Praedium, Centennial Team on $42M Mack-Cali Acquisition

The off-market acquisition marks the first time in several years that the New York City-based Praedium has bought office product in Dallas. Praedium, the majority owner, and Centennial, the asset manager, have acquired the 367,018-sf TriWest Plaza at 3030 LBJ Freeway in Dallas and 187,312-sf Century Building at 84 NE Loop 410 in San Antonio. The early 2005 closing will bring the swap of Santa Fe Plaza, an empty 82,576-sf building at 1122 N. Alma Rd. in Richardson.

Centennial, a previous buyer of Mack-Cali properties, put the deal before Praedium, which has sold most of its Texas holdings save for a few assets in Houston. "It's an interesting transaction," Chris Hughes, Praedium's principal, tells GlobeSt.com. "It wasn't so much a great desire to go back to Texas as it was a good transaction."

The office trio was "attractively priced...and well located," Hughes says. "The hope is the overall market will continue to show recovery."

Gary Carr and Russell Ingrum, CB Richard Ellis Inc.'s investment sales team in Dallas, were the buyers' consultants for the transaction. Centennial was the general partner in May 2002 for the $34-million acquisition of a four-building, 489,000-sf Mack-Cali package in Dallas/Fort Worth.

When the next deal closes, the Cranford, NJ-based REIT will have stripped the portfolio of all wholly owned Texas properties. Two joint venture assets in Houston are not for sale at this time, says Mitchell E. Hersh, president and CEO of Mack-Cali.

Hersh tells GlobeSt.com that talks began a couple months ago for the off-market sale of the unencumbered properties, which were on the disposition list a couple years ago and then pulled for stabilization. "We've enjoyed doing business in Texas, but strategically, with how I've reshaped the company, it didn't fit," he says.

Texas "has huge challenges to keep buildings well occupied," Hersh says, "and meet the demands of the marketplace." TriWest Plaza is 81.8% filled and the Century Building is resting at 90.6% occupancy.

The new owners, Hersh says, are going into the deal with a "leasing challenge." The plan calls for Centennial to manage the assets and hire third-party leasing teams, according to Hughes.

All in all, Hersh says the latest sale "was a fairly fluid transaction." As before, the gain will be redeployed into the REIT's core markets in the Northeast and Mid-Atlantic. In 2001, Mack-Cali began selling assets in markets west of the Mississippi River, except San Francisco. Hersh says the Denver portfolio, 20 buildings totaling nearly 1.6 million sf, will be held for a couple more years. Meanwhile, the 319,535-sf Brandeis Building at 210 S. 16th St. in Omaha is again up for grabs because the REIT ended up foreclosing after financing part of the mortgage for a local buyer, Hersh explains. "We are making progress with a residential converter," he adds.

In contrast, the three San Francisco buildings, totaling 755,891 sf, are "well leased," Hersh says. "It's been my position and strategy that we would retain the West Coast and have a bi-coastal presence."