ADDISON, TX-Grabbing its second class AA deed in North Dallas in months, KBS REIT has closed on the 353,461-sf Millennium Tower. The 87%-leased prized piece of real estate has traded for close to the $200-plus per sf that JPMorgan International Plaza II brought in April.

The 14-story landmark building and six-story parking garage at 15455 N. Dallas Pkwy. have been under San Francisco-based Rreef North America’s control since October 2003. As always, Texas’ confidentiality rule enables the price to be a closely guarded secret, although a good market barometer of the asset’s value is its $70.23-million assessment by Dallas Central Appraisal District.

“The price per sf was very, very similar to International Plaza. There might have been a 1% to 2% difference in the price per sf,” Walter Foster, senior vice president for the Newport Beach, CA-based KBS Realty Trust, tells “But when it came on the market, it was almost identical in terms of pricing, quality and rental rate structure. It was a very reasonable transaction.”

And like the 351,872-sf International Plaza, Millennium Tower’s upside, in part, lies in its location, one of the few submarkets in the Dallas area with steadily climbing rental rates and historically high occupancy year after year. “For us, it’s not a value-add purchase by buying low and hoping for a huge gain in a short period,” Foster says, explaining the hold will produce upside with moderate rent gains over time.

Foster says recent leases in the tower have brought $27.50 per sf to $28 per sf plus electric. “We’re going to hold with that,” he says. KBS has put Kim Brooks and Matt Didyk of Transwestern Dallas in charge of leasing while Houston-based PM Realty Group’s local team has been given management keys to the 3.3-acre landmark, recognizable by a prominent architectural crown.

Foster says there is some minor lease rollover coming due before the year ends, but basically the roster is “very stable” for the long haul. “There is not a lot of rollover. That’s one of the things that attracted us to the building,” he says. “And, it’s got blue chip companies in the building.” The sweet spot to that is they generally renew and often expand, he adds. The asset’s chief space-takers are Dresser Inc., SAS Institute, UnumProvident Corp. and HBO TimeWarner. It’s also the regional headquarters office for Cushman & Wakefield of Texas Inc.

“We want to perpetuate what’s there, take good care of it and maintain the occupancy in the building,” Foster says. Right now, the plan is a five or six-year hold.

The close was made with cash and debt although details weren’t readily available. Most often, KBS REIT opts for 55% to 60% leverage. CB Richard Ellis’ Gary Carr and Russell Ingrum, executive managing directors in Dallas, sold the nine-year-old asset for Rreef. Bargaining for the REIT was Bill Rogalla, senior vice president and acquisitions officer.

Millennium Tower pushes KBS Realty Advisors to 2.85 million sf of class A and class AA office space in Dallas. Foster says there are no more contracts in hand, but the REIT is far from being done with its selective shopping, in which quality and stability are chief criteria for the chase. “We know the kind of buildings we want to own. There’s only a certain slate that fits our investment criteria,” he says.

Foster says he isn’t finding the market to be slow, particularly since KBS has banked two major acquisitions in two months. Plus, he points out there are buying opportunities rolling in steadily for the REIT’s team to review. “We’re still continuing to see investors bring buildings to market,” he says. “It’s a healthy market and we anticipate it will remain healthy. And, we certainly look forward to more acquisitions in Dallas this year.”

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