former church/creative office building parking lot … · apartments. several high rises provide...

FOR SALE OR LEASE FORMER CHURCH/CREATIVE OFFICE BUILDING & PARKING LOT LOCATED AT: 2700 FAIRMOUNT STREET & 2518 MAHON STREET DALLAS, TEXAS

OFFERED EXCLUSIVELY BY:

NATIONAL REALTY PARTNERS 6621 SNIDER PLAZA, SUITE 200

DALLAS, TX 75205 214-692-6920

National Realty Partners 2

NATIONAL REALTY PARTNERS

6621 Snider Plaza, Suite 200

Dallas, Texas 75205

Phone: 214-692-6920 x1

Bill Langhenry 214-893-5331

[email protected]

Summary of Important Facts

GENERAL Subject:

Former Church/Creative Office Building & Parking Lot 2700 Fairmount Street & 2518 Mahon Street Dallas, Dallas County, Texas The subject consists of a 20,340 SF former church/creative office building and an associated parking lot.

Owner:

Fairmount Church, LLC

Legal Description:

Former Church/Creative Office Building Block 1/954, Tract 10, Mahon's Homestead Addition to the City of Dallas, Texas Parking Lot Block 2/954, Tract 4, Mahon's Homestead Addition to the City of Dallas, Texas

Parcel ID Number(s): #00000135469000000 (Church/Creative Office) #00000135520000000 (Parking Lot) Dallas Central Appraisal District

Improvements: Building Summary

Building Name/ID Year Built Condition Number of Stories

Gross Building Area

Rentable Area

2700 Fairmount Street 1910 Good 1.0 20,340 20,340

Occupancy: The property primarily vacant, and partially used as office space by the current owner.

Zoning: PD 9 - City of Dallas


Metropolitan Area Analysis Introduction The subject property is located in Dallas, Dallas County, Texas, within the Dallas Metropolitan Statistical Area (MSA). The Dallas/Fort Worth Metroplex is located in the central-northeastern part of Texas, approximately 250 miles north of the Gulf of Mexico. The Dallas-Fort Worth-Arlington Metropolitan Statistical Area (MSA) is comprised of two Metropolitan Divisions (MD), the Dallas-Plano-Irving MD and the Fort Worth-Arlington MD. The Dallas-Plano-Irving MD includes eight counties: Collin, Dallas, Delta, Denton, Ellis, Hunt, Kaufman, and Rockwall counties. The City of Dallas is situated approximately 30 miles east of Fort Worth. The Fort Worth-Arlington MD includes Johnson, Parker, Tarrant and Wise counties. Together, these MD’s comprise the Dallas-Fort Worth-Arlington Metropolitan Statistical Area, and are often referred to as the Dallas/Fort Worth Metroplex. A brief summary overview of the Dallas/Fort Worth Metroplex is included in the following pages.


Location Map

Moody’s Economy.com Metropolitan Summary The following pages are taken from Moody’s Economy.com Metropolitan Summary of the Dallas MSA.


Employment The Dallas economy is continually showing signs of outpacing the nation as a whole. A notable industry that has bounced back to near prerecession levels is the financial services industry in Dallas. Financial services will grow significantly over the coming year, in contrast with the national performance. The Dallas recovery has strengthened, and the metro division is on the verge of expansion. Employment has increased in all major industries except for manufacturing. Payrolls have risen faster than the national average over the past year, though the pace has slightly lagged that of other major Texas metro areas. Since the beginning of 2012, the unemployment rate has trended down. At the same time, the labor force has steadily increased. According to the Texas A&M Real Estate Center the unemployment rate for the Dallas-Plano-Irving MA and the Fort Worth-Arlington MD was 3.6% as of January 2018.

Plano-Irving MA – Historical Employment Rate Trends

Fort Worth-Arlington MD - Historical Employment Rate Trends

The DFW economy is continually showing signs of outpacing the nation as a whole. A notable industry that has bounced back to near prerecession levels is the financial services industry in Dallas. The DFW market continues to be the destination of companies from across the country. Population The following table summarizes the population growth reported by the University of Texas A&M Real Estate Center for the DFW metro area since the 1970 Census.


The Dallas/Fort Worth MSA remains one of the fastest growing areas in the country due to strong employment compared to the overall nation and the comparatively low cost of living. As of year-end 2016 the Dallas/Fort Worth MSA had a population of 7,233,323, and increase of 2.023%, or 143,435, from 2015. The continued population growth will continue to spur economic growth and demand for real estate in the area. Metropolitan Area Conclusion The Dallas/Fort Worth area has experienced dynamic growth over the past three decades, due to its emerging prominence as a trade and business center for a variety of industries, moderate cost of living, favorable governmental environment, temperate climate and abundance of area amenities. Sustained growth is projected for an extended period in the Dallas/Fort Worth area as it continues to outpace the nation in job growth. Retail sales will remain a key driver for the economy. The commercial real estate market is showing signs of improvement with rising rents and declining vacancy rates. Residential construction rates are increasing, but still at low levels compared to the robust construction levels from 2005 to 2007, which is helping to absorb excess supply in the market. In conclusion, the Dallas/Fort Worth MSA benefits from healthy demographics and with the presence of key employment growth drivers, the area should remain an above average performer in the future.


Market Area Analysis

Introduction The neighborhood analysis provides a bridge between the analysis of the general regional influences affecting all property values and the study of a specific subject property. The goal of neighborhood analysis is to determine how the operation of social, economic, governmental and environmental forces influence the property values of the specific area in which the subject property is located.

