EXECUTIVE SUMMARY INVESTMENT ADVISORY H. DAN MILLER, CCIM, SIOR Senior Managing Director T. (713) 852-3576 [email protected]
JOHNNY KIGHT Analyst T. (713) 212-6575 [email protected]
FINANCING INQUIRIES MATTHEW PUTTERMAN Director T. (713) 852-3524 [email protected]
HFF HOUSTON LOCATION 9 Greenway Plaza, Suite 700 Houston, Texas 77046 T. (713) 852-3500 F. (713) 527-8725 hfflp.com
Holliday GP Corp. ("HFF"), a Texas licensed real estate broker.
THE OPPORTUNITY
HFF, as the exclusive representative of the owner, is pleased to offer for sale a 100% fee simple interest in 1010 Lamar and 1111 Main (the “Property”, the “Building”), a 20-story, 277,991-square-foot office building with attached parking garage in Houston’s central business district.
The office building was constructed in 1981 while the parking garage was added in 1998, when the former Sakowitz Department Store was purchased and converted. The garage offers an extremely unique 1.8 per 1,000 parking ratio, far greater than most buildings in the CBD including class A assets. Bounded by Lamar, Dallas, Main and Fannin, the Property sits on 1.36 acres, nearly a full city block. Due to its irreplaceable location and superior accessibility, the Property has been deemed the “100% intersection” for the city’s retail redevelopment initiative which looks to follow the success of the Downtown Living Initiative. The purpose of the Downtown Living Initiative was to promote the development of up to 5,000 multi-family units in Houston’s CBD by providing tax incentives. To date, 17 residential projects totaling 4,995 units have been built. The city is now looking to provide tax incentives to promote the development of retail space in Houston’s CBD. In the past 4 years, the current ownership has invested $4,548,450 in non- leasing capital making future invested capital accretive to the NOI. Significant near-term value creation is achievable through rolling current in-place rents to market and through the lease up of the remaining vacant space. 1010 Lamar is ideally located on Downtown’s 7.5 mile tunnel system and the Metro Light Rail system. The Building offers a 20-story central atrium, 5 high-speed recently modernized, passenger elevators, and separate freight elevator. The tunnel level offers over 15,000 square feet of space ideally suited as a future amenity level which could include a restaurant, fitness facility, coworking areas and sundry shop. 1010 Lamar boasts a 98 walk score and 100 transit score due to its adjoining location on METROrail’s Red Line and dominate “Main at Main” position.
PROPERTY SUMMARY Address 1010 Lamar Street, Houston, TX 77002 Rentable Area 277,991 Site Size 1.36 Acres Year Built 1981 % Leased 54.5% Parking Ratio 1.8 / 1,000 SF Average Remaining Term (July 2018) 2.4 Years Average Tenure (July 2018) 5.7 Years Expenses NNN & FS 1010 LAMAR
W. DALLAS Sam Houston Park
M
ANDREWS A C BAGBY BAGBY
T A C D T H L HOWE H 00 S A C H SHAW Tranquility C T A O A Park T 00 S C C 500 C H H O 00 S C C I U.S. L C SMITH SMITH 40 S H M A H 00 R T C R R 00 F O L 00 L L S T C T 400 L H L L C D F LOUISIANA LOUISIANA M S R E 500 T C T L I C M L H H T E T M T S MILAM MILAM
H T 00 T H D T T 00 Market T E L F YMCA CLAY H M C T Square DALLAS F POLK Park M LAMAR
T MCKINNEY WALKER TRAVIS C TRAVIS T A F U 000 L C T 0 T R M M M M M S 300 T M T L M H F C H U C M I MAIN M MAIN S . S M L 334 O C L 0 H C C U A A 0 0 L C A 00 M C M H H D FANNIN
FANNIN L M 00 F M T H C A U C T S 4 5 F 30 H C S F
GRAY RUSK U C H C PIERCE
F TEXAS LEELAND H BELL F R C H H L C PEASE JEFFERSON
H PRESTON
C FRANKLIN C PRAIRIE C ST. JOSEPH ST. H CAPITOL
C
L C SAN JACINTO CONGRESS SAN JACINTO 0 COMMERCE C C L U.S. D C C H C 30 S H C E AT&T F C 4 T H A C C L T D T CAROLINE H C CAROLINE A M C F & H H & S U C T S F HS VA H C A S T C S U C U C U C C H AUSTIN A L AUSTIN Root 5 H 4 4 Memorial O A C C H C Sisters of Charity S C Park Square D U C D LA BRANCH LA BRANCH E S . S H H 500 C M C T H D CRAWFORD T Toyota CRAWFORD Center I A U H H S M C A A C H Discovery M JACKSON Green JACKSON Minute H Maid A AVENIDAS DE LAS AMERICAS Park H CHENEVERT CHENEVERT
