Pearland Parkway Village Shopping Center
Pearland, Texas 8501 South Sam Houston Parkway East
NOT OPEN TO GENERAL SOLICITATION
The Opportunity
Sage is pleased to present an opportunity to invest alongside Jay Williams and Property Commerce in Pearland Parkway Village, a 65,500 sf, multi-tenant retail shopping center shadow anchored by a top performing Target with exposure to over 80,000cars per day. Tenants include Burlington Coat Factory (national), Dollar Tree (national), AT&T (national), and Castle Dental (national).
Key Highlights
Great Location: Strategically located in an established retail corridor with immediate highway access and visibility to Beltway 8 and Pearland Parkway which experiences more than 80,000 cars per day.
Critical Retail Corridor: Retail in the area includes Target, Starbucks, Whataburger, Chick Fil A, Spec’s, and Studio Movie Grill making it a primary retail node serving a growing affluent surrounding population
Desirable Demographics: Diverse surrounding demographics with a population of over 90,000 residents and $83,000 average household incomes within 3 miles of the property.
Strong Shadow Anchor: The center is shadow anchored by a strong performing Target store.
Pad Building: The property includes a three tenant pad building with frontage along Beltway 8. Pad buildings such as this are currently trading in the 6% cap rate range offering a cap rate arbitrage potential.
Project Summary
Year Built: 2018-2020
Land Area: 6.0 acres
Acquisition Price: $10,250,000
Net Rentable Area: 62,585 sf
Occupancy: 94.8%
Year 1 NOI: $815,765
Business Plan
Sage Equity Partners anticipates maintaining the asset for a traditional hold period of 5-7 years. With strong national tenants, long-term below-market leases, and accretive financing Pearland Parkway offers a dependable cash flow play with upside via lease-up.
Upside: While modeling a 5% general vacancy factor is prudent for forecasting purposes it’s possible that the center will stay fully leased once stabilized. As an example, more than half the retail centers in the Houston MSA between 50,000 and 75,000 do not currently have vacancy. Therefore as an upside scenario we removed the assumption that the center remains 95% leased.
Strong Upside: The strong upside scenario assumes that shadow anchored shopping center spaces remains highly sought after by a large pool of buyers. If that’s the case and coupled with long-term lease extensions the exit cap rate could compress into the high 7% cap rate range which would also deliver solid exit proceeds.
Cap Rate Arbitrage: An alternative upside scenario exists that has not been included in the underwriting. Ownership could sell off the three tenant pad building at a +/- 6% cap rate once fully leased. With a return of proceeds, Sage LP’s would then hold the inline shop space (Burlington, Dollar Tree, Castle, Pizza Hut, Nail Salon) for north of a 10% cap rate which would yield a 15% cash on cash return.
Property Commerce will place new bank financing with five years of term, 65% leverage, an approximately 4.50% interest rate, with FCCU – a local credit union.
The Asset
Market Demographics
$3,400,000
Offering size
Timing
Timing of Funds:
June 13th, 2022
Timing of Close:
July 7th, 2022
Management Team
Property Commerce was founded in 1976 and has built a strong, continually evolving shopping center development and investment organization, complemented by it's property management, leasing and brokerage teams. They have extensive experience in real estate investment, development and management, as well as proven track record of generating returns that out perform the broader real estate market. Property Commerce has worked with tenants such as Chili's, Chase Bank, Chick-Fil-A, Arby's, Whataburger, Panda Express and Sonic. They invest in high density, high barrier-to-entry markets, with a focus on properties that are undermanaged, underpriced or both. Property Commerce owns and operates single and multi-tenant retail properties located in dense, urban neighborhoods or within walking distance of universities. They focus on acquiring assets that generate superior returns through re-development, leasing or other value-add opportunities.
