Thursday, July 21, 2005

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News

Hillwood, Belo Stamp Landmark 10-Year Lease in Victory Plaza

DALLAS (GlobeSt.com) -Planning to take its message live to the crowds, Hillwood and Belo Corp. have preleased 5,000 sf of street-level retail space to set up a broadcast station on a prime corner of Victory Plaza. The dirt work for the 100,000-sf, mixed-use building is just getting under way.

"Part of what they produce will be simulcast throughout Victory," says Jonas Woods, president of Hillwood Capital. He tells GlobeSt.com that the landmark lease has a 10-year term and a pair of five-year options to back a plan that is hoped will catapult the $600-million-plus Victory development into the ranks of Times Square and Rockefeller Center.

Belo's ABC affiliate, WFAA-TV, will broadcast live, beginning in mid-2006, from Victory Plaza East Tower, a twin-building development with 200,000 sf of office and retail space. The 75,000 sf of retail space has reached 90% preleasing with the Belo pact and the office floors are 40% taken, according to Woods.

Woods says Hillwood and its partners first approached the media conglomerate on the list of possible tenants because it's Dallas based plus it has connections as an ABC affiliate and a "strong" presence in local market. "Because of that, they were the first choice," he says, adding talks began just a few months ago.

"The most important aspect is what it does for Victory Park as a neighborhood," Woods says. "It will generate interest between the celebrities inside those spaces to the crowds gathering outside these locations."

Woods says construction crews are just now "mobilizing" on the Victory Plaza East's tract at the northwest corner of Houston and Wichita streets. The building will go up across the street from the W Dallas Victory Hotel & Residences, which topped out last Thursday.

In keeping with Hillwood's media plan for the development, Belo will equip the station with the most sophisticated high-definition video technology that's available. The studio space will be a second location in Dallas for Channel 8. Other Belo media lined up to share the space are reporters from the Dallas Morning News, al dia, Quick and other outlets with a team on assignment.

"For more than 50 years, WFAA has been directly connected to downtown Dallas, which is why this new studio is absolutely a natural," Kathy Clements, the station's president and general manager, says in a press release. "WFAA is the first station in our region to build anything on this scale." The upcoming broadcast format is being likened to ABC's "Good Morning America," aired live each day from New York City. Plus, it's taking a cue from stations in Chicago and Raleigh-Durham that have recently built studios in their downtowns.

Orne + Associates Inc. of Los Angeles designed the twin-tower project, which is being raised by the partnership of Hillwood, a Ross Perot Jr. company, and Hicks Holding Co., owned by Tom Hicks.

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News

Class A Office Space Race Triggers 75,540-SF Shuffle

DALLAS (GlobeSt.com)-Seven tenants have triggered a 75,540-sf space shuffle in the Quadrangle in Uptown and Galleria Crossing in North Dallas with most of the class A deals crossing the finish line at the same time. Save for one, all are long-term leases.

The flurry of deals began in the 195,910-sf Quadrangle at 2800-2828 Routh St. and trickled over to 232,000-sf Galleria Crossing at 5429 LBJ Freeway. The gist of the play is an immediate backfill for 22,000 sf on the Quadrangle's second and third floors, vacated by the Lauck Group and its sublease tenant, Meinhart Texas Inc. to make way for hawkeye/FFWD Group, which is moving from 301 N. Market St. to the eight-story Uptown structure. Daniel T. Paterson, executive vice president and principal with Swearingen Realty Group LLC in Dallas, represented hawkeye/FFWD.

Joel Pustmueller, principal with Peloton Real Estate Partners in Dallas, tells GlobeSt.com that FFWD, a top-ranked marketing firm, signed an eight-year lease for a class A office connected by a stairwell and spread out on two floors. The agency is planning a September move-in, he says. The deal became reality when the Lauck Group made plans to downsize, ultimately taking 8,900 sf on the fourth floor where Berger IT practically cut its office in half as part of the shuffle. Lauck signed a three-year lease while Berger simply gave back the space, Pustmueller explains. Lauck moves in this weekend.

Meanwhile, Meinhart is making an early exit from a three-year subleased spot for an 8,815-sf office in Galleria Crossing. The engineering firm worked out a six-year lease for half of the third floor to house its US headquarters, says Lee Wagner, vice president in Dallas for Grubb & Ellis Co. who teamed with Sam Hocker, senior vice president, and Bill Coleman, associate, to find relocation space after Lauck triggered a domino effect with its downsizing. Meinhart also is moving this weekend, Wagner says.

Meinhart looked at 16 options, including staying in Uptown. "They were coming out of a sublease," Wagner says. "The sticker shock in Uptown was not going to work for them." Galleria Crossing's space is on the market at an effective rate of $15 per sf plus electric--a price that also snared an 8,600-sf tenant, MW Logistics LLC.

