CSFB, Faison Hand Off Landmark CBD High-Rise for About $100M

Word on the street is the Los Angeles-based Berkeley Investments paid close to the expected value of $100 million for a landmark asset that was on the market in July 2004, pulled for a repositioning and quietly shown to the buyer earlier this year. The rumored price for the 49-story building is right in line with projected upside from a 70% occupancy and an $82.6-million assessment by Dallas County. The new owner, who's not talking about the final price, hired the locally based Lincoln Property Co. to manage the asset. Trammell Crow Co. will continue to lease it.

Berkeley's Jon Hamilton tells GlobeSt.com that he's been pursuing the high rise since Boston-based CSFB and Faison Capital Advisors of Charlotte, NC brought it to market last year. It went under contract to another buyer, fell out and then was pulled for repositioning.

After looking at several deals, Hamilton says 1700 Pacific was "the best one" to surface. "So, I put in an offer that was easily higher than the offer before and essentially convinced them to sell," he says. Start to finish, the deal took four months to close despite complexities from multiple agreements over sky bridges, parking garages and repeated extensions from longtime tenants, he says, adding the title document alone had more than 2,000 pages.

Hamilton says the biggest hurdle was convincing lenders that the deal had merit although it was trading for significantly less than the replacement cost. "Downtown Dallas office buildings do not sell well on Wall Street these days," he says. The acquisition loan was floated by the New York City-based conduit lender, Ixis North America Inc. The JV sellers, which owned the class A building since 1986, had CSFB's former man on the street in Dallas, John Alvarado, a TCC senior vice president of investment sales, steering the sale.

After last year's extensive renovation, the 22-year-old high rise landed 90,000 sf of new leases. "His leasing strategy is to come in and continue the leasing momentum that we started in 2004 bodes very well for him," says Jeff Eckert, TCC vice president.

To continue the momentum, Berkeley intends to lob an aggressive play to fill the halls of 1700 Pacific Ave., which has a 382,000-sf contiguous block on floors one through 12 and another 161,000-sf stack in the mid-rise. The old rate was $15 per sf to $16 per sf plus electric. Hamilton says the new one is $10 per sf gross for the first year and $1 per sf for subsequent years. A five-year lease would work out to $12 per sf, without a tenant improvement allowance, and a 10-year lease would average $14.50 per sf. "It will be just for six months and then it will have to go back to market rates," he says. "Whatever it takes to fill up is what we're going to do." On the retail side, the work's practically done: 39,000 sf of fully leased concourse space and 9,000 sf open at street level.

Eckert and TCC's new senior vice president, James Esquivel, will be handling the day-to-day lease-up chase under the direction of principal James Yoder. Like its peers, the TCC team is in hot pursuit of several 200,000-sf to 300,000-sf leases and one 500,000-sf deal--all eyeing CBD space.

The 39-tenant building sold with no immediate near-term lease rolls, according to Eckert. The law firms of Thompson & Knight and Akin Gump are the top space takers with 180,000 sf and 140,000 sf, respectively.