Uptown Overview The subject’s Market Area (neighborhood) is defined as the area generally bounded by Blackburn Street on the north, North Central Expressway on the east, Woodall Rodgers Freeway on the south and Cedar Springs and Turtle Creek Boulevard on the west. These boundaries have been designated because properties in this area are comparable in such general features as physical characteristics, price range and use, or are complementary. The neighborhood is adjacent to the Oak Lawn/Turtle Creek area of Dallas northwest of the Uptown. Oak Lawn/Turtle Creek is one of the wealthier parts of Dallas, with many professionals and urban types living in townhouses, condos, apartments, and duplexes. Along McKinney Avenue and Turtle Creek Boulevard are many new, and updated older, luxury high-rise condominiums and apartments. Several high rises provide retail on the bottom and apartments or office space up above. It is also a very diverse neighborhood with well-established areas of older, single family homes. Uptown has emerged as Dallas’s most urban and desirable submarket, demonstrated by the highest rents in the market and its concentration of private equity, family offices and leading law firms. The core of the neighborhood, primarily along the McKinney Avenue trolley line, has become a vibrant, pedestrian-oriented neighborhood of Uptown Dallas, an upscale area where young professionals live and work. This area features upscale tenant finishes, walkable access to the area’s retail, top-tier residential and hospitality amenities, and access to the Dallas North Tollway. By some estimates, Uptown is home to approximately 18,000 residents at night and 30,000 employees during the day.

Access and Major Roadways The subject neighborhood is a densely-developed area with adequate accessibility for visitors or workers. Oak Lawn Avenue, Lemmon Avenue, Central Express, Woodall Rodgers Freeway and the IH-35E provide primary access to the neighborhood. The Dallas North Tollway also provides a rapid means of travel to and from the neighborhood. In addition, there are several major traffic arteries located a short distance to the north; these include Harry Hines Boulevard and Cedar Springs Road. Woodall Rodgers Freeway is a multi-lane roadway that forms the northern boundary of the neighborhood and facilitates the neighborhood’s accessibility to Interstate Highways 30, 35E and US- 75. These roadways are heavily-traveled freeways of the Dallas-Fort Worth area that extend through the city of Dallas and provide accessibility to the suburban cities to the east and west. North Central Expressway (US-75) provides access from downtown to the central areas of Dallas and the northern suburbs of Richardson, Plano and McKinney.


Primary Market Map

Distribution of Land Uses The subject market area is densely developed, with the majority of the improvements along the primary roadways being commercial in nature. Retail and supporting commercial developments are the predominant improvement types located at the major intersections of the neighborhood. The area also contains numerous office buildings and high-rise residential properties. Improvements in the area vary widely in age dating to the early 1920's. However, it was noted that many of the older residential improvements were converted into commercial uses and a number of new developments have been constructed over the past ten years. The locale has gone through several periods of intense development and urban renewal. The primary land usages in the neighborhood can be estimated as follows:

Commercial/office 75% Residential 15% Parks, Schools, Churches 5% Vacant Land 5%

Subject


There is a growing presence of multi-family residential improvements in the subject neighborhood. These are typically housed in low to mid-rise buildings, although several high-rise projects have been developed over the past decade. It is one of the most densely developed areas in Dallas and is home to a wide variety of establishments, including office buildings, residential towers, apartment complexes, retail centers, restaurants and hotels. The Margaret Hunt Hill Bridge spanning the Trinity River extended west of I-35E, where it will connect downtown Dallas to west Dallas. The subject property is located one block from the Katy Trail, the city’s premier running and cycling trail set among 30 acres of lush greenery and landscaping. The recent construction of the Klyde Warren Park which encompassed the roofing of a section Woodall Rodgers Freeway between Pearl and Akard, created a municipal park over the freeway, and thereby connecting the downtown Arts District with Uptown. The subject neighborhood is in the gentrification phase of its economic life cycle. The area is densely developed with little vacant land available for new development. Developers are increasingly looking for properties occupied by low-rise buildings for redevelopment. The most recent commercial development is primarily occurring in the central portion of the locale.

Notable Development Notable new developments in market area include McKinney and Olive, a 530,000-square-foot, 20-story mix-use project built in 2016. It is on one what was one of the last large empty blocks north of downtown Dallas. The office tower’s lower floors include retail and restaurant space with almost one-acre of outdoor public space. McKinney and Olive located across from the Ritz-Carlton Hotel and Residences. Retail and office rents in the building are in the mid to $40s to $50s per square foot. Monaco on Katy Trail, a 6-story apartment project on along on the Katy Trail at 3003 Carlisle Street. Builder Alamo Manhattan recently built a 212-unit apartment development known as Routh Street Flats, along the south side of Routh Street and Carlisle Street. Projects recently completed include the Alexan Katy Trail located 2900 Carlisle Street. The 15-story residential tower has 159 units and is currently in the leasing phase. A 23-story, 393-unit luxury residential tower known as Ardan West Village opened in mid-2018. The project located at 2975 Blackburn Street features 25 penthouses and more than 10,000 SF of indoor amenities and an outdoor pool deck with cabana lounges, grilling stations, bistro seating and fire pits. The Hilton Canopy Hotel located at 2900 Cityplace W. Boulevard recently opened. This project includes a 9-story, 150-room hotel with a connected 24-story, 389-unit residential tower. The new two-tower Park District is mixed-use development with more than 900,000 square feet of Class A office space, restaurants and luxury residences. This project is located at 2121 Woodall Rodgers Freeway, across from Klyde Warren Park. This project offers residents immediate access restaurants, retail, performing arts venues and urban green spaces. Rents within these projects range from $1,500 to $6,500 per month, the high-end being penthouse residences.