Galleria Crossing's broker, Art Kline with Thompson Realty Corp. of Richardson says MW Logistics, planning a mid-September occupancy, signed a 72-month lease for the fifth floor. Lawrence Gardner, a Dallas director with Cushman & Wakefield of Texas Inc., represented MW Logistics.

Kline says Galleria Crossing is 40% leased and more leases are close to signing for a building bought on a value-add basis in December 2004 by Thompson in partnership with Goddard Real Estate.

But the Quadrangle was the bigger winner: a 95.4% occupancy, new tenants and all 2005 lease rolls put to bed. Besides the related deals, Pustmueller says J Development Co. just moved into a 3,910-sf, third-floor office for five years and the Chicago-based Mesirow Financial Holdings Inc. will open doors on a 12,000-sf office this month, signing a seven-year lease for its space. To make way for Mesirow, the management office moved from the sixth floor to a second-floor retail spot.

"All these deals just sort of happened at the same time," Pustmueller says. "The asset's in good shape and locked up for awhile." And if his prediction is right, the building, quoted at $23 per sf plus electric, will be filled by year's end.

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News

Monuments to Dallas' boom times are becoming condos
Glass-and-steel office towers lure developers
By PATRICK O'GILFOIL HEALY
New York Times

DALLAS - The condo and apartment conversion craze has hit a wall here — a sleek corporate wall of smoked glass and cheap steel girding.

It was bound to happen. Across the country, buildings with character — old garment factories, warehouses, Art Deco skyscrapers and Beaux-Arts firehouses — are being revived as condominiums and loft apartments as cities try to draw residents back to their core. But with that historic stock depleting, developers are now turning to uglier candidates for condo makeovers: moribund office towers.

They are installing new windows, limestone facades, balconies and contemporary ornament, and in some cases stripping the buildings to curtain walls and I-beams to do it.

"You've got to take off some of the old ugly facades and let there be glass and light," said Laura Miller, the mayor of Dallas. "If you take the skin off and restore it, it's beautiful."

The glass-and-steel monoliths sprang up in droves from 1950 to 1980, when cities like Dallas experienced explosive and unchecked commercial development. In the 1950s, Dallas added 7.2 million square feet of office space, second only to New York City, according to an article in May 1960 in the Dallas Morning News.

But as the buildings aged and jobs fled Dallas during the dot-com recession, many of those buildings emptied, giving Dallas the highest office vacancy rate in the country. From 2000 to 2005, amid a glut of office space, office rents declined by 22 percent, according to Reis, a real estate research company.

Although the city's numbers have improved over the last year, 26.5 percent of its office space is still vacant. Downtown alone, 9 million square feet of office space sits vacant, according to the brokerage firm Cushman & Wakefield.

In other cities, the choice to tear down or redevelop a dilapidated old building can instantly ignite an emotional battle, pitching preservationists and historians against developers. Less so in cities like Dallas, said Art Lomenick, managing director for the Trammel Crow Co., a Dallas real estate brokerage firm.

"It's not that old of a city," Lomenick said. "You've got buildings that are functionally obsolete now that were built in the '50s and '60s. They're not architecturally significant. They're terrible."

Razing or refacing often boils down to a cost-benefit analysis, said Joseph Sapp, a San Diego developer who plans to reface three downtown Dallas office buildings and convert them to apartments.

If the building's footprint is not too big (sprawling office floors beget cavelike apartments) and its bones are solid, it is often cheaper and faster to reface than rebuild.

In Dallas, some of the before-and-after building renderings are as striking as photos in a weight-loss brochure.

At 1217 Main Street, British developers have sketched out plans to morph a dark and vacant five-story office into an Edenic mix of offices, stores and restaurants, where waterfalls flow down a crystal-clear facade and a giant red awning sweeps up to a roof garden planted with palms. New stone and metal panels would complete the picture.

The building known as 1200 Main St. is a classic black-and-brown office box being transformed into condos costing $120,000 to $600,000.

The developers will carve balconies into the building, giving it notches and texture, but they said it would cost too much to replace the building's exterior. "This building has been here since 1972," said Audra Hall, the senior sales manager for the project, as she walked through the renovated apartments. "It is what it is."

