Pegasus, Westmount Buy 313,264-SF Office Duo
By Connie Gore
THE DALLAS MORNING NEWS
Published June 26, 2007
DALLAS-Pegasus Ablon Properties, formed six months ago by a well-known
local broker, has teamed with Westmount Realty Capital LLC to buy its
first pieces of real estate. The partnership has paid north of $25
million to get a 313,264-sf class A foothold in two office buildings in
a pair of submarkets where large blocks of space are rapidly
disappearing.
The joint venture partners' flagship buy is the 200,566-sf
Courtyard at Arapaho, a vacant two-building complex at 250 E. Arapaho
Rd. in Richardson that's been renamed to Richardson Commons, and
112,698-sf Atrium at Bent Tree, a 70%-leased six-story structure at
16775 Addison Rd. in Addison. The story behind the story is the class B
buildings, in line for $5 million of cap ex, will be primed for lease
to class A tenants now facing rising rental rates due to the market's
uptick and expiring bargain-basement deals that were inked during the
downturn, Clifford A. Booth, principal of Dallas-based Westmount, tells
GlobeSt.com.
Booth says the capital pool will be used to upgrade the
buildings' statuses to class B-plus or A-minus and provide a
tenant-improvement reserve. "When you have a strong market like
Richardson and the tollway, the rates start rising and tenants
unwilling to pay rents for an A building start to migrate to B
buildings," he adds. "We'll be the beneficiaries of that."
Booth says the starting quotes for Atrium space is $18 per sf
plus electric. Richardson Commons is tagged at $17 per sf plus
electric. In contrast, class A rates are rapidly pushing toward $25 per
sf. The Atrium will be paced through cosmetic upgrades while Richardson
Commons will be stripped down to the shell.
The JV, which includes investment partner Baker Realty
Advisors of Dallas, has bought the assets from San Francisco-based
Rreef North America, immediately jumping into different strategies for
the lease-up campaigns. The common thread to the acquisition plan,
though, is an anticipated three-year hold, Booth confides. Holliday
Fenoglio Fowler LP in Dallas marketed the properties.
Booth says the Atrium, visible from the tollway, will remain
multi-tenant, but Richardson Commons is being reserved for large users
since it's the largest block of open class A space in its Richardson
pocket, which is three miles south of another opportunistic buyer's new
claim. At the Atrium, one-third of the leases roll within two years.
"They're significantly below-market rates," he points out about the
deal's built-in upside.
The partners' risk factor is Richardson Commons, but Booth
says it's not as great of a risk as it seems. "We decided the most
important feature of this building is that it's in Richardson," he
says. "And, we're not looking to divide it." In fact, he says there are
several prospects already sizing up the space.
Michael Ablon, a former senior executive for Cousins
Properties Inc.'s Texas group who went out on his own nearly two years
ago, started working the acquisitions when he launched Pegasus Ablon
Properties in January. "I'm doing the same thing that I've done for the
last 15 to 20 years--value creation," Ablon says. The going-forward
plan is to buy, build and redevelop with a mixed bag of joint venture
partners for office, industrial and retail. Ablon says office, though,
is the focus for now because "there are greater opportunities." He has
two more contracts pending.
The motive to buy Atrium and Richardson Commons, both built in
the mid-1980s, was obvious in Ablon's mind. "There are great
opportunities on both buildings to raise their standards," he explains.
"Both are tremendous opportunities."
Johnny Johnson, principal of Dallas-based Capstar Commercial
Real Estate, will lead the team to reposition Richardson Commons. It
has a 155,984-sf two-story building fronting Arapaho Road and a
one-story flex structure at the rear, with a landscaped courtyard to
create a park-like, campus setting. Capstar principal Chris Taylor will
spearhead the lease-up campaign for the Atrium at Bent Tree. Interprise
Design of Dallas is the architect for both buildings.
"Arapaho Road and Addison Road are two locations that have
been addresses for success in Dallas for many years," Steve Kanoff, a
Westmount partner, says in a press release, "and they continue to
signify quality prominence and opportunity. We feel very fortunate to
be able to develop significant enhancements to both areas moving
forward."
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