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H-E-B Anchored Tanglewood Court Sale Latest Sign of Hot Asset Class

American Realty Advisors Completes Deal with Fidelis Realty, BayNorth for Fully Leased Shopping Center in West Houston
June 1, 2018
Grocery-anchored retail continues to be an investor favorite.

Four months after being listed, Los Angeles-based American Realty Advisors purchased Tanglewood Court, a 125,500-square-foot, fully leased, H-E-B-anchored shopping center in west Houston’s affluent Galleria submarket, from Bellaire, TX-based Fidelis Realty Partners and development partner, BayNorth Capital of Quincy, MA. Terms of the deal were not disclosed, though American Realty Advisors did secure acquisition financing for the purchase through an undisclosed national life insurance company.

Developed in 2014 on a 12-acre, urban infill site at 5895 San Felipe, the three-building retail center is fully leased to a variety of national and regional tenants, including Mattress Firm, La Madeleine and Memorial Hermann, in addition to anchor H-E-B.

Investment in grocery-anchored centers in 2017 increased by 5.3 percent nationwide. It was one of the only retail sectors to see growth in a year of low retail transaction volume - overall retail sales volume decreased by 22.5 percent in 2017, according to JLL’s U.S. Investment Outlook.

"Tanglewood Court attracted a wide range of interest primarily from institutional pension fund investors," HFF Senior Managing Director Rusty Tamlyn, who led the advisory team that represented the seller, said.

While grocery-anchored retail development has been robust, the sector is slowing down rapidly. New supermarket delivery fell to 1.2 million square feet in Texas in 2017, down from 3 million square feet in 2016. In 2016, Texas accounted for more than 16 percent of total new grocery space, and Houston alone accounted for 9.2 percent of new national grocery product. Though grocery-anchored centers are abundant, only a few are sold every year.

"H-E-B typically owns their stores, so very few come up for sale in the state of Texas on an annual basis. The combination of an urban infill location with great demographics and strong H-E-B sales led to tremendous investor interest," said Rusty Tamlyn of HFF, who along with Ryan West, John Indelli and Charlie Strauss brokered the sale for the selling venture.

Three prominent Houston-area grocery-anchored retail centers changed hands last year. LaSalle Investment Management acquired the fully leased, 253,000-square-foot, Costco-anchored Greenway Commons retail center at 3830 Richmond near Greenway Plaza. HFF worked with Westwood Financial Corp. to secure the sale of the Market at Lake Houston, a fully leased, 101,000-square-foot H-E-B-anchored asset in Atascocita. Market Square at Eldridge, a Sam's Club-anchored center at 13331 Westheimer in West Houston, also changed hands.

Grocery construction is expected to stay slow, but investors’ hunger for grocery-anchored shopping centers is not satiated yet. For the foreseeable future, grocery-anchored shopping centers will remain an aggressive seller’s market, according to investment experts.

For the record:

Fidelis Realty Partners' Alan Hassenflu, Lynn Davis and Glenn Airola represented Fidelis in negotiations. BayNorth Managing Director David Cronin represented BayNorth.

American Realty Advisors' Jessica Harrison represented American Realty Advisors in the purchase.

Colby Mueck and Michael Johnson of HFF's debt placement team arranged the loan on behalf of American Realty Advisors.

For more information on the transaction, please see CoStar Comp #4277891.


Kyle Hagerty, Houston Reporter  CoStar Group   
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