Saturday, July 16, 2005

GlobeSt.com - Centrum Lands 36,610-SF Fitness Evolution Health Club

GlobeSt.com - Centrum Lands 36,610-SF Fitness Evolution Health Club: "
Centrum

Centrum Lands 36,610-SF Fitness Evolution Health Club
By Connie Gore
Last updated: July 11, 2005 09:06am
For more retail coverage, click GlobeSt.com/RETAIL.
DALLAS-West Village's Fitness Evolution has worked out a plan to fill two floors at the Centrum, putting the first health club into the class A retail space in two years. Doors swing open in early September on a 36,610-sf facility.
Fitness Evolution, owned by Sam Mulroy of Dallas, signed a five-year retail lease with extension options for its fourth location in the metroplex, Larry Jordan with Transwestern Commercial Services Inc.'s Dallas office, tells GlobeSt.com. The lease for the third and fourth floors of 3102 Oak Lawn Ave. included about $300,000 of exercise equipment, some of which will go and some that will stay as part of the plan for a center with state-of-the-art cardio equipment, yoga, trainers and plasma TVs.
Jordan says the Fitness Evolution lease has been under negotiation for six months after a cold call jumpstarted talks. 'We talked to several other major operators and it appeared to us we would have to do a boutique operation,' he says. The club will be used as a tenant amenity, but also will be open to the general public, he adds. 'It's a real plus for the building and the area,' he says. The Centrum's retail space is quoted at $15 per sf, triple net.
Mulroy, who also operates a center in the Shops at Willow Bend in Plano and is opening a location in Denton, expects to generate 2,000 to 2,500 members for the Centrum center, which also will be used as overflow for West Village, according to Jordan. The Fitness Evolution lease bumps occupancy to 90% in the Centrum, which has 367,251 sf of office space, 60,000 sf of"

GlobeSt.com - Centrum Lands 36,610-SF Fitness Evolution Health Club

GlobeSt.com - Centrum Lands 36,610-SF Fitness Evolution Health Club

Wednesday, July 13, 2005

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News

Dallas Office Demand Makes a Jump

DALLAS (DallasNews.com) - Jul. 1--After a slow start in the first quarter, demand for office space in the Dallas area has bounced back, with more than 1 million square feet of net leasing.

Of course, developers and building owners want more.

"I don't think things are as strong as they were at the end of 2004, but there are positive signs," said Matt Heidelbaugh, a director at Cushman & Wakefield of Texas Inc.

"Things are still not improving as fast as we thought they would."

Cushman & Wakefield's preliminary office market numbers for mid-2005 show about 1.2 million square feet of net leasing in the Dallas area. In the first quarter, net leasing was down about 85,000 square feet.

"We need to see more, but we will take positive absorption," said John Zogg, senior vice president of Crescent Real Estate Equities Co.

"It is consistent with what we are seeing in our buildings."

North Texas office leasing has a way to go before landlords can overcome about a 25-percent overall vacancy and raise rents, Heidelbaugh said Thursday.

"Rental concessions have dried up a bit, but it's still a tenants' market," he said.

That's especially true in places that are still losing office tenants.

The mid-cities, Arlington and even the hot Uptown and Turtle Creek office markets have lost tenants through the first half.

Other business districts that had seen big tenant consolidations and move-outs in recent years - including Las Colinas and Richardson's Telecom Corridor - came out on top of the leasing market. The Telecom Corridor alone accounted for more than half of the Dallas area's net leasing in the first half of 2005, according to Cushman & Wakefield.

The booming office districts at the north end of the Dallas North Tollway near State Highway 121 in Frisco and the Legacy business park have also had significant leasing.

"It certainly seems that way," said Greg Fuller, managing director of Granite Properties, which just broke ground for an office tower near the tollway.

"We have over 200,000 square feet of lease proposals out on our new building, which is a lot more activity than we had on our other two projects at this stage."

But businesses are taking a long time to do deals, he said.

"People aren't making choices quickly, and everybody scrutinizes their decisions."

So far in 2005, the increases in office leasing are in suburban buildings.

In the downtown market - which still has about a 30 percent vacancy rate - net leasing was down by a scant 468 square feet.

Citywide, the amount of sublease office space on the market has dramatically declined in the last year.

"Some of that space has been leased, and a lot of it has gone back into direct vacancy" as leases expired, Heidelbaugh said.

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News

DALLAS (NewYorkTimes.com) - The condo and apartment conversion craze has hit a wall here - a sleek corporate wall of smoked glass and cheap steel girding.

It was bound to happen. Across the country, buildings with character - old garment factories, warehouses, Art Deco skyscrapers and Beaux-Arts firehouses - are being revived as condominiums and loft apartments as cities try to draw residents back to their core. But with that historic stock depleting, developers are now turning to uglier candidates for condo makeover: moribund office towers.

From Dallas to Fort Worth, Los Angeles to Chicago, developers are lifting the corporate skin off these skyscrapers. They are installing new windows, limestone facades, balconies and contemporary ornament, and in some cases stripping the buildings to curtain walls and I-beams to do it.

"You've got to take off some of the old ugly facades and let there be glass and light," said Laura Miller, the mayor of Dallas. "If you take the skin off and restore it, it's beautiful."

