Younan Properties Achieves 100% IRR in $27.5 Million Sale of Stemmons Office Portfolio
DALLAS, TX (October 13, 2005) In an office market that is among the most challenging in the United States, Woodland Hills, California-based Younan Properties, Inc. (YPI), one of the fastest-growing, privately held real estate investment groups in the country, has delivered an IRR as high as 100% with the $27.5 million disposition of its Stemmons Freeway Corridor portfolio, containing three Class B office buildings totaling 600,000 square feet in Dallas, Texas.
Scot Farber and partner Darrell Betts, senior vice presidents of Dallas- and Houston-based Grubb & Ellis, represented both Younan Properties and the two buyers of the portfolio in the heart of Dallas' Stemmons Freeway Corridor The Khoshbin Properties of Irvine, California and Professors Capital, with offices in Solano Beach, California and Washington D.C.
Younan Properties' expertise in turning around properties for outstanding profitability in one of the country's toughest markets was very apparent in these complex transactions, Farber observed. Younan was able to increase overall occupancy and reduce operating costs while boosting building standards with significant capital improvements in the three structures.
We entered the challenging Stemmons submarket two years ago, in the middle of a recession, fully aware of the difficulties associated with stabilizing and improving assets in an office market that has been plagued with vacancy rates of 35% and higher, commented Zaya S. Younan, chairman and CEO of Younan Properties, Inc. Although the Stemmons market declined over the course of our ownership, we achieved almost unheard-of returns for our investors by enhancing the properties through renovations, increased occupancies and improved operational efficiencies. Younan noted that his firm reduced operating costs by at least 30% in all three buildings, while maintaining top standards for tenants.
By executing its plan to dispose of the Class B Stemmons Freeway Corridor buildings from its portfolio, Younan Properties has strengthened its position to acquire additional Class A assets in key Dallas submarkets for solid, long-term investments. Most recently, YPI acquired a 1.1 million-square-foot office portfolio in Dallas from Equity Properties Trust (NYSE: EOP), making the firm the third largest office owner in Dallas, with a portfolio of 2.3 million square feet of Class A office space.
The Stemmons Portfolio properties included in the sale are:
Brookriver Executive Center, a 312,000-square-foot office building located at 8200 Brookriver Drive. The seven-story property is 28% leased with tenants that include Castlemark Consulting, Inc., ATI Capital Group, Inc. and Republic American Life Insurance Company. Over just 11 months of holding, YPI delivered a 100% return to investors by reducing operating expenses from $3 million to $1.2 million a cut of more than 50%, despite a 2% drop in occupancy.
One Brookriver Place, a seven-story mid-rise located at 7929 Brookriver Drive in Dallas. The 155,000-square-foot office property is 70% leased with tenants that include Concorde Acceptance Corporation, The Greensheet Newpapers and Mapp Construction. Over 18 months of ownership, YPI delivered a 22% return to investors by reducing operating costs by 30%, while maintaining top standards for tenants. Occupancy increased from 48% to 70% over the course of YPI's ownership.
Mockingbird Tower, a 125,000-square-foot office building located at 1250 West Mockingbird Lane in Dallas. The seven-story property is 88% leased with tenants that include Parkland Hospital, Sterling Bank and Career Education Corp. Over 18 months of ownership, YPI delivered a 22% return to investors. Once again, Younan Properties reduced operating costs by 30%, while maintaining top standards for tenants. Occupancy increased from 40% to 88% over the course of YPI's ownership.
The management team at Younan Properties has more than 40 years of experience in developing and managing commercial real estate in Dallas. Headed by Zaya S. Younan, Younan Properties has accumulated $500 million in real estate holdings since its inception in 2002. The company's national portfolio currently includes 20 Class A office properties totaling four million square feet.