A big chunk of the Dallas skyline is for sale.
Six towers — including the city’s tallest, Bank of America Plaza — are being offered to investors willing to make a bet on Dallas.
Sellers are hoping to catch the eye of buyers with recent good news about Dallas’ downtown.
“If you look at the leasing activity in the central business district in the last 24 months vs. the previous decade, there is no argument that a paradigm shift is occurring,” said Chad Cook, CEO of Dallas-based investor Quadrant Investment Properties. “The mojo has been incredible the last 12 months in particular.”
Quadrant recently put its 22-story Saint Paul Place office tower on Ross Avenue on the sale block. The property firm remodeled the 36-year-old high-rise and wants to cash in on the investment.
Cook said major investors see the upside in downtown Dallas real estate. “You would be hard-pressed to find another central business district in the country that offers this kind of opportunity,” he said.
Cook would say that, of course, since he’s trying to sell his building.
But other property owners downtown have the same idea.
More buildings have come to the market in just the past few months. It’s the largest number of Dallas skyscrapers to hit the market at once in decades.
The offerings have something for everyone, ranging from pristine towers that are almost fully leased to fixer-uppers that will need millions in upgrades. The headquarters for Dallas’ biggest company, telecom giant AT&T, is also on the table.
The new 1900 Pearl office tower in the Dallas Arts District is expected to attract a record price of almost $700 per square foot when it sells. The Ohio State Teachers pension fund already has the high-rise under contract.
At 72 stories, Bank of America Plaza makes the biggest statement on Big D’s skyline. But buyers will have to spend millions to upgrade the 1980s skyscraper, which is about 70 percent leased.
Downtown’s 1700 Pacific tower is only about 40 percent rented to office tenants and is being pitched to buyers as a redevelopment opportunity.
“It will be interesting to see who steps up to buy all these buildings,” said Jack Crews, managing director at JLL. “The buyer for every one of these buildings is likely to be a different profile.”
Crews said he expects to see a lot of tire-kickers.
“There is a lot of enthusiasm about downtown Dallas, and now is the time for them to sell,” he said. “There is a lot of big money looking for deals.”
Building owners who have held on to the properties for several years also have to be watching both the U.S. economy and the property sector, which are late in the current cycle. Recent polls of commercial real estate executives say they are more worried about a recession in the next few years and the likelihood of higher interest rates that could eat into their profits.
In the real estate game, timing can be as important to success as a property’s location and quality.
“I think a couple of the assets haven’t performed that well for their owners, and it is time for them to be sold,” Dallas real estate broker Jack Minter said.
When Bank of America Plaza last changed hands in 1998, it fetched more than $300 million. Current sales price estimates for the 1.85 million-square-foot building are well below that mark.
“Dallas is still one of the best places to own commercial, and investors are still looking to invest here,” Minter said.
Some of the downtown sellers can expect a payday.
The 33-story 2100 Ross office tower on the edge of the Arts District sold four years ago to Dallas businessman Tom Dundon for about $131 million. The high-rise is 80 percent leased and is expected to fetch nearly $175 million.
Downtown office building values are being boosted higher by record rents in the nearby Uptown market. Average building rents in Uptown can be twice that of downtown towers.
“We think we are going to see investors show up domestically that have been waiting on true urban value-add opportunities to present themselves,” said Jonathan Napper of Cushman & Wakefield. “The central business district presents a great value alternative for tenants seeing an urban, walkable environment.”