H I George R. Brown E Convention Center T U C HAMILTON HAMILTON
CHARTRES ST. EMANUEL BELL CLAY POLK GRAY RUSK LAMAR TEXAS PEASE PIERCE DALLAS WALKER CAPITOL PRESTON LEELAND FRANKLIN ST. JOSEPH ST. CONGRESS MCKINNEY COMMERCE JEFFERSON HUTCHINS
BASTROP BBVA Compass Stadium
EMANCIPATION
ST. CHARLES
03 INVESTMENT HIGHLIGHTS
REPOSITIONING OPPORTUNITY IN IRREPLACEABLE LOCATION 1010 Lamar offers the unique ability to acquire a Houston CBD office tower for a fraction of replacement cost in the heart of Houston’s central business district.
Bounded by Main, Fannin, Dallas and Lamar, the site is situated across the street from GreenStreet, Downtown Houston’s largest mixed use development, and sits in the middle of a submarket that commands the highest rents in the city. The downtown infill location is surrounded by Fortune 100 companies, and has seen a steady increase in residential population through the Downtown Living Initiative.
04 1010 LAMAR
SIGNIFICANT NON-LEASING CAPITAL INVESTED PARTIAL LIST OF CAPITAL IMPROVEMENTS Over the last 4 years, approximately $4,548,450 have been invested COMMON AREAS AMOUNT COMPLETION DATE into the property, mitigating a buyer’s exposure to future capital Miscellaneous Upgrades, Retrofits and $271,800 2018 expenditures. Replacements Fire Alarm Panel Replacement $30,000 2016
Elevator Lobby Renovations (Floors LL and 2-18) $60,000 2017 With minimal deferred maintenance, a buyer has the opportunity to concentrate on aesthetic upgrades to enhance Restroom Renovations $255,000 2018 the attractiveness of the building to current and future tenants. Fire Sprinkler Retrofit $750,000 2017 In the past 3 years, elevators were modernized, building and Elevator Modernization $1,500,000 2018 garage fire panels were replaced, the HVAC energy management Suite 710 Building Auditorium/Conference Room $150,000 2018 system was upgraded, and numerous floors have been converted Whiteboxing Basement for Tenant Marketing $500,000 2018 to DDC controls. Furthermore, the cooling tower was replaced Total $3,516,800 in 2008 and roof was replaced in 2000. Please refer to the HFF GARAGE
Document Center for a full schedule of capital expenditures. Miscellaneous Garage Repairs, Renovations and $110,500 2018 Replacements
Parking Access System $125,000 2015 IMMEDIATE UPSIDE POTENTIAL AND Retrofit Garage Lighting $100,000 Ongoing-50% Complete MARK-TO-MARKET UPSIDE Total $335,500 Currently, the building is bifurcated between net and gross leases with significant embedded upside as in-place rents are at least 25% BUILDING below market rates. Whitebox and Spec Suites $108,000 2018 Fire Damper Access Panel Installation (Code) $16,000 2015 With an average remaining lease term of 2.4 years, the Property Bldg Access System $35,000 2017 is well positioned to offer investors near-term access to the rent Miscellaneous Building Repairs and Upgrades $82,350 2018 roll with the potential to substantially increase base rental Total $241,350 income by rolling rents to market and converting gross rents MECHANICAL to net rents. Furthermore, 1010 Lamar currently is 54.5% leased Miscellaneous Mechanical Repairs, Renovations $204,800 2018 and has over 120,000 square feet of vacant space to lease up. and Replacements Houston’s CBD office market is home to the greatest velocity Install New Water Lines & Valves $69,000 2017 of leasing activity and new ownership will be able to position Replace Controllers on AHUs $35,000 2017 the property for stabilization at an attractive basis. Retrofit HVAC to DDC $55,000 2018 Pneumatic Repairs $25,000 2018
Replace Hot Water Heaters $21,000 2018
EMS Front End Replacement $45,000 2017
Total $454,800
BUILDING TOTAL $4,548,450 05 INVESTMENT HIGHLIGHTS
SUPERIOR ACCESSIBILITY WITH SUPERB PARKING Perhaps the ultimate Downtown luxury is the ease of ingress and egress to a tenant’s desired workplace.
