The nine-story, class B-plus office building at 5525 MacArthur Blvd. was on the market 30 days, without an ask. The buyer is Falcon Southwest, the highest of more than 10 offers fielded by Seattle-based Kennedy Associates Real Estate Counsel for the value-add piece of real estate, Michael Hardage, managing director for Transwestern Commercial Services in Dallas, tells GlobeSt.com.
"It was simply time to harvest the gain," Hardage explains about adviser's release of the deed. And, it did so with definite upside left in the deal: marketing started at 77% occupancy and pushed to 85% by the closing. "And, it's still climbing," he says.
Philip Capron, Falcon Southwest president, says this is the one of, possibly the only time, that he's inked a deal in which the occupancy rose en route to the closing. "Either Transwestern did a good job or the market is improving or it's just good luck. But, I'll take it," he says. "It's one of the rare times that I bought a building that went up in occupancy."
Capron says the original plan called for a three- to five-year hold, but the improved market has the investment group and its equity partner, Minneapolis-based CarVal Investors, "leaning toward the longer term." Transwestern was kept in place to lease and manage MacArthur Plaza. He says the deal closed with a five-year, fixed-rate loan from National City Bank's Cleveland office.
"Kennedy Associates were terrific to work with and so was Transwestern," Capron says. "It was the single smoothest closing and inspection that I've dealt with in a long time." He says it was the buying group's second deal with the adviser for Delta Airlines Pension Fund.
The leads for the 26-tenant roster are full-floor occupants, HealthNet Inc. and EMJ Corp. "There is very minor rollover for the next five years," Hardage says, "and it's very evenly spaced. That was one of the beauties of it."
As market watchers are keenly aware, the Las Colinas submarket has rebounded this year with one of the region's highest absorption rates. That uptick and upcoming residential, retail and entertainment construction in the nearby Urban Center were strong selling points for MacArthur Plaza, a 6.3-acre hard-corner positioning with three corners of retail and a close-by brand-new LA Fitness Center. "Las Colinas for years was an 8 a.m. to 5 p.m. market, but now there's more residential and the market area is improving dramatically," says Hardage, who partnered with Transwestern managing director Stephen Simon to run the sale.
The 23-year-old MacArthur Plaza was renovated in 1997. And, Capron says, it traded in pristine condition, with just a few minor aesthetic upgrades planned. "It's really an occupancy play, a good B-plus building that we could raise from 75% to 95% in 12 months," he says.
Falcon Southwest has spent $130 million on acquisitions this year. In 2007, Capron says it will put out $100 million to $150 million, with Dallas and Houston at the top of the buy list. In Dallas, Capron is eyeing mostly office, possibly some industrial, while Houston has been earmarked for office and multifamily property acquisitions. The buyer's sweet spot is $15 million to $50 million. "We are closing one to two every quarter," Capron says. The three-year-old company, launched with 90 million sf, now has a portfolio with more than 400 million sf in the three Texas metros and Phoenix.
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