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Texas Investor Buys Near-Vacant Office Building From New York REIT
Low Interest Rates to Spur More Deals for the Buyer
A Texas-based real estate investment and services firm has made its latest buy in North Texas and plans to renovate the office building.
Dallas-based Sunwest Real Estate Group bought the building from iStar, a New York City-based real estate investment trust, according to CoStar data. The three-story, 185,148-square-foot office building is at 2901 Kinwest Parkway in Irving, Texas.
Terms of the deal were not disclosed, but the Dallas Central Appraisal District last valued the property at $13.6 million.
“We’ve been working on [the deal] since November in starts and stops,” Marc Grossfeld, managing principal at Sunwest Real Estate Group, said in an interview. “For all intents and purposes, we are buying a vacant building. We think repositioning a vacant building in this submarket will have long-term potential.”
The Irving office building has been the home of operations for AllianceRx Walgreens Prime, a home delivery pharmacy collaboration between Walgreens and Prime Therapeutics. But the company is in the midst of moving out of the office building into about 90,000 square feet of space in Dallas as part of a larger real estate strategy for the home delivery pharmacy.
In looking at the building, Sunwest Real Estate Group knew the pharmacy would no longer be leasing space, but given the firm’s knack for renovating and leasing up value-add office buildings, Grossfeld said he wasn’t concerned and still isn’t concerned going forward. That being said, a lot has changed since the firm began looking at the building with the coronavirus pandemic bringing a new level of uncertainty into the investment market.
“I am nervous with the current environment and leasing has slowed down, but this is the building for us and we are going to renovate the building and market it as a low-cost back office call center,” he added. “It’s a very attractive value proposition for call center users in today’s environment.”
Some office tenants, such as dentists, unable to work for what could be months, he said, have begun asking for special lease considerations in existing office buildings Sunwest Real Estate Group manages. So far, he said, the team has been able to handle those requests.
“There is no standard operating procedure,” Grossfeld said. “These are unprecedented times and we are looking at this on a case-by-case basis. Right now, we are evaluating April, but haven’t evaluated anything beyond that.
“A few of our dentist tenants can’t practice right now and whether that’s six months or 45 days, it’s hard for us to make a decision like that today,” he added.
In future deal making, Grossfeld said he believes the market will create some buying opportunities, but those buyers will have to carefully underwrite rent growth and manage for potentially extending lease up time. For sellers, they may need to set more realistic expectations, he said, and not expect pricing from months ago to return anytime soon.
“Something we still have going for us is the really low interest rates,” he added. “We are still going to be buying.”