Sale of Greenspoint office portfolio another boost for struggling area
Updated 11:50 am, Tuesday, August 22, 2017
A six-building office complex in the Greenspoint area that went into foreclosure after its largest tenant, oil giant Exxon Mobil, moved out a couple of years ago, has been acquired by a private real estate firm from Dallas.
The deal, which closed last week, is the latest major investment in a struggling north Houston region that's been plagued by image problems and record high vacancies in its office towers.
The buyer, Lincoln Property Co., said it was attracted to the property, Greenspoint Place, because of its high-end towers and location near the intersection of Interstate 45 and Beltway 8.
"It's just in a submarket experiencing softness right now. There's a lot of vacancy, but the purchase price reflects that," said Charlie Giammalva, senior vice president of Lincoln Property, which bought the property with H.I.G. Realty Partners.
Houston's latest oil bust reverberated throughout the real estate market and the broader economy as energy companies unloaded mounds of office space. Yet the Greenspoint area took its biggest hit after several longtime corporate tenants left the area for new campuses elsewhere.
Upscale office space in the area is now 50 percent vacant, the highest its ever been, said Michelle Wogan, an executive vice president at commercial property firm Transwestern, which began leasing Greenspoint Place after lender Northwestern Mutual took over the property last summer from Houston-based Hines and partner General Motors Pension Fund.
COMING SOON? Changes ahead for Greenspoint Mall
Yet in the past year, Wogan and her firm have handled around 150,000 square feet of new leases in Greenspoint Place in addition to other sale and lease activity in the area.
"What we're seeing is opportunities for tenants to upgrade into nicer product for very competitive economics," she said.
Sale prices are depressed, too.
"We haven't seen this pricing in a long time," Wogan said, noting that some commercial properties are selling for less than $40 per square foot, which she called "very low for the area."
Wogan is also optimistic about new industrial leasing, which she says often leads to stronger office occupancy.
She cites the nearby Pinto Business Park where Amazon recently built a distribution center and is hiring 2,500 full-time employees to staff it.
"That's huge for the area," she said.
The proposed sale of Greenspoint Mall is also generating buzz.
A group of investors recently agreed to buy the struggling property from Triyar Cos. and transform it into a mixed-use development, though physical changes might not be seen for several years.
"That's 120 acres of prime real estate for redevelopment," said Greg Simpson, president of the North Houston District. "We're just excited someone saw the potential there."
Dallas-based Lincoln Property contracted to buy Greenspoint Place at the end of last year.
The 36-acre campus has more than 2 million square feet of space, including some 50,000 square feet of retail space.
Office occupancy there, now at about 40 percent, is expected to fall to 30 percent in a year based on expiring leases.
Exxon Mobil, which once occupied more than 3 million square feet in the Greenspoint area, relocated to a new corporate campus south of The Woodlands in Spring. American Bureau of Shipping, another Greenspoint Place tenant, is relocating to the same area.
But Giammalva said there also are disadvantages to being that far north.
"It's beautiful," he said, "but it's expensive and not as convenient to employees."
"We'll compete much more favorably from an economic standpoint and location standpoint," he added.
The acquisition of Greenspoint Place brings Lincoln Property's Houston office holdings to more than 9 million square feet. The company did not disclose what it paid for the complex.
Giammalva said there are plans to make improvements, but details haven't been determined.
Changing the name is "highly possible," he said.
While the submarket continues to have its struggles, the property's location, amenities and accessibility to the airport and high-end residential areas like The Woodlands, Champions and Kingwood are appealing, said Warren T. Hitchcock, senior vice president and senior director of the Houston office of NorthMarq Capital.
Not only did Exxon Mobil have a large presence there, he notes, but Halliburton, GE Oil & Gas and FMC Technologies are nearby.
"The biggest takeaway is there's still investment looking at Houston," said Hitchcock, who, along with Bill Haley, advised Lincoln on the purchase and secured financing with ACORE Capital.
ACORE facilitated the acquisition and will provide future capital to execute Lincoln Property's business plan.
Transwestern's Wogan said many of the investors betting on a Greenspoint recovery are local.
"They know Houston's cycle and know it's going to come back," she said. "They know it's an opportunity to buy low and hold for a while as the market recovers.