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FORT WORTH-In its ongoing bid to claim California space, Crescent Real Estate Equities Co. has signed the final documents for a development partnership with JMI Realty Services Inc. of San Diego while deploying part of its gain from two office building sales to help cover the buy-in cost. The end result of the double sale is the REIT netted another $69 million for acquisitions.

Keira Moody, vice president of investor relations for the Fort Worth-based Crescent, says the JMI partnership talks have been in the works for awhile, but papers finally got inked in the past week after the dust settled on the second sale, Two Renaissance Square at 2 N. Central Ave. in the Phoenix CBD. As previously reported on GlobeSt.com, Crescent sold the 195,733-sf, two-building Chancellor Park, located at 4510 and 4520 Executive Dr. in the UTC submarket, for $56 million or $286 per sf to Washington, DC-headquartered CarrAmerica Realty Corp. in early September.

In the second sale, the Pauls Corp. of Denver in a joint venture with Fairfield, CT-based GE Capital scooped up the 476,373-sf, 89%-leased Two Renaissance for $120 million or $251 per sf. The deal closed about three months after Pauls and GE bought the 484,000-sf sister, One Renaissance, for $128.8 million from Los Angeles-based Maguire Properties Inc.

Moody says Crescent carefully weighed whether to part with its only Phoenix office property. “While we still favor Phoenix as an area we’d like to invest in long term, we couldn’t pass up the offer,” she tells GlobeSt.com. Crescent also is a stakeholder in Desert Mountain, a resort residential development in Scottsdale, and Canyon Ranch, headquartered in Tucson.

It’s been no secret that the California markets are a top priority in the REIT’s inner circle. Crescent managing director in Los Angeles, Thomas Miller, “is continuing to scour the market for acquisition opportunities and development opportunities,” Moody says. The crux of the strategy is to acquire high-return properties with strong potential for future partnership sales, much like it’s eventually planning to do with Hughes Center in Las Vegas and as it’s done with the Crescent in Dallas.

Besides California and Texas, Crescent’s target markets are Las Vegas and Miami. Moody says the REIT’s not holding anymore purchase contracts, but “we are working an extensive pipeline for acquisitions.”

Getting a foothold in the prestigious Del Mar Heights submarket is the kind of “play” that the REIT’s been chasing for roughly 18 months as it juxtapositions itself into an investment manager. In the case of the Paseo Del Mar development, Moody says JMI had the prime piece of land and needed a development partner.

According to Moody, Crescent invested $23 million for an 80% stake in the 240,000-sf Paseo Del Mar, which is rising along El Camino Real, just north of the Interstate 5 and I-805 merge. The spec development is valued at $82 million, including its 65% leverage.

“We are very enthusiastic about this development with JMI Realty. The Del Mar Heights submarket is one of the premier submarkets of San Diego,” John C. Goff, Crescent’s vice chairman and CEO, says in a press release, “and it is particularly interesting to us because it has such high barriers to entry due to limited land availability.”

JMI broke ground about two months ago on Paseo Del Mar while it firmed up the final terms for the partnership contract. Under the plan, JMI will lease the office trio; Crescent will manage it.

“We have a significant number of customers lined up to be in the buildings,” Moody says, adding there are no signed leases to date, but “strong commitments for a significant amount of the space.” The development delivers in August 2006.

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