$271M JV Allows REIT To Recycle Capital

HOUSTON-The recent transaction involving a 1.5-million-square-foot shopping portfolio valued at $270 million is the first time local companies Weingarten Realty Investors and Hines Real Estate Investment Trust Inc. have joined forces. The transaction was part of an ongoing program by Weingarten to boost return on equity through strategic joint partnerships.

“This is the latest deal in our program,” explains Weingarten’s senior vice president, capital markets, Gary Greenberg. “This is allowing us to recycle capital while retaining interest in properties we believe have good long-term potential.”

The partners last week unveiled the conditions of the partnership in which a subsidiary of Hines REIT will acquire a 70% interest in the Weingarten portfolio of 12 supermarket-anchored shopping centers in Texas, Georgia, Tennessee, Florida and North Carolina. An initial closing on eight centers took place Nov. 13, with closing on the other four to be complete by Q1 2009. Holliday Fenoglio Fowler LP senior managing director Trey Morsbach and executive managing director Mark Gibson, both with the company’s Dallas office, brokered the initial transaction and will work the final closing.

For Hines, the transaction connects the company with another well-known REIT, while adding some strong assets to its portfolio. “We’re both Houston firms, they have a great reputation and we have a lot of respect for them and they for us. Plus we liked the assets a lot,” says Charles Hazen, president and CEO with Hines REIT. “Those things made this an attractive opportunity for us.”

Greenberg tells GlobeSt.com Weingarten approached several potential partners the particular portfolio and received a great deal of interest. Given Hines was another local REIT with an outstanding reputation, “we felt they’d be a great partner with the ability to do multiple deals in the future as well,” Greenberg comments.

Weingarten is kicking in $134 million of equity for the closings. Hazen says the joint venture is also working with a mortgage lender that will finance the deal. Though he declined to name the lender, he did say the loan should close in about a month. “That will fund the repayment of Weingarten’s preferred equity,” he adds.

Greenberg says the centers were selected because of their geographic and tenant diversity. The Houston assets consist of the 137,000-square-foot Bellaire Boulevard Center at Bellaire and S. Rice and the 408,000-square-foot Champions Village at FM 1960 and Champion Forest Drive. Other properties in Texas are the 128,000-square-foot Kings Crossing at Kingwood Drive and Lake Houston Parkway in Kingwood; and the 65,000-square-foot Oak Park Village at Nacogdoches and New Braunfels Roads in San Antonio.

Assets in Georgia are the 98,553-square-foot Cherokee Plaza at Peachtree Road and Colonial Drive in Atlanta; the 72,784-square-foot Sandy Plains Exchange at Sandy Plains and Scufflegrit Roads; and the 78,000-square-foot Thompson Bridge Commons, Thompson Bridge and Mount Vernon Roads in Gainesville. Also in the portfolio are Florida centers: The 145,000-square-foot Shoppes at Parkland, Hillsboro Boulevard at Highway 7 in Parkland and the 99,000-square-foot University Palms Shopping Center at Alafava Trail and McCulloch Road in Oviedo.

The collection also has two Memphis, TN portfolios; Commons at Dexter Lakes at 670 N. Germantown Pkwy. and the 80,216-square-foot Mendenhall Commons on South Mendenhall Road and Sanderlin Avenue. The center in North Carolina is the 68,778-square-foot Heritage Station at Forestville and Rogers Roads in WakeForest.