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December 13, 2017  

Dallas Apartment/Retail Portfolio Up for Grabs

Sarofim Realty is marketing a Dallas portfolio that encompasses a luxury apartment building and 11 low-rise retail properties, some of which are ripe for expansion.

The buildings, valued at about $260 million, are clustered in the Knox District, a trendy neighborhood in the city’s urban core. The six-story apartment building, completed last year, has 165 units that are 93% occupied and retail space on the ground floor. Overall, the portfolio’s retail space totals 203,000 square feet and is 80% occupied.

The properties are generally within the area stretching from the Katy Trail to Route 75, between Armstrong and Hester Avenues. HFF is marketing them as a package for Dallas-based Sarofim.

While a buyer could simply seek to lease vacant retail space, the likely play is to collect the steady income from the stabilized buildings while expanding the others to tap into growth in the neighborhood. The pedestrian-friendly Knox District is one of the city’s top shopping corridors.

The vacant retail space is in a few buildings along Travis Street that were recently emptied to pave the way for vertical expansion. Approvals have been obtained for the immediate development of 409,000 sf of office, apartment, residential condominium or hotel space on upper floors, investors have been told. The leases of two tenants at other buildings expire in 2019, when another 218,000 sf could be added, according to marketing materials. Another 267,000 sf could be added in 2027. Ultimately, the listed properties, including the 181,000-sf apartment building, could exceed 1.5 million sf.

Some of the retail space in the apartment building is leased to a Trader Joe’s supermarket. Other retail tenants in the portfolio include Crate & Barrel, Kate Spade, Lululemon, Pottery Barn and several high-end restaurants. Sales average a lofty $780/sf.

The apartment building, called Armstrong at Knox, is at 4525 Cole Avenue. The units have 1-2 bedrooms and rent for $1,895-4,050, according to the property’s website.

Overall, the Knox District has 500,000 sf of retail space, 258,000 sf of offices and 1,470 apartments. Other retailers in the district include Apple and Restoration Hardware.

The Katy Trail, a path for jogging, walking, skating and bicycling, goes through the neighborhood. Since 2010, approximately 3,500 apartments have been developed along the trail. They command rents 19% higher than at comparable properties nearby, according to marketing materials.

There are 203,000 residents with an average household income of $120,000 within three miles of the Knox District. It’s surrounded by some of Dallas’ most affluent residential neighborhoods with lofty average home values, including Highland Park ($3.7 million), University Park ($2.3 million), Lakewood ($1.2 million) and Uptown ($1.1 million).