Hicks Ventures Picks Up 141 KSF Across Two Houston Office Assets

Seeking a value-add opportunity in the hot Houston market, Hicks Ventures Ltd. has acquired two Class B office buildings in the area’s Energy Corridor with a total of 141,265 square feet from American Spectrum Realty Inc.

By Gail Kalinoski, Contributing Editor

16360 Park Ten Place in Houston

Seeking a value-add opportunity in the hot Houston market, Hicks Ventures Ltd. has acquired two Class B office buildings in the area’s Energy Corridor with a total of 141,265 square feet from American Spectrum Realty Inc.

Rudy Hubbard, managing director, and Leah Gallagher, vice president, of Jones Lang LaSalle Inc.’s capital markets team handled the transaction for American Spectrum Realty, a Houston-based real estate investment and management company. American Spectrum, which had owned the buildings since 2002, said in an earlier release that it planned to pay down debt and redirect assets to its management business.

Patrick Hicks, principal and founder of privately-held Hicks Ventures, declined to release the price paid for 16350 Park Ten Place and 16360 Park Ten Place located in the 550-acre, master-planned Park 10 Regional Business Center.

Hicks told Commercial Property Executive the firm, a Houston-based investment, development and management/leasing company, would immediately begin approximately $1.7 million in renovations of the adjacent properties. He said the lobbies, bathrooms, elevators and parking areas would be refurbished.

“Our upgrades will bring these two buildings to the premier Class B (level) in that submarket,” Hicks said.

“These properties represent a classic underperforming value-add opportunity for the buyer,” said Hubbard. “The two buildings are a combined 73 percent occupied and there’s the ability to put together 30,000 square feet of contiguous space.”

The properties are located in the Katy Freeway West submarket, also known as the West Houston Energy Corridor, about 20 miles west of Houston’s central business district, said Lisa R. Bridges, director of market research in Houston for Colliers International. Built in 1979, 16350 Park Ten Place is a Class B, two-story, multi-tenant property with 72,599 square feet of space. The second property at 16360 Park Ten Place is a three-story, Class B+ building with 68,666 square feet of space that was built in 1981.

The West Houston Energy Corridor is Houston’s second largest office submarket and the fourth largest employment center in the greater Houston area, according to Jones Lang LaSalle.

“The Energy Corridor is one of Houston’s most dynamic submarkets and leasing opportunities here will be tremendous,” Hubbard said.

Hicks said he was attracted to the buildings because they were underperforming with average occupancy less than 70 percent while other buildings in the development had vacancies in the low- to mid-90s.

He said the firm was already fielding leasing inquiries, most were in the 2,000 to 4,000 square foot range. The 16350 Park Ten Place building is the one with approximately 30,000 square feet of contiguous space that Hicks said might appeal to an energy-related services firm.

Both Hicks and Bridges said they expect Class B leasing and rental rates to increase in the coming year because the demand for Class A office space is outpacing the inventory and new construction won’t be ready for at least one to two years. Bridges said in the Colliers International Houston Office Market Research and Forecast Report for the first quarter of 2012 that “expansion in the energy sector has spurred demand for office space.” The report noted that the Houston area added 93,400 jobs between February 2011 and February 2012, a 3.7 percent increase. Home sales were up 16.9 percent in the same period.

The Colliers International report noted that the largest quarterly rental rate increase was in Class A suburban rates, which rose 5.5 percent to $28.86 percent from $27.34 in the fourth quarter of 2011.  The Class B suburban average rent rose 4.1 percent between quarters from $18.30 to $19.05 per square foot.

“Every time we hit this spot in the cycle, you’re going to see a spike in existing Class A rates and Class B will always follow suit,” Hicks said.

Bridges agreed, noting that office leasing agents have said they have tenants that need to renew but can’t afford the top Class A rates, “so they will probably look at Class B.”

The Katy Freeway West submarket isn’t the only Houston suburban location seeing office building sales. The Khoshbin Co., a privately held Irvine, Calif.-based real estate firm, just acquired two office buildings in the Greenspoint submarket. It bought 333 N. Sam Houston Parkway East and 10700 Interstate 45 North, two multi-tenant office buildings with a total of 395,424 square feet.