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DALLAS-In a behind-the-scenes trade, the locally based Lazarus Property Co. has turned over the deed to the bulk of 1401 Elm St. after a four-year hold to the European owner of the first nine floors of the 52-story landmark structure in the Dallas CBD. As the sale closed, so did another lease at the going-in rate of $6 per sf for built-out suites.

The new owner, with more than 400,000 sf to fill, is holding onto Peloton Real Estate Partners, which signed about 25,000 sf in recent months at the bargain-basement rate for a five-year lease. Joel Pustmueller, a Peloton partner, tells GlobeSt.com that the strategy is simple: “cover operating expenses and build a good tenant base for the future.”

The balance of the 1.1-million-sf building changed hands in a closed-door sale between Lazarus, led by Sam Ware of Dallas, and SCI-ROEV Texas Partners LP, with Richard Shaw as the Dallas agent. The hard times that have befallen Elm Place, once the premier CBD address, have cut the Dallas Central Appraisal District assessment to $9.9 million.

The building’s first nine floors are primarily leased for the long term to Bank of America while the remaining 43 floors or the “Tower” are just 25% occupied. In the last 30 days, 11 leases have closed as tenants and brokers prove office keys can turn for $6 per sf, just a shade more than the operating costs. Another five leases, totaling 15,000 sf, are pending, Pustmueller says, noting the line-up’s being filled by law firms and financial services for offices ranging from 3,000 sf to 5,000 sf. Signing on the same day that the building traded was Wetzel Enterprises, a private investment firm that will relocate from the Landmark Building in the West End to a 2,500-sf suite at Elm Place. The lease kicks in Jan. 1.

Pustmueller says the $6 per sf rate will be reassessed in six months, when he expects to have banked 100,000 sf at the fire sale price for office space that commanded close to $25 per sf in its heyday and “the middle teens” just a few years ago. “Our goal is to capture the above-market share that’s out there,” he says.

The Peloton team is courting an established restaurant operator, looking to launch a new eatery and catering service, for the 48th floor, a one-time home for the Petroleum Club. The deal is likely to close in a month.

The 38-year-old Elm Place includes a valet parking garage, retail mall and banking center while neighboring DART’s Akard Station. The property management will be handled by SCI-ROEV Realty Group, a subsidiary founded in sync with SCI-ROEV Texas Partners LP in 1991. The European group now owns about two million sf of office product in the CBDs of Dallas and Fort Worth.

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