Friday, July 25, 2008

Realty Capital Planning $31M Redevelopment

DALLAS-Two vintage office buildings, totaling 125,000 sf, on eight acres in the Southwestern Medical District have changed hands. The redevelopment plan, including acquisition costs, will hover $31 million.

Realty Capital Partners of Colleyville, TX and its development affiliate have formed RCP Medical District Urban Living Ltd. for the project at 5919 Maple Ave., just north of Inwood Road. A 300-unit, class A multifamily complex will be built and a 30,000-sf office building, built in the early 20th century and now leased to Harold's Stores Inc., will be converted into loft units. A second office building on the site will be demolished.

Realty Capital investment manager Jared Gossett says interviews have started with contractors and processing for construction financing has begun. The developer plans to start construction as soon as financing is in place, which is expected to be in the coming months. A construction timetable of 12 to 14 months is anticipated. Gossett says Realty Capital Partners financed the acquisition and pre-development costs with 33% equity. He adds that the borrower's 67% debt portion includes seller financing.

The Realty Capital exec reports rents have not been determined, but he tells rates in the general area run from $1.20 per sf to $2 per sf. He presumes project's rents will fall at the upper end of the spectrum. The targeted rental pool is young professionals working in Dallas' CBD and students and staff of the University of Texas' Southwestern Medical School as well those at Parkland, Children's and Scottish Rite hospitals. The medical institutions alone have more than 26,000 students and employees, he points out.

According to Gossett, the demand for multifamily product in the submarket is strong, with nearby competitors' complexes nearly 100% occupied. He says the nearest competition is 95% leased and has a waiting list for one-bedroom apartments. In addition, he points out that the project's location is in a major redevelopment corridor being fueled by a future Dallas Area Rapid Transit light-rail station. Several retail, office, and residential projects are scheduled for completion over the next several years.