Location | 3860 and 3890 Northwest Highway, Dallas, TX 75220
Projected IRR | Approximately 20%
Actual IRR | Approximately 22%
In December 2006, CREA Real Estate Advisors acquired Bluffview Towers, a Class A asset o the western edge of the Preston Center submarket, one of Dallas’ most prestigious – and tightest – markets. CREA acquired the building at a price significantly below replacement cost.
The property is adjacent to an Embassy Suites hotel and near some of Dallas’ most prestigious neighborhoods, as well as Dallas Love Field. It was 95 percent leased and 70 percent occupied at the time of acquisition, due to the recent relocation of the previous owner. Roughly 55 percent of the existing leases were due to expire within three years of the acquisition date.
CREA created a plan to reposition Bluffview Towers as a lower-priced – but still upscale – alternative to core Preston Center buildings, whose rent for comparable space are at least $8.00 per square foot higher than Bluffview’s pro forma rents. Drawing on the identity of the elite Bluffview neighborhood nearby, CREA changed the property’s name from the Plaza at Bachman Creek. The Company began a $3 million project to renovate select common areas, including the buildings’ lobbies, upgrade the parking garage, add new signage, update landscaping and remediate water infiltration issues. CREA also established on-site management, significantly improving building services. CREA undertook a marketing plan to attract an appropriate tenant mix, leveraging Preston Center’s standing, along with area’s rich amenity base, to tenants who are locked out of Preston Center’s core, either by lack of capital or lack of space.
CREA, despite buying the building near the peak of the market, executed the business plan as contemplated. CREA was able to sell the asset slightly above the original pro-forma within four years of acquisition. The partnership enjoyed an internal rate of return of over 22 percent.