Energy Square Sale Adds Approximately $95 Millionto Younan Balance Sheet

DALLAS-A long-term plan involving a “recycling” of current assets, as well as a strategy to avoid a maturing debt prompted Younan Properties Inc. to sell the three-building office portfolio dubbed Energy Square. The Southern California-based Younan Properties collected about $95 million for the portfolio, which totals 953,622 square feet, from the buyer, a joint venture between Champion and Lincoln Property Co. and Long Wharf Real Estate Partners.

“We typically hold our assets from three to five years, and we held this for three years,” Younan Properties’ Chairman and CEO Zaya Younan tells GlobeSt.com. “We stabilized it, we added value to it, and the loan was coming due. We felt it was easier to sell the asset than to refinance it.” He adds that the cash obtained will strengthen the balance sheet so his company can start acquiring once again.

When Younan Properties acquired Energy Square, occupancy was 77%. As part of its business model, Younan Properties increased occupancy to 85% and made cosmetic improvements in the buildings, which are located on Greenville Avenue. Younan says all three buildings were in very good shape when acquired.

He adds that the assets attracted a large amount of interest from credible bidders – all were institutional and many wanted to use the potential buy to enter Dallas. “When you see a lot of institutional buyers coming to buy assets in Dallas, especially for the first time, it’s a good sign that the market is strong,” Younan comments.  He goes on to say that the buyer offered certainty of close and knowledge of the market. Longwharf’s previous incarnation was Fidelity Real Estate, which has had a significant presence in the Dallas-Fort Worth area.

As the dust settles on the Energy Square transaction, Younan Properties is beginning to market, through Jones Lang LaSalle’s Dallas office, the 850,000 square-foot KPMG Building at 717 N. Harwood St. in the CBD. Younan says this was another asset purchased approximately five years ago and it also carries maturing debt. However, unlike its hold of Energy Square, Younan Properties invested a significant amount of funds in refurbishing the building.

“We literally gutted this building and put everything brand new in it,” Younan explains. “It was completely modernized with the latest and greatest of everything.” With an occupancy of 70%, Younan says this is a value-add play for the buyer.

Younan says that his company’s sales efforts doesn’t mean he’s turning his back on Dallas, however. Dallas has performed very well for the company. “We’re trying to recycle some of our capital, deleverage our loans and strengthen our balance sheet so we can grow and buy again,” Younan explains. “That’s part of the long-term strategy.”