One major project under construction is the Uptown Dallas Marriott located at 3031 Fairmount Street. The 14-story, 277,524-square-foot hotel is planned to include 255 rooms with an opening date of scheduled for early 2020. The $300 million Park District development - at the northwest corner of Pearl Street and Woodall Rodgers Freeway - includes the 20-story PwC Tower office building and Residences at Park District, a 34-story luxury apartment building. The PwC Tower is a 494,300-square-foot building that opened in second quarter 2018 and is now 55% occupied. These buildings are surround by a large public plaza which faces Klyde Warren Park and the Downtown Dallas. The Residences at Park District, adjacent to the PwC Tower, features 228 luxury apartment units and ground-floor retail space. Other amenities include separate lobby and lounge areas, a rooftop swimming pool, conference facilities and a 7,000-square-foot fitness center. The biggest penthouse apartment in the tower is a 3,200-square-foot, 3-bedroom unit with a study that goes for almost $20,000 a month.

Vacant Land / Development Sites A prime Uptown development site recently sold in 2018 to apartment developers at one of the highest prices yet for the area. San Antonio-based Kairoi Residential and Chicago-based investor RREEF bought the more than 1-acre tract on Maple Avenue across the street from the Crescent for close to $375 per square foot. The vacant half block was formerly the site of Dallas’ storied Old Warsaw restaurant. The Maple Avenue property was one of a few vacant high-rise development sites available in that area. According to local property brokers, Uptown land prices are setting new highs locally but are still low compared with what similar property is trading for in other major U.S. metro areas. Land prices in Uptown now top $350 per square foot for well-located high rise development sites. A small block on Akard Street north of downtown that’s planned for an office tower recently sold for almost $400 per square foot, according to local brokers. After more than two decades of rapid growth, the Uptown Dallas has very little available land of development. According to Uptown Dallas, Inc., the district is now 99 percent developed, meaning the only place to go is up.

Public Facilities/Services The neighborhood lies within the Dallas Independent School District with adequate bus service provided to area students. Higher education opportunities in the area are provided by two major private universities, Southern Methodist University in Dallas and Texas Christian University in Fort Worth. In addition, the Dallas/Fort Worth Metroplex provides numerous community colleges and technical schools, as well as branches of state universities

Demographic Summary An important consideration for the subject property is the current demographic pattern and economic climate of the neighborhood. For pertinent information concerning the neighborhood, the appraisers have considered data reported by STDB online for a radius extending one (1), 3 and 5 miles from the subject property is reported in the Addenda.


One (1), 3 and 5 miles from the subject property

One (1) mile from the subject property


December 04, 2018

Data Note: Income is expressed in current dollarsSource: U.S. Census Bureau, Census 2010 Summary File 1. Esri forecasts for 2018 and 2023. Esri converted Census 2000 data into 2010 geography.

2023 Vacant Housing Units 1,856 12,882 22,8622023 Renter Occupied Housing Units 25,572 83,322 126,8292023 Owner Occupied Housing Units 5,509 26,941 65,965

2023 Total Housing Units 32,937 123,145 215,6562018 Vacant Housing Units 2,494 13,760 23,3752018 Renter Occupied Housing Units 20,574 70,385 111,2952018 Owner Occupied Housing Units 4,478 23,524 59,244



2000 Total Housing Units 9,176 61,577 140,575Housing

2018-2023 Annual Rate 1.64% 2.12% 1.97%2023 Per Capita Income $81,258 $55,669 $49,299

Per Capita Income2018 Per Capita Income $74,927 $50,127 $44,721

2018-2023 Annual Rate 2.02% 2.24% 1.98%2023 Average Household Income $129,798 $112,333 $112,054

Average Household Income

2018 Average Household Income $117,466 $100,534 $101,572

2018-2023 Annual Rate 2.87% 3.20% 2.74%2023 Median Household Income $94,494 $73,075 $67,276

Median Household Income2018 Median Household Income $82,041 $62,418 $58,765

2018 Average Household Size 1.51 1.98 2.252018-2023 Annual Rate 4.41% 3.26% 2.48%2010-2018 Annual Rate 6.15% 4.17% 2.78%2000-2010 Annual Rate 6.89% 1.90% 0.56%2023 Total Households 31,081 110,263 192,7942018 Total Households 25,051 93,908 170,5392010 Households 15,310 67,041 136,060

Households2000 Households 7,862 55,559 128,685

Median AgeThe median age in this area is 33.5 , compared to U.S. median age of 38.3.

