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VOL. 123 | NO. 228 | Thursday, November 20, 2008

Houston REITs Buy $42M Share In Local Shopping Centers

By Eric Smith

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A newly formed joint venture between Weingarten Realty Investors and Hines Real Estate Investment Trust (REIT), both of Houston, has bought a majority share of two local Kroger-anchored retail centers for a combined $41.6 million.

WRI HR Venture Properties I LLC bought 70 percent of the Commons at Dexter Lake at 1675 N. Germantown Parkway for $29 million and 70 percent of the Mendenhall Commons at 540 S. Mendenhall Road for $12.6 million.

The deal was part of an aggregate $271 million deal that included 12 properties and 1.5 million square feet in multiple states. The centers are anchored by a mix of grocery and other retail box stores.

The 167,000-square-foot Commons at Dexter Lake sits on 23.5 acres at the southwest corner of Dexter Road and North Germantown Parkway in Cordova. Tenants include Kroger, Stein Mart, Samuel’s Furniture, Marshall’s, Dress Barn and Cingular Wireless. The Shelby County Assessor of Property’s 2008 combined appraisal of its three parcels is $24.7 million.

The 80,000-square-foot Mendenhall Commons sits on 5.73 acres at the southeast corner of Sanderlin Avenue and South Mendenhall Road in East Memphis. Tenants include Kroger, Pei Wei Asian Diner, Lucchesi’s Ravioli & Pasta Co. and Breakaway Running. The Assessor’s 2008 appraisal is $9.5 million.

Justin Robertson, the Houston-based leasing executive for Weingarten’s Memphis properties, said there are no planned changes for either shopping center.

“We sold an interest in the properties, but Weingarten is going to stay on and lease and manage the projects,” Robertson.

Mendenhall Commons has only one space left, making it about 98 percent occupied, Robertson said. He didn’t have the occupancy rate for Commons at Dexter Lake, but he said it has been a solid property for the company.

“All of our assets in Memphis are strong, Kroger-anchored shopping centers with the exception of the new Target development we’re doing at Ridgeway (Trace),” he said. “I think we’ve got very strong centers in pockets of Memphis that are doing well.”

Calls to the company’s marketing department for further comment were not immediately returned, but Weingarten Realty president and CEO Drew Alexander said in a statement: “WRI is extremely pleased to become partners with a world-class organization that also has its deep roots in our wonderful city – Houston. We believe this transaction will provide stable and growing returns to the joint venture while also meeting our objective of recycling capital and building our assets under management.”

Hines REIT president and CEO Charles Hazen said in a statement: “We are pleased to acquire an interest in a portfolio of quality supermarket-anchored shopping centers in locations with strong demographics. This is our first joint venture with WRI and we are very pleased with this new relationship.”

Scott Barton, senior vice president of retail services for CB Richard Ellis Memphis, said the creation of a joint venture offers needed benefits for both parties, whether it’s for freeing up cash or investing cash. Also, this type of deal is fairly standard in commercial real estate.

“Forming a joint venture is not a landscape-changing event,” Barton said. “I don’t think it means Weingarten is any less committed to Memphis that I can tell.”

It’s the first investment for Hines in the Memphis area, but Weingarten has a growing portfolio here. Its local properties include the 179,000-square-foot Bartlett Towne Center at Bartlett Boulevard and Stage Road; the 154,000-square-foot Summer Center at Summer Avenue and Waring Road; and the 14,000-square-foot Highland Square at Summer Avenue and North Highland Street.

The company also is developing the Ridgeway Trace retail development at 5959 Poplar Ave. near Interstate 240. That center will be anchored by a Target store.

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