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Investors snapping up towers along DART line
05/30/2003

By STEVE BROWN / The Dallas Morning News

Investors hoping to hitch a ride on the DART light rail system have gone on a buying spree in northeast Dallas.

Four office towers along Dallas Area Rapid Transit's red line have changed hands in the last week, and two more are under contract to sell soon. In all, more than $130 million worth of properties are in play.

Real estate brokers who've closed some of the recent sales say that fierce competition in the far suburbs and the popular transit system have sent investors south on North Central Expressway looking for deals.

"Many investors have come to look at proximity to the DART light rail stop as offering a competitive advantage for their properties," said Jeff Stone, senior managing director of Holliday Fenoglio Fowler LP.

"If you look at the buildings that are directly on the rail line, they have had higher occupancy and effective rents."

Mr. Stone and his partner, Andrew Levy, have just closed sales on four buildings near the Mockingbird and Lovers Lane DART stations.

Transwestern Investment Co. of Chicago bought the two Energy Square office towers at University and Greenville and the Triton Energy Tower at North Central and Milton from a Canadian investor, Kolter Properties.

Together these buildings fetched almost $65 million, brokers say, and have more than 980,000 square feet of office space.

Just south of there, at North Central Expressway and Twin Sixties Drive, the 20-story Premier Place office tower sold last week to Cornerstone Real Estate Advisors, an affiliate of Massachusetts Mutual Insurance Co.

Cornerstone's George Helf agrees that having the yellow trains stop at Mockingbird Station next door to Premier Place is a plus.

"I live in Chicago, and trains are a big part of business life there," Mr. Helf said.

"I don't think Dallas has seen the full benefit of it yet, and DART's importance will grow."

The Mockingbird Station retail complex next door and Premier Place's proximity to executive housing in the Park Cities was also important, he said.

Investors shopping along North Central Expressway south of LBJ Freeway have also recognized that a lack of empty construction sites means less competition in the future from newer buildings.

"There has been so much overbuilding in the far out suburbs that we see investors going back into the city," said Mr. Levy of Holliday, Fenoglio Fowler.

Defensive investments


"People are trying to buy defensive investments that aren't easy to duplicate."
Transwestern Investment's purchase of the two Energy Square buildings and the Triton Energy tower make it one of the biggest landlords along North Central.

"We saw the DART line as a huge plus," said Matt Haley, the company's senior vice president of acquisitions.

"The ridership on DART has been better than expected and will appeal to tenants."

Transwestern plans to remodel the two Energy Square buildings. Altogether, the three towers it purchased are about 80 percent leased.

"We saw them as undermanaged properties with a lot of potential," Mr. Haley said.

More sales in the area are pending.

An investment partnership headed by Dallas' Harvest Partners is buying the NorthPark One and NorthPark Two office buildings at the southwest corner of Park Lane and North Central. The two silver glass buildings are next to the Park Lane DART station.

And several buyers are shopping the 15-story 10000 North Central tower, which recently came on the market.

North Central market


Investors have had a love-hate relationship with the North Central market.
In the late 1990s, the area south of LBJ Freeway lost favor with buyers when all the activity moved further north to the Telecom Corridor.

And construction along North Central – first the widening and now the LBJ Freeway interchange construction – chased off some potential buyers.

"People used to be concerned about North Central, but now that isn't a problem," said Jack Minter of Cousins Properties. "If you look at the fundamentals of the market, they are great.

"Some office building owners made a mistake when the DART line was being built, and they didn't lobby to have a station put in at their buildings," he said.

Driving all the recent purchases is investors' desire to buy seemingly undervalued commercial properties, he said.

"There is a tremendous amount of capital in the market," Mr. Minter said. "Dallas crashed early, and people feel now is the time to buy."

Mr. Helf of Cornerstone Real Estate agrees.

"We have gotten back into the office buying game this year, and Dallas is one of the markets that we are interested in," he said. "Dallas is always one of the first cities to come back, and we want to position ourselves."

E-mail stevebrown@dallasnews.com