A joint venture between Highwoods Properties and Granite Properties bought a high-profile office tower in the Uptown section of Dallas designed by a late star architect in a deal that shows investors still have an appetite for trophy buildings.

The 50-50 venture between Raleigh, North Carolina-based real estate investment trust Highwoods and Plano, Texas-based real estate investor Granite bought the building in an investment worth nearly $400 million, Highwoods said Friday. The mixed-use tower called McKinney & Olive was designed by the late César Pelli, a world-renowned architect.

The sale of McKinney & Olive shows the office market is still robust, with the price being about $788 per square foot just for the office space. That sets a new high-water mark, said Bill Kitchens, director of CoStar Market Analytics overseeing the Dallas-Fort Worth market.

"It's a testament that well-placed, trophy assets continue to attract investors and will command prices that are establishing new high-water marks in the market," he said.

The tower, built in 2016, includes 507,000 square feet of office space and about 50,000 square feet of retail space. The property also contains a 1-acre piazza within a block from Klyde Warren Park.

The acquisition adds to the Highwoods-Granite joint venture holdings in the sought-after Uptown neighborhood. The two firms teamed up on 23Springs, another mixed-use project underway with 626,000 square feet of office space and 16,000 square feet of retail. The 23Springs development, within four blocks of McKinney & Olive, is scheduled for completion in 2025.

McKinney and Olive is "a solid bull's eye with its prime infill location in a top tier submarket and financially sound, diversified customer base," Highwoods President and CEO Ted Klinck said in a statement. "Plus, with rents estimated to be 35% below-market, McKinney & Olive provides meaningful upside potential."

The REIT's management team has "long-emphasized the importance of having a strong balance sheet with dry powder to capitalize on exactly this type of strategic opportunity" by adding what is a "singularly iconic asset" such as McKinney & Olive "at or below estimated replacement cost," Klinck said. He also said the firm plans to focus on accelerating its noncore dispositions in 2023 as the investment sales market stabilizes.

The joint venture's total investment in the deal was $394.7 million, according to Highwoods Properties. The deal includes $1.7 million of near-term building improvements and $2 million of transaction costs. In 2023, McKinney & Olive is expected to generate net operating income of $22 million cash.

McKinney & Olive has a wide range of tenants with no tenant leasing more than 100,000 square feet of space. Tenants include Cushman & Wakefield, Saatchi & Saatchi, McKinsey & Co. and Prologis. Del Frisco's Double Eagle Steak House also anchors the retail portion of the property.

The deal closes at a time when the capital markets for office space in particular have been upended by recessionary fears, economic concerns and uncertainty about the future of office space. This sale is one of the largest office deals to close in the Dallas-Fort Worth market this year, with only the sale of Trammell Crow Center earlier this year in downtown Dallas edging it out for the market's top office deal.

Granite said the McKinney & Olive deal fits with its investment strategy. "We continue to be focused on growing our firm through acquisitions and developments of high-quality projects in the best submarkets, and this building is a very strong addition to our Dallas portfolio," Granite's Will Hendrickson said in a statement.

JLL's Andrew Levy and Todd Savage represented the seller, Crescent Real Estate, in the deal. Crescent was also advised in the deal by J.P. Morgan Asset Management.