May 8, 2017

By: Jacob Steimer

In-Rel Properties just dropped $8 million overhauling Clark Tower – focusing on the building’s lobby, elevator system, HVAC system and a new conference center.
The company’s next goal, according to CEO Kirk Cypel, is making the building more fun and unique.
“It’s a serious work environment, but that doesn’t mean we can’t have fun with it,” Cypel said.
New outdoor lamps will light up the building in different colors, and the fun will also include a new, 8th-floor game room with ping pong tables, pool tables and video games.

“I have no idea if that’s an amenity that tenants will use. … But if tenants use it, I’d reinvest in it,” Cypel said.
Cypel’s hoping much of Clark Tower’s individuality will come from future, “diverse” tenant renovations that will dramatically change the feel of the building from one floor to the next.
“The building is a canvas,” Cypel said.
Another way In-Rel is trying to bring uniqueness to the building is through leveraging its next-door neighbors, such as Porcellino’s Craft Butcher, Hog & Hominy and Bangkok Alley.
In 2015, the company worked with Fleming Architects, MEMFix, Cushman & Wakefield/Commercial Advisors and surrounding businesses to conduct a walkability study. In recent months, the company removed the fences between Clark Tower and the restaurants and painted paths to them in the tower’s parking lot. More substantial walkways are still in development, Cypel said, as are other beautifying initiatives.
Currently, the 670,000-square-foot building is about 40 percent vacant, but the recent renovations have drummed up about 150,000 square feet of interested users in the last 90 days, according to Colliers International’s Ron Riley — the building’s broker.
“The reception has been night and day from 2003 [when the building was last renovated with a $1.5 million investment],” Riley said.
Cypel said he has been particularly excited by the buzz the new, 60-seat conference center has created.

April 26, 2017

By:  Marty Finley

The sale of the 26-story Meidinger Tower is final.

Florida-based In-Rel Properties has closed on the property in a $32 million deal. The seller was an affiliate of New York-based real estate investment firm Torchlight Investors, which has acquired more than $20 billion in commercial real estate debt investments since its inception.

The Class A office tower at the corner of Fourth Street and Muhammad Ali Boulevard exceeds 331,000 square feet and is 97 percent leased. The building has a mix of professional firms and technologically inclined companies, including Computershare Inc., Mountjoy Chilton Medley LLP, River Road Asset Management LLC, Cotiviti and Seiller Waterman LLC. Louisville Business First also is a tenant.

The tower is managed by Louisville-based NAI Fortis Group, which will be retained by In-Rel Properties as property manager, In-Rel CEO Kirk Cypel recently told me.

Holliday Fenoglio Fowler L.P. and NAI Fortis Group partnered to market the property for sale on behalf of Torchlight Investors, which bought Meidinger Tower for $16.6 million in a foreclosure sale in 2013.

The Holliday Fenoglio Fowler team was led led by managing director Ralph Smalley and senior managing director John Merrill. Mark Wardlaw and Lenisa Alvey were the leads on the sales process for NAI Fortis Group, according to a news release.

“Louisville is a vibrant city with its own unique character, combining aspects from both Midwestern and Southern cultural influences,” Merrill said in the news release announcing the sale. “As a result, Meidinger Tower, with its outstanding location within the heart of the city, was attractive to investors from throughout the Southeast and Midwest.”

The building was renovated in 2006 and Cypel told me has no immediate renovation plans in mind. Instead, the new owner will maintain the property and review it regularly for possible upgrades.

In-Rel has about 3.5 million square feet of commercial space in its portfolio, which ranges from stabilized properties in the vein of Meidinger Tower to older properties that require renovations.The company operates in Alabama, Georgia, Florida, Kentucky, Oklahoma and Tennessee.

Cypel said In-Rel owns commercial properties in cities such as Memphis, Tenn.; Birmingham, Ala.; Oklahoma City; Tampa, Fla.; and Fort Lauderdale, Fla., and is opportunistic about expansion into new cities if the deal makes sense. He said the company evaluates each deal by the quality of the real estate, not what sector it fits into.

Cypel told me before the deal closed that his firm feels strongly about the Louisville market as it has watched it evolve over the past several years. He said the city is moving in an interesting direction with the completed construction of the Ohio River Bridges Project, the renovation and expansion of the Kentucky International Convention Center downtown and new hotel and residential developments in the works.

