TIC Buyer Closes $5M Retail Sale

HOUSTON-A San Diego-based tenants-in-common group, formed by five family trusts, has made its first acquisition in Texas, paying $4.8 million for 21,120 sf of shop space at New Forest Crossing.

The freestanding shop space, situated on 2.3 acres at 5805 E. Sam Houston Pkwy. near the corner of Beltway 8 and Wallisville Road, was sold by Forest Crossing Partners LP, a local owner and developer. "The TIC structure made the financing a bit more difficult," says Bernard Branca, a director with LJ Melody & Co. The loan originator tells GlobeSt.com that most lenders prefer TICs be single-purpose entities, but the family trusts making the purchase own multiple assets. "Lenders had to get comfortable with the structure," he says, adding the low leverage of 55% loan-to-cost helped.

Branca secured a 10-year, fixed-rate loan with a 5.3% interest rate through Morgan Stanley. The loan is amortized over 30 years. "We had a good auction going of lenders who wanted the deal, but Morgan Stanley had the most competitive pricing," he says.

Built in 2001, the shop space is shadow-anchored by Big Lots and 99 Cents Only. New Forest Crossing also is anchored by Lowe's, Ross Dress for Less and PetsMart. The shop space is fully occupied by national and regional tenants like Trudy's Hallmark, RadioShack, Jackson Hewitt, GameStop, GNC and Sally Beauty Supply.

Branca says nearly 60% of the leases roll in 2006. The rents, averaging $17.60 per sf, are $1.50 per sf to $2 per sf below market. "This deal has lot of upside, in my opinion," he says.

Jamie Bouterie of Houston-based Hunington Properties Inc., representing the seller, had the property listed at $4.9 million. The property is assessed at $2.3 million, according to the Harris County Appraisal District. Trevor Thorpe of CB Richard Ellis Inc.'s San Francisco office represented the TIC buyer in the transaction.