Value-Add Player Marches 104,337-SF Office Deal to Closing

HOUSTON-A 104,337-sf, class B office building, with upside in a 78% occupancy, has sold for close to the $6.2-million assessment to an affiliate of locally based Asset Plus Cos. The seller is Chicago-based Transwestern Investment Co.

As soon as the ink dried, Asset Plus took over leasing and management after waiting out a 10-month acquisition process and picking up the deal when an $8.3-million contract fell out for 15915 Katy Freeway, James Doerr, vice president of acquisitions and asset management for Asset Plus, tells GlobeSt.com. “It sold to us for significantly less than what they originally wanted,” he says. “We’re going into it with a three- to five-year hold. We are looking forward to turning it around and repositioning it and hopefully selling it for a little profit.” During the wait, occupancy dropped from 88% to 78%, he says.

Doerr says the turnaround plan will bring about $250,000 in renovations to a 21-year-old office building with freeway visibility and access that’s only going to get better as Interstate 10 construction pushes from the front of the six-story building into the CBD. He says the freeway widening to 24 lanes and the 20-mile ride to the downtown will only add to the attractiveness of office leasing in the Park 10/Energy Corridor submarket of West Houston.

Transwestern Investment bought the 15915 Katy Freeway building, positioned on 3.6 acres, in 1998. The brokerage affiliate, Transwestern Commercial Services, was cutting recent deals as high as $18 per sf, but Doerr says the new ticket will be $17 per sf gross.American Habilitation Services Inc., one of the nation’s largest service providers for people with developmental disabilities, is the lead tenant, with 17,000 sf carved out for its headquarters. The roster of general office users has some near-term roll in the leases, Doerr says.

Asset Plus has bought eight office buildings in four years, employing the same kind of strategy. “We buy at discount due to vacancy,” Doerr says, “that’s kind of our whole objective.”

Holliday Fenoglio Fowler LP director B. Jeffrey Knowles arranged about $4.3 million in financing for buyer of record, Apcar Investment Partnership IX Ltd., with its longtime lender, Nationwide Life Insurance Co. of Columbus, OH. “They offered them a competitive structure that they had on previous loans…with a lot of flexibility,” he says of a package with a sub-5% fixed-rate interest. The loan-to-value ratio was less than 70%.

“It was a value-add opportunity at a 78% occupancy in a submarket that has 88% occupancy overall,” Knowles says. The deal was co-brokered by Transwestern Investment and Granite Partners, with headquarters offices in New York City and Houston. Doerr and Asset Plus principal Steve Spessard negotiated the buy side.