X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

MIDLAND, TX-A controversial Las Vegas casino owner is betting on the auction block to do what he couldn’t do for the last eight years–sell a quartet of office buildings, with cratered occupancies, in a Texas oil town that’s seen better days. The no minimum, no reserve auction is set for Nov. 13 at the Hilton in Midland.

The seller is Ralph Engelstad, a self-made multi-millionaire who turned to philanthropy after he paid a $1.5-million fine to the Nevada Gaming Commission in the late 1980s for staging Adolph Hitler birthday bashes at his 2,600-room Imperial Palace positioned in the center of the Las Vegas Strip. Engelstad’s wheeling and dealing, for better or worse, most often falls in the three digits: an outgoing $104-million gift to the University of North Dakota for an ice hockey arena or an incoming $215-million check, split with a partner, from the sale of the Las Vegas Speedway.

For three years, Engelstad has been on a selling spree. News articles claim the multi-millionaire is looking to retire. The auction team’s story is Engelstad is “ailing” and wants to unload the Midland buildings so his family won’t be burdened with them, J. David Ryan of JDavR tells GlobeSt.com. Robert Deiro & Associates of Las Vegas is handling the auction along with JDavR, a Las Vegas brokerage and management firm.

Industry sources, who asked to remain anonymous, are making some side wagers that the shrewd Engelstad will seed the crowd to deliver a price to his liking. It’s no secret that he’s walked away from offers through the years because they fell short of his expectations. Another safe bet, GlobeSt.com is told, is the buildings, totaling 603,608 sf, are shouldering little, if any, debt.

But, Engelstad’s buildings are weighted down with extraordinarily high vacancies due to oil company consolidations and mergers, a fact of life in Midland, a boom or bust town with 70% of its economy dependent on oil pumped from the Permian Basin.

The town’s office occupancy for several years has ranged from 65% to 75% for the seven-million-sf inventory, says Dennis Clayton, vice president of the Economic Development Corp. It’s not a reflection on the buildings. Engelstad’s buildings are high on Clayton’s list to show when prospective suitors come looking because they are considered “prime products” for a back office or call center.

Neill McClung, president of Midland Red Oak Realty Inc., tells GlobeSt.com that out-of-towners most likely will be the ones bidding at the auction. He also predicts it will attract a fair share of users, specifically independent energy-driven firms with offices now in Houston. “Midland will always have a very healthy climate for independent oil operators,” he says.

What McClung can’t predict is how many will show up. “It’s hard to tell how many will come out,” he says. “That bulk price is going to look very attractive for the quality of the buildings.”

Martin O’Malley, senior vice president of Colliers International’s Houston office, says “the real problem is that it’s a market that has been contracting. It’s a bad time to be selling an office building in Midland, TX.” O’Malley’s observations are supported by Clayton’s calculations: occupancy is now 74% and rent brings in $8 per sf to $12 per sf annually.

O’Malley has been watching Engelstad’s buildings go on and off the market since 1994. As Midland’s market contracted, so did Engelstad’s asking prices. The $35 per sf asking price of eight years ago fell to about $15 per sf just a few months ago, O’Malley says.

Engelstad’s original portfolio was a package of six office buildings of class A and B-plus caliber that accounted for more than 1.2 million sf of Midland’s seven million sf. Four buildings sit in the 160-acre ClayDesta Plaza, a project of former gubernatorial candidate, Clayton Williams. Last year, Williams bought 626,543 sf or two of the four in his park.

The auction showpiece will be the 180,134-sf Centennial Tower, a 15-story, multi-tenant building built in 1979 on close to an acre at 200 N. Loraine in the CBD. It is 49.6% occupied. In 1999, Engelstad wanted a little more than $3.7 million. Last year’s price was $3.5 million.

The other high-profile, CBD property is Heritage Center, a 213,502-sf structure on about 5.5 acres at 500 N. Loraine St. Vacancy plummeted to 10% in the past six months due to Texaco’s exit to Chevron’s building at 15 Smith Rd. in ClayDesta Plaza. Built in 1991, Heritage Center was listed for almost $7.5 million in 1999, but the price dropped to $6.5 million in 2001.

Engelstad’s remaining ClayDesta Plaza properties are the 90,290-sf Smith Tower, a 1983 product sitting on just under three acres at 24 Smith Rd., and the A-B-C Building, a 20-year-old trio of low-rises, totaling 119,682 sf, on nearly 6.9 acres along Desta Drive.

In 1999, Engelstad was asking close to $1.7 million for Smith Tower, then reduced the price $100,000 for the 2001 marketing drive. The building, which insiders say historically has low occupancy, is 28% leased.

The low-rises have been empty for a couple years, the aftershock of the ExxonMobil merger and their office shift to Dallas. The 1999 asking price was slightly more than $3 million. Engelstad wanted almost $1.9 million last year.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 3 free articles* across the ALM subscription network every 30 days
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.