Meidinger Tower’s position next to the Fourth Street Live entertainment complex also is a plus, with Cypel noting that real estate is all about location.

“It’s just an exciting place to be. I just think it’s only going to get stronger,” Cypel said.

This is In-Rel’s first Louisville acquisition, but second in Kentucky. The firm owns the 238,000-square-foot Chase Tower in downtown Lexington.

Louisville, Kentucky

By: Marty Finley

A Florida real estate investment firm has one of Louisville’s largest downtown office towers under contract and should close on the acquisition later this month. Kirk Cypel, CEO of Lake Worth, Fla.based In-Rel Properties, said his firm plans to close on the purchase of the 26-story Meidinger Tower on South Fourth Street by late April. The current owner is New York-based DOF IV Meidinger Tower LLC, which purchased the tower in 2013 for $16.6 million in a foreclosure sale. Cypel declined to disclose the negotiated purchase price. The building ranked sixth on Louisville Business First’s largest office buildings list for 2016 based on leasable square footage, with roughly 331,000 square feet.

The building has a mix of professional firms and technologically inclined companies, including Computershare Inc., Mountjoy Chilton Medley LLP, River Road Asset Management LLC, Northwestern Mutual and Seiller Waterman LLC. Louisville Business First also is a tenant. The tower is managed by Louisville-based NAI Fortis Group, which will be retained by In-Rel Properties as property manager if the deal goes through, Cypel said. “They’ve done a good job with the building,” he said. Jon Seiz, president of NAI Fortis Group, said the building is 96.7 percent leased. This will be In-Rel’s first Louisville acquisition, but second in Kentucky. The firm owns the 238,000-square-foot Chase Tower in downtown Lexington.

Cypel said his firm feels strongly about the Louisville market as it has watched it evolve over the past several years. He said the city is moving in an interesting direction with the completed construction of the Ohio River Bridges Project, the renovation and expansion of the Kentucky International Convention Center downtown and new hotel and residential developments in the works.

Meidinger Tower’s position next to the Fourth Street Live entertainment complex also is a plus, with Cypel noting that real estate is all about location. “It’s just an exciting place to be. I just think it’s only going to get stronger,” Cypel said of Louisville. “I wish there was more of a residential component downtown, but I think it’s coming.” Cypel also pointed to Louisville’s historic architecture and a push by developers to creatively reuse several downtown buildings for office, retail and other uses as a draw to the market. Furthermore, he praised the strong tenant mix inside Meidinger Tower, calling it a stabilized tower with no need for major renovations. “The bones of the building are very good,” he said. Because the building has received a refresh in recent years, he said his firm’s goal is to maintain the quality of the tower and assess it each year for possible tweaks.

In-Rel has more than 3 million square feet of commercial space in its portfolio, which ranges from stabilized properties in the vein of Meidinger Tower to older properties that require renovations. The company operates in Alabama, Georgia, Florida, Kentucky, Oklahoma and Tennessee. Cypel said In-Rel owns office, retail and some residential properties in cities such as Memphis, Tenn.; Birmingham, Ala.; Oklahoma City; Tampa, Fla.; and Fort Lauderdale, Fla., and is opportunistic about expansion into new cities if the deal makes sense. He said the company evaluates each deal by the quality of the real estate, not what sector it fits into. “You don’t grow for the sake of growth,” he said. “You grow when you find great opportunities.” The company stays away from what Cypel called “gateway cities,” such as New York, Chicago and Washington, D.C. In those cities, he said, the institutional players are deeply entrenched and are throwing “silly money” around on real estate. Louisville, in comparison, is a less-volatile market that doesn’t see the dramatic ups and downs of a giant city. “You can make a living (here) and don’t have to compete with the world,” he said.

By:  Ron Riley, Senior Vice President, Colliers International

Memphis may be known for its industrial market, but there are several interesting stories unfolding in the Memphis office market as well. Investors, both local and national, have found opportunities in an office market that can relate to the phrase, “slow and steady wins the race.”

The Memphis office market con­sists of just over 52 million square feet, with nearly 60 percent of that in the Downtown, East and 385­ Corridor submarkets and more than 85 percent of the Class A space located in those same submarkets. The Memphis metro ended 2016 with overall vacancy rates of 10.5 percent. Those rates have remained in the 10.5 to 10.9 percent range for the last two years.

