Tuesday, January 29, 2013

office building 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.
Within the last two weeks, 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.”
And Regent is not alone.
On Thursday, another California buyer, Adler Realty Investments, paid $23 million for the 400,000-square-foot Four Forest Plaza building in North Dallas.
The 19-story tower near North Central Expressway and LBJ Freeway is only about half full.
That’s why Adler Realty was able to snap up the property for about $60 per square foot.
Four Forest Plaza’s previous owner, Younan Properties, paid more than $33 million, or more than $80 per square foot, for the building in 2005.
Younan has been selling its Dallas-area holdings. The investor also has lost properties here to foreclosure.
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.
New York investor CapLease Inc. just paid $144 per square foot, or $46 million, for the two Lakeside Centre office buildings in Richardson’s Telecom Corridor.
Those buildings fetched more than twice as much as the Four Forest Plaza and Bent Tree Tower II properties.
But they are also fully leased to high-quality tenants: telecom firms Metro PCS and AT&T.
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.
“The market is much healthier than it was last year and continues to get better,” he said. “We have had consecutive quarters of economic growth, and now we are seeing a rush of investment capital.”
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