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THE COLONY, TX-A joint venture of Chicago-based Inland American Real Estate Trust Inc. and three unaffiliated entities created by Dallas-based Weber & Co. secured financing for a proposed 287,967-sf Target-anchored retail center at North Josey Lane and State Highway 121. Neither company responded to requests for details, but a recent SEC filing reveals the partners received a $45.5-million loan from Compass Bank for the project.

According to the filing, Inland American Lewisville LP, LLC contributed approximately $10.2 million in equity to the venture and the Weber limited partners contributed approximately $1.1 million. The project, which is slated to be built on vacant land across Highway 121 from an existing Wal-Mart Superstore, is budgeted at $56.8 million. The loan covers both land acquisition and development costs and has a 7% interest rate. It matures on May 16, 2011, but may be extended for an additional two years. In the event development costs exceed the amount budgeted, Inland American may, but is not required to, contribute additional funds to the venture in the form of a loan bearing 20% interest.

Under the joint venture agreement, one of the Weber entities, Weber Lewisville GP Inc., will manage the acquisition and development process. In exchange, it and the two other Weber entities, Weber LTC LP and DB/EB LTC LP, will receive a development fee equal to 4.5% of the hard construction costs, not to exceed $1.2 million. Inland American will be entitled to a property management fee equal to 4.5% of gross revenues.

Additionally, DB/EB LTC is establishing a $2.2-million interest-bearing escrow account, from which Inland American will receive a preferred monthly return equivalent to 11% per year on its total capital contributions, as decreased by all distributions paid to it. Further parts of the agreement give Inland American the option to require an additional $1.1-million deposit from DB/EB LTC in 18 months if it determines the project will not be completed by April 3, 2010. The Weber partners will not receive any distributions until our capital contribution has been returned.

In addition to the Super Wal-Mart, the intersection has a second existing retail center on the north side of Highway 121. Several more are located within a quarter mile, and DBSI Development of Meridian, ID recently broke ground on the $24-million, 21-acre Gateway 121, which will bring yet another 100,000 sf of stores and restaurants to the strip by mid August. DBSI also owns two adjoining 13-acre parcels on which it plans additional retail and office development. Other current and committed retail tenants in the immediate area include Home Depot, Staples, Target, Lowes. Stacy Furniture and Ross.

Eddie Liebman, a senior vice president in the Dallas office of the Weitzman Group, who represents the Home Depot-anchored Colony Marketplace at Highway 121 and Paige Road, tells GlobeSt.com leasing and sales in the area have been slow, the past couple years, due to a major highway improvement project. But with the improvements nearing completion, he says interest is picking back up. He believes long-time prospects for the strip are excellent.

“121 is one of the region’s major east-west thoroughfares, running from McKinney to Lewisville and tying in Frisco and The Colony as well,” he says. “Anything that’s at a good intersection along 121 is going to be successful. It’s got a huge, booming population. There are probably 170,000 people within five miles and maybe 70,000 within three miles. The highway had over 163,000 vehicles a day before construction. After construction it will be much higher. This is a very strong location for retail.”

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