Pegasus, Westmount Buy 313,264-SF Office Duo

The joint venture partners' flagship buy is the 200,566-sf Courtyard at Arapaho, a vacant two-building complex at 250 E. Arapaho Rd. in Richardson that's been renamed to Richardson Commons, and 112,698-sf Atrium at Bent Tree, a 70%-leased six-story structure at 16775 Addison Rd. in Addison. The story behind the story is the class B buildings, in line for $5 million of cap ex, will be primed for lease to class A tenants now facing rising rental rates due to the market's uptick and expiring bargain-basement deals that were inked during the downturn, Clifford A. Booth, principal of Dallas-based Westmount, tells GlobeSt.com.

Booth says the capital pool will be used to upgrade the buildings' statuses to class B-plus or A-minus and provide a tenant-improvement reserve. "When you have a strong market like Richardson and the tollway, the rates start rising and tenants unwilling to pay rents for an A building start to migrate to B buildings," he adds. "We'll be the beneficiaries of that."

Booth says the starting quotes for Atrium space is $18 per sf plus electric. Richardson Commons is tagged at $17 per sf plus electric. In contrast, class A rates are rapidly pushing toward $25 per sf. The Atrium will be paced through cosmetic upgrades while Richardson Commons will be stripped down to the shell.

The JV, which includes investment partner Baker Realty Advisors of Dallas, has bought the assets from San Francisco-based Rreef North America, immediately jumping into different strategies for the lease-up campaigns. The common thread to the acquisition plan, though, is an anticipated three-year hold, Booth confides. Holliday Fenoglio Fowler LP in Dallas marketed the properties.

Booth says the Atrium, visible from the tollway, will remain multi-tenant, but Richardson Commons is being reserved for large users since it's the largest block of open class A space in its Richardson pocket, which is three miles south of another opportunistic buyer's new claim. At the Atrium, one-third of the leases roll within two years. "They're significantly below-market rates," he points out about the deal's built-in upside.

The partners' risk factor is Richardson Commons, but Booth says it's not as great of a risk as it seems. "We decided the most important feature of this building is that it's in Richardson," he says. "And, we're not looking to divide it." In fact, he says there are several prospects already sizing up the space.

Michael Ablon, a former senior executive for Cousins Properties Inc.'s Texas group who went out on his own nearly two years ago, started working the acquisitions when he launched Pegasus Ablon Properties in January. "I'm doing the same thing that I've done for the last 15 to 20 years--value creation," Ablon says. The going-forward plan is to buy, build and redevelop with a mixed bag of joint venture partners for office, industrial and retail. Ablon says office, though, is the focus for now because "there are greater opportunities." He has two more contracts pending.

The motive to buy Atrium and Richardson Commons, both built in the mid-1980s, was obvious in Ablon's mind. "There are great opportunities on both buildings to raise their standards," he explains. "Both are tremendous opportunities."

Johnny Johnson, principal of Dallas-based Capstar Commercial Real Estate, will lead the team to reposition Richardson Commons. It has a 155,984-sf two-story building fronting Arapaho Road and a one-story flex structure at the rear, with a landscaped courtyard to create a park-like, campus setting. Capstar principal Chris Taylor will spearhead the lease-up campaign for the Atrium at Bent Tree. Interprise Design of Dallas is the architect for both buildings.

"Arapaho Road and Addison Road are two locations that have been addresses for success in Dallas for many years," Steve Kanoff, a Westmount partner, says in a press release, "and they continue to signify quality prominence and opportunity. We feel very fortunate to be able to develop significant enhancements to both areas moving forward."