Uptown Wheelings And/Or Dealings

[snooch]

Wonder what they plan to do with the land?
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PRIME DALLAS REAL ESTATE SALE

DALLAS (DallasNews.com) – Behringer Harvard Funds is purchasing almost a complete block that lies on the border between Uptown and downtown Dallas. The block is along the east side of St. Paul Street between McKinney Ave. and Woodall Rodgers Freeway. The seller is Olympus Real Estate. The site includes vacant lots and the five-story Precept office building on the freeway.

[gc]

Development Talks Begin for $10M Uptown Buy
By Connie Gore - Last updated: Mar 24, 2004 11:13AM
http://www.globest.com/RMIRM8T4FRD.html

DALLAS-Talks have begun with developers for a high-profile property in Uptown, bought a month ago as the first acquisition from the $110-million Behringer Harvard Short-Term Opportunity Fund I LP. A decision to develop hotel or multifamily could come within 90 days.
The Dallas-based duo of Behringer Harvard and PRG Realty picked up the deal when another fell out for 1909 Woodall Rogers, a 74,000-sf, class A office building and abutting Bank One drive-through facility and 1.6 acres of prized developable land. Real estate sources tell GlobeSt.com that seller Olympus Real Estate Partners got in excess of $10.2 million despite the trio's infill positioning in a high-brow location.

"For us, it's an opportunity play," says Robert Aisner, partner in Behringer Harvard. With office development less than likely, talks have started with developers as hotel and multifamily grab the spotlight. A decision could be forthcoming in three months, Aisner tells GlobeSt.com. As for the play itself, he says the mid-term fund's plan is simple: buy, reposition and sell in three to five years.

Mark Robertson, PRG principal, says the two struck a 50-50% partnership to pick up the asset. "It was the right size, has excess land and it's not right for a lot of people because it's a ground lease," says partner, Drew Peterson. "But, it's right for us. It's a perfect match between us and Behringer." The properties are leased for 99 years from Mrs. Orien Woolf of Dallas.

Trammell Crow Co. has secured leasing and management for the five-story office building, 76% occupied at sale time. But, there's work to do since Republic Title, with 25 months to go on its lease, exited 15,000 sf earlier this month. There's also "a significant roll" coming in a couple years, says Jason Mattox, Behringer's senior vice president who negotiated the acquisition. The top space taker is the headquarters for Precept Builders. The office space is quoted at $19 per sf for a five-year term with 50-cent bumps.

The assembly of mixed uses has "plenty of upside potential," says Mattox. "Among the options being considered is a continuity among all the tracts." But, the immediate plan is to address some deferred maintenance for the office building and garage.

Olympus acquired the properties in 1998 in a portfolio takeover. With $3.5 billion in three funds under management, Olympus has just one other asset in Uptown and that hold too is coming to a close as buyers are sought for the remaining condos at the 1999 McKinney Lofts, developed with locally based CLB Partners, says Greg Adair, a partner in Olympus. The 1909 Woodall Rogers sale, he says, was normal turnover of assets that resulted "in a transaction that most parties were pleased with."

[aceplace]

If they don't build, this would be a perfect candidate for eminent domain. Downtown Dallas is not made an exciting place to be when out-of-town developers can use it as a speculative land bank. The Dallas City Council can condemn it, use it for any public purpose, say a storage area for gravel, to meet the requirements of the eminent domain law, and then resell it to a developer who will build under contract, or forfeit ownership.

[jsoto3]

I am a bit confused. Are they purchasing just the building and tearing it down? Or are they also purchasing the remaining vacant lots on the block to develop?

[tamtagon]

Two quotes:
"A decision to develop hotel or multifamily could come within 90 days." and "As for the play itself, he says the mid-term fund's plan is simple: buy, reposition and sell in three to five years."

Sounds like they will leave the fate the property and existing structures to the eventual developer. They'll probablly sell the whole lot 'as it' once the value increases as neighboring property is developed. I'm skeptical that a decision to build anything here will happen until Behringer Harvard makes a big profit on the land.

[INTX dave]

I am really amazed at all of the planned or potential hotel development in downtown/uptown. The market is currently so weak. I wonder if the developers think that the new hotels will help the whole market (something new and exciting) or if they think they will steal the business from the existing hotels.

[barrycb]

INTX dave,

It will be a two stage bet; they will offer the market new product (W, Ritz, DT Boutique) which should drive above average occupancy for a couple of years (like Za Za), then the bet shifts to the continued development of the Dallas core as an entertainment district.

Ace,

At least the comment I made about Chavez in the Cancer Survivors Plaza thread doesn't toss around eminent domain. Behringer just purchased the asset; my frustration is with those who position developable land as a parking lot for decades in hopes that 80's land prices will return someday.