Piedmont Office Realty Sells Irving Tower At 53% Discount To Former Purchase Price
Nearly eight years after purchasing the Irving office building once known as CVS Health Tower and making nearly $800K worth of interior renovations, Piedmont Office Realty Trust has sold the property for less than half of its purchase price to a well-known buyer of troubled offices.
Piedmont acquired the 12-story, nearly 315K SF office building at 750 W. John Carpenter Freeway in 2016 from Columbia Property Trust for $49.6M, according to Commercial Property Executive. Over its eight years of ownership, the company made extensive upgrades, including $150K in renovations to the building’s lobby in 2017 and a $617K interior remodel and office space expansion in late 2022, according to permits filed with the Texas Department of Licensing and Regulation.
But despite the hefty investment, the property sold for $23M earlier this year, according to Piedmont’s third-quarter investor results report issued this week.
County records show the building sold to Austin-based Capital Commercial Investments in what the company called a value-add investment. The just-reported sale was completed in July as part of a package deal that also saw CCI pick up a Houston Energy Corridor office building for a 63% discount on its former purchase price.
750 W. John Carpenter was approximately 46% leased at the time of the deal, according to Piedmont's filing.
One of those tenants is CVS Health, which renewed its lease to 2028 two years ago. But Rhode Island-based CVS has been in cost-cutting mode since summer 2023, laying off more than 150 employees at the Irving facility as well as one in Richardson last year as part of restructuring efforts. This month, it announced a $2B cost-savings initiative that will see it reduce its workforce by another 2,900 jobs after cutting approximately 5,000 last year.
The layoffs have led to office closures elsewhere, CoStar reported, but in a YouTube video discussing the sale, CCI founder and President Doug Agarwal said two current tenants were negotiating to expand while a long list of others had expressed interest, including UPS, Siemens, Topo Chico, Waste Management and Mars Inc.
CCI, which has become known for snapping up vacant and distressed offices, also purchased the 290-acre former Exxon Mobil campus across the street in 2022.
“There's very little office that's going to get built in the Dallas area until rents rise above about $10 a SF, which we think won't start happening for three more years,” Agarwal said of CCI's rationale. “The most important thing about Dallas is that it's absorbing 6M to 7M SF from in-migration of 170,000 people per year.”
The Irving property was last assessed at $35M, with around $12M of that being the land value, according to a listing on the Dallas Central Appraisal District website.
Office availability throughout the region remained elevated during Q3, and a Switch on Business study showed Dallas had around 53M SF of empty offices.
Still, there is a growing list of distressed office buyers, including CCI, betting on the reemergence of the sector.
In addition to Gulf Coast Western and Enverra Real Estate Partners, which purchased a pair of office towers in Dallas last month, SkyWalker Property Partners and Bradford Cos. have been working to pick up distressed office buildings.
SkyWalker established a $250M fund last year aimed at acquiring distressed assets and new developments across Texas and beyond.
Dallas-based Bradford Cos. launched a $100M fund in April 2023 to capitalize on distress in the market by acquiring value-add properties across North Texas. That fund was set up to target industrial and office assets emerging from capital markets challenges.
