Thursday, October 04, 2012

Office Buildings Sell on Low-End, High-End




You won’t see any “SOLD” signs out front. But a growing number of North Texas office buildings have either just changed hands or are about to be sold. 
More than $100 million in Dallas-Fort Worth office buildings have been purchased by investors. In some cases, the buildings have been bought on the cheap.
Los Angeles-based Regent Properties paid about $9.4 million, or $57 per square foot, for the eight-story Bent Tree Tower II in Addison. That’s less than half what a building that size would cost to build. The 30-year-old office high-rise has a high-profile location on the Dallas North Tollway. But alas, it’s only 25 percent leased.
“General Electric used to be a major tenant, and they moved out in December,” said Regent Properties senior vice president Matthew Benbassat. “The property is looking for new life and repositioning. We are doing a $2 million to $2.5 million overhaul to the property,” Benbassat said. “It needs a new developer to bring the building to life.”
Regent Properties recently bought more than 1 million square feet of similar office projects.
“In the last year and a half, we have focused primarily on buying office projects that need repositioning,” Benbassat said. “We’ve bought similar properties in Phoenix — buildings in Class A locations that need some work. These are the types of projects we love.”
Of course, how much an investor is willing to pay for a North Texas office building is based in large part on how much rent the property is generating. Real estate brokers say investor demand for office buildings these days is split between the buildings with lots of dings and the prime properties.
“We call them the trophies and the traumas,” said John Alvarado, senior vice president at CBRE Group. "It’s the middle-of-the-road properties that are slower to sell," Alvarado said.
“There’s not a big appetite for the tweeners in the marketplace today,” he said. “There is a great amount of dollars slated for value investments — properties that can be purchased for low prices per square foot.” Alvarado credits North Texas’ improving economy and strong real estate fundamentals with bringing buyers to the closing table.

Steve Brown
Real Estate Editor
Dallas Morning News