2018 Median Age 33.5 33.8 34.12018 Female Population 47.5% 45.9% 48.1%2018 Male Population 52.5% 54.1% 51.9%2018-2023 Annual Rate 4.69% 3.13% 2.36%2010-2018 Annual Rate 6.36% 3.88% 2.57%2000-2010 Annual Rate 6.17% 0.10% -0.32%2023 Population 48,984 232,024 450,3072018 Population 38,960 198,863 400,6782010 Population 23,426 145,288 325,078

Population2000 Population 12,867 143,846 335,804

1 mile 3 miles 5 miles

2700 Fairmount St, Dallas, Texas, 75201 Prepared by EsriRings: 1, 3, 5 mile radii Latitude: 32.79660

Longitude: -96.80391

Executive Summary


Within the one-mile radius of the subject, the current year population is 38,960. In 2010, the Census count in the area was 23,426. The rate of change since 2010 was 6.36% annually. The five-year projection for the population in the area is 48,984 representing a change of 4.69% annually from 2018 to 2023. Currently, the population is 52.5% male and 47.5% female. The median age in this area is 33.5, compared to U.S. median age of 38.3. The household count in this area has changed from 15,310 in 2010 to 25,051 in the current year, a change of 6.15% annually. The five-year projection of households is 31,081, a change of 4.41% annually from the current year total. Average household size is currently 1.51, compared to 1.48 in the year 2010. The number of families in the current year is 5,477 in the specified area. Current median household income is $82,041 in the area, compared to $58,100 for all U.S. households. Median household income is projected to be $94,494 in five years, compared to $65,727 for all U.S. households. Current average household income is $117,466 in this area, compared to $83,694 for all U.S. households. Average household income is projected to be $129,798 in five years, compared to $96,109 for all U.S. households. Current per capita income is $74,927 in the area, compared to the U.S. per capita income of $31,950. The per capita income is projected to be $81,258 in five years, compared to $36,530 for all U.S. households. Currently, 16.3% of the 27,545 housing units in the area are owner occupied; 74.7%, renter occupied; and 9.1% are vacant. Currently, in the U.S., 56.0% of the housing units in the area are owner occupied; 32.8% are renter occupied; and 11.2% are vacant. In 2010, there were 17,653 housing units in the area - 19.3% owner occupied, 67.5% renter occupied, and 13.3% vacant. The annual rate of change in housing units since 2010 is 21.86%. Median home value in the area is $391,104, compared to a median home value of $218,492 for the U.S. In five years, median value is projected to change by 1.65% annually to $424,459. As revealed in the demographic report, the Market Area primarily consists of a young, educated and affluent population.

Summary and Conclusion The subject neighborhood is a mixed-use commercial/entertainment area located north of downtown Dallas locally known as Uptwon. The area is densely developed with few vacant sites yet to be developed. The neighborhood is well located, well served by an extensive roadway infrastructure, and is within commuting distance of other areas of Dallas and the surrounding communities. The accessibility of the locale is enhanced by its proximity to Stemmons Freeway (IH- 35E), Central Expressway (IH-75), R.L. Thornton Freeway (IH-30), Woodall Rodgers Freeway and the Dallas North Tollway, as well as the Harry Hines Boulevard, McKinney Avenue, and Cedar Springs/Turtle Creek travel corridors. In addition, the neighborhood benefits from the presence of major commercial and retail facilities and close proximity to the downtown Dallas office district, McKinney Avenue, Oak Lawn/Turtle Creek, the American Airlines Center and the surrounding Victory Park and Klyde Warren Park areas. The long-term outlook for the neighborhood is positive from virtually all sources.


Retail Market Analysis The following pages contain charts that are taken from the CoStar Retail Report - Dallas/Ft. Worth 3rd Quarter 2018. They illustrate existing inventory, construction, vacancy, and average quoted rates in the Dallas/Ft. Worth markets. Following the MSA retail market overview, is the subject’s submarket statistics with vacancy, rental rate, and absorption trends. The following table illustrates the overall DFW area retail market statistics: The vacancy rate went from 4.6% in the previous quarter to 4.6% in the current quarter. Net absorption was positive 744,864 square feet, and vacant sublease space increased by 67,964 square feet. Quoted rental rates increased from second quarter 2018 levels, ending at $16.51 per square foot per year. A total of 52 retail buildings with 774,075 square feet of retail space were delivered to the market in the quarter, with 2,544,665 square feet still under construction at the end of the quarter Net Absorption Retail net absorption was moderate in Dallas/Ft. Worth third quarter 2018, with positive 744,864 square feet absorbed in the quarter. In second quarter 2018, net absorption was positive 1,676,152 square feet, while in first quarter 2018, absorption came in at positive 732,222 square feet. In fourth quarter 2017, positive 2,023,998 square feet was absorbed in the market. Vacancy Dallas/Ft. Worth’s retail vacancy rate changed in the third quarter 2018, ending the quarter at 4.6%. Over the past four quarters, the market has seen an overall no change in the vacancy rate, with the rate going from 4.6% in the fourth quarter 2017, to 4.8% at the end of the first quarter 2018, 4.6% at the end of the second quarter 2018 remaining unchanged in the current quarter. The amount of vacant sublease space in the Dallas/Ft. Worth market has trended up over the past four quarters. At the end of the fourth quarter 2017, there were 350,600 square feet of vacant sublease space. Currently, there are 459,651 square feet vacant in the market. Rental Rates Average quoted asking rental rates in the Dallas/Ft. Worth retail market are up over previous quarter levels, and up from their levels four quarters ago. Quoted rents ended the third quarter 2018 at $16.51 per square foot per year. That compares to $16.35 per square foot in the second quarter 2018, and $15.93 per square foot at the end of the fourth quarter 2017. This represents a 1.0% increase in rental rates in the current quarter, and a 3.51% increase from four quarters ago. Inventory & Construction During the third quarter 2018, 52 buildings totaling 774,075 square feet were completed in the Dallas/Ft. Worth retail market. Over the past four quarters, a total of 5,189,254 square feet of retail space has been built in Dallas/Ft. Worth.