1010 Lamar is situated between Lamar and Dallas Street, the main east/west arteries in Downtown. These two streets evolve into Allen Parkway, which provides immediate access to some of Houston’s finest neighborhoods including River Oaks, the Memorial Villages and Tanglewood. They also provide direct access to I-45. Moreover, the Property is located on Main Street, which is a pivotal north/south thoroughfare that provides access to I-10 and is home to the city’s METROrail. These locational attributes are why 1010 Lamar has a perfect transit score of 100. The 1.8 per 1,000 parking ratio is nearly double the standard ratio in the CBD and provides additional income through transient and contractual parking rates. The 1111 Main Garage presents investors with an incredible redevelopment opportunity which is highlighted on the following page.
RICH IN BUILDING AND AREA AMENITIES Tenants at 1010 Lamar can enjoy an attractive array of on-site and nearby amenities that make it a desirable location to call home.
1010 Lamar is tunnel connected, which is essential for leasing and provides an expansive amenity base for tenants. This network of subterranean climate controlled, pedestrian walkways links 95 full city blocks, offers over 400,000 square feet of retail space, and is 7.5 miles long. Boasting a walk score of 98, the Property is adjacent to GreenStreet, a 570,000 square foot retail, upscale dining and live entertainment mixed-use complex. One block away from the Property is the Shops at Houston Center, a 190,000 square foot center with a food court and four restaurants. Amenities and features at 1010 Lamar include a 20-story central atrium, 5 high-speed recently modernized, passenger elevators, separate freight elevator, on-site management, and on-site courtesy guard. The entire tunnel level of the building, which contains over 15,000 square feet, is virtually a blank canvas and could include a fitness facility, restaurant, co-working areas, or other retail uses.
REDEVELOPMENT RENDERINGS
06 1010 LAMAR
AERIAL PHOTOGRAPH
10
KINDER HIGH SCHOOL FOR THE PERFORMING MARKET SQUARE TOWER AND VISUAL ARTS (HSPVA) 10 MAIN
HOBBY CENTER DISCOVERY GREEN OF THE PERFORMING ARTS
MINUTE MAID PARK ONE PARK PLACE
THE SHOPS AT HOUSTON CENTER 1010 MARRIOTT BBVA COMPASS STADIUM LAMAR MARQUIS
GEORGE R BROWN CONVENTION CENTER
SKYHOUSE
FOUR SEASONS
GREEN STREET
TOYOTA CENTER
HILTON AMERICAS HOTEL
07 REDEVELOPMENT OPPORTUNITY
Milam DOWNTOWN RETAIL TASK FORCE HFD Travis Market Travis 919 The J.P. Morgan Houston Market Head- Americana Place Square Tower Milam Esperson Chase Chronicle Square In early 2013 former mayor Annise Parker announced the formation of a Downtown Retail Task quarters Garage Park Garage Tower Force to research all available retail opportunities in Downtown. The purpose of the task force Travis Commerce 806 Main Travis Tower Courtyard Reliant was to research all available retail opportunities and to consider physical and policy changes Towers J.P. Morgan J.P. Morgan The First United by Marriott/ Energy Majestic Chase Chase Rice Methodist Residence Macy's Plaza Metro 801 Travis Building Center needed to address challenges currently impacting Downtown’s consumer appeal, ease of shopping, Church Inn Superstop Main 1001 St. Germain recruitment, commerce and ability to attract retailers. Upon intense research and due diligence, Harris Main One McKinney Lofts Binz County Street 1010 City C Building Admin. the task force’s vision set for “Dallas Street to be transformed into an exceptional, shopping, dining Garage Lamar Centre Club Quarters Hotel and entertainment destination with a mix of anchor and specialty retailers offering the best in Fannin Fannin Magnolia Harris Hotel Christ Sam County national, regional and local brands.” At the absolute epicenter of the project is 1111 Main and 1010 Greenstreet Dallas Garage 1301 First 2 Church Houston Civil
