"This was a compelling situation and pricing was obviously the motivational aspect," explains Stephen Plenge with Pacific Retail Capital Partners about the appeal of the mall at 14700 Westheimer Rd. "On a macro basis, this is obviously an interesting time to be investing; investing in retail is not for the faint of heart."
He tells GlobeSt.com that he and his partners haven't been back to Houston since selling the 1980s mall to the notorious Edward Okun's Investment Properties of America LLC. Less than four years later, Okun was sentenced to 100 years for fraud conviction and the fallen company's sole Houston holding was placed on the sales block by LNR Partners.
Plenge who was vice president with seller Somera Capital, says the first thing he and his partners did during the recent due diligence was examine trade area, then the anchor system. The trade area had gotten stronger, Plenge says, and despite the departure of JC Penney, the anchor system was solid as well.
"We looked at Dillard's, Macy's and Sears' sales, and found them to be good, solid, mid-market stores," Plenge says. The main problem with the property was neglect. "There wsa no one really properly managing the center and no capital going into the property," Plenge explains. "Over the past couple of years, several tenants tried to renew, and no one would return their phone calls."
That being said, the 70%-occupied center attracted a great deal of interest. Holliday Fenoglio Fowler LP's Robert Williamson and Rusty Tamlyn marketed the asset, and 17 bidders made bonafide offers. "Then we had five all stacked up on top of each other," Williamson tells GlobeSt.com. "This property is well-located with great demographics and in the heart of west Houston." Though many regional malls, especially the older ones, are fighting for survival, "this has a definite future as a regional mall once again," Williamson comments.
Williamson acknowledges Pacific Retail Capital's familiarity with the asset and area gave it an edge, but the buyer was up against some pretty tough competition. "This was a really good mix of seasoned retail operators, private investors that smelled a bargain and other qualified owners," he adds.
Plenge says the joint venture has a multiyear capital plan that will take care of deferred maintenance and cosmetic improvements. Also on tap are minor enhancements of the interior and examination of a possible redevelopment of the old Mervyn's space, he says.
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