TIC Group Wins 65,289-SF Retail Chase

WATAUGA, TX-SCI Real Estate Investments, with about 20 tenant-in-common investors backing the play, has acquired the 65,289-sf inline component for Watauga Towne Center. The deal, sporting a cap rate north of 7%, was leveraged with a near $10-million loan.

The TIC play, with minimum buy-ins of $250,000 per investor, is all sold out, says Scott Derrick, chief acquisitions officer for the Los Angeles-based investment group that took the deed to the 8420-8848 Denton Highway development from Weingarten Realty Investors of Houston. The 95.71%-leased, 29-tenant Watauga Towne Center is anchored by a 56,346-sf, corporate-owned Albertsons grocery store.

Derrick tells GlobeSt.com that the 10-year financing from Wachovia Bank, representing a 65% loan-to-value ratio, has interest-only payments for the full term. He says SCI anticipates, though, that the hold will be five to seven years.

The deal's sweet spot is the first-generation rollover is complete for the eight-year-old center on 16.35 acres. Derrick says the end result is a 33% income growth over the coming decade just for the shop space and immediate 7.15% cash on cash return going into the play. "That's why it told out relatively quickly," he adds. "We, in general, like shadow anchored centers. We were really confident with the sales at Albertsons that if they ever vacated, there would be three or four others who'd want to go in there." The demographics show a 32% population increase in the past five years and average annual household incomes higher than state and national averages.

Dallas-based Lincoln Property Co. has been hired to manage a center with two multi-tenant buildings flanking the grocery store and four buildings on pad sites fronting Denton Highway and North Tarrant Parkway. The Retail Connection, also from Dallas, will be leasing it. The existing lineup includes national and local retail names like CitiFinanical, Wendy's, GNC, Panda Express and Eyemasters.

Thomas Salanty, Jeff Eakins and Katy Holland-Cleary with Cushman & Wakefield of Texas Inc. in Dallas marketed the asset for Weingarten with Derrick and SCI's COO Andrew Van Tuyle handling details for the buy side. "There were people who really wanted this center," Derrick says about the chase. "We were able to get the center with our track record and we were able to go non-refundable on Day 1." The deal now has SCI and Weingarten negotiating a second sale.

SCI now owns a mix of retail and residential in four properties in Dallas/Fort Worth. To date, it's spent about $166 million to acquire Texas properties.