Eight months ago, when New York investor Blackstone Real Estate Advisors bought the 34-story Maxus Energy Tower in Dallas, it was just one of a string of big downtown sales.
But after paying almost $60 million for the skyscraper, it now is back on the market as part of a package of properties that Blackstone hopes to peddle.
“The capital markets are right, and it’s time for a lot of people to take their profits and move on,” said Barry Brown of Dallas mortgage banker Holliday, Fenoglio, Fowler.
It’s a decision more and more Dallas commercial property owners are making to cash out of one of the nation’s hottest real estate markets.
“Some people who have bought properties think it’s time to get out with a profit,” said Randall Howard in the Dallas office of Eastdil Realty, which is marketing the Blackstone package. “We are in a market where values (of existing buildings) are getting very close to the cost of new construction.
“If we are not at a peak, then there is not that much room to go,” Howard said.
That was what prompted investor Craig Hall recently to sell his two downtown office towers St. Paul Place and Harwood Center to New York investor Witkoff Group for almost $114 million.
“I’d rather sell too early than too late,” Hall said. “We think this is the time to take some money off the table in this market.”
Parkway Properties Inc., a Mississippi-based real estate investment trust, was more blunt in announcing the sale of four of its Dallas buildings.
“Our decision to sell the Dallas properties was based on our belief that the significant amount of development and proposed development of office properties in the Dallas market may have the effect of depressing the recent growth in rental rates,” Parkway president Steven Rogers said in a written statement.
Parkway sold the properties for $53.25 million, booking a $3.5 million gain in the sale.
“Investors are continuing to place capital into Dallas, which makes this an attractive time for Parkway to exit the market,” Rogers said.
Brazos Fund has said the same thing about its pending $125 million sale of the Plaza of the Americas in downtown Dallas and other real estate assets.
The Dallas-based real estate investor is now putting some of the profits from its U.S. sales in depressed Asian markets.
And Houston developer Hines Interests LP couldn’t have picked a better time to sell or refinance its landmark Galleria complexes in Dallas and Houston, real estate investors and owners say.
“If ever you were going to sell assets like those, this is the market in which to do it,” said David Gruber, president of Dallas-based MEPC American Properties.
Dallas office building prices have risen from a low of about $30 per square foot in the early 1990s to more than $100 per square foot in many recent sales.
At the same time, billions of dollars of new investment capital have created a feeding frenzy for first-class properties.
Prudential Insurance Company of America has hired real estate broker Jones Lang Wootton to find a buyer for its 72-story NationsBank Plaza, downtown Dallas’ tallest tower.
The silver-glass giant could fetch more than $250 million.
Prudential bought out its developer partner in the project in 1995, just before the local real estate market took off.
“People who bought at the bottom of the market have made a nice profit,” said Robert Axley, managing director of Dallas-based investor Cottonwood Partners.
“It’s like with stock: Do you sell it now or hope you can ride the market a little higher?
“The dilemma, if you are a long-term investor, is if you take your money out of the market, what do you do with it?” Axley said.
Some public real estate companies and institutional investors such as pension funds aren’t structured to cash out of the market and pocket the proceeds.
“Owners like the big REITs are buying long-term yields; it’s not an appreciation play,” said Eastdil’s Howard. “They aren’t going to be cashing out of the market when values peak.”
