Real estate investors from New York have poured into Texas, chasing rising rents and massive population growth in recent years. The trend has slowed since the Fed started raising rates, office occupancy has stagnated and rents have come down, but the influx hasn’t totally stopped. On Tuesday, a relatively unknown New York firm, Shelbourne Global, jumped into the Dallas office market in a big way.
The company bought Plaza of the Americas, a 1.2 million-square-foot office complex in downtown Dallas. The buildings, at 600 North Pearl Street, were built in 1980 and previously sold in 2011 for $100 million.
Shelbourne’s purchase price wasn’t disclosed, but the property was valued for tax purposes at nearly $95 million this year, according to the Dallas Central Appraisal District. That valuation works out to less than $78 per square foot.
The sellers, M-M Properties and Invesco Real Estate, had poured $26 million into renovations at the property, but downtown has lost ground in recent years to spiffy new developments in Uptown.
About 70 million square feet of office space sat empty in Dallas-Fort Worth as of last quarter, with just over 10 million square feet of that hole in downtown. Shelbourne, as unlikely a buyer as it may seem at first glance, may have just the background for these older buildings in a market like Dallas.
Shelbourne was founded in 2012 by Bernard “Shimmy” Bertram, a New York multifamily investor who wanted to start investing in offices. The origin of the company’s name is unclear, but appears to come from David Shelbourne, who is not listed on the company’s website but calls himself its “senior advisor” on his LinkedIn.
Before founding Shelbourne, Bertram came to control around 2,500 multifamily units in New York City. He sold the portfolio to a hedge fund before starting Shelbourne.
Shelbourne is based in Midwood, a Brooklyn neighborhood somewhat removed from the hustle-bustle of Manhattan.
The firm’s other managing member, Ben Schlossberg, was a debt specialist before joining the firm. He bought both performing and non-performing debt, the kind of skills that have become critical in the tumultuous modern office market. He also holds a “controlling interest” in CAT Health Partners, a management consulting firm for nursing homes and assisted living facilities.
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The company manages more than 8 million square feet of commercial real estate worth $1 billion, according to its website. It has built that portfolio by raising private equity money and, until now, buying offices in secondary and tertiary markets. That would seem to make its foray into downtown Dallas a major step up from its standard deal, but Shelbourne has built a niche buying older offices, typically built around the 1980s, and renovating their common areas and amenities before flipping them.
In Dallas, where Uptown has taken a huge chunk of the office market by leaning into hotel-style amenities at offices, value-add flips are one of the few options left for many older downtown properties.
Shelbourne typically holds a property for seven to 10 years and has amassed its biggest assemblage of properties in Hartford, Connecticut. There, the firm’s holdings include the Gold Building, a 621,000-square-foot office it bought with Laz Parking in 2019. The 26-story building’s tenants include KPMG, IBM and Virtus Investment Partners.
It has branched into multifamily in Hartford, including at its developments along Pratt Street, where it owns or is building 450 apartments, along with 40,000 square feet of retail.
Its closest holding to Texas is Eastgate Metroplex, a 1 million-square-foot office complex in Tulsa. The company bought the L & C Tower in Nashville, a 390,000-square-foot office building for $24 million in 2014. A year later, it sold the building for $29.75 million.