Houston, Texas – Houston-based Mission Equities GP, LLC. (Mission Equities) and Baltimore-based Alex Brown Realty, Inc. (ABR) have entered into a joint venture to acquire the St. Joseph Professional Building, a 138,586 square foot medical office building in Houston, Texas. Mission Equities and ABR Chesapeake Fund III, a value-added real estate investment fund sponsored by ABR, both provided equity to the venture.
Equity capital and debt were arranged by Robert LaRue of Live Oak Capital. Whitney National Bank in Houston provided the acquisition and redevelopment loan for the project. Tim Gregory of Transwestern Houston represented the seller, Orix, in the transaction. Transwestern’s Healthcare advisory group will continue to handle the leasing responsibilities for the new owners.
The building, located at 2000 Crawford, is an 18-story, medical office building constructed in 1964. The bottom six floors include ground-level retail with five floors of structured parking above. The upper 12 floors house medical office space. The building’s basement includes additional office space as well as a tunnel that connects directly to St. Joseph’s Medical Center.
Given the building’s proximity to St. Joseph’s Medical Center, which was acquired by Hospital Partners of America (HPA) in 2006, and its current below-market occupancy level, ABR and Mission Equities view St. Joseph Professional Building as a classic value-added opportunity. “The medical center’s current owners have invested more than $10 million over the last year to reposition it as a convenient, high quality alternative to the Texas Medical Center,” said Dennis Nelson, principal at Mission Equities. “We anticipate the medical center’s ongoing improvements will heighten the demand for medical office space in an already supply-constrained market.”
To address the anticipated increase in demand, the building will undergo a $7.8 million renovation. “The building suffered significant damage in 2001 after Tropical Storm Allison caused major flooding in downtown Houston, said Tom Burton, chief investment officer for ABR. “The owners at the time were undercapitalized and the building’s capital needs were never properly addressed,” continued Burton. As part of the renovation, the joint venture will replace the HVAC system, install a new sprinkler system, ensure compliance with ADA standards, upgrade the elevators and life safety systems, and renovate the exterior façade and common areas. Burton noted that the renovation, when combined with the repositioning of St. Joseph’s Medical Center, should enable the property to reach a stabilized occupancy of 90% or better within 36 months.
St. Joseph Professional Building represents the first joint venture between Mission Equities and ABR. “We are pleased to expand our network of joint venture partners,” said John Prugh, ABR’s president and CEO. “Based on Mission’s knowledge of the Houston market and experience in acquiring medical office space, we have tremendous confidence in their ability to add value to this property and generate strong returns for our investors. We look forward to building a strong relationship with them.”
Alex. Brown Realty (ABR) is a privately owned real estate investment manager organized in 1972 and headquartered in Baltimore, Maryland. ABR co-invests with joint venture partners in a broad spectrum of property types located throughout the United States. www.abrealty.com
Mission Equities GP, LLC. is part of the Mission Companies, a Houston-based group that focuses on acquiring, developing, managing, and leasing commercial and medical office buildings throughout Texas. Since its inception in 1986, the Mission Companies have managed and leased more than 5 million square feet of commercial space in Texas. www.missioncompanies.com
Live Oak Capital, Ltd. is a full-service commercial real estate mortgage-banking firm specializing in debt and equity placement as well as loan servicing for the commercial real estate industry. www.liveoakcapital.net
Transwestern, is of the largest privately held commercial real estate in the U.S. Transwestern’s unique business model offers fully integrated real estate services and operates through six distinct functional lines of business: agency leasing, property and facility management, investment services, tenant advisory, development and research for a broad range of property types, including office, industrial, retail, healthcare and multifamily. www.transwestern.net.