Fort Worth Investors Win Race for 337,500-SF Bank of America Building

"We were going up against quite a few bidders from Dallas and all over the place, at least 10," James Eagle, president of Red Oak Realty LLC, tells GlobeSt.com. "It was a healthy pack of able-bodied bidders." The 500 W. 7th St. purchase encompasses nearly 2.75 acres, including a vacant tract capable of holding a four-story building.

The seller is Elm Street Portfolio, a subsidiary of the Italian investment group, SCI-ROEV, which agreed to "test the water" for a free-and-clear sale after Colliers International Inc. executive vice president David Glasscock knocked on its door. "I think we just approached them at the proper time," he says. The deal closes out SCI's holdings in Fort Worth, but not in the Dallas area.

Glasscock says the listing attracted regional and national investors in its 60-day run on the market. The buyer of record, First on 7th LP, is made up of the Darden family of Fort Worth and Eagle. "They looked at the credibility of the company and who they felt could close the deal," Glasscock says. "It was the most credible offer that was out there." The Colliers' team also included senior vice presidents Cary Krier and Kevin Brookmole.

In Fort Worth circles, the return to local owners is important. "I think it helps people to know it's in local hands," says Eagle, whose Red Oak vice president Joe Kline steered talks for the buy side.

The high rise, built in 1962, underwent an extensive renovation in 1999. Still, its 19th floor has been dormant since it delivered. Eagle says the penthouse is now being eyed for a build-out as "three or four" apartments. Meanwhile, talks are underway with tenant prospects for 15,000 sf above the 631-space, eight-story parking garage, which spans a full city block. The space, used years ago as First National Bank's cafeteria, is being marketed for data center, retail or office use. The developable tract, for now, is banked.

Eagle says the partnership intends to "enhance" the class B-plus building with class A amenities to nudge it to the next level. It's the same strategy, he says, they used at the Water Gardens, the office acquisition that launched the partnership nearly three years ago.

Bank of America Building's 277,000 sf of rentable space is 85% leased to a 26-tenant roster. The bank occupies about 100,000 sf plus has a 36,000-sf motor bank on one of the asset's four tracts. The bank's lease doesn't expire until January 2010, according to Glasscock. "It's a very stable rent roll," he says. "A majority of the tenants have been in the building for over 10 years." Its occupancy has ranged from 82% to 87% for the past 15 years, he adds.

Eagle says many tenants hail from "old Fort Worth families" who have had offices in the building since the 1970s. "I used to lease it years ago," he says, adding he will do so again as well as manage it under the partnership terms. "We definitely had some experience and knowledge with that building and that aided us in seeing the value."

The building's quality, location and the Downtown's 6.1% office vacancy had all the right elements for Red Oak's acquisition strategy, according to Eagle. "This asset would work in any similarly sized city because it's such a perfect size and has been so perfectly maintained," he adds.

The Bank of America Building sits in the shadow of the one-million-sf Burnett Plaza, which recently sold for $172 million. Though the latest trade isn't a class A, local sources remain confident the deal closed at $15 million to $20 million based on market dynamics.