Bank of America Plaza, the tallest skyscraper in Dallas, has been taken off the market as its potential suitor backed out of the deal, leaving plans for the potential big redevelopment of the 72-story, 1.85 million-square-foot office tower and an adjacent developable land parcel up in the air.
The move means Chicago-based Metropolis Investments Holdings, which represents the ownership group on behalf of the family of the late German billionaire Hugo Mann, will continue its two decades of ownership of the skyscraper at 901 Main St. in downtown Dallas. In a statement to the building’s tenants, JLL Vice President Adam Bernhardt, who oversees the management and leasing of Bank of America Plaza, said the group was not able to finalize the agreement for the sale of the property.
“We have made the decision to withdraw the property from being marketed for sale,” Bernhardt said in a statement emailed to CoStar News. “As longstanding owners, we will continue to reinvest in the property and maintain our high standards, ensuring the iconic status of Bank of America Plaza.”
Prior to the deal falling through, real estate brokers expected Dallas-based Stream Realty Partners to purchase the skyscraper for about $200 million, or about $111 per square foot. The firm did not immediately return interview requests. The Cushman & Wakefield team hired to market Bank of America Plaza for sale also did not respond to interview requests.
Bank of America Plaza, which last traded for $325 million in Decemb
er 1998, is about 76% occupied, with its largest tenant being namesake Bank of America, which leases about 500,000 square feet of office space. The bank’s lease is expected to expire in 2024, and the bank is weighing its real estate options, including potentially consolidating its footprint.
The skyscraper’s scrapped sale isn’t indicative of the Dallas-Fort Worth market, which ranked No. 6 for overall real estate prospects and investor demand this year, slipping from the top spot, according to the Urban Land Institute’s latest report, “Emerging Trends in Real Estate 2020.” Dallas captured 4.2% of total U.S. transactions in the first half of 2019, the third-highest rate in the nation after Manhattan and Los Angeles, according to ULI.
Bank of America Plaza is somewhat of a “needle in a haystack type of deal,” in needing to find the right buyer that wants to own an iconic downtown building with a development opportunity on adjacent acreage, said Creighton Stark, an executive vice president at Colliers International’s Dallas office, who was not involved with the would-be deal.
“In my opinion, a new ownership group would have to have a strategic and aggressive lease-up model going forward with the property if they were going to make it work,” Stark said in an interview. “But it’s hard to compare a big property like this one in downtown Dallas to the rest of the market.”
“As of late, the market has been flooded with capital from all over the country and all over the world with investors from Mexico, Canada and Israel all shopping properties right now,” he added. “There is no end in sight anytime soon of groups wanting to get into the Dallas market. Not a lot of new properties have been built in the market and we seeing a lot of deals trading hands.”
Recently, another office tower expected to trade in a similar time period, KPMG Plaza at 2323 Ross Ave. in the Dallas Arts District, sold to Masaveu Real Estate of Spain with the help of Miami-based Exan Capital LLC at the end of December for more than $238 million, or about $516 per square foot. Other offices, including Premier Place at 5910 N. Central Expressway, Rent-A-Center’s headquarters at 5501 Headquarters Drive, and the Keurig Dr Pepper campus in Plano’s Legacy Business Park, also traded hands.
And the deal flow leading into 2020 is already looking to be busy with several big properties already geared up to get new owners soon. CBRE Global Investors is expected to sell Galleria Towers, which include One Galleria Tower, Two Galleria Tower and Three Galleria Tower; Fortis Property Group is expected to sell The Point at Las Colinas after owning it for about seven years; and Stanford Corporate Center along the Dallas North Tollway is also expected to sell in the near future.
Even as new deals are coming to the market and being put under contract, it’s not a surprise to see Bank of America Plaza pulled off the market entirely, said Susan Gwin Burks, a senior vice president for Avison Young’s Dallas office, who joined the brokerage firm in recent months as part of the capital markets team.
“With every asset that comes out, a seller has to put a whole lot of time taking it to market and they don’t do it lightly,” Burks said in an interview. “But when things happen midstream when an asset is being marketed that changes the complexion of the deal or if the seller can’t achieve the desired result, they would rather pull it off the market rather than have it over shopped and wait until the time is right and the buyer is there.”
Burks said she’s also seeing an “extremely robust” amount of deal activity in Dallas-Fort Worth, but pricing expectations have to be managed in this kind of market.
“There’s so much interest in Dallas and even more than ever with the population numbers and job growth numbers we’ve been experiencing,” Burks said. “As is with every cycle, the pricing has been pushed up and everyone’s expectations have been pushed up. If you were an owner, you’d want to grab the gusto and maximize the value of an asset you’ve treated as a growing child. But, like in every situation, the market speaks and sometimes you can’t get that price.”
Even in a robust market, Burks said she’s still seeing a lot of disciplined buyers staying within the boundaries of their real estate investment strategy and would-be deals still need to match those respective strategies.
“There’s a lot of buildings on the market now and there’s more coming to the market,” she said. “The job growth is good, the economy is good and the interest rates are good. Sellers are looking at what their exit plan might be in the next few years.”