These glass-and-steel monoliths sprang up in droves from 1950 to 1980, when cities like Dallas experienced explosive and unchecked commercial development. In the 1950's, Dallas added 7.2 million square feet of office space, second only to New York City, according to an article in May 1960 in The Dallas Morning News.

But as those buildings aged and jobs fled Dallas during the dot-com recession, many of those buildings emptied, giving Dallas the highest office vacancy rate in the country. From 2000 to 2005, amid a glut of office space, office rents declined by 22 percent, according to Reis Inc., a real estate research company.

Although the city's numbers have improved over the last year, 26.5 percent of its office space is still vacant. Downtown alone, nine million square feet of office space sits vacant, according to the brokerage firm Cushman & Wakefield.

"These buildings have kind of been shunned," said Ted Hamilton, who is working with his father, Larry, to redevelop and partly reface the vacant Fidelity Union Life Towers downtown to create 435 apartments and 20,000 square feet of retail space.

Developers like the Hamiltons have snatched up these buildings - some boarded up, some 15 percent occupied - for $10 a square foot and concocted sales pitches for lofts and new retailing spaces. The city is eager to unload its outmoded office stock and is serving up tens of millions of dollars in tax incentives for construction, exterior renovation and landscaping.

Dallas could use 10,000 residential units downtown, and about 3,800 have been built or are being developed, according to the Central Dallas Association.

In other cities, the choice to tear down or redevelop a dilapidated old building can instantly ignite an emotional battle, pitching preservationists and historians against developers. Less so in cities like Dallas, said Art Lomenick, managing director for the Trammel Crow Company, a Dallas real estate brokerage firm.

"It's not that old of a city," Mr. Lomenick said. "You've got buildings that are functionally obsolete now that were built in the 50's and 60's. They're not architecturally significant. They're terrible."

Razing or refacing often boils down to a cost-benefit analysis, said Joseph Sapp, a San Diego developer who plans to reface three downtown office buildings here and convert them to apartments. If the building's footprint is not too big (sprawling office floors beget cavelike apartments) and its bones are solid, it is often cheaper and faster to reface than rebuild.

"You're just buying it for bupkis," Mr. Sapp said. "Everything's already intact. Think of it as a big tenant improvement job. I call them recycling."

Mr. Sapp's company, 3J Development, plans to replace the dark-glass shell of an empty 1961 office building at 1600 Pacific Street with walls of blue glass, tack on balconies, add a contemporary cornice and cut terraces into the building.

On Main Street, he will expose the original stone facade and cornice of the Praetorian, a 1908 office building with a face that was girded in glass and silvery metal during the 60's. Other developers along Main Street have unwrapped small older buildings and set up stores and restaurants.

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News

An empty downtown office tower may soon lose the blues.

DALLAS (DallasNews.com) - The 211 N. Ervay tower now. The 18-story 211 N. Ervay building is being purchased by a California developer that also owns two nearby towers.

3J Development LLC of San Diego plans to convert the 47-year-old office building at Ervay and Elm streets into residential units.

Clad in blue metal panels, the vacant tower has been praised by preservationists but is despised by some downtown boosters – including Mayor Laura Miller – who don't like its colorful 1950s architecture.

The new owners plan to redo the exterior.

"We are going to make the exterior look very nice," said Joseph Sapp, 3J Development president. "I don't know what it will be yet, but it won't be turquoise.

"We are playing with lots of different scenarios," he said.

3J Development is buying 211 N. Ervay from a local investor. Terms of the transaction have not been disclosed.

Since January, Mr. Sapp's firm has also purchased the 33-story 1600 Pacific tower, the 16-story Praetorian Building and an Elm Street parking garage.

A lack of parking has previously discouraged developers and investors away from redoing 211 N. Ervay.

"Our parking garage will serve all three buildings," Mr. Sapp said. "We now have over 1 million square feet in downtown Dallas if you include the parking structure."

Mr. Sapp said he hasn't decided if the buildings will be converted to rental units or condos.

He expects to begin construction on the first renovation within nine months.

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News

Building redo to provide medical offices
By: Jennifer Gordon

DALLAS (DallasBusinessJournal.com) - Trophy Healthcare Realty L.P. and the Sports Medicine Clinic of North Texas, an orthopedic surgery practice, have banded together to buy a building at 1015 N. Carroll Ave. in Dallas, near the Baylor University Medical Center Campus.

Trophy bought the two-story, 23,0000-square-foot building on nearly 3 acres in January for an undisclosed price, and is gutting the building's interior. Allan Brown, managing partner of Trophy, a Dallas-based health care real estate company, estimated it will cost $4 million to get the property ready for move-in by the end of August.

The building formerly was Scofield Memorial Church and most recently housed an electricians' training center, Brown said.

