Detroit-based Ally Financial will close on 163,000 square feet of Dallas office space in June, according to documents filed with the U.S. Securities and Exchange Commission. Prior to the pending purchase, Ally was the sole tenant in the two-story building at 2911 Lake Vista Drive in Lewisville, Texas. Lewisville is a suburb 25 miles northwest of Dallas.
The seller was City Office, a Canadian real estate investment trust. Ally exercised a lease option to buy the Lake Vista Pointe property, according to the filed documents. The Vancouver-based REIT signed a purchase and sale agreement with Ally and expects to close in June.
City Office reclassified its agreement with Ally from an operating lease to a sales-type lease when it was renewed in March and Ally paid a $1 million deposit. The lease renewal included three months of rent abatement at the beginning of the extension term and approximately $5.5 million in leasing commissions and tenant improvement allowances, the Dallas Business Journal reported at the time.
Terms of that lease raised the triple net rental rate — the rate a tenant agrees to pay in addition to all property expenses, including real estate taxes, building insurance and maintenance — to $17.50 per square foot with 50-cent per square foot annual increases, a 6.1 percent increase over the company’s previous rate. An option to buy the building by July 31, 2022, was also included in that lease.
At the time of Ally’s renewal, City Office derecognized the net book value of the property and recorded a sales-type lease receivable of $42.6 million — the discounted present value of the remaining lease payments and the purchase option price. The reclassification resulted in a gain on sale of $21.7 million.
City Office owns 61 buildings with a total of approximately 6.2 million square feet of net rentable area in the metropolitan areas of Dallas, Denver, Orlando, Phoenix, Portland, Raleigh, San Diego, Seattle and Tampa, according to its website. In addition to the Lewisville office currently under contract for sale, its Dallas properties included the 303,000-square-foot 190 Office Center building in Richardson and the 111,000-square-foot building at 2525 McKinnon in Dallas’ Uptown district.
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