DALLAS-By month’s end, IPC US REIT will be holding its first deed in Texas, spending $56.3 million for the 844,000-sf, class A San Jacinto Tower, which has been on the market at least a year and victim of a couple sidelined contracts. IPC vows it will close the deal and flip a 15% stake to locally based PNL Cos.

The REIT will make the close with a $45-million, 10-year first mortgage with a 5.27% fixed-rate interest from the UK-headquartered Barclays Capital Inc. and immediately flip a share to PNL, which headquarters in the 33-story tower at 2121 San Jacinto St. in the Dallas CBD. When the deal closes, it will be the third major asset along Ross Avenue this week to be tagged for a closing before the month ends.

The PNL flip is still under negotiation as is the leasing contract, Y. Dov Meyer, the chief investment officer for the Toronto, Ontario-based IPC, tells GlobeSt.com. The buyer, which manages its assets, is interviewing brokerage houses for the leasing contract, a decision that will be made before the REIT takes the reins from Red River LP, an affiliate of the Texas Teachers Retirement System, and Farmington Casualty Co., part of the St. Paul Cos.

Meyer says “there is no one underlying reason” why the deep-pocketed buyer has been unable to win a deal in its target Texas markets of Dallas and Houston although it’s made several attempts in recent years in the $40 million and over bracket. In some cases, he says the REIT’s offer admittedly “just wasn’t competitive enough.”

Holliday Fenoglio Fowler LP senior directors Jeff Stone and Andrew Levy wed the REIT to PNL Cos., which put a bid on the building last year. David Porter, PNL president, says his interest in partnering on the buy landed the introduction to the REIT, which most often picks a local partner where it stakes a claim. “We felt either directly or indirectly we wanted to be a partner in this transaction,” Porter says.

PNL’s interest runs deeper than just wanting to own where it offices. The Arts District location is a beehive of activity due to the $275-million performing arts center that’s just broken ground. Plus, the 22-year-old San Jacinto Tower, one of the first big blocks of bricks to rise along Ross Avenue, has the class AA Trammell Crow Center and Chase Tower at its sides.

Porter believes San Jacinto matches up to its Arts District neighbors even though it’s 65% leased versus the 90%-plus of the next-door trophies. “With the right tenant finishes, it’s going to create equally good space,” he says. And, he adds, there is no structural deficiency as has been rumored, but there are more floors to be leveled as part of the turnaround plan.

Despite the high vacancy, San Jacinto’s existing roster “is pretty favorable,” Porter says. Ernst & Young, Clark Consulting and Merrill Lynch have 350,000 sf locked down with pacts that expire between 2009 and 2012. The buyer intends to spend $2 million or more to renovate the lobby, entry plazas and lighting as part of the turnaround plan to increase occupancy, according to Meyer and Porter.

The buyer, the only Canadian REIT investing solely in US assets, was founded in 1998 by Paul Reichmann. When the San Jacinto Tower changes hands, IPC US will have ownership interests in 28 office buildings and six retail centers, representing more than 8.3 million sf in 11 states.

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