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March 28 , 2005

Buyers, capital spur shopping-center sales

March 28th, 2005 - Sandra Zaragoza Senior Writer Instead of slowing down after a stellar last year in retail investments, Jennifer Pierson is busily marketing MacArthur Center, a grocery-anchored shopping center in Irving. Touting MacArthur's visibility from State Highway 183, attractive rental rates and 70% occupancy, Pierson isn't worried about finding a buyer for the 123,807-square-foot property. "This is the strongest I've ever seen" retail sales activity, said Pierson, who's first vice president of the retail private client investment group at CB Richard Ellis in Dallas. "On every deal I take to market, it's not unusual to get 10 offers or more." Brokers, lenders and investors agree that much of North Texas has become a hotbed of retail-property sales activity. Seventy-four retail centers were purchased in Dallas County last year, up from 70 in 2003, according to Dallas-based Roddy Information Services. Retail-center sales weren't quite as heated in Tarrant County, where Roddy says they dipped to 71 in 2004, down from 79 the year before. Lots of capital Seeking to capitalize on the heightened activity in some areas, a number of Dallas-Fort Worth shopping centers have hit the market recently. They include Metroplex Plaza Shopping Center, a 108,000-square-foot center listed for $12.7 million in Irving; and Preston Forest Village, a 171,000-square-foot property that attracts well-heeled shoppers from Preston Hollow. Preston Forest is on the sales block for $55 million. Retail property buyers -- including pension funds and real estate investment trusts -- have become more aggressive lately, said Adam Howells of Holliday Fenoglio Fowler L.P. in Dallas, who's listing Preston Forest Village. Aggressive pricing "Retail investment pricing is as aggressive as it's been in a number of years," Howells said. "There is an abundance of capital chasing real estate and, specifically, the retail sector. "This is primarily due to retail fundamentals outperforming other product sectors, and demand equaling supply on the development side," he said. Michael Ablon, president of Dallas-based Connected Acquisition Services, a division of The Retail Connection, agrees with Howell. "If there is one thing fueling transactions, it is the supply of capital," he said. That means "a continual supply of equity from the institutional markets, as well as the growing broker-dealer networks." Indeed, the pool of would-be retail property buyers is more crowded these days. One reason: a mushrooming number of so-called tenant-in-common owners, or groups of individual investors who own a fractional interest in a property. Retail investors are attracted to North Texas because it's an "expanding market" that's poised to see population growth in future years -- which also is inducing developers to build more retail space, Ablon said. Last year, Roddy Information says, Dallas-Fort Worth saw about 1.8 million square feet of new multitenant retail space, while retailers snapped up 3.1 million square feet of such space. As a result of the converging trends, prices for shopping centers are high -- "and they are going higher," said Pierson of CB Richard Ellis. At the same time, Howells said, some shopping center owners -- "concerned about where to reallocate their money" -- are choosing to hold on to their properties, for now at least. "There was a historical amount of retail sales in 2004, but we probably won't see as many sales in 2005," Howells said. Greg McDonald, executive vice president-investment properties with Dallas-based The Weitzman Group, is more bullish on shopping-center sales this year. "I think it will be stronger," McDonald said. "In 2004, we could feel momentum building. In 2005, we are in the middle of a strong market for us, and everything that we hear from economists and others says that there will be heated activity into 2006." Lenders, for their part, are continuing to open their wallets for retail-center transactions. "There are a lot of savvy investors, and they are buying smart," said Bob Stone, vice president of GMAC Commercial Mortgage Corp. in Dallas. "I don't see a lot of people making bad buys, and that makes it good for lenders."
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