California Buyer's $18M Hooks Another Piece of Dallas

"We were just interested in a prime asset in a prime location," Zaya S. Younan, chairman and CEO of Younan Properties Inc., tells GlobeSt.com about the 45-day, start-to-finish close for One Graystone Center, a 15-story office building at 3010 LBJ Freeway in Dallas.

The 60%-leased office building, which is being primed for a $2-million renovation, represents the largest office building acquisition in the 15 months since Younan founded the buying group with US capital from a family trust, a high net-worth individual and institutional funds. "Graystone will be the beginning of a major expansion for Younan Properties in the Dallas market," he confidently says.

One Graystone Center, built in 1982 and sitting on 3.7 acres, was plucked from Dallas-based Kolter Property Co., which hired the Holliday Fenoglio Fowler LP team of Andrew Levy and Jeff Stone to sell a nine-building package. The properties initially were offered as a whole or individually. Younan confides he's working a deal for a portfolio in excess of one million sf, but he's not saying he's the one lined up to take the rest of the Kolter assets.

Younan Properties assumed a $14-million loan and put up the balance in cash to take the Graystone deed. Four months earlier, he plunked down $7 million in cash for the 152,500-sf One Brookriver Place in Dallas, a class B holding sold by Morgan Stanley Dean Witter. The deal closed in less than 20 days. Next month, Younan confides he will take the deed to 1250 Mockingbird Lane, a 116,000-sf class B building owned by Texas Land & Title Co. of Dallas. Younan says the deal, in the works for two months, will close at $6 million via a refinance.

Younan's Dallas office acquisitions have one common factor: low occupancies. Graystone was sitting at 53% when it went under contract. By the closing date, Dallas-based Kimball Homes Inc. was signed to a 21,000-sf lease with a seven-year term to push occupancy to 60%. Move-in will take place in August. And that, says Younan, is just the beginning for the Graystone repositioning.

Younan has hired two Dallas firms, Stream Realty Partners LP and Peloton Real Estate Partners, for property management and leasing, respectively. Younan predicts Graystone will be 80% leased in the coming months and 100% in eight to 12 months.

"We will hit the streets with very competitive rates," Younan says, noting the package will be built with a $17 per sf quoted rate, sweetened with tenant improvements and shored up with free rent plus services to help "ease the process of moving." He firmly believes the rehab of the building and 1,200-space parking garage will sell the space.

"By providing the prettiest building on the block and providing the best service on the block, the tenants will come to the building," Younan contends. "At the end of the day, tenants look to be in a building that offers services that others cannot." The Graystone makeover includes exterior and interior upgrades, cosmetically and mechanically. As for the amenities, a concierge service, restaurant and gym are part of the plan.

Younan started buying in Texas in summer 2002, taking deeds to two class B office buildings in Houston. In December 2002, he bought two more Houston office properties. The plan is to buy another one million sf of office product in Houston and an equal amount in Dallas. Younan, an ardent Texas fan, believes Houston and Dallas-Fort Worth are strong on the upside and sport less risk on the downside than what is generally perceived by market watchers.

Since its founding in January 2002, Younan Properties acquired more than 1.5 million sf in 20 office buildings, mostly in California and Texas, and sold 350,000 sf in eight properties. The strategy now is to trade in its class B product for class A. In the next three years, the goal is to add another 20 million sf in a coast-to-coast search for value-add, class A office buildings where Younan can go in, change the image, boost the occupancy and then sit back for a long-term ride.

"The hallmark of Younan," the founder says, "is our ability to move very fast and complete the transaction." The well-known Grubb & Ellis investment sales team of Darrell Betts and Scot Farber represent Younan Properties.