wholly owned subsidiary of Behringer Harvard REIT I, Inc., acquired Crescent Center in December 2007 as part of its acquisition of IPC US REIT for $1.4 billion. Behringer Harvard currently owns the office property at 6075 Poplar through IPC Crescent Center LLC. IPC US REIT bought Crescent Center from Cooper Realty Investments and the Arkansas Teacher Retirement System for $63 million in October 2005. Since Weston Cos. developed Crescent Center in 1986, the property has also been owned by Travelers Insurance Group and Archon Group, the company that sold it to Cooper Realty Investments. Mark Halperin, executive vice president with Boyle, says the Crescent Center sale won’t have a significant initial impact on the submarket because Highwoods will take care of the property and have qualified people leasing it, similar to Behringer Harvard’s ownership. CB Richard Ellis Memphis has handled leasing at the property since 2005. However, he does say the sale will continue to concentrate East Memphis Class A office space into a few hands. “How that will impact the marketplace, I’m not sure,” Halperin says. Highwoods’ basic strategy, like Boyle’s, has been to manage and lease the buildings it owns. “I think there is an advantage for the tenants to be dealing with the same entity from the initial process through occupancy,” Halperin says. “Leasing office space is kind of like being married and I don’t think people emphasize enough who owns the building and who runs it.” Halperin says the East Memphis submarket has seen minor office leasing activity recently, but there could be more.
Boyle recently brought its newest property, the 155,000-square-foot 999 S. Shady Grove building, to 75% occupancy. Meanwhile, across the street from Crescent Center, Highwoods recently opened Triad Centre III, a 155,000-square-foot property that is the first Leadership in Energy and Environmental Design speculative office building in Memphis.
Highwoods Properties, Inc.
Office management, leasing and development
HQ: Raleigh, N.C.
President: Edward J. Fritsch
2009 revenue: $454 million
Local Address: 6410 Poplar, Suite 140
Local Phone: (901) 683-2444
Web site: www.highwoods.com
Class A office building
Address: 6075 Poplar
Developed by: Weston Cos.
Total square footage: 336,396
Available square footage: 44,196
Stories: Nine, plus basement
Asking lease rates: $29/sq.ft.