NORTH MIAMI BEACH, FL-The previously announced sale of a portfolio of Equity One's Texas shopping centers to a newly formed joint venture with Investcorp has closed. Under the agreement, New York City-based Investcorp acquired an 80% stake in 29 shopping centers, which have an aggregate of 2.8 million sf throughout Texas, for $388 million, or nearly $139 per sf.
Locally based Equity One retains a 20% ownership in the portfolio, and an Equity One subsidiary will handle management and leasing of the assets under a 15-year agreement. The sale represents a cap rate of 7.3% based on 2005 net operating income and 7.8% based on projected figures for 2006. The portfolio was 91% leased on Dec. 31.
The JV arranged approximately $312 million in financing from affiliates of Goldman Sachs, and Equity One has completed the prepayment or defeasance of about $55 million of outstanding debt on the properties. It anticipates net proceeds of approximately $312 million and a total gain of about $90 million from the sale. In addition, Equity One expects to pay a special dividend of up to $1.50 a share to its stockholders.
Equity One is retaining the 51,231-sf Rosemeade Shopping Center in Dallas and is under contract to sell another two Texas assets. They are the 69,504-sf Hedwig Village in Dallas, which had originally been included in the sale to the Investcorp JV, and Sutherland Lumber, a 53,571-sf freestanding property in Marble Falls. Howard Sipzner, CFO, tells GlobeSt.com that Investcorp didn't want the Rosemeade center. He declined to disclose either the buyers or the prices for the additional two properties, which he says will be completed in two unrelated transactions.
Among the largest of the properties in the portfolio are the 298,354-sf Westgate in Houston, the 195,438-sf Bandera Festival in San Antonio, and the 160,047-sf Mason Park in Katy, TX. The overwhelming majority are in the Dallas, Houston and San Antonio metro markets. According to an Investcorp statement, national retailers account for approximately 50% of the portfolio's tenants.
"The portfolio will not only generate robust cash flow over the short- to medium-term, but also holds significant potential for excellent capital gains over the longer term," says Herb Myers, an Investcorp principal, in a statement. Completion of the transaction is also portrayed in the statement as the beginning of an "important new joint venture relationship with Equity One." An Investcorp spokesman tells GlobeSt.com, "joint ventures in which the seller retains an equity stake and continues to manage properties is a strategy Investcorp has used in other acquisitions. These partnerships can lead to additional acquisitions, such as several Investcorp has done with Ceebraid Signal, but no such additional transaction with Equity One is currently under way."In a recent conference call, Chiam Katzman, chairman and CEO of Equity One, called this JV transaction "the first in this line of deals…[to] sell a stable portfolio of properties and redeploy in other markets." In a statement at the close of the Texas deal, he says, "this transaction will allow us to recycle capital to higher growth opportunities in our target markets in the southern and northeastern US as well as explore new opportunities in the mid-Atlantic region."
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