"We started getting inquiries, unsolicited offers," James Hankins, senior vice president of ASG Real Estate Co., says about the firm's first ground-up project in Dallas/Fort Worth. "We kept seeing the prices these developments were receiving and felt like the timing was right." ASG's timing was so good that the 22-acre Watauga Pavilion at 7600-7620 Denton Highway had 25 investors jockeying for the win from a 30-day marketing period. "We knew it was going to be strong, but we didn't think it was going to be that strong," he says.
And the buyer was the Oak Brook, IL-based Inland Western Retail Trust Inc., marking its fifth purchase this year in Texas. "Inland had the top offer," Adam Howells, a Dallas director for Holliday Fenoglio Fowler, says. "But, there was a cluster of offers in the same proximity as Inland." The deed swapped hands after a 30-day look and 15-day close in Inland's true MO--cash on the line.
An Inland spokesman says debt will be placed down the road with the usual 50% to 53% leverage so the REIT, which is ringing the bell this morning at the New York Stock Exchange, can gain more purchasing power for a pool that's been spinning Texas deeds at the rate of one per month since the year began. And Joseph Cosenza, Inland's chairman of acquisitions, is holding more contracts.
Hankins tells GlobeSt.com that ASG has construction obligations to fulfill before the holdbacks are released and it can walk away from the 98%-leased asset. The developer must finish and lease a 7,600-sf building on an out-parcel and fill the final block of inline space, 3,300 sf. He says talks have begun with Chipotle Mexican Grill Inc. of Denver, Zales Corp. of Irving, TX and local retailer, Vision City, for the out-parcel structure. United Commercial Realty's Stan Lotridge, executive vice president and partner, and Maury Levy, senior vice president, are steering the project's lease-up.
The seven-building Watauga Pavilion, situated at the intersection of US Highway 377 and Starnes Road, is filled with national retailers, with the average lease bearing a 10-year term on space at quoted rates of $24 per sf to $30 per sf.
"It's been a homerun for us," Hankins says. ASG, the Carrollton-based subsidiary of Kuwait's Alshall Group, held onto an adjacent four acres, still on the drawing board as garden-style office product.
Howells, who negotiated the sale along with HFF's managing director Barry Brown, says Watauga Pavilion attracted a broad spectrum of buyers from private capital to REITs. "Newer developments with long-term leases and stability of cash flow are driving down cap rates," he says. Watauga Pavilion sold at close to a 7% cap rate.
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