A physical therapist is expected to rent space on the first floor, and other related specialties likely will lease space on the lower level, Brown said.

Practice to expand
The orthopedic surgery practice is a 20% owner in the building and will be leasing the entire second floor, said Dr. Don Buford, with the practice. The practice will have an extra 2,000 square feet of space compared with its current offices.

The move became necessary when Baylor failed to renew the practice's lease in the Tom Landry Building because Baylor was planning to put a day spa in that space, Buford said. "We saw it as an opportunity to expand and upgrade our services."

Buford said the space will be used to accommodate two new orthopedic surgeons who are joining the group, as well as to enable the practice to add an MRI machine and convert to all-digital radiology.

The practice has 18 employees, not including the surgeons, and likely will add another person or two soon, Buford said.

While they were looking around, the partners spoke with Trophy officials and decided this was a "neat project," Buford said. "We gave them a tight schedule to meet, and they've been ahead of schedule."

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News
Heritage Galleries & Auctioneers Adds 20,833 SF to Class A Lease
By Connie Gore

DALLAS (GlobeSt.com) -Marking the fourth expansion of its world headquarters in 18 months, Heritage Galleries & Auctioneers has pulled out another 20,833 from the class A 3500 Maple in Uptown. The extra space pushes Heritage's bottom line to nearly 80,000 sf.

The world's leading numismatic dealer took over the 10th floor on an as-is basis to get immediate additional storage area for its Art/Antiques and Americana auction divisions. To keep the deal simple, the add-on was crafted as an expansion with the same 12-year term and conditions as Heritage had when it moved into the 374,165-sf building in January 2004, Robert Deptula, principal with NAI Stoneleigh Huff Brous McDowell's Dallas office, tells GlobeSt.com. Negotiations took just one month to fill a floor that's been empty more than two years, he says. At last count, 3500 Maple had 91,351 sf on the market for $21 per sf plus electric.

Deptula and NAI principal Nora Hogan represented Heritage. Jay Bailey and JJ Leonard with Capstar Commercial Real Estate Services in Dallas structured the deal for the Los Angeles-based building owner, CB Richard Ellis Strategic Partners LLC.

Wednesday, July 06, 2005

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News

7-Eleven's plans send Uptown prices across the freeway

DALLAS (DallasNews.com) - For years, Woodall Rodgers Freeway has been a great divide.

On the north side of the concrete and steel canyon, land prices soared in Uptown.

To the south of the highway, property values snoozed.

Not anymore.

The announcement that 7-Eleven Inc. is moving its corporate headquarters to the Arts District and plans for more than $300 million in additional cultural facilities have caused prices just south of Woodall Rodgers to jump.

"Six months ago, you could buy development sites down there for $40 and $50 per square foot," said real estate broker Newt Walker.

"Now it's all $70 and up."

Indeed, prices for some choice sites are now rumored to be $100 and up – a level the area hasn't seen since the go-go days of the 1980s.

"It's because of all the hoopla from the 7-Eleven announcement," Mr. Walker says.

The convenience store giant announced in April that it would be the lead tenant in a $100 million office, retail and residential complex to be built near the intersection of Woodall Rodgers and Routh Street.

At the opposite end of Woodall Rodgers, the forest of construction cranes at the Victory project is catching the eye of other builders.

Since the availability of developable land in adjacent Uptown is shrinking, who wouldn't go a couple of blocks farther south to save money and find a good development tract?

The folks that are said to be looking near the Arts District include developer ZOM Texas and other residential builders.

But they'd best hurry.

In the area between Ross Avenue and Woodall Rodgers – the new gold coast for in-town development – all but a handful of sites are already in the hands of developers or the public sector.

Nothing like a lack of building sites to push prices even higher.

EDS manager?

Real estate execs are expecting an announcement soon about whom Electronic Data Systems Corp. has hired to run its real estate operations.

For the last few months, the Plano-based information services giant has been interviewing real estate companies about managing its real estate needs – which it now does in-house. The job would include overseeing the 2,600-acre Legacy business park in Plano.

Brokers familiar with the deal say that EDS has decided on Trammell Crow Co. to handle its property. The two firms are reportedly still working on the contract.

EDS representatives had no comment about the deal.

Crescent tenants

Uptown's anchor Crescent complex is getting some new office tenants and hanging onto others.

Crescent Real Estate Equities said this week that it has signed a handful of office leases in its namesake project.

Credit Suisse First Boston USA Inc. leased 17,227 square feet in the Crescent, relocating its offices from J.P. Morgan Chase Tower on Ross Avenue. CB Richard Ellis negotiated the lease with Crescent.

Stanford Group Co. leased 10,301 square feet for its office, which was formerly in Las Colinas. CB Richard Ellis also handled that lease.

