WELCOME BACK
Khoshbin Co. returns to Houston with Greenspoint office building.
The Khoshbin Co., a privately held real estate company based in Irvine, Calif., has re-entered the Houston market with the purchase of a 20-story office building in the Greenspoint region of north Houston.
Founder Manny Khoshbin acquired 363 North Belt, a nearly 400,000-square-foot building from an affiliate of TA Realty. Khoshbin said he paid $13 million for the building, which is 41 percent occupied following the departure of anchor tenant Newfield Exploration in 2014.
“Real estate is cyclical, just like the economy,” Khoshbin said. “I like to buy in the down cycle.”
The Greenspoint office market has suffered from weakened demand following the steep drop in oil prices in 2014. It lost a major tenant when Exxon Mobil left more than 1 million square feet behind in Greenspoint after opening its Springwoods Village campus.
Availability, including sublease space, in the North Belt/Greenspoint office submarket stood at 50.8 percent in the third quarter, according to commercial real estate firm Savills. That compares with 26.2 percent for the Houston region overall.
Greenspoint offers some of the most affordable office space in the city with average rents of $17.74 per square foot per year, according to Savills. That’s less than half the rate of downtown, the city’s most expensive market, and is only higher than the FM 1960 submarket, which fetched $14.90 per square foot in the third quarter.
Khoshbin’s strategy is to take occupancy at 363 North Belt from the current 41 percent to 75 to 80 percent in the third year of ownership. He aims to fill vacancies in the building, which has undergone $8.2 million in capital expenditures, by targeting smaller tenants and offering lower rents than competing Class A buildings. The offices will rent for about $9 per square foot — $16 once expenses are factored in, Khoshbin said.
“Price drives deals,” Khoshbin said of his plan to attract tenants.
At its current occupancy, the building generates $500,000 in net operating income, Khoshbin said.
Khoshbin is familiar with the neighborhood, having bought and sold area buildings, including 10700 North Freeway and 333 N. Sam Houston Parkway twice.
From 2004 to 2007, Khoshbin amassed a local portfolio of more than 2 million square feet. Khoshbin divested approximately 1 million square feet of office buildings in 2007 as he saw the market topping out, later purchasing some of the same buildings back at deep discounts from banks.
The 363 North Belt building sold for well off its peak price. Khoshbin recalls offering $41 million for the building in 2006. He was unwilling to pay the seller’s counteroffer of $45 million. The building, at 363 N. Sam Houston Parkway E., is currently valued on the tax rolls at $17 million, down from $25 million in 2015, according to Harris County Appraisal District.
Realty Associates Fund X, an affiliate of Boston-based TA Realty, owned the building since 2014, according to appraisal district records.
Rudy Hubbard, Kevin McConn and Rick Goings with JLL marketed the property for sale. Brandon Harris, Emil DePasquale and David Michalski of Black Bear Capital Partners procured debt financing.
Moody Rambin provides leasing and management services, with Terri Torregrossa handling leasing. Built in 1981, the building has about 35 tenants.
Recent renewals at 363 North Belt include Murex Petroleum Corp., Premier Directional Drilling, Babcock & Wilcox Power Generation and Borusan Mannesmann Pipe U.S., according to the North Houston District.