In addition to the current quarter, 67 buildings with 1,013,546 square feet were completed in second quarter 2018, 86 buildings totaling 1,839,654 square feet completed in first quarter 2018, and 1,561,979 square feet in 65 buildings completed in fourth quarter 2017. There were 2,544,665 square feet of retail space under construction at the end of the third quarter 2018. Some of the notable 2018 deliveries include: Music Factory, a 300,000-square-foot facility that delivered in first quarter 2018 and is now fully occupied, and Gates of Prosper, a 212,086-square-foot building that delivered in first quarter 2018 and is now fully occupied. Total retail inventory in the Dallas/Ft. Worth market area amounted to 428,992,419 square feet in 31,960 buildings and 3800 centers as of the end of the third quarter 2018.


Historical Market Statistics

Submarket Cluster / Submarket The subject is a retail property located in central Dallas County, which falls in the Central Dallas Retail Submarket Cluster and Uptown Retail submarket. Uptown Retail submarket is one of four submarkets that make up the larger Central Dallas Retail Submarket Cluster. The others being the Dallas CBD, Lakewood and Lovefield/West Dallas Retail submarket. As of the 3rd Quarter 2018 the Central Dallas Retail Submarket Cluster had a total inventory of 21,142,524 square feet within 2,051 buildings. The average vacancy within this submarket was 2.9%. The year-to-date net absorption was negative 98,603 square feet and the average quoted rental rate for the submarket was $25.04 per square foot. The Uptown Retail submarket had a total inventory of 2,214,533 square feet within 261 buildings. As of the 3rd Quarter 2018, the average vacancy within this submarket was 4.4%. The year-to-date net absorption was negative 32,335 square feet and the average quoted rental rate for the submarket was $38.91 per square foot, the highest of all markets. The following table summarizes the Central Dallas Retail Submarket Cluster’s trends.


Retail Overview Conclusion Employment and job growth cycles have helped support consistent gains in retail sales. The DFW retail market is expected to continue to experience robust growth throughout the end of the year. Though construction levels remain high, vacancies remain below historic norms due to the economic stability throughout the DFW Metroplex and strong fundamentals of the overall marketplace. The subject’s submarket is likely to outperform the overall market in the period ahead with declining vacancy and rising rents. Considering bars and restaurants have been a leading retail growth sector, the outlook for retail and other net-leased assets remains strong.


Office Market Analysis The following pages contain charts that are taken from the CoStar Office Report - Dallas/Ft. Worth 3rd Quarter 2018. They illustrate existing inventory, construction, vacancy, and average quoted rates in the Dallas/Ft. Worth markets. Following the MSA retail market overview, is the subject’s submarket statistics with vacancy, rental rate, and absorption trends. The Dallas/Ft. Worth Office market ended the third quarter 2018 with a vacancy rate of 14.9%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 1,667,502 square feet in the third quarter. Vacant sublease space decreased in the quarter, ending the quarter at 3,605,543 square feet. Rental rates ended the third quarter at $25.51, an increase over the previous quarter. A total of 32 buildings delivered to the market in the quarter totaling 1,234,476 square feet, with 8,744,430 square feet still under construction at the end of the quarter. Net Absorption Net absorption for the overall Dallas/Ft. Worth office market was positive 1,667,502 square feet in the third quarter 2018. That compares to positive 379,181 square feet in the second quarter 2018, positive 2,199,059 square feet in the first quarter 2018, and positive 1,596,204 square feet in the fourth quarter 2017. Vacancy The office vacancy rate in the Dallas/Ft. Worth market area decreased to 14.9% at the end of the third quarter 2018. The vacancy rate was 15.0% at the end of the second quarter 2018, 14.7% at the end of the first quarter 2018, and 14.6% at the end of the fourth quarter 2017. The amount of vacant sublease space in the Dallas/Ft. Worth market decreased to 3,605,543 square feet by the end of the third quarter 2018, from 3,889,356 square feet at the end of the second quarter 2018. There was 3,356,179 square feet vacant at the end of the first quarter 2018 and 3,083,192 square feet at the end of the fourth quarter 2017. Rental Rates The average quoted asking rental rate for available office space, all classes, was $25.51 per square foot per year at the end of the third quarter 2018 in the Dallas/Ft. Worth market area. This represented a 0.4% increase in quoted rental rates from the end of the second quarter 2018, when rents were reported at $25.42 per square foot. Inventory & Construction Total office inventory in the Dallas/Ft. Worth market area amounted to 381,728,949 square feet in 13,088 buildings as of the end of the third quarter 2018. The Class-A office sector consisted of 160,400,870 square feet in 646 projects. There were 6,128 Class-B buildings totaling 172,745,593 square feet, and the Class-C sector consisted of 48,582,486 square feet in 6,314 buildings. Within the Office market there were 908 owner-occupied buildings accounting for 55,644,563 square feet of office space. The following tables illustrates the overall DFW area retail market statistics.


