Closed $6,300,000 Asking Price - Multi-Tenant
Pearland Corners Shopping Center is located at 1635 East Broadway (F.M. 518) and 3108 Dixie Farm Road, on the northwest corner of F.M. 518 and Dixie Farm Road, in Pearland, Texas directly across from a Walmart Supercenter. Pearland is a fast growing city of more than 144,000 residents (2017) that is 10 miles south of the Houston Central Business District (CBD) and eight miles from the Texas Medical Center, both of which are major employment centers for many Pearland residents.
The property’s trade area also includes Friendswood, Texas, which is a city of over 38,000 people and has a white collar resident profile. Friendswood is known for a highly educated adult population with 98 percent of its residents being high school graduates and 40 percent graduating from college. Broadway (F.M. 518) is the major east/west roadway in Pearland, connecting major retail and commercial development as well as residential subdivisions. Broadway (F.M. 518) intersects with Highway 288 and has multiple exits to access the highway. Dixie Farm Road links F.M. 518 to Interstate 45 (Gulf Freeway) and provides excellent access to the property from the highway.
The impressive recovery of Pearland’s retail market from the economic downturn of 2008 to 2009 has seen absorption increase dramatically. Pearland Corners as well as competing properties have experienced incremental leasing and the current stability should lead to higher rates overall since the market has achieved normalcy. The Pearland economic growth has been propelled due to residential growth; the city’s appeal to corporations, because of its proximity to Houston; the area being the gateway to Brazoria County, which has experienced a rapid expansion in the petrochemical industry, specifically in Lake Jackson where Dow Chemical has major facilities and Freeport on the Gulf Coast and the Pearland highway system, which has provided a framework for growth and acts as a direct connection to the Texas Medical Center and Houston Central Business District via Highway 288. Furthermore, on the north end of the city, Beltway 8, a loop around Houston, connects with Highway 288 and has been an attractive area for industrial companies to open facilities.
The property, built in 2003, is located in an impressive retail cluster that includes Home Depot, Walmart Supercenter, Walgreens, Chase Bank, Bank of America and NTB in front of Pearland Corners on the hard corner of Dixie Farm and F.M. 518 is a Raising Cane’s. The Walmart Supercenter, though in Pearland, is also a destination for Friendswood residents that frequent Walmart, because there is not a Walmart Supercenter in Friendswood proper. Pearland Corners is directly across from this Walmart Supercenter at the northwest corner of F.M. 518 and Dixie Farm Road, which intersects with Gulf Freeway (Interstate 45 South) and is a major thoroughfare as well as F.M. 518.
Pearland Corners consists of two buildings of approximately 22,495 and 15,684 square feet, respectively. One building fronts Dixie Farm Road and the other F.M. 518. The shopping center has multiple direct access points from F.M. 518 and Dixie Farm Road as well as through a newly developed Raising Cane’s on the hard corner. It has 18 spaces, three of which are considered vacant for this analysis, with asking rents of $15.00-$18.00 per square foot NNN and account for 8,609 square feet out of the total 37,642 square feet. One is a 3,025 square foot space for former Mexican restaurant. All are second generation.
The property has a mix of both national and regional tenants. National tenants include CiCi’s Pizza, Sport Clips, Subway, Snap Fitness and Tutti Frutti Frozen Yogurt. Cici’s Pizza is the largest tenant, occupying a 4,400 square foot space. Rental rates range from $13.74 per square foot to $19.97 per square foot NNN.
The Pearland Corners demographics are impressive. In a one mile radius, there are 8,555 people with a $107,655 average household income. In a three mile radius, there are 64,466 people with a $101,730 average household income. The area around the property, at the intersection of F.M. 518 and Dixie Farm Road, has a 24 hour traffic count of over 47,000 cars. Furthermore, the area continues to grow, because of its location and economic drivers.
The property is priced at $6,300,000 which is a 7.77 percent CAP rate based on existing income. The proposed structure of the financing will be a 75 percent LTV with payments at a five percent interest rate based on a 25 year amortization schedule maturing in seven years. It will provide an initial “as is” 9.85 percent cash on cash return and stabilized at 95 percent occupancy, a 14.92 percent return at the list price based on Pro Forma.
- CAP Rate: 7.77%