Stacey Davis, vice president for the Los Angeles-based buyer,credits CB Richard Ellis' executive managing director Gary Carr inDallas with putting 4245 N. Central Expwy. on M West's desk. "Heput two and two together," Davis says, pointing out that M West'seye is only on Uptown-Turtle Creek and Preston Center officebuildings.

|

Behringer Harvard Short-Term Opportunity Fund I LP held the22-year-old building in a partnership with Behringer HarvardHoldings, taking 62.5% of the ownership interest at acquisition inAugust 2004 and investing $3.5 million in equity. The partners paid$7.7 million for the building.

|

In an SEC filing, Behringer Harvard says the sale pricerepresents a loss to the fund, but is predicated on the average oftwo appraisals, which is $8.9 million. "While the identifiedthird-party purchaser is also offering a price higher than theaverage of the two appraisals, it is still substantially less thanthe purchase price Behringer Harvard Holdings is paying to thepartnership," it reports, noting that its $12-million payout was34.8% higher than the average of the two appraised values.

|

[IMGCAP(2)]M West is starting out with 87% occupancy in theseven-story, class B office building. Davis tells GlobeSt.com that12% of the leases will roll before 2011, 23% in 2011 and 54%through 2012. "There's upside in the rents," he emphasizes, addingthe average lease is 4,000 sf. Nathan Durham of PM Realty Group inDallas has been brought on board to lease the asset with a quotedrate of $21 per sf plus electric.

|

In the fund's SEC filing, it reports falling short of leasingexpectations for its acquisition strategy. Capital One was seatedon the first floor, but two large tenants didn't re-up as BehringerHarvard had expected. Today's roster also includes BGO Architectsand the McCarthey Co.

|

Nonetheless, the asset was attractive to the fund for the samereasons as M West: a prominent location near Downtown Dallas in aperforming submarket. Behringer Harvard concluded that increasedtenant-improvement costs and unexpected capital expenditures forthe partnership have increased its basis in the 86.4%-leasedbuilding "to the point where its general partners believe that itis unlikely that the partnership will be able to sell the buildingfor a price that will result in a cash-on-cash gain."

|

Davis points out that M West is a long-term holder, which is whyit's focused on Uptown and Preston Center, the two best performingoffice submarkets in the city. "We can feed off the sticker shockin Uptown proper," he says. "We feel like the building presentswell. It's got a good place in the market along CentralExpressway." And, the tenant profile is similar to 3500 Oak Lawn, a101,000-sf class B office building that M West bought in January2006 and is now prepping for a renovation.

|

The building will be re-branded to 4245 Uptown to take advantageof its 0.64-acre irreplaceable location at the corner of FitzhughAvenue and North Central Expressway, Karl Slovin, M West'spresident, says in a press release.

|

Behringer Harvard's point man was senior vice president MichaelWestfall. "Despite all of the current market turmoil, M WestHoldings stepped up to the plate and closed the transaction," hesays in the release.

|

Davis says the purchase was underwritten for five years althoughM West is a long-term holder. The deal crossed the finish line witha three-year floating-rate loan from New York City-basedCitigroup.

|

With the deal now closed, Davis says the search has picked upagain for more office deeds in M West's favored submarkets. "Welike what's going on there for long-term holders," he says.

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.