Historical Market Statistics

Uptown/Turtle Creek Office Submarket The subject is situated in central Dallas County, which falls in the Uptown/Turtle Creek Office Submarket. As of the 3rd Quarter 2018 the Uptown/Turtle Creek Office Submarket had a total inventory of 15,322,760 square feet within 306 buildings. The average vacancy within this submarket was 13.8%. The year-to-date net absorption was positive 131,376 square feet and the average quoted rental rate for the submarket was $39.08 per square foot, the highest of all markets. The following table summarizes the Uptown/Turtle Creek Office Submarket trends.


Office Overview Conclusion The Dallas-Fort Worth-Arlington economy continues to thrive, as increases in total population and overall employment persist. The Dallas-Fort Worth office market continues to show growth during the first three months of the year. The Dallas market is still seeing a good balance of corporate relocation activity and organic growth from existing company expansions. A large number of office tenants are anticipated to renegotiate leases throughout 2018, as many 10-year


leases were signed during the downturn in 2008 and 2009. Landlords will continue to update older buildings and add amenities to keep up with tenant demands and compete with newer product. Due to the economic stability throughout the DFW Metroplex and strong fundamentals of the overall marketplace, the subject’s submarket is likely to outperform the overall market in the foreseeable future.

Investment Properties

As a growing number of property owners near retirement, many are choosing to transition their investment portfolios from apartment assets that are trading at a premium into net-leased retail properties throughout the U.S. Benefits can include higher initial yields than other low-maintenance options and reduced volatility relative to other property types. Net-leased properties offer a wide range of choices with average cap rates in the mid-5 percent range, depending on location and tenancy. While pending mergers and minimum-wage concerns made headlines in several net-leased sectors, deal flow was limited by a lack of available listings rather than a slowdown in demand. Investors typically use cash to close transactions, underscoring the amount of capital readily available for well-positioned assets with corporate credit tenants. Although cap rates are likely to remain stable due to the tight spread between credit financing and prices, willing investors continue to actively search for attractive offerings. With several states considering more stringent definitions of like-kind exchanges, potentially limiting where acquisitions can be made, the current demand for net-leased properties remains robust.


Site Description The subject consists of a 20,340 SF former/creative office building and associated parking lot. SITE ANALYSIS Location:

The subject site is located at the north corner of Fairmount Street and Mahon Street, in the center of the Uptown portion of Dallas. The parking lot is located at the south corner of Mahon Street and Routh Street.

Current Use of the Property:

Creative Office

Site Size: The subject building is situated on 15,610 SF, or approximately 0.358 acres of land. The subject property also includes a parking lot with 4,892 SF, or approximately 0.112 acres of land located across Mahon Street from the former church/creative office.

Shape: Both sites are rectangular.

Frontage/Access/ Visibility:

Both sites have good access and visibility with frontage along Fairmount Street and Mahon Street.

Topography/ Drainage:

The primary site has generally level topography, gently sloping southward toward street grade.

Utilities/Adequacy: The site is serviced by typical utilities. The subject's utilities are typical and appear adequate for the market area.

Site Improvements: Site improvements include a concrete paved parking lot and attractive

landscaping. Flood Zone:

The subject is located in an area mapped by the Federal Emergency Management Agency (FEMA). FEMA Map Number: 48113C0345 J, Flood Zone: X FEMA Map Date: August 23, 2001 The improvements do not appear to be in a flood prone area. The Zone X classification is in an area located outside the 100-year designated flood hazard area.

Wetlands/ Watershed:

No wetlands were observed during our site inspection.


Environmental Issues: Soil Conditions:

We did not observe any potentially hazardous material or notice the existence of underground storage tanks at the site. However, we are not qualified to detect such materials and did not conduct an extensive search. We were not provided a Phase I Environmental Assessment for the subject. There are no known adverse environmental conditions on the subject site. The soil conditions observed at the subject appear to be typical of the region and adequate to support development. We assume no responsibility for any hidden or unapparent conditions at the site that would require additional engineering or expense to develop. We were not provided a Phase I report.

Encumbrance/ Easements: Zoning:

Typical utility drainage easements. PD 9 - City of Dallas.

PD 9 is established on property located south of Boll Street and Routh

Street, northwest of McKinney Avenue, northeast of Maple Avenue, and east of Cedar Springs Road. With some exceptions, permitted uses include all of the permitted uses of the Neighborhood Service District including which allows for a variety of retail and office uses. Single family use is also allowed.


Survey


Ariel Photo


Zoning LAND USE CONTROLS

Zoning Code

PD 9 - City of Dallas

Zoning Description

PD 9 is established on property located south of Boll Street and Routh Street, northwest of McKinney Avenue, northeast of Maple Avenue, and east of Cedar Springs Road. With some exceptions, permitted uses include all of the permitted uses of the Neighborhood Service District including which allows for a variety of retail and office uses. Single family use is also allowed.

Max Zoning Density/FAR

None

Zoning Change Likely

A zoning change is unlikely.

Parking

Current zoning requires one space for each 366 square feet of floor area for office use. The subject requires 56 spaces. The subject has a total of 28 space (7 on church/office site and 21 in the parking lot). There is ample street parking.

Zoning Comments

It appears that the subject's improvements are a legal, non-conforming use under the existing zoning regulations.

It is noted that we are not experts in the interpretation of complex zoning ordinances. Detailed zoning studies are typically performed by a zoning or land use expert, including attorneys, land use planners, or architects. Detailed information regarding city regulations and uses is available at the City of Dallas.


