Argus Realty Marks TIC Sell-Out for $14M Office Buy

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IRVING, TX-Viewing the play as prime TIC material, Argus Realty Investors LP has just closed the book on the buy-in to a pair of class B office buildings bought in recent months for $13.8 million from Granite Properties Inc. The minimum buy-in was $262,500.

Fifteen investors were pooled for the TIC partitioning of the 85,900-sf DFW West at 4001 W. Airport Rd. and 85,212-sf DFW East at 4425 W. Airport Rd., J. Drever, vice president for acquisitions in Texas and the Central US, tells GlobeSt.com. The acquisition was the San Clemente, CA-based Argus Realty’s first in two years in Dallas/Fort Worth, but key to its interest was a price primed for a TIC investment. Not only was the minimum buy-in smaller than usual for its TIC investors, but the complex came with a steady cash flow and “healthy return on the back end,” he explains. The plan calls for a seven-year hold.

Drever says the TIC pool, all 1031 exchange investors, is heavily weighted with West Coast capital. The sweet spot is the minimal roll in leases and minor repairs that will be needed for the 23-year-old office buildings, situated on 5.83 acres at the south entrance to DFW International Airport.

DFW West is fully leased to 11 tenants. Drever says Automatic Data Processing Inc. from Roseland, NJ, which occupies 52,000 sf or 62% of the building, is in place until 2011 while the Calabasas, CA-headquartered Countrywide Financial Corp.’s lease runs through 2008. DFW East’s 84% occupancy creates the immediate upside, Drever adds. The roster has 28 tenants, the largest of which fills 8,000 sf. Bryan Graham with CB Richard Ellis Inc.’s Dallas office has been hired to lease the complex; Sean Attaguile with Transwestern Commercial Services’ local team is managing it. The quoted rent is $15 per sf.

The acquisition works out to $80 per sf or 25% below the estimated replacement cost of $120 per sf to $130 per sf, according to Argus. Dallas-based Granite marketed the complex through Andrea Peskind and Brad Thornburg in the Dallas office of Cushman & Wakefield of Texas Inc.

Argus made the close with a seven-year loan for $10.35 million from LaSalle Bank in Chicago. Brian Eisner, a principal with George Elkins Mortgage Banking Co. in Los Angeles, arranged the financing with the first two years as interest only at a 5.63% fixed rate.

Argus has been persistent in trying to acquire properties in North Texas. “We have made strong runs at several buildings and came very close,” Drever says. “Dallas is extremely competitive. We haven’t had much luck here, but that’s about to change.”