FORT WORTH, TX-Morris-Floyd Capital Partners has added more retail centers to its growing portfolio, buying three assets in separate transactions for a combined total of $20 million. The acquisitions boost the local investor’s portfolio to more than 460,000 square feet.
Morris-Floyd acquired the 34,000-square-foot Neighborhood Shoppes at Polaris at 8453 Sancus Blvd. in Columbus, OH from Ohio developer Jeff Coopersmith, and the 118,000-square foot Military Road Shopping Center at 1500-1528 Military Rd. in Benton, AR from two brothers. The 66,000-square-foot Brazito Plaza at 1205-1205 El Paseo Rd. in Las Cruces, NM was obtained from a California-based private equity group nicely rounded out the deals.
The interesting aspect about transactions was that two of the assets – the Neighborhood Shoppes and Brazito Plaza – were fully leased and stabilized, and acquired mostly for cash flow. Military Road Shopping Center, was clearly a value-add play, as it will require some leasing help. As such, Morris-Floyd is planning upgrades to the tune of $500,000 to $1 million, which could include the addition of more square footage.
These three assets do have one thing in common: They’re in second-tier markets, which is Morris-Floyd’s sweet spot.
“The top markets are competitive and there is some bubble pricing there,” explains Bill Morris, Morris-Floyd’s co-principal. “We think we can pick up good opportunities in some healthy, very strong, but smaller markets that are off the radar.”
Morris says the second-tier markets – what he calls the “B” markets – tend to be less competitive. Also, because rents are lower in these markets, it will be awhile before developers can justify building more product. In short, “it’s easier to come into a market like Las Cruces and buy the best location than it is to come into a market like Dallas and buy the best location,” Morris tells GlobeSt.com.
Though obtaining financing can be difficult in smaller markets, Morris says that in some cases, CMBS lenders (before they were temporarily shut down) were more comfortable with the second-tier markets because of the lack of competition there. Morris-Floyd is fortunate in another way as well: The company has a good banking relationship. On its recent acquisitions, the Morris-Floyd obtained resource financing, though Morris says he and partner Walter Floyd are capable of buying all-cash and obtaining financing at a later date.
“One deal we closed last year, in Stillwater, OK, was a distressed asset, and we paid $5 million in cash for that,” he comments. “We couldn’t get financing.”
Morris, who launched Morris-Floyd with Floyd in the first part of 2010 says the company could close another two or three acquisitions by year-end. “Our goal is to do as many deals as we can without killing ourselves,” Morris says with a laugh. “Three to five acquisitions a year is our upper limit.”
And there is no lack of opportunities in today’s market. Interest rates remain attractive and Morris-Floyd, unlike other buyers, doesn’t have legacy issues that could interfere with obtaining and placing debt. The duo, in fact, is considering pulling together a fund to finance current properties in the pipeline, as well as future buys.
“We’re lean and mean, we can be nimble and move fast,” Morris remarks. “That is working well in this environment.”
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