Hines, the Houston-based real estate firm that develops and invest in properties around the world, has picked up another trophy building in its hometown.
The company Monday said it had closed on the acquisition of 600 Travis, the 75-story building it developed almost four decades ago and was known for years as JPMorgan Chase Tower.
After opening in 1982, Hines sold its interest in the building — the tallest in Texas — to its financial partner in the project, Prime Asset Management, an entity affiliated with the late Lebanese billionaire and former Prime Minister Rafik Hariri.
Hines, which has continued to manage the building over the decades, reacquired the property in partnership with an affiliate of New York’s Cerberus Capital Management, a private equity firm known for investing in distressed properties and those in need of capital improvements. This is the companies’ first joint investment.
The purchase price was not disclosed, but a report published over the summer by industry publication Real Estate Alert said the deal, which includes the 20-story 601 Travis building, was inked at an estimated $627 million, or nearly $300 per square foot. Hines declined to comment on the price.
While the the acquisition is among the largest in Houston by dollar value, it is far from the top of the market on a per-square-foot basis. In 2015, a German real estate investment manager paid $440 million — or $526 per square foot — for the 36-story 1000 Main building downtown.
One of the last local megadeals was Brookfield Asset Management’s purchase of Houston Center for $819 million — or $195 per square foot — in late 2017. The property is now being redeveloped.
In its earlier report, Real Estate Alert said the deal would give Cerberus a 90 percent interest in the complex and Hines a 10 percent stake. Hines declined to confirm the interests each company has taken.
“It’s an iconic asset designed by I. M. Pei working closely with our chairman in the early ’80s,” Hines Senior Managing Director John Mooz said, referring to company founder Gerald Hines. “It’s continued to maintain its status.”
At 37 years old, however, the building will be improved, making Hines the latest in a list of downtown landlords sprucing up their aging buildings.
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Other buildings in the midst of makeovers include Heritage Plaza, Houston Center, Allen Center and Total Plaza. The 717 Texas building and 700 Louisiana, previously known as the Bank of America Tower, have also had major renovations.
Plans for 600 Travis include the addition of a conference center, collaborative workspaces and upgrades to the lobby and exterior plaza, which Hines said has the largest Joan Miró sculpture ever commissioned, entitled “Personage and Birds.”
Architecture firm HOK will design the improvements, which will include the addition of so-called flex office space, commonly referred to as coworking. Hines, which leases space in some of its buildings to beleaguered coworking operator WeWork, recently launched its own flex space brand called Hines Squared.
“Our flex space strategy is still being developed,” Mooz said. “I can tell you we’ll make very significant changes to the ground floor plain and revitalizing the asset as we’re doing with other prior generation assets around the country.”
The improvements will activate the building’s common areas in hopes of attracting and retaining tenants, the company said in a press release.
The push to renovate and update older office buildings comes as Houston’s office market has been slow to improve following the 2014 oil crash. The city’s newest buildings, however, have been able to lure companies that are leaving older space in the area.
“Companies see the value in offering best-in-class amenities for their employees and understand it’s simply a cost of doing business,” Alex Taghi, a vice president at NAI Partners wrote in a recent market report.
Downtown’s new Bank of America Tower opened earlier this year and is about 86 percent leased. Hines’ Texas Tower, which is expected to deliver in late 2021, is some 35 percent preleased.
At 24.9 percent, downtown has one of the highest vacancy rates among Houston-area submarkets, NAI data show. That number jumps to 31.6 percent when factoring in sublease space. Across the area, total availability amounts to 26.1 percent.
Downtown asking rents average $41.41 per square foot a year, compared with the overall market average of $29.32.
“The tenant market in Houston has always found it a highly desirable location,” Mooz said of 600 Travis. “It just seemed like an absolute natural play to build off that desirability. To further amenitize it seemed like the natural thing to do.”
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The five-sided 600 Travis tower has more than 1.7 million square feet and includes 22,237 square feet of tunnel-level retail space. Tenants include Andrews Kurth, Locke, Lord, Bissell & Liddell, Winstead and Morgan Stanley.
The neighboring 601 Travis building has 407,896 square feet in 20 stories and was recently renovated. The lobby has an illuminated glass wall designed by Paul Housberg. The building also features a 7,000-square-foot fitness center available to tenants of both buildings, a 280-seat auditorium and 12 floors of parking.
Hines developed and manages both buildings. New York-based I. M. Pei & Partners designed them. Pei, who died this year at 102, was among the revered architects called on by company founder Gerald Hines to design Hines buildings.
Hines now owns four downtown buildings: 600 and 601 Travis, 609 Main and an apartment tower called Aris Market Square at 717 Texas. The company also owns a site in the 800 block of Texas Avenue where it is developing the 47-story Texas Tower office building and a parcel on an adjacent block where it is building The Preston, a 46-story multifamily tower.
Mooz said it is still to be determined whether it will re-open the building’s 60th floor “sky lobby” where for years Houstonians and visitors could take in views of Houston above the clouds.
In 2016, the lobby closed to everyone other than tenants and their guests.
“Our primary focus is to provide a quality experience for our tenants and their employees who were often inconvenienced by the extra non-business-related traffic in the building,” Hines said at the time.