Improvement Description IMPROVEMENTS ANALYSIS Development/Property Name:

Former Church/Creative Office Building

Property Type: Special Use

Overview:

The subject consists of a 20,340 SF former/creative office building and associated parking lot. The interior features a large and open sanctuary/showroom space. A mezzanine perched above the sanctuary/showroom offers a conference room and office space enclosed in glass. The sanctuary/showroom interiors are painted wood with hardwood floors. The property features commercial men and women’s restrooms behind the sanctuary and bathrooms in the office addition. Behind the original structure, a two-story structure with a basement which was added sometime after 2013 that consists of 14 office suites, a sound studio room on the lower/basement level, and several other open plan office rooms. In addition to the double-level sanctuary/showroom, and the added office space with basement sound studio, there is a unique living area. The small apartment features a first floor with a working area, a second floor (access by a spiral staircase) with a kitchen and a third floor with the living room/bedroom.

GENERAL Building Identification:

2700 Fairmount Street

Building Description:

Vacant Church/Office/Creative Building

Construction: Masonry.

Construction Quality: Very good

Year Built: 1910

Renovations:

Various renovations of the years

Effective Age:

15 years

Remaining Useful Life: 35 years

Condition: Good


Appeal/Appearance:

Good

Areas, Ratios & Numbers:

Number of Stories: 1 to 2 Gross Building Area: 20,340 SF Net Rentable Area: 20,340 SF

FOUNDATION, FRAME & EXTERIOR Foundation:

Poured concrete slab

Structural Frame: Masonry

Exterior: Brick & Stone

Doors: Doors are typically solid-core wood in metal frames. Ornate doors at primary entrances

Roof/Cover:

Pitched/Composition Shingles. The roof is supported by wood trusses.

Other: The exterior is in good condition.

INTERIOR

Floor Cover:

A combination of commercial grade carpet, ceramic tile and hardwood.

Walls: Textured drywall over metal studs in office areas, covered with various finishes of paint and vinyl.

Ceilings & Height:

The building features suspended lay-in grid acoustical ceiling tiles in the office areas. The sanctuary/showroom includes tongue in groove cross-beams and original plaster moldings. The ceiling heights are approximately 10’ to 20’.

Lighting: Fluorescent lighting, majority being canned and parabolic.

Restrooms:

Adequate restrooms.

Other: The interiors will be in overall good condition. MECHANICAL SYSTEMS Heating/Cooling:

Package Units

Electrical: Assumed adequate and up to current codes.

Plumbing Condition: Good


Sprinkler/ Fire Safety: Assumed adequate

Elevators/Escalators: None/None

Security:

Assumed adequate

Other: Mechanical systems assumed adequate.

PROPERTY ANALYSIS Design & Functional Utility:

Overall design and functional is adequate for a wide variety of uses and conforms to the neighborhood.

Comments / History of the Subject Property The property is in overall very good condition, with good quality construction and modern updates. It conforms well with the immediate area. The structure is a an architecturally significant historical church designed by Herbert Miller Greene (architect of the very first Dallas News building in 1897, the downtown Neiman Marcus and other local landmarks) and his partner James P. Hubbell. It was completed in 1910 when commissioned as Westminster Presbyterian Church. The Beaux Arts structure has been carefully preserved and creatively renovated into tasteful and eclectic space suitable for a variety of uses. Americans With Disabilities Act The Americans with Disabilities Act (ADA) became effective January 26, 1992. We have not made a specific survey or analysis of this property to determine whether the physical aspects of the improvements meet the ADA accessibility guidelines. Since compliance matches each owner's financial ability with the cost to cure the property's potential physical characteristics, we cannot comment specifically on compliance to ADA, yet there are many ADA features already in place.


Site Layout


Main Floor and Upper Level Office Area


Lower Level Office Area and Mezzanine Floor Plan


Mezzanine Framing Plan


Assessment and Ad Valorem Tax Analysis Taxing/Assessing Authority

Dallas Central Appraisal District

Assessment Year

2019 (See Comments)

The subject is identified by the Dallas Central Appraisal District as Parcel No. #00000135469000000 and #00000135520000000. Texas is not a disclosure state, with sales prices not reported in public records. Assessments tend to be based on values other than single sales and are generally in line with assessments of similar properties within the area. In order to determine a feasible assessment for the proposed improvements, we have examined assessments of similar properties in the market. The subject’s current real estate taxes and 2018 total taxing authority rates are summarized below.

Real Estate Assessment and TaxesTax ID Land Improvements Total Tax Rate Taxes

#00000135469000000 $1,404,900 $745,100 $2,150,000 $2.8452 $61,172#00000135520000000 $440,280 $0 $440,280 $2.8452 $12,527Totals $1,845,180 $745,100 $2,590,280 $2.8452 $73,699

Notes: Based on appraisers' estimated assessment and 2018 tax rate


MarketAnalysis

Rental Rate Analysis The rental comparables have been analyzed and compared with the subject property through a qualitative analysis. We have considered comparison in the areas of:

Lease Terms Conditions of Lease Other

Economic Trends (time) Location Physical Characteristics

Lease Structure The analysis of this rental data indicates that the leasing agents and building owners of office facilities in the area typically utilize a triple net (NNN) lease arrangement in the handling of expenses. The brokers who were consulted indicated that it is typical for a building such as the subject to be leased on a NNN basis, where the tenant pays all operating expenses, including non-structural maintenance and repairs.

Office / Retail Comparables Office and retail property in the immediate vicinity of the subject property was surveyed. Four of these offerings are summarized in the following table.

