Densification of Sprawling DFW Region Putting Premiums on Well-Located Properties

Reserve Capital Partners' Purchase of Danari Office Park Reflective of Impact North Texas' Density is Having on Investments

Dallas-based Reserve Capital Partners' latest deal to land in the last six months - the acquisition of Danari Office Park - fits squarely into the private equity firm's investment strategy and illustrates the impact North Texas' densification is having on real estate investments. 

Reserve Capital partnered with Southlake, TX-based Trinity Private Equity Group to acquire the three-building, 111,286-square-foot office complex, located at Preston and Belt Line roads in North Dallas, for an undisclosed sum. The park last sold at $10.5 million in 2007. It was last valued by county appraisers at about $8 million. 

"We like to target value-add opportunities in irreplaceable locations," Brant Landry, a partner at Reserve Capital, told CoStar News. "This is a strategic play for us that has been, so far, serving us well."

To date, Reserve Capital has deployed $60 million of its $300 million fund acquiring properties, including Hidden Grove at Park Central in North Dallas. The firm has an $80 million property under contract in San Antonio with hopes of investing in more Texas markets. 

"The building in San Antonio matches the profile we are looking for in a property with a similar size to Danari Office Park in a similar-type location," Landry added. "There is nothing broken about it; it's a great building, but it needs another long-term owner and a little TLC."

Ron Hebert, a first vice president of investments for Marcus & Millichap's Dallas office, said he is seeing an increased investor interest in well-located properties as Dallas-Fort Worth continues to sprawl with the influx of new residents.

"Traffic is getting worse and people want to live closer to work," Hebert told CoStar News. "If they want a 30-minute commute, it's no longer 15 miles, but 10 miles away. Everything is becoming denser, which is helping the investment value of existing buildings."

Hebert represented the seller of Danari Office Park, California-based Adler Realty Investments, Inc. He and his colleague Joe Santelli of Marcus & Millichap also procured the buyer. 

Reserve Capital Partners plans to upgrade the park with improvements to the common spaces and tenant amenities, and rebrand the park as Preston Grove. The firm has hired Dallas-based Holt Lunsford Commercial to lease and manage the office buildings. 

Meanwhile, Reserve Capital Partners is seeking more deals with plans to fully deploy its $300 million value-add real estate fund by mid-2019. The team is underwriting a handful of properties in Dallas-Fort Worth right now, Landry said.

Upon deploying the entire fund, the Reserve Capital team plans to raise a second real estate fund.

"Our average deal size is $20 million to $25 million," Landry said. "We'd like them to be larger, but they have to be the right deal."

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