Risky Business: Meet The Company Snapping Up Some Of DFW’s Largest Office Campuses
Investing in commercial real estate has always been a high-stakes game, but the pool of buyers willing and able to take a risk on office has become almost nonexistent of late.
Emphasis on “almost.”
Even as vacancies rise and financing slows to a drip, one company in Texas is actively snapping up office properties. And not just any office properties — Austin-based Capital Commercial Investments is bullish on some of North Texas’ largest suburban campuses, many of which are either partially or fully vacant.
It's a strategy some view as challenging, but Capital Commercial has embraced with gusto.
The company has thus far been mum on its plans for North Texas but agreed to speak with Bisnow via email. CEO Doug Agarwal said the region’s population gains, paired with a dearth of new construction, will be enough to propel demand for the move-in ready office stock his company is amassing.
“The overall net immigration to Texas and Dallas gives us confidence in restabilizing commercial real estate office properties,” he said. “We don’t anticipate any new construction for 24 to 46 months unless they are a build-to-suit.”
Of the 11M SF of office Capital Commercial owns across Austin, DFW and Houston, 7.6M SF is located in the Metroplex, according to data from Partners Real Estate. On average, the company’s DFW office buildings are 43% leased.
In business since 1992, Capital Commercial has done more than $2B worth of deals. But in recent years it has made waves with ambitious plans to revitalize a number of high-profile office campuses, including the former headquarters for JCPenney, ExxonMobil, McAfee and American Airlines.
The company has been forthright about its desire to see some of its largest office buildings leased by a single tenant. Executives are working with brokers and economic development professionals to identify a Fortune 500 company for the former ExxonMobil campus in Las Colinas, which is home to a 365K SF office built in 1996.
“The former ExxonMobil site is one of the most exceptional infill locations in North Texas,” Capital Commercial Executive Vice President Robb Buchanan told the Dallas Morning News upon purchasing the property in December.
“We look forward to engaging with the city of Irving and other parties to redevelop the campus into a luxury master-planned community and capture Fortune 500 companies that are continuing to move to Dallas-Fort Worth from out of state.”
On its face, Capital Commercial’s strategy is inherently risky and perhaps overly ambitious, said Steve Triolet, senior vice president of research and market forecasting at Partners.
Large-scale corporations moving into Texas have historically opted for new construction, so the idea that one would choose a building constructed in the 1990s or early 2000s seems unlikely, Triolet said.
“If you’re a tenant that’s over 200K SF, you almost always either go into a build-to-suit or a brand-new product,” he said. “In my 23 years of [researching] commercial real estate for Dallas, I can only name a handful that are outliers from that.”
That may have been true in the past, but companies are softening to plug-and-play options as lengthy construction timelines and heightened costs stymie new builds, said Ashley Curry, a senior vice president with JLL Dallas who is marketing several of Capital Commercial’s properties, including the ExxonMobil campus and the former McAfee HQ at 5000 Headquarters Drive in Plano.
“We’ve seen some very large users — 300K SF-plus — that people would typically put in the category of a build-to-suit … that see this as an opportunity to get in much quicker than you would if you had to start from scratch and build something,” Curry said.
Capital Commercial intends to be the moderately priced provider of high-quality space, Agarwal said. The company’s strategy has been to buy value-add office buildings, renovate them and then sell them off. It is currently eyeing 2027 as the first year of dispositions for office properties acquired between 2023 and 2025, he added.
The company has yet to buy a DFW office building this year, though Agarwal told Bisnow the company is under contract to purchase 4200 Regent Blvd. in Irving for $2M above its land value. The 123K SF, Class-B property is 36% occupied, according to data from Partners.
Capital Commercial has had some success in leasing the properties it owns, though 13 of its 30 DFW office buildings remain totally vacant, per industry data. Six buildings are listed as 100% occupied.
The 1.8M SF former JCPenney HQ at 6501 Legacy Drive in Plano is Capital Commercial’s largest North Texas office holding. The company purchased the property in late 2021 and spent $10M on renovations, which was enough to bring back not only JCPenney but also NTT Data. Today, the property is 41% leased.
Curry attributes new signed leases at that property to the convenience and savings companies realize by choosing to go the move-in-ready route.
“They already have a full kitchen and café in place. They have pickleball courts, they have game rooms and golf simulators,” she said. “It’s a substantial savings for them to be able to come into a campus setting and provide all of those things they need to provide to their employees.”
Capital Commercial also owns the three-building, 1.4M SF former American Airlines HQ located south of DFW Airport. Aerospace manufacturer Bell Textron signed a 109K SF lease for one building in December 2020. The other two buildings remain empty.
The firm partners with equity investors to fund its acquisitions, and in some cases pays all cash, Agarwal said. For new acquisitions, the firm opts for lower leverage thresholds. The company has acquired more than $650M of investment real estate totaling more than 5.5M SF over the past three years, per its website.
Capital Commercial has a long track record of picking up vacant or partially vacant offices in DFW, but it is hardly the first company to embark on an ambitious buying spree, Triolet said.
Zaya Younan of Younan Properties entered the market in the early 2000s and grew his portfolio to include a roster of landmark office building, including Thanksgiving Tower, KPMG Center and Patriot Tower. At one point, the company was the largest office owner in DFW, Triolet said.
But after defaulting on his loans, Younan was forced to sell off the majority of his assets through foreclosure sales.
“He had a couple of home runs, but from most people’s perspectives, it didn’t pay off very well,” Triolet said. “He probably made money on some of them, lost money on some of them, got some income while he was operating them — but he was kind of a slumlord, and then when he got overleveraged, he had to dispose of them.”
Capital Commercial has both recourse and nonrecourse loans with local and regional lenders, Agarwal said. It shies away from commercial mortgage-backed securities debt since it is less flexible when it comes to negotiating extensions or modified terms. The company uses loan rate swaps to hedge against and manage credit risk during a property’s initial holding period, Agarwal added.
Curry said Capital Commercial puts a lot of time, money and effort into ensuring the success of its properties. The company has had some luck in stabilizing assets and selling them off, including the gold-glass Campbell Centre towers in North Dallas, which sold to a New York–based investor in 2016.
“These are large-scale, notable projects that make a huge impression on the cities that they’re in,” Curry said. “They’re buying some of the best-positioned sites in DFW, so getting to see their vision and be a part of it so early on has been really exciting.”
Office-using businesses have given back millions of square feet in DFW over the past few years, and a persistent pattern of negative absorption continues to do a number on the Metroplex’s vacancy rate.
But while market fundamentals may not be stacked in their favor, Triolet said one has to assume Capital Commercial is confident it will score enough home runs to outweigh any losses.
“I guess they have enough money, patience and deep pockets that they feel like they can get enough wins and that it makes sense for them,” Triolet said. “But of course you wouldn’t do it if you didn’t think that.”
