Equastone Wins Race for 319,421-SF Trio

CMD, still working to close out its local holdings, has turned over the 158,650-sf Landmark at 14800 Landmark Blvd., 74,125-sf Emerald Plaza at 14900 Landmark Blvd. and the neighboring 86,646-sf 14850 Quorum Dr. The portfolio was 78% leased at sale time. The class B-plus trio sits at the ramp of the Dallas North Tollway, a high-rise office pocket making headway in occupancy and rent due to a positioning north of the heavily congested LBJ Freeway.

Clint Harrington, executive vice president in Texas for the San Diego-based Equastone, tells GlobeSt.com that the value-add plan, calling for at least $1 million in upgrades, targets class A tenants in the submarket who now are facing higher rates. "As prices continue to increase in the A market, people will need to get back to the B buildings," he explains. "A dressed-up B-plus building won't be too far from the corporate environment that they're used to."

Harrington says the delta already is widening between the two classes: class A is running nearly $24 per sf in the Quorum-Bent Tree submarket and class B is hanging at $17 per sf. He says Equastone, which picked up some deals en route to the closing, is quoting $19 per sf gross on three- to five-year deals with 50-cent annual bumps.

Equastone's newest properties primarily are filled with medium and small users, with annual rollovers weighing in at 15% to 20%. Ameriprise Financial Services is the largest tenant in the eight-story Landmark; First Support Services Inc. in the six-floor Emerald Plaza; and Homecomings Financial Network in the five-story 14850 Quorum.

Landmark is 76% leased; Emerald Plaza, 72%; and 14850 Quorum, 85%. The submarket at large has a 15% vacancy. "There's definitely some upside for us to exceed market occupancy," Harrington stresses. Matt Hurlbut and Matt Didyk with Transwestern Commercial Services bested three other brokerage teams to win the leasing assignment.

Harrington predicts Landmark and Emerald Plaza will be leased up in a year to 16 months. He's banking the Quorum Drive building will be filled in six to nine months. "We'd like to get them to where the properties are stabilized," he says. "Out typical hold is three years."

The Holliday Fenoglio Fowler LP team in Dallas of Andrew S. Levy, senior managing director, and Todd W. Savage, director, ran the sale. "At the end of the day, there were eight offers," Savage says "It was a very competitive bidding process. Value-add opportunities in Dallas are flying off the shelves as investors embrace the job growth levels that we've not seen since the late 1990s." He says the mix of would-be buyers were "coastal and local," including several 1031 exchange players from California.

Equastone has spent $168.2 million in 10 months in Texas. Harrington, who's holding more contracts in all four major metros, says the investment group expects to drop another $200 million to $300 million before the year ends. Equastone is operating with a $2-billion pool to fund two years of buying. "The appetite for Texas has intensified," says the senior exec, who teamed with Equastone chief investment officer Jeff Schindler to close the CMD deal. Its past month of dealmaking in Dallas/Fort Worth has scored wins for the 225,000-sf Atrium at High Point and 317,472-sf VHA Place, both in Irving.