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DALLAS-In an off-market transaction, a local investment group has put close to $60 million on the line for nearly 1.7 million sf of redeveloped former Safeway grocery store space. The 64-property package was 92% leased at sale time.
J. Kenneth Dunn, president of Rainier Capital Management, bought the Sunwest portfolio from a private investor in Dallas who acquired the package in 1989. Dunn tells GlobeSt.com that the deal closed with a $46-million assumption of a GMAC-serviced loan that matures in 2012. He says the plan is to let the financing ride and invest another $3 million to $4 million into long-overdue upgrades at the properties over the life of the loan.
The properties are located in a region with Tennessee on the eastern bound, Utah on the western front and Billings, MT on the northernmost line. Dunn says 20 of the 64 redeveloped grocery stores are located in Dallas/Fort Worth. The two most readily identifiable in Dallas are the original Whole Foods store along Greenville Avenue and Designer Shoe Warehouse at the corner of Preston and Alpha roads.
The deal has been six months at the bargaining table. "There's good cash flow above the debt, with good tenants," he says. "We bought it for about $35 per sf and it rents on average for $6 per sf, triple net." Among the brand names on the stores, averaging 35,000 sf, are Office Depot, Blockbuster, 24 Hour Fitness, Walgreens, United States Postal Service and CVS/Pharmacy.
"We think it's a huge value add," Dunn says. "The ownership never contributed TIs or rent abatements. We've gone into this with a pretty big reserve." At closing, Rainier slid in Emerson Horizon of Dallas as portfolio manager and hired Trammell Crow Co. to lease a mix of single stores and some locations with inline space flanking the anchor's door.
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