Bear Stearns Cos. – represented by Staubach Co. – renewed its 34,396-square-foot lease in the Crescent for 10 years.

And law firm McKool Smith PC renewed its 88,249-square-foot lease.

McKool Smith has been in the Crescent for 14 years. Staubach handled its lease, too.

"We are 95 percent leased, and one reason we are doing very good with this project is because of our tenant list," said Crescent senior vice president John Zogg.

The Crescent's tenant rolls include more than 70 financial services firms.

Behringer Harvard deal

Investor Behringer Harvard has purchased a Plano office building.

The Addison-based real estate firm acquired the Parkway Vista Building at 5072 Plano Parkway. Built in 2002, the two-story property has 33,467 square feet and is 97 percent leased.

Tenants include American Express Financial Advisors and SouthTrust Mortgage Corp.

Trammell Crow Co. has been hired to manage the property.

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News

Commercial market takes a different path

DALLAS (DallasNews.com) - By now you've probably heard that when it comes to home foreclosures, we're No. 1.

It's not something the chamber of commerce will be putting on signs at the airport.

But the Dallas-Fort Worth area is also attracting national attention because of its home loan default rate – and not for the first time, either.

Back in the bad old days of the late 1980s, the home foreclosure rate was even worse.

What's interesting this go-round is that the housing market is taking hits on the courthouse steps while commercial real estate zips right along.

During the first six months of 2005, only about 543 commercial buildings were posted for foreclosure, a decline of 19 percent from the same time last year.

At the same time, lenders have posted almost 17,000 D-FW area homes, an increase of 8 percent.

Prices for commercial real estate, including office buildings, shopping centers, warehouses and apartments, are soaring. And the number of investors with cash in hand to buy these properties seems endless.

George Roddy of Foreclosure Listing Service Inc. estimates that about 60 percent of the homes posted each month are actually foreclosed on while fewer than 25 percent of the commercial properties are sold at auction.

In some cases, investors buy the properties before they get to the auction, he said. "There are so many people interested in buying foreclosed commercial properties that they are waiting in line."

Mr. Roddy says he's surprised at the low number of commercial foreclosures.

"Every month I'm expecting the worst, and we never see it," he said. "Of course, we haven't seen the same kind of funny-money loans that were made in the 1980s.

"The lenders and investors were more savvy this time, and there is more equity in the deals," Mr. Roddy said.

Most of the commercial real estate deals that have gone bust have been smaller, older properties. And now that the prospect of a jump in mortgage rates this year is fading, there's less likelihood that more commercial buildings will wind up in the tank.

Distribution center

A Los Angeles-based industrial developer is lining up two major projects north of Dallas/Fort Worth International Airport.

Majestic Realty Co. plans to develop a two-building, 300,000-square-foot speculative distribution center on Belt Line Road in Coppell.

"We are going to build both of them at the same time," said Al Sorrels, Majestic's local vice president and director of development. "We think there is a lot of opportunity in that market north of D/FW Airport.

Majestic is building the Coppell project in partnership with Northwest Mutual Insurance Co. The buildings should be finished in early 2006.

Before then, Majestic hopes to start work on an even bigger project in Lewisville.

The developer has purchased a 170-acre site for a business park on State Highway 121 at Edmonds Lane.

"We have that site master-planned for just under 3 million square feet," Mr. Sorrels said. He said the company plans to start work there within the next 180 days.

Majestic has been in the North Texas market since 2000, when it built a million-square-foot warehouse for Mattel Inc. in North Fort Worth. The company also has a 300,000-square-foot industrial project in Plano.

"We'll be looking for more opportunities throughout the metroplex," Mr. Sorrels said. "We will be trying to do some things in Houston as well."

Lender to be acquired

Longtime Dallas-based lender Malone Mortgage Co. is being acquired by KeyCorp of Cleveland.

Malone Mortgage makes and services apartment loans nationwide. The company does about $200 million in loans each year and services a loan portfolio of almost $1.2 billion.

"We are looking forward to the endless capabilities this acquisition will offer our clients," Malone Mortgage founder Bernard "Bud" P. Malone said in a statement. "Our employees will benefit as well, since they will be joining one of the premier real estate capital providers in the country."

Terms of the transaction were not disclosed.

KeyCorp is one of the nation's largest commercial real estate capital providers, with about $19 billion in annual financings.

Fairmont renovations

The Fairmont Dallas has completed its $4.5 million redo, hotel officials said this week.

The most noticeable change was that the two room towers were painted brown – they had been white since the hotel opened in 1969.

The only thing left to finish is tinting the windows, which is scheduled for early next year, Fairmont general manager Frank Naboulsi said.

