Market sources say the question isn't whether or not the 85.2%-leased Summit at 545 E. John Carpenter Frwy. and 92%-occupied Tower at Lake Carolyn at 909 Lake Carolyn Pkwy. can draw offers, but rather if financing is available to get the deal, or deals, across the finish line. A Holliday Fenoglio Fowler LP team has been hired to quarterback this year's run at the market, grabbing the listing without competing against peers and packaging the play as a no-ask scenario with no firm call dates for offers. Dallas Central Appraisal District has a combined assessment of $73.76 million resting against the Lake Carolyn-fronting pair, which works out to nearly $101 per sf in a submarket where sales prices go considerably higher.
CBRE's SP III fund acquired the towers, both with high vacancies, in April 2005 from Chicago-based Equity Office Properties Trust Inc. Since then, the Los Angeles-based owner has pumped $4.5 million into renovating the 19-story Summit and $7 million into the 20-story Lake Carolyn tower, according to HFF on-line executive summaries.
It's been no secret in the market that CBRE's leasing team has been dangling sweetheart deals to pump up the buildings' occupancies for their resale. Sources say the strategy offered as much as $40 per sf in tenant-improvement allowances with unused capital able to be swapped for free rent. The unusual tact kept the owner from lowering base rents and cutting into net operating income streams.
But, make no mistake: CBRE isn't under any pressure to sell, one source stresses to GlobeSt.com, nixing any notion that the assets might in some fashion be linked to the coffers of Goldman Sachs, Lehman Brothers, American Insurance General, Merrill Lynch, Morgan Stanley or any other capital markets player that's made headlines of late. The reality is the seller is a value-add fund that's added its value and is ready to move on to its next project.
In July, CBRE Investors paid roughly $176 million for the 1.03-million-sf Colonnade I, II and III in North Dallas. The source says the owner logically doesn't want to be over-invested in any one marketplace.
The Summit, situated on 4.1 acres, has JPMorgan Chase & Co. in 65,993 sf or 17.9% of the building. It has 6.3 years left on its term. The second largest tenant is Administaff Inc., which has 48,612 sf or 13.2% tied down through October 2016. Other top tenants are Dow Jones & Co., FelCor Lodging Trust Inc., Chart One Inc. and Highgate Holdings. And the high rise's LEED certification is suppose to be in hand by April 2009.
[IMGCAP(2)]The Tower at Lake Carolyn and its garage, positioned on 3.5 acres, has five tenants occupying more than 40% in leases that have an average of 6.4 years left on terms. HFF's summary also says 42% of the leased space expires before 2014.
The market sources say there are buyers and there are lenders for low-leverage loans on high-quality assets despite the tough challenges to get deals done in today's cataclysmic capital markets. "Selling in today's market is possible although we do have a more shallow pool of buyers," one source adds.
But, another source does shed some doubt. "In light of what's happened in the past week, I can't tell you what's going to happen," the veteran says. "But if there is a market for class A office buildings in Las Colinas, those certainly are quality buildings."
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