L.A. LANDLORDS
Former Greenway Plaza Design Center building trades hands.
Los Angeles-based Stockdale Capital Partners has expanded its Houston office portfolio with the purchase of 20 Greenway Plaza, a landmark building visible from the Southwest Freeway.
The property was purchased from Principal Real Estate Investors, which completed a multimillion-dollar renovation five years ago, for an undisclosed sum. HFF marketed the property for sale, procured the buyer and arranged acquisition financing. Cigna Realty Investors provided a seven-year, fixed-rate loan.
The 10-story black granite building, known for the diagonal stair-step pattern notched into the side, was built in 1984 as a showcase for the interior design industry. Once known as the Innova Building, the building was developed by a partnership of Mischer Corp. and Century Development Corp.
“It was built by Kenneth Schnitzer, the developer of Greenway Plaza, at a time when oil prices were at their peak and people were building office buildings like crazy in Houston and they all needed furniture to go in them,” said Stephen Fox, an architectural historian and lecturer at Rice University and the University of Houston. “By the time it was completed, the oil market had gone through a catastrophic downturn, and no one needed office furniture anymore.”
Designed by Cambridge Seven Associates, the building was patterned after the Cesar Pellidesigned Pacific Design Center in West Hollywood, Calif., Fox said. The building was converted it into an office building in the late 1990s, at which time windows were cut into the granite.
“The building never quite had the impact thereafter as it did with the sleek polished black granite box,” Fox said.
The building’s unique design and large rectangular floorplates resonate with companies seeking creative office space.
“There’s a stair-stepped light
well that goes from the top of the building all the way to the bottom of the building, which fills the building with natural light on every floor,” said H. Dan Miller of HFF. “Even interior offices and interior spaces have natural light.”
Located south of Richmond Avenue at Cummins Street, the 433,132-square-foot building is close to upscale neighborhoods including River Oaks, West University Place, Afton Oaks and Bellaire.
The building is 95 percent leased, according to HFF. Merrill Lynch, the largest tenant, occupies a little more than 80,000 square feet. Koch Industries, which previously owned the building, occupies about 40,000 square feet. Other tenants include Sunnova Energy Corp, RealEC Technologies and Mitsubishi Heavy Industries America.
Miller and Trent Agnew of HFF represented Principal Real Estate Investors in the sale, while Wally Reid of HFF arranged financing.
Stockdale Capital Partners, which manages its buildings in-house and has an office in Houston, acquired the Sugar Creek I and II office buildings in Sugar Land in 2014.
Office buildings in the Greenway Plaza submarket on average rent for $35.82 per square foot per year, according to JLL. That’s on par with the Galleria and is $4.34 more than average rents for the overall Houston market.
The Greenway Plaza submarket’s total vacancy rate of 16.7 percent is below the region’s average vacancy rate of 23.1 percent, according to JLL.
The 20 Greenway Plaza building represented an opportunity for investors to add value when rents roll over, since average rents in place are below market, Miller said.
“The economy is making a strong comeback. We’ve created over 80,000 jobs in the last trailing 12 months,” Miller said. “This is a great value add market.”