The five-year-old note was $27 million when the asset last hit the foreclosure docket. Although deal details are being kept under lock and key, Tom Bacon, founding principal of Lionstone, tells GlobeSt.com that $14 million is being pumped into immediate upgrades for the class B block of office and retail space along Forest Park Road in the North Stemmons Corridor. As the upgrades progress, Lionstone's execs will be fine-tuning a repositioning plan for a mixed-use foothold within a stone's throw of several hospitals, Love Field and the campus of UT Southwestern Medical Center, which also is the largest tenant in Exchange Park.

The note was bought through Lionstone Urban Investments I, a $185-million discretionary fund that launched in April. Bacon says the special fund is structured with a 70% leverage and eight- to 10-year hold.

For two years, Lionstone has been buying under-developed properties in expanding medical districts in Houston, Nashville, Chicago, Portland and now Dallas. Bacon says the Exchange Park purchase is one of the better pick-ups because it's a prime candidate for redevelopment and came with 10 acres for extra development. "From our standpoint, it's a perfect asset at the price," he says.

Bacon, estimating the initial work will be complete by December, says Exchange Park's future development will bring more medical office space and possibly some residential. It's too early to say if the name is going to stay or change.

Lionstone's first post-closing action was to put leasing and property management into the hands of Transwestern Commercial Services Inc.'s Dallas office, which oversees its other holdings in Dallas and Houston. In recent years, Exchange Park has taken some difficult hits on the office leasing side with insurance company, American International Group Inc., moving out and AT&T downsizing in the complex, which includes a 2,000-space parking garage. "We expected more people to leave than have," Bacon says. "They really like it there and they're staying."

Bacon says occupancy is picking up. The former AIG Tower at 6333 Forest Park Rd. is 75% filled--the largest structure with 14 stories and roughly 300,000 sf. The 131,000-sf mall at 6363 Forest Park Rd. is 90% leased and the 168,663-sf AT&T Tower at 6303 Forest Park Rd. is 30% to 40% occupied since its lone tenant lowered the shades on six of 10 floors. Mall tenants include four restaurants, deli, pharmacy, day care and US post office. One building boasts a Mickey Mantle bowling alley in the basement and another's claim to fame is it served as the headquarters for the defunct Braniff Airlines.

George Roddy, president of the locally based Roddy Information Services, says Crown Exchange Partners LP of Garden City, NY had its eight-year holding hit the foreclosure docket for "two or three months" running. Lionstone bought the note at the end of May in a deal put together by Scot Farber and Darrell Betts, both senior vice presidents for Grubb & Ellis Co. Even Dallas County's tax records have yet to reflect the ownership change.

"That's an area that's actually been overlooked to some degree for development," Roddy says, citing the one-block distance to both UT Southwestern's medical and research campus and Love Field. In some regards, he says, Exchange Park's land is more valuable than its existing stock of buildings, all products of the late 1950s and early 1960s.

Instant Insights /

GlobeSt.com EXCLUSIVE: New Owner Airs Plan for 625,000-SF Exchange Park

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