Friday, August 01, 2008

Healthcare REIT Puts Up $59M Plus for Pyramids

DALLAS-Putting $59.2 million on the line, Healthcare Realty Trust has acquired the Pyramids at Park Lane, two class A office towers with 291,389 sf parked right beside its 250,000-sf North Central Medical Center. Both office footprints have Baylor Health Care System on the tenant roster.
The Nashville-based REIT closed the deal with Goddard Investment Group LLC of Atlanta in recent days, allowing the one-year owner to cross off another piece of Dallas real estate on its "to go" list. The Pyramids, positioned on 6.6 acres at 9101 and 9201 N. Central Expwy., came to market in May with two other class A office properties, with more than one million sf, in an opportunistic move to take advantage of value-add capital looking for landing spots, according to a previous interview with the seller.

Healthcare Realty didn't return telephone calls to comment on the deal, which surfaced two days ago in an SEC filing. The seller indicated it was unable to comment and its sales team confined comments to a press release that was issued late last night. The Holliday Fenoglio Fowler LP team consisted of senior managing director Andrew S. Levy, director Todd W. Savage, director John Bourret and analyst Kelsey Roop.

Seller financing at a fixed-rate interest and 70% LTV cap was an option of the offering, but it couldn't be determined by deadline if the REIT leveraged the 98%-leased Pyramids' purchase in any way. The lease stack has Baylor in 95,000 sf until June 2020 of the 145,963-sf south tower and the Dallas Plastic Surgery Institute in 33,664 sf through June 2023, with the multi-tenant balance mostly filled by medical tenants. The Pyramids' 145,426-sf north tower is fully occupied by XO Communications Inc., with a lease that expires in July 2010.
According to the buyer's SEC filing, XO Communications plans to vacate the complex when its lease expires that, if it happens, will set up the value-add for the acquisition story. HFF's marketing flyer reported XO's lease is about $10 per sf below current class A rates in the tony mixed-use corridor, where class A office space is commanding $26.60 per sf on average. Capstar Commercial Real Estate Services in Dallas has been leasing the Pyramids.

Developed in 1999 by Dallas-based Champion Partners, the Pyramids complex sits at the epicenter of one of the state's largest medical districts in an infill location adjacent to NorthPark Center, one of the Southwest's top-ranked malls. Close by is the 866-bed Presbyterian Hospital of Dallas and 660-bed Medical City Hospital. The Pyramids' northern line abuts the buyer's 97%-leased North Central Medical Plaza, which it bought in April 2006. Assessed at $51 million by Dallas County, the abutting 13-acre campus holds the 110,000-sf Carrell Clinic Center and a 140,000-sf, six-story multi-tenant, medical office building, with its halls filled by more affiliates of the locally based healthcare provider.

HFF characterizes the Pyramids as two of the newest office buildings in the North Central Expressway corridor, with 12 competing buildings and all more than 90% leased. The complex includes a six-story garage with 977 spaces and another 150 of surface spots. The acquisition bumps the REIT's holdings to more than two million sf in Dallas/Fort Worth.