"We believe this new look will help the hotel continue its contributions to the revitalization of downtown and to the exciting developments taking place in and around the Arts District," he said.

COMMERCIAL FORECLOSURES

During the first half of the year, North Texas commercial foreclosures fell 19 percent. The number of commercial properties posted for foreclosure in Dallas, Tarrant, Collin and Denton counties:

YEAR # of Foreclosures
1999 731
2000 660
2001 779
2002 880
2003 1,039
2004 1,265
2005 543*

*First six months

SOURCE: Foreclosure Listing Service

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News

Atmos Adds 103,000 SF at Lincoln Centre

DALLAS (GlobeSt.com) -Atmos Energy Corp. has seated the former TXU Gas team in about 103,000 sf of class A space in a quietly orchestrated lease for Lincoln Centre II. Atmos, which houses its 145,000-sf headquarters right next door, has shopped, signed and settled in the team within three months.

The expansion runs concurrently with Atmos' headquarters lease, which was renegotiated last year with a 12-year term, Steve Jarvie, senior vice president for Dallas-based Staubach Co., tells GlobeSt.com. The group is filling the top three floors of the 19-story Lincoln Centre II at 5420 LBJ Freeway.

"We definitely looked at other places, but obviously with the headquarters and the space being there, it just made sense," says Jarvie, who teamed with Staubach executive vice president Scott Collier to negotiate the deal for Atmos. Jarvie says Lincoln Property Co., represented in house by David Quisenberry, was "very aggressive" with pricing.

"It was a good deal," Jarvie says. "It was comparable with what they got on their headquarters renegotiation."

Jarvie says the three floors of long-empty space came with a finish-out allowance pushing $30 per sf. The deal includes a first right of refusal on another full floor in the 612,462-sf Lincoln Centre II. According to a local database, the class A space's quoted rate hovers $20 per sf.

Atmos went in search of office space for the TXU team after donating its five buildings with 401,300 sf in Downtown Dallas to the city. Despite rumors to the contrary, Atmos' execs made it clear when it turned over the deeds that it never considered moving its 19-year, four-floor headquarters from Lincoln Center III at 5430 LBJ Freeway.

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News

Fountain Place Tenant Re-Ups, Expands With Full-Floor Lease

DALLAS (GlobeSt.com) -After shopping the market for roughly 10 months, the Crouch & Ramey law firm has re-upped and expanded a trophy lease in Fountain Place. The full-floor lease for the six-year tenant will drive a relocation within the 60-story downtown landmark.

Kirby White, leasing director for the Fort Worth-based Crescent Real Estate Equities Co., tells GlobeSt.com that the firm will move before September from 14,122 sf on the 23rd story to the 18,622-sf 36th floor of the 1.2-million-sf high-rise at 1445 Ross Ave. White says the building owner, Crescent Fountain Place LP, got the floor back last month in accordance with last year's agreement with the Jenkins & Gilchrist law firm, which still occupies nine floors of the 94.1%-leased trophy.

Crouch & Ramey's broker, William McClung with Cushman & Wakefield of Texas Inc., started searching in fall 2004 for expansion space. The firm's existing lease expires at the end of this year. "We were in fairly serious talks last fall," White says, "but it took awhile to work out the details." The freshly inked deal has a four-year term, he says.

With the 36th floor staying tied to a law firm, finish-out will be minimal, according to White. "The space fits well for their needs," he says.

White has four more deals in the hopper to fill another 25,000 sf in the trophy and has bed down all significant rolls for this year. "It's been a pretty good spring and summer so far," he says. The stepped-up activity is translating into finished deals hitting closer to the building's top quoted rent of $26.50 per sf. "The average rate we've gotten in the last few months is $25 per sf plus electric," he says.

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News

West End's Oilwell Supply Building Comes to Market

DALLAS (GlobeSt.com) -The Oilwell Supply Building, built in 1922 and overhauled in 1999, is up for grabs without an ask by an owner looking to mine a location at the edge of the West End and the closest office property to Ross Perot Jr.'s $3-billion works in progress, Victory.

"I think the thought is given the stability of the cash flow, positive trends in the West End and great news continuing to come out of Victory that now is a great time to take it to market," Evan Stone with Jones Lang LaSalle Inc.'s Dallas office tells GlobeSt.com. With six years of repositioning under its belt, Dallas-based Brook Partners, led by John Sughrue, has pushed occupancy to 94% in the multi-tenant building at 2001 N. Lamar St.

Stone says the call for offers will ring at the end of July. The 65,314-sf structure has six tenants, including Turner Construction Co.'s three-story headquarters. For West End goers, the building's best recognized for Joe's Crab Shack and Spiatza Italian Grill & Bar at the street level and four upper floors of office space priced at $18 per sf plus electric.

