Fund Snaps Up 725,000 SF of Premier Dallas Office Space

July 21, 2010
By Barbra Murray, Contributing Editor

A portfolio of four Class A office buildings featuring an aggregate 725,000 square feet in the Preston Center submarket of Dallas, Tex., has just come under new ownership. The CBRE Strategic Partners U.S. Value 5 fund, a commingled private equity real estate fund sponsored by Los Angeles-headquartered CB Richard Ellis Investors, has purchased the three-building Preston Commons and Sterling Plaza from Chicago-based real estate investment firm Capri Capital Partners L.L.C.

CBRE is remaining mum on the amount of money it shelled out to acquire Preston Commons and Sterling Plaza. Los Angeles-based BentleyForbes had purchased the properties in 2005, relying on two separate first mortgage loans totaling $114.5 million from Hypo Real Estate Capital Corp. Capri provided two mezzanine loans for the properties and, after an agreement on refinancing was not reached between Capri and BentleyForbes, Capri stepped in as owner of the assets earlier this year.

Carrying addresses on Preston Rd., the three buildings that comprise Preston Commons feature a total of nearly 422,000 square feet on a 4.3-acre site. Preston Commons I is a 10-story structure that is also known as the Bank Building, and Preston Commons II and II are both eight-story buildings. According to BentleyForbes’ documentation on the properties, Preston I was originally developed in 1954, while the remaining two buildings sprouted up in 1986. Preston Commons also features three levels of structured parking accommodations.

Sterling Plaza, located on a 2.1-acre parcel at 5949 Sherry Lane, wraps up the group of buildings CBRE just acquired. The 19-story tower was built in 1984 and renovated in 2005. The property also boasts six levels of structured parking.

Now that CBRE has added the office assets to the Value 5 fund, it will institute a capital improvement program to reposition the properties. Currently, Preston Commons has an average occupancy level of 73.7 percent, and Sterling Plaza is 82.6 percent leased. The numbers, specifically for Preston Commons, come as no surprise given the current state of the Dallas office market. As per a second quarter report by real estate services firm Grubb & Ellis Co., the average vacancy rate in the Dallas area is 23.2 percent. With a 17.4 percent vacancy rate, Sterling Plaza is ahead of the game.

CBRE, however, is undeterred by the lackluster figures. “Dallas is a market where we have significant experience,” Vance Maddocks, President of CBRE Strategic Partners U.S., noted in a prepared statement. “We believe our strength of ownership coupled with our market knowledge will allow us to add considerable value to these already high-quality buildings.”