Chase Tower Deal Jumpstarts New JV Strategy

AUSTIN-Triple Net Properties LLC has bought one, sold one and secured a sales contract for a third–all class A office properties in the state capital’s bounds. The trophy catch is the 391,500-sf Chase Tower, a value-add landmark in the CBD that sets a new strategic plan into motion for the Santa Ana, CA-based investment group.

Triple Net most often solos on its buys, but this time the deed’s been divvied. The NNN Opportunity Fund VIII holds title to 47.5% of the landmark property at 221 W. Sixth St.; Triple Net LLC investors took 41.6%; and local firm, Endeavor Realty Group is in the play for 10.9% along with the leasing and management rights to the 72%-leased, 21-story tower. The seller is a joint venture of Fort Worth-based Crescent Real Estate Equities Co. and the Stamford, CT-headquartered GE Commercial Finance Real Estate.

“This is the beginning of a number of strategic joint ventures,” Louis Rogers, president of Triple Net Properties LLC, tells GlobeSt.com. Endeavor, like those firms who will pass muster in the future, is “highly regarded” in its marketplace and “a strong local partner to help us lease, manage and someday sell” the deeds that will be collected as Triple Net-backed JVs start to surface in US buying circles.

“It is the first of many,” Rogers vows. “We could have gone anywhere in the country and we decided on Austin.”

Rogers and Triple Net senior analyst Steve Leathers aren’t discussing how much Chase Tower cost nor do Crescent’s SEC records offer a hint. But, the 1.85-acre footprint, with a 720-space parking garage, is assessed at $68.89 million by Travis County. That and the 20-some offers that went on the table undoubtedly pushed the price considerably higher than the assessment even though it still traded at less than replacement cost based on Leather’s comments.

“This probably was one of the most heavily sought-after office buildings on the market,” Leathers says, adding Triple Net’s reputation at the closing table helped to drive the deed its way. Wally Reid of Holliday Fenoglio Fowler LP’s Houston office arranged financing through MMA Realty Capital LLC of Baltimore. Cushman & Wakefield of Texas Inc.’s Dallas team of Andrea Peskind and Brad Thornburg had marketed the asset.

Chase Tower, built in 1974 and renovated in 1994-95, will undergo “some fine-tuning” to common areas, including the lobby, and possibly a modernization of the Headliners Club, a daily favorite of the business community’s movers and shakers. The estimated $500,000 of work is ticketed to begin in three to six months.

JPMorgan Chase Bank is the tower’s anchor with 55,000 sf locked in until 2015. But, Rogers says, the building’s in line “in the near future to add a substantial, big tenant.” Currently, there are 24 tenants in the building–and plenty of room to add more.

On the sales front, Triple Net has a buyer in hand for the five-building, 281,885-sf AmberOaks V at 13620-40 Briarwick Dr. plus it’s just sold the three-building AmberOaks III along Loop 360. It’s also marketing Las Cimas II and III, another 308,325 sf of class A space along Loop 360, for $92 million.

The just-sold AmberOaks III is part of an eight-building corporate campus with Dell as the lead tenant. Triple Net picked up $32.96 million for the 206,770-sf trio, resulting in a $10-million gain for a two-year hold for its T REIT Inc., a 75% owner, and the TIC pack that held the balance. The buyer is private investor Chase Merritt, who was represented by Phoenix-based Voit Commercial Brokerage. The AmberOaks sales team was made up of Jeff Hanson with Grubb & Ellis Co.; Max Moss with Trammell Crow Co.; and Thomas Young, Dave Mellor and Phil Hurst, all with Triple Net.

Rogers says AmberOaks was put on the market because “it had appreciated dramatically” in the past two years. And, the same most likely will happen with Chase Tower once it’s stabilized, he says, adding the plan calls for a three- to five-year hold. “It’s a value-added deal so it should be above normal [return],” he predicts. “The investors will do very well. Just like Las Cimas and AmberOaks, it’s the right building in the right location at the right time.”