lker Rusk Fannin Howell City Houston Cathedral Hotel Polk Clay Rusk Leeland
Bell Courts
Garage Texas Lamar Prairie Wa Capitol Building Tower Preston Lamar, even labeled the “100% intersection” in the Downtown Retail Task Force Report (see HFF McKinney Center San Jacinto Harris Document Center for report). While GreenStreet will serve as the southern anchor to Downtown’s First South Lyondell U.S. County City Texas The Shops Basil Tower Customs Juvenile Tower new shopping district, 1111 Main and 1010 Lamar are perfectly positioned as the northern anchor College at House Justice
Garage Congress of Law Houston Center of the new corridor and centrally located to the easily accessible and dense office population in Caroline Center 4 Houston Four Houston 1301 Center Great Urban the CBD. Seasons Center McKinney Garage Southwest League Hotel One Life
Austin
DEVELOPMENT INCENTIVES South Root Houston Following the success of the Downtown Living Initiative that generated a remarkable collectionSquare Center of mid-rise and high-rise apartment housing in Downtown - all of which include active ground La Branch Trammell floor uses, the city and downtown organizations have organized the Downtown Redevelopment Crow Inn at the Site Authority. As Houston continues to push for a true work/live/play Downtown atmosphere, several Ballpark L Toyota Crawford Center Annunciation development incentives have been offered to help catapult the retail scene in the CBD. Such incentives Catholic Union Incarnate Church Station Hilton Word include 50%-95% tax rebates from the Downtown TIRZ. Soft good retailers are particularly desired Americas Academy Houston Discovery Jackson and the city is open to further incentives as well. These tax rebates can equate to approximately Hotel Green Hilton Minute Maid $15,000,000 over 10 years with 100,000 square feet of development. Houston hopes to expand its Americas Park Hotel Avenidas de las Americas Downtown population from 7,500 to 30,000 over the next 20 years and this population expansion Garage Chenevert will need retail to help support it. 1800 Texas George R. Brown Convention Center SHOPPING DISTRICT VISION & BOUNDARIES Hamilton Referenced on page 23 of the Downtown Retail Task Force, the task force determined that efforts Highway 69 and financial resources be focused on transforming Dallas St. into a pedestrian-oriented retail corridor by improving the streetscape and by providing financial incentives for aligning property owners to improve their building facades with more storefront windows, new signage and enhanced building materials and interior retrofits as needed. Main and Dallas have been identified as the only concentration of downtown street level retail with GreenStreet. At the heart of Downtown, the task force believes Dallas Street has the highest amount of potential retail space in the CBD.
08 1010 LAMAR
“What’s happened in downtown Houston over the [last] five years is arguably the greatest shift to its Urban Core since the city began its renewal backin the mid 1990’s”.
09 INVESTMENT ADVISORY H. DAN MILLER, CCIM, SIOR Senior Managing Director T. (713) 852-3576 [email protected]
JOHNNY KIGHT Analyst T. (713) 212-6575 [email protected]
FINANCING INQUIRIES MATTHEW PUTTERMAN Director T. (713) 852-3524 [email protected]
9 Greenway Plaza, Suite 700 Houston, Texas 77046 T. (713) 852-3500 F. (713) 527-8725 hfflp.com