Class A vacancy has been on a slow and steady decline, falling from 10.2 percent at the end of 2014 to 7.9 percent at the end of 2016, its lowest level in more than a decade. This has prompted Class B owners to make investments in their properties, like the $7 million capital investment by Clark Tower, located in the East Memphis submarket, to upgrade mechanical systems and common areas.

Rates, too, have been relatively steady for the last decade. At $17.07 per square foot as of the end of 2016, they are nearly the same as they were at the end of 2007. With the exception of 2012, rates haven’t dipped below $16 per square foot for the last 10 years.
This stability can be largely attributed to very measured development. Even for several years prior to the recession, significantly all office development was for pre-leased buildings, with less than a million square feet delivered since 2010. So it is striking that nearly 1.4 million square feet is currently under construction and investors from outside the market are suddenly taking notice of the Memphis metro area.

The most unique and significant office development in Memphis is actually a redevelopment in the Mid­town submarket. Crosstown Con­course will completely transform the Sears, Roebuck & Co. distribution center and retail store originally constructed in 1927 in Crosstown, just two miles from downtown Memphis. Between 1927 and 1965, the building expanded to a total of 1.5 million square feet, but by 1993, both the retail store and the distribution center were closed. The building remained vacant until construction began on this massive project nearly two years ago.

The redevelopment project was bandied about for many years and ultimately garnered the support it needed to get off the ground when eight founding tenants, including St. Jude Children’s Research Hospital, Methodist HealthCare and Crosstown Arts, committed to leasing 600,000 square feet of the space. When completed this spring, the 10-story building will be home to a variety of office, residential, retail, healthcare, education and arts organizations. The Crosstown Concourse website sums it up nicely as a million square feet of opportunity, built on history and powered by renewal.

Adaptive reuse of existing space isn’t limited to the Crosstown project. Peabody Place, a 360,000-square-­ foot downtown mall that cl0sed in 2012, is being renovated by its owner, Belz Enterprises, and will be home to a new headquarters building for ServiceMaster. The majority of the building will house 1,200 of the company’s 2,200 Memphis employees, while 20,000 square feet is being set aside for retail and/or res­taurants.

In keeping with the measured approach to development and redevelopment, more than 87 percent of the nearly 1.4 million square feet under development is pre-leased. Unlike some major markets that may have overbuilt and are now seeing a softening in leasing and a corresponding slowdown in rent growth, Memphis has become more attractive to investors that are looking for stable fundamentals that result in higher yields.

Real Capital Solutions, an investment manager for high net worth individuals, recently purchased over 500,000 square feet m Cordova, in­cluding multiple buildings at Ger­mantown Court, and the Horizon Business Center, for a total of over $47 million.
Priam Capital, based in Nashville, is a sponsor of boutique private equi­ty real estate funds focused on stabi­lized assets. Priam recently acquired Grove Park Center, a 60,300-square­foot, multi-tenant building that is 96 percent occupied, for a reported $8.6 million.

Priam Capital also purchased 5400 Poplar Avenue, a 45,000–square-foot building occupied by Paragon Bank, for $5.7 million.

According to Jimmy Beard, an as­sociate with Priam Capital, “We see Memphis, and in particular East Memphis, as an extremely stable market that will provide our inves­tors with long-term cash preserva­tion and appreciation. A number of institutional buyers have entered the market, including Angelo, Gordon & Co.’s and Olymbec, in addition to long-time Memphis investor High­woods. This shows confidence from across the country that Memphis is trending in the right direction. We recently had our first capital closing on our Fund III vehicle and Mem­phis remains a target market for us.”

MEMPHIS, TENN. — In-Rel Properties, a commercial real estate investment firm based in Lake Worth, Fla., is overseeing the $7 million renovation of Clark Tower in Memphis. Located at 5100 Poplar Ave., the 32-story, 668,009-square-foot office tower is the second-tallest building in Memphis. The renovation was designed by the Crump Firm and includes a new entry, updates to the lobbies, bathrooms and common areas and new elevators and mechanical systems. Existing amenities at Clark Tower include 24-hour security, a fitness center, on-site banking, structured parking and an on-site conference center. Colliers International leases Clark Tower on behalf of In-Rel. Dan Walker Associates began construction in the third quarter of 2016 and expects to wrap up at the end of the first quarter this year.