The office and retail comparable shown above exhibit rental rates ranging from $25.00/SF to $35.00/SF. The following pages display local Class A spaces which range from $26/SF, NNN to $40.00/SF NNN.

Name Address Rental Rate Year Built Building Rentable Building Area

Comments

2512 Boll 2512 Boll St. $27.00/SF/Yr (NNN) 1922 Class C 3,148 SF 1,574 SF available for lease on the first floor of 2-story boutique office building

2517-2519 Fairmount St 2517-2519 Fairmount St. $25.00/SF/Yr (Plus E) 1965 Class C 5,300 SF Up to 2,600 SF available for lease on the first floor of 2-story boutique office building

2708 Fairmount St. 2708 Fairmount St. $35.00/SF/Yr (Gross) 1986 Class C 7,446 SF Office space available in 2-story boutique office building

Quadrangle Garden 2800 Routh St $30.00-$35.00/SF/Yr (NNN) 1967 Class C 43,984 SF Storefront retial and office available

A: 1919 McKinney Ave. 3rd Floor, Suite 300

Rental

Rate

$26.00

/SF/Yr

Date

Available Now

Building

Class B

Rentable

Building

Area

118,940

SF

Service

Type

Triple

Net Space Use Office

Total

Space

Available

51,728

SF

Year

Built 1924

Space

Available

10,000

-

28,200

SF

In

Contiguous

Block

42,639 SF

in

building

Min.

Divisible

2,637

SF

Property

Type Office

Fits

25 -

226

people

Floor 3rd Floor

Max.

Contiguous

42,639

SF

Space

Type Relet

A

B

C

D E

F

B: 2501 Cedar Springs Rd. 1st Floor

Rental

Rate

$26.00 -

$27.00

/SF/Yr

Year Built 1982

Service

Type

Triple

Net

Date

Available 30 Days

Property

Type Office

Rentable

Building

Area

109,404

SF

Space

Available

15,630

SF Floor 1st Floor

Building

Class B

Fits 39-125

People

Lease

Term Negotiable

C: 3100 McKinnon St. 7th Floor, Ste. 700

Rental

Rate

$26.00 -

$27.00

/SF/Yr

Rentable

Building

Area

226,344

SF Service

Type

Triple

Net

Date

Available Now

Total

Space

Available

67,374

SF

Year

Built 1987 Space

Available

19,966

SF Floor 7th

Property

Type Office

Building

Class A Fits

50-160

people

Lease

Term Negotiable

D: 1845 Woodall Rodgers Fwy. 16th Floor, Ste. 1650

Rental

Rate

$30.00

/SF/Yr

Rentable

Building

Area

149,815

SF Service

Type

Triple

Net

Date

Available

March 01,

2019

Total

Space

Available

24,135

SF Year Built 1984 Space

Available

10,744

SF Floor 16th

Property

Type Office

Building

Class A Fits

27-86

people

Lease

Term Negotiable

E: 2021 McKinney Ave. 3rd Floor

Rental

Rate

$39.00

/SF/Yr

Rentable

Building

Area

536,000

SF Service

Type

Triple

Net

Date

Available Now

Total

Space

Available

17,263

SF Year Built 2016 Space

Available

17,263

SF Floor 3rd

Property

Type Office

Building

Class A Fits

43-138

people

Lease

Term

Through

January

2027

F: 2100 McKinney Ave. 10th Floor, Ste. 1000

Rental

Rate

$40.00

/SF/Yr

Rentable

Building

Area

360,859

SF Service

Type

Triple

Net

Date

Available Now

Total

Space

Available

85,253

SF

Year

Built 1999 Space

Available

10,000-

25,099

SF

Floor 10th

Property

Type Office

Building

Class A Fits

25-201

people

Lease

Term Negotiable


After considering factors such as market trends, types of lease, size, and location, as well as the quality and condition of the comparables relative to the subject, a probable market rental rate for the subject would likely fall in the lower end of the range indicated, or $25.00 to $30.00/SF, NNN (triple net). CoStar Report A survey of commercial properties which have sold recently (both retail and office) generally range from $300 to $500/SF in the subject’s immediate area. Costar write-up of sales can be made available. Listings Below is a recap of several current listings of commercial properties in the Uptown area. These include three former residences which have been converted to office use with asking prices ranging from $685 to $845/SF.

Listing #1 Listing #2 Listing #3Address 2515 Thomas Ave. 2315 Routh St. 3615 N Hall St.

Dallas, TX 75219 Dallas, TX 75219 Dallas, TX 75219Price $2,500,000 $1,995,000 $2,750,000 Price/SF $845 $685 $786 Year Built 1930 1898 1904 Building Class C Class C Class CBuilding Area (SF) 2,958 2,911 3,500Comments This property is zoned for residential and

commercial use. Located in State Thomas historic district in Uptown Dallas. This property underwent a full remodeled in 2018. It is currently arranged as 3 bedroom, 3 bath, with an backyard and pool/spa.

This property is in the Thomas Historic District of Uptown. It is zoned for Commercial and/or Residential use. The property is currently utilized for 100% commercial use.

This owner-user office is in the Oak Lawn/Turtle Creek area. The property features nine (9) covered spaces.


Addenda


Subject Photographs


Costar Sales Data (Upon Request)


Information About Brokerage Services

former church/creative office building parking lot … · apartments. several high rises provide...

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