EastGroup, Lincoln Close $4.4M One-Off Deal

The problem with the Lombardy portfolio, EastGroup vice president Jan Puckett tells GlobeSt.com, was that the Jackson, MS REIT only wanted three buildings in the lot. EastGroup, which clusters its holdings, was chasing the trio because it sits close to five other buildings in its 98%-leased, Dallas-area portfolio.

The Dallas-based Lincoln Property apparently isn't parting with two buildings, but did let go of 10405 Shady Trail for slightly more than $4.4 million in cash, Puckett says, crediting EastGroup's broker, Ken Wesson of Bradford Cos., with hooking the catch. "Ken was wise and went to them when they bought it," she says. "I'd love to buy the others. We'd still buy them if Lincoln would sell them, but I don't think Lincoln wants to sell."

EastGroup's new acquisition was the only one in the trio with significant vacancy, a boon for the REIT since it needed expansion room for existing tenants and courting space for new names. Wesson already started talking to EastGroup tenants about backfilling the 50% empty building, vacated recently by Warren Electric Co. The Earthgrains Baking Co., a division of the Sara Lee Bakery Group of Chicago, occupies the balance. Bradford's Debe Nichols will manage the 4.8-acre asset.

Puckett says the five-year-old building is newer than EastGroup's other 600,000 sf in the immediate area and it sits in one of the region's more active submarkets, Walnut Hill/Stemmons Freeway. "We were willing to risk buying with that much vacancy because we fell confident about our brokers," she says. The Shady Trail Distribution Center, assessed at $3.5 million, is projected to generate an un-leveraged stabilized yield of about 9.5% at lease-up.