COVER STORY, JANUARY 2005

GEOGRAPHIC & ASSET DIVERSITY
Coastal Capital Partners continues to expand its portfolio in the Southeast and Mid-Atlantic.
Julie F. Hunt

Charles Moore (left) and Kevin DiBona at Coastal Capital Partners’ office in Virginia Beach, Virginia.

Coastal Capital Partners, LLC, a real estate investment firm based in Virginia Beach, Virginia, recently celebrated its third anniversary, and the firm has a lot to show for it: Since Southeast Real Estate Business last met with founders Charles W. Moore and Kevin A. DiBona at the end of 2002, Coastal Capital Partners has increased its property acquisitions from three to 10 and added a chief financial officer who also runs the property management side of the business.

The team has another major announcement to make: After moving to Virginia Beach in 2002 to consolidate offices, Moore, who originally headed the Atlanta office, is moving back to Atlanta to reestablish the company’s presence in the South.

“I think you need to be able to get to your properties in order to manage them properly and understand the markets,” says Moore. “Right now we want to be in Florida; I think that’s a market we’re going to focus on. We’ve also got five properties that are within a few hours’ drive from Atlanta.”

In August 2003, Coastal Capital Partners purchased Port Crossing Shopping Center, a 56,960-square-foot, Food Lion-anchored center in Harrisonburg, Virginia.

“Reopening the Atlanta office is very important for us,” DiBona adds. “It will allow Charles to cover the South more effectively. Our leasing team is going to be [in Atlanta] as well. I believe many opportunities will be available to us in the South.”

The firm manages all 10 of its properties, which are located in Brunswick, Vidalia and Hinesville, Georgia; Gulfport, Mississippi; Reidsville, Tarboro and Biscoe, North Carolina; Decatur and McCalla, Alabama; and Harrisonburg, Virginia.

“Right now, five of [our properties] are Wal-Mart shadow-anchored centers, and five of them are grocery-anchored centers,” says Moore. (Please see chart below for details.)

Coastal Capital Partners looks for high-quality assets in rural and urban areas. The company remains focused on the Southeast and Mid-Atlantic, and hasn’t spread itself too thin by buying outside of the specific geographic region it set at the beginning. The closely held company also has a small group of investors — the same investors that have been with the firm from the beginning.

In October 2004, Coastal Capital Partners purchased The Shoppes at Letson Farms, a Food World-anchored, 95,092-square-foot center in McCalla, Alabama.

“We’ve managed to keep the company small,” says Moore. “I think that’s a benefit to us, because we don’t have to buy properties in order to pay our overhead. We make the decision based on the real estate and not on our company’s cash flow requirement, and that’s how we’ll always be.”

“Charles and I have refused to change our underwriting criteria, and I think that’s one of the great things we’ve done,” DiBona notes. “We haven’t bought as many deals as we thought we would — we have 10 deals now, and we thought we would have 15 to 20 at this point. But that’s okay, because we’re going to stick with our program.”

“The interest rate environment has helped us like everybody else,” says Moore. “But, even with the benefit of that leverage, we pass on a lot of deals. If it doesn’t work within the model, if our returns aren’t where we need them to be, we don’t buy it.”

Most of the company’s product is new construction, although it does own a few older centers. “We are yield-driven, so it has to fit in terms of being able to provide the yield that we require,” Moore says.

In small markets, Coastal Capital Partners likes to be the in the shadow-anchored product because of the extended trade area that comes with a Wal-Mart Supercenter. “It’s not just going to be the 12,000 to 20,000 people within the immediate area, it’s going to be a five-county trade area,” Moore explains. “If it’s a little bit larger market, then the grocery-anchored centers are great product.”

Small or large, the company is always looking for product in growth markets.

In January 2004, Coastal Capital Partners purchased River Oaks Landing, a 32,800-square-foot shopping center located in Tarboro, North Carolina, that is shadow-anchored by Wal-Mart Supercenter.

“I think our last purchase is a good example of targeting a growth area,” DiBona says of The Shoppes at Letson Farms, a newly developed 95,092-square-foot, Food World-anchored shopping center in McCalla. “Within a 5-mile radius of the center, there are 22 new neighborhoods under construction with significant homes in each one. Of course, we also buy in stable markets, but our preference is growth.”

The company closed on The Shoppes at Letson Farms in October 2004. “This last purchase was our largest deal; it was just over $13 million,” says DiBona. “We’re going to try to focus on larger deals now; I think you’ll see us trying to buy assets in the $15 million to $25 million range. That’s our goal over the next year or two.”

When considering which centers to purchase, opportunity drives Coastal Capital Partners’ decision. “We have plenty of capital,” says DiBona. “We could by 20 centers in a year, or we could only buy one. It’s going to depend upon finding the right asset and making sure that each one works in our formula. We’re not going to stretch and try to buy something that doesn’t fit. So a lot of it’s market-driven. As soon as things calm down in the market and cap rates return to a more realistic level, you will see us buying a lot more assets.”

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