The Newport Beach, CA-based KBS was one of roughly 10 institutional buyers in pursuit of the 13-story building at 14241 Dallas Pkwy. It is the last building that Fortis Property Group owned from a 1.1-million-sf triple play with other New York City-based partners, who split the landmark trio immediately after the closing, with International Plaza Tower III rolling to a Fortis-led partnership with Mizrachi-Alcaly Group.
International Plaza Tower III was nearly empty when Fortis bought it. It was 75% leased when the deed changed hands yesterday. Transwestern Dallas, which leases most of KBS' Dallas office buildings, will take the leasing reins from locally based Stream Realty Partners LP and management duties from Fortis.
The new owner is basing its upside on the 25% vacancy and "what we projected as continually growing rates in the tollway market," says Bill Rogalla, KBS' senior vice president and acquisitions officer. "It's a tremendous addition to our Dallas portfolio."
Rogalla says there is "minimal" lease rollover in the near future, with a 27,000-sf full floor as the largest contiguous block. Built in 2002, he says "no major improvements are necessary at this time."
The building hit the market in September 2007, but the capital markets turmoil and a loan pre-payment scenario dragged out the closing, according to John C. Alvarado, managing director in Dallas for Jones Lang LaSalle. "We felt confident with KBS, having worked with them in the past. They brought a lot of credibility to the closing table and performed well," he tells GlobeSt.com. "Institutional capital that uses low amounts of leverage is the favored buyer at this time because they can get deals closed."
KBS has bought several office properties in recent years in Dallas/Fort Worth, with International Plaza Tower III pushing its holdings to 2.5 million sf in the region. Rogalla says there are no more contracts in hand although he's actively scouting for more buildings to buy.
Rogalla says the tower's chief selling points are "its strong location and its lease-up potential" plus "it's a great building." KBS placed debt against the building, but the lender and terms are being kept confidential.
Alvarado and vice president Kelly Branum led the JLL sales team, which included managing directors Jack Crews and Evan Stone. Rogalla did KBS' bargaining. Walter Foster, a KBS senior vice president, oversees the firm's Dallas, Austin and San Antonio portfolio. Transwestern's Kim Brooks and Fletcher Cordell will be leasing KBS' newest prize.
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