Stone says he expects institutional investors will chase the deal even though it's not a CBD high-rise. With the "as-is play" just being launched, he predicts the half-acre property will pull upward of $130 per sf. "It's still a discount to replacement cost," he adds, citing a tenant roster without any lease rolls this year. "For all intents and purposes, it's a new building on the inside and on the outside it's a historic building."

For 60 years, the building was filled by its builder, the Oilwell Supply Co., which later became a division of US Steel Corp. It sat vacant for 15 years until Brook Partners undertook the adaptive reuse. "The building shows well," Stone says. "It's been a labor of love."

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News

Dallas Observer Pens 10-Year Relocation Lease

DALLAS (GlobeSt.com) -The Dallas Observer will exit a longtime downtown address for a full floor in Oak Lawn, signing a 10-year lease with an Aug. 1 kick-off. The weekly newspaper, changing neighborhoods about five months before its existing pact expires, becomes the lead tenant in Oak Lawn Plaza.
The Dallas Observer's executive team will take over the 16,940-sf seventh floor of the 128,725-sf, class B-plus office building at 2510 Oak Lawn after a 25-year run in the downtown. The lease, which has been under negotiation nearly nine months, fills space emptied more than a year ago and sets up a full-floor overhaul for a now 93%-occuppied building, Lowrey Burnett with the Gaedeke Group tells GlobeSt.com.

The Observer staff will go from a historic structure at 2310 Commerce St., which underwent an adaptive reuse, to a newer, eight-story building owned by Gaedeke Holdings II Ltd. "It's dramatically different space," Burnett says. "This is a much more streamlined, efficient layout for them." Talks open at the going rate of $17.50 per sf full service.

As for the local owner, Burnett says "this is the first face that we've had in the building that's this large." The deal includes a top of the building sign. Burnett teamed with David Hughes, also with the Gaedeke Group, to negotiate the lease with tenant rep, Mary Bentley of Dallas-based Fischer & Co. The Observer, owned by Phoenix-based New Times Media LLC, has distributes 110,000 copies weekly.

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News

Fluor chooses Las Colinas for new international headquarters

DALLAS (Dallas Business Journal ) - After a whirlwind search for space, Fluor Corp. has decided to build its new international headquarters in Las Colinas. The $10 billion engineering and construction giant announced in May it would move its home base from Orange County, Calif., to North Texas by early 2006, citing a desire to improve operational efficiencies and better serve its global clients.

Fluor (NYSE: FLR) has tapped Dallas-based Koll Development Co. to build a 120,000-square-foot office building on Las Colinas Boulevard, just north of Royal Lane. The project will sit on 26 acres near Citigroup's massive new three-building, 625,000-square-foot office complex, which Koll is developing nearby.

About 100 Fluor employees are expected to relocate from California. Another 100 will be hired locally, said Matt Heidelbaugh with Cushman & Wakefield of Texas. Heidelbaugh assisted lead broker Jeff Osborn, senior director in C&W's Orange County office, who handles Fluor Corp. real estate on a national basis.

"Fluor considered both existing properties and doing a build-to-suit," Heidelbaugh said. "Initially they wanted to be in by the end of the year, which greatly limited opportunities. Delaying things a few months enabled them to get exactly what they wanted."

Heidelbaugh said the real estate team "crammed six months of work into six weeks" to help Fluor speed up its decision-making process. Other sites in North Texas were considered, but Las Colinas was chosen due to its proximity to Dallas/Fort Worth International Airport, excellent housing, quality labor pool and business and personal amenities, Heidelbaugh said.

"We're getting a lot of cooperation from Irving, which is very pro business," he said. "They're doing everything we've asked and more."

Fluor will become the fourth Fortune 500 company headquartered in Las Colinas, joining Exxon Mobil Corp. -- Fluor's biggest client -- Kimberly Clark and Commercial Metals.

The city of Irving is providing economic and other incentives. The full value of the package is still being worked out, said Chris Wallace, president and CEO of economic development for the Greater Irving-Las Colinas Chamber of Commerce.

"We're going to complete the final contract soon," he said. "Besides the typical incentives, we added a lot of creative incentives, such as discounts for employees at local clubs and other businesses. The whole Irving business community really came together to support this. It was a real team effort."

Fluor also is pursuing incentives from the state of Texas.

Koll will break ground on the new headquarters in mid-July. The three-story building will include an auditorium, cafeteria and fitness center.

Andrew Boeckmann, Fluor Corp. chairman and CEO, said the new facility will play a pivotal role in the company's future success.

"We want the new Fluor Corp. headquarters to be representative of our company's achievements worldwide," he said. "The communities of greater Dallas offer very good quality-of-life choices for our employees, and Las Colinas is a location that supports our continuous efforts to enhance operational efficiency and client focus."