BUYER OF CHRONICLE COMPLEX DOWNTOWN NOT EXPECTED TO CRUSH IT JUST YET 
The deal could still fall through, cautions Ralph Bivins, but real estate development firm Hines is in the middle of negotiating a purchase of the Houston Chronicle’s complex and parking garage at 801 Texas Ave. downtown. Expected sale price: “more than $50 million, perhaps as much as $55 million.” But Bivins doesn’t think Hines is ready to knock down the structures and build another of its downtown office developments on the 99,184 sq. ft. of land on 2 blocks right away. Instead, he writes, the company “appears to be seeking to lock up a prime skyscraper development site for future years.” [Realty News Report; previously on Swamplot] Photo: Walter P Moore
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I wonder if it means leasing is going well at 609 Main, that they are willing to throw that much cash out for another land parcel?
I don’t get it. Assuming they have no demo costs, is downtown really selling for $500+/sf?
So far no leases have been completed at 609 Main. That probably has no bearing on this purchase as Hines has a very long term view for this site. It doesn’t matter if they build something in 2 years or 10 years CBD development sites are few and far between and very rarely will there be an opportunity like this one. (There was considerable interest in this site so it’s not like Hines was the only bidder.)
What will most likely happen is they will demolish the office building and create a surface parking lot. Between that and the existing parking garage I’ve heard the numbers work out like a 4-5 cap on the purchase price. They’ll make modest returns and wait for an opportunity to go big with something vertical when the time is right.
It’s a VERY prime site well worth the time it takes to wait for the right development opportunity. I agree fully with the prediction it will be used for surface parking for a number of years before a new building starts there.
Wish they would demolish the Chronicle itself…I am getting tired of reading “Top 7 Best Pizzas” and “Most Friendly Dog Parks” style lists [in lieu of real journalism].
@ Superdave: so true. Some of my elderly relatives get all their news from the chron and ABC 13. Yikes.
I do hope the Houston Chronicle sign stays on the building when they implode it. I’ll enjoy watching it fall.
Is it possible there have been leases signed that are confidential, that they aren’t disclosing?
Also, it seems like while the main site will probably be a surface lot for awhile, the garage could be cleared for an apartment tower if leasing at other nearby apartment towers is strong.
If you end up with two surface lots in a row running south from Market Square and then another parking garage/surface lots on the other side of Chase Tower, that kind of ugliness really starts to neutralize the positive effect we’ve had of other nearby surface lots being developed.
Cody, this doesn’t make any sense to me either unless there’s something suspect about their underwriting. It may be true that well-located land downtown is in short supply and doesn’t often come to market, but holding costs and the opportunity costs of capital on a deal this expensive would leave me scratching my head. It would also be very sensitive to changes in cap rates and/or interest rates, which are a function of global capital markets.
Its always possible, though, that the deal is convoluted in some way and that the “price” in absolute dollar terms doesn’t mean what we think that it means.
Maybe a mattress store will open until they firm up their long term plans. . .