Hillwood, Hines Set Bar at 25% Preleasing to Start 800,000-SF Project

DALLAS-Hillwood and Hines, setting up an inaugural joint venture, will be ready to break ground in early to mid-2006 on the first phase of an 800,000-sf, two-building office complex in Victory. The starting flag drops when the 400,000-sf One Victory Park shoots above the 25% preleased mark.

The partnership effectively is a 50-50 deal, Clayton C. Elliott, senior vice president for the Houston-based Hines, tells GlobeSt.com. Talks began a couple months ago, he says, citing Victory’s coming of age as a premier mixed-use development as the incentive to strike a deal.

“They’ve got considerable gravity at that location,” Elliott says about the under-construction W Hotel & Residences, 600 multifamily units, retail plans and the American Airlines Center anchor. “That type of environment took us from a generic site to a highly desirable site. That’s what caught our eye.”

Hillwood’s strategy for nearly three years has been to secure top-notch development partners for the $3-billion-plus build-out of 75 infill acres flanking the Dallas CBD and stretching into Uptown. David Hicks, senior vice president of Hillwood Capital, says discussions were held with other office developers, but key to any decision was that Hillwood would continue to market and lease all space. “Hines was our first choice,” he says, “given their expertise in mixed-use developments and green building design and cutting-edge technology.”

Elliott says Hines will manage the office complex and Hillwood does get to lease it. Rent is proposed in the high $20-per-sf range. Designed by Dallas-based BOKA Powell, One Victory Park has an 18-month construction window. The 18-story building will rise at the corner of Lamar Street and Victory Avenue, two blocks south of the $420-million American Airlines Center.

For at least a year, Hicks has lobbied hard for a lead tenant to kick off a 600,000-sf office building in Victory. But, the coveted deal has yet to materialize. The Hines-Hillwood partnership now tosses the focus to the 800,000-sf complex with the powerhouse players planning to knock on doors together.

Hicks has built a pipeline totaling 650,000 sf–five tenants in the 50,000-sf to 180,000-sf category. He predicts the first deal will be signed in the fall. Hicks says the tenant round-up is being done from inside the CBD, Preston Center, LBJ Corridor and Las Colinas as well as outside the metroplex.

Hicks is sticking to the broker’s mantra not to talk about unsigned deals. But, it’s well-known in the marketplace that a number of significant headquarters deals are at play. Among those looking to stay or land in town are Fluor Corp., which is coming from California, and top-credit locals like Southwest Securities Inc., Texas Capital Bank, Blockbuster Inc. and the Patton Boggs law firm.

“Talks got under way because there is a considerable number of tenants in the market looking for alternative space,” Elliott says. The partnership decision was mortared by Hillwood’s reputation. “Hillwood is known for outstanding quality and vision and obviously they’ve got the dirt,” he adds.

Elliott says the Victory project is one of three that Hines has in the works around the state. The development docket includes a $56-million hotel-condo project, Lakeside DFW, in Flower Mound, which is awaiting an incentive package from local officials. The 280-room hotel and 45 to 65 condos is the anchor for a 163-acre development by the Peter P. Stewart family and Pat Cornell of Cornell-Rader. Elliott says Hines also has plans working for Houston and Austin.