Cousins Picks Up Downtown Dallas Tower at Foreclosure Sale
- Aug 09, 2012
Cousins Properties Inc., of Atlanta, has acquired an 844,000-square-foot, Class A office building in downtown Dallas’ Arts District submarket at a foreclosure auction for a net price of $59.2 million, the company announced Wednesday. The building joins the small but growing number of downtown Dallas office buildings that have been foreclosed on recently.
Cousins had previously acquired a $10 million B-note backed by the building, at 2100 Ross Ave., in an off-market transaction.
2100 Ross had been owned by a real estate partnership set up by The Moinian Group, of New York, which had bought the tower for $73 million in April 2007, borrowing $71 million to do so. The foreclosure sale reportedly was on behalf of U.S. Bank.
The property is 67 percent leased; tenants include CBRE, Prudential Mortgage Capital and Bank of America Merrill Lynch. Cousins intends to reposition the property through “a variety of common area and amenity-oriented enhancements.”
“2100 Ross Ave. is an outstanding fit with our ongoing strategy to acquire quality urban office assets in the best southeastern submarkets at valuations below replacement cost,” said Cousins president & CEO Larry Gellerstedt in the announcement. “This investment also provides a rare combination of significant value creation potential and an attractive in-place yield.”
The price Cousins paid for the office tower at 2100 Ross Ave. equals $70 per square foot. Built as the San Jacinto Tower in 1982, the building was last assessed for tax purposes at $60 million, according to The Dallas Morning News. A source who is familiar with the situation but requested anonymity estimated the building’s replacement cost at $325 to $350 per square foot.
Cousins noted the building’s desirable location near Dallas’ leading cultural venues and the new 5.2-acre Klyde Warren Park, which connects the Arts District to Uptown Dallas by essentially roofing over a three-block stretch of the Woodall Rodgers Freeway, creating a roughly 1,200-foot tunnel. The park, to be completed this fall, will include a performance pavilion, a 3,000-person Great Lawn, a restaurant, a dog park, as well as a children’s discovery garden and playground.
2100 Ross joins several other downtown Dallas office towers that have gone through foreclosure within the past 12 months:
* The 30-story, 615,000-square-foot Patriot Tower, built in 1979, was sold through a foreclosure auction in September 2011 to Quality Properties Asset Management for $11.9 million. As of May 2012, it was under contract for sale to Encore Enterprises of Dallas, which reportedly plans to convert much of the upper two-thirds of the building from office space to residential.
* In March 2012, Dividend Capital Total Realty Trust announced that it had foreclosed on a nonperforming $20 million mezzanine loan it held on the 60-story, 1987-vintage Comerica Bank Tower, according to the Dallas Morning News. Metropolitan Real Estate Investors L.L.C. had owned the 1.5 million-square-foot building since 2006. The building’s $180 million mortgage comes due in 2017.
* And in early June, the 34-story KPMG Centre tower, which had $64 million in debt, was bought by its lenders for $42 million at a foreclosure auction, the Dallas Business Journal reported. The building’s appraised value reportedly was $44 million. KPMG occupies about 71 percent of the building under a lease that expires in 2015.
According to just-released figures from the CoStar Group, Class A office projects in the Dallas-Ft. Worth area reported a vacancy rate of 17.8 percent at the end of the second quarter 2012. The vacancy rate has been fairly stable, in the 17.8 to 18.1 percent range, over the past year.