KBS Sells Austin Office Tower

A joint venture of Palmatum Ventures, AQUILA and Glendon Capital Management has acquired 515 Congress, a 26-story, 267,956-square-foot office tower in downtown Austin, Texas. KBS Real Estate Investment Trust III was the seller of the Class A building that also includes roughly 12,000 square feet of street-level retail space.

JLL represented KBS in the transaction. KBS retained JLL Capital Markets in June to market the mixed-use property.

The sale price for 515 Congress was not disclosed but the asset was appraised by Travis County at $117 million this year, down from $150 million in 2022, The Real Deal reported. KBS Realty Advisors acquired the tower in August 2015 from Stream Realty for $112.4 million, according to Yardi Matrix.

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Also known as the Bank of America Tower, the office building was developed by Hines and opened in 1975. A cosmetic renovation was completed in 2013.

The move comes a few months after KBS Real Estate Investment Trust III sold Salt Lake Hardware Building, a five-story, 210,938-square-foot office building in downtown Salt Lake City to Dart Interests.

Capital improvements, multiple leases

KBS invested more than $15.5 million in capital and base-building improvements, including renovations to the lobby, tenant lounge and conference facilities, along with a modernization of the elevators. The tower averaged more than 91 percent occupancy over the past decade, according to Giovanni Cordoves, KBS’ Western regional president.

KBS executed multiple lease transactions over the past year, including the expansion of space by webAI, an artificial intelligence software company, to a total of 40,000 square feet. The tech company, which has its headquarters at 515 Congress, now has its name on the tower as the anchor tenant.

Other tenants include The Boeing Co., Austin Business Journal, Cloudera, PMG, Stream Realty, Downtown Austin Alliance, BDO and Barton Creek Capital. Bank of America retains a retail bank branch on the ground level. Restaurant tenants include Cava, Jimmy John’s and P. Terry’s Burger Stand.

515 Congress is located at the corner of Congress and Sixth streets, within walking distance of the Texas State Capitol, along with dining, retail, hotel and cultural outlets.

Ben Tolson, managing principal at AQUILA, said in prepared remarks the property’s location and strong fundamentals were key factors in the joint venture’s acquisition. Tolson said the venture sees an opportunity to invest in the building and further enhance the experience for both existing and future tenants.

Active Austin office sales market

The 515 Congress sale comes soon after several Austin office buildings changed hands in recent months. Austin’s office investment volume reached $543 million year-to-date through May, when DRA Advisors and Pillar Commercial sold 823 Congress, a 16-story, 181,000-square-foot tower in the central business district, to Brick Row.

In July, Cousins Properties sold One Eleven Congress, a 30-story, 518,385-square-foot office tower, for $208 million. Canyon Creek Real Estate acquired the building that had been owned by Cousins since 2016.

Also in July, Hines acquired 405 Colorado, a 206,000-square-foot trophy office tower from Brandywine Realty Trust for $151 million. The 25-story tower, which came online in 2021, reached full occupancy by 2023. Amenities include a sky lounge with conference rooms on the 14th floor, a café and a terrace.

KBS disposition brokers, advisors

Mike McDonald, a senior managing director who was part of the JLL Capital Markets team marketing the property for KBS, said in a prepared statement investors remain selective, but well-located, renovated properties with durable tenant bases and clear leasing potential can still generate meaningful competition.

McDonald’s JLL colleagues involved in the transaction were Senior Managing Director Jonathan Napper and Managing Directors Ryan Stevens and Drew Fuller.

Greenberg Traurig LLP represented KBS in the disposition. Bruce Fischer, chair of the firm’s West Coast real estate practice & co-managing shareholder in its Orange County office, led the team and was assisted by Howard Chu, attorney & shareholder, and paralegal Amanda Kennedy.