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DALLAS-The locally based HSM Equity Partners Inc. has spent slightly more than $11.2 million for a pair of shopping centers in Biloxi, MS, to mark its easternmost acquisition in its history. With the off-market purchase, HSM Equity gets a 67,891-sf foothold at a key location and the promise of buying another 135,000 sf, plus or minus, in the same spot.
"We are going outside the Dallas/Fort Worth area because things are so overheated here," Stephen A. Scott, executive director for HSM Equity, tells GlobeSt.com. The deal with Encore Enterprises of Gulfport, MS, includes an option to take down more class A space after it's built, leased and stabilized. And the sweet spot, Scott says, is "it's at the same cap rate that we bought these." The initial takedown has a 16.5% IRR for a five-year hold although the plan is to keep the holdings in the portfolio for the long haul.
The just-bought assets are the Lakeview Village's first phase, 35,291 sf at 3680 Sangani Blvd. in D'Iberville on the eastern outskirts of Biloxi, and neighbor, the 32,600-sf Indian River Plaza at 3711 Sangani Blvd. The second phase to Lakeview Village will get underway in 60 days, according to Scott. "We plan to own 200,000 sf when it's all said and done," he adds. Dan Slaven with Winshire Equities in Dallas brokered the transaction.
The 87%-leased package is occupied by a mix of national and local retailers, the majority holding five-year leases. Going forward, Henry S. Miller Cos.' management group will lease and oversee the assets, which neighbor a Wal-Mart Supercenter and Lowe's Home Improvement Warehouse and are positioned at the crossroads of Interstates 10 and 110, less than a five-minute drive from the second-largest gaming area in the US.
Neither center sustained any damage from the recent hurricanes that bashed Biloxi. "We got very lucky," Scott says.
The $6.2-million Lakeview purchase was completed with a loan of nearly $4.9 million from Charlotte, NC-based Wachovia Securities, locking in a 5% fixed rate for a five-year term with a 30-year amortization. The Indian River takeover, with an all-in tag of roughly $5 million, was closed with the assumption of a $3.2-million loan, with a 6.9% fixed rate, with a 10-year term that matures in 2012, Scott says. Wells Fargo Bank is the mortgage holder, with Houston-based Gemsa as the servicing agent. An HSM entity and various private investors staked the equity claim, according to Scott.
The purchase is the farthest east that HSM has ventured. The firm is a week away from closing on a 151,000-sf shopping center in Tulsa, OK. Scott says the strategy is the heated bidding scenarios for properties in its homeport are forcing the out-of-state moves for off-market retail pickups.
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