Developer Kicks Off $500M Mixed-Use Project

HOUSTON-Nearly three years after buying 37 acres in the Memorial submarket, a local developer has begun to move dirt on the $500-million CityCentre. Initial phases of the 1.1-million-sf mixed-use project will be complete by summer 2008, with a 500,000-sf office building and 217-room hotel slated to be up and running by the end of next year.

With Midway Cos. as its developer, CityCentre's master plan calls for 400,000 sf of retail, restaurants and entertainment; 500,000 sf of class A office space; 375 multifamily units, 250 urban lofts and 40 brownstones in addition to the class A office and hotel. Valencia Group of Houston is the hotel developer. The project will include a 140,000-sf Lifetime Athletic Club, an urban prototype of Lifetime Fitness Inc. headquartered in Eden Prairie, MN. Other tenants on board are Studio Movie Grill and Eddie V's.

Midway's executive vice president Jonathan Brinsden says when his company first acquired the land during May 2004 that the end goal was far from certain. "We knew it was a fantastic piece of property, but we didn't know what we'd do with it," he tells GlobeSt.com. After exhaustive research and feedback from residents and businesses, upscale mixed use was the decision. He says CityCentre is the first project of its type for Midway to take on although it has plenty of other local and national development experience on which to draw.

Brant Smith, vice president in the Houston office of Capmark Finance Inc. adds that, with Midway's experience that "they were able to identify what made a mixed-use development special." The Capmark team arranged a $94-million construction loan through Chicago's LaSalle Bank Corp. He adds that Midway's experience also impressed lenders. Joining LaSalle in the lending process was a syndication made up of local Amegy Bank Corp., CitiBank Texas, owned by Citigroup Inc. in New York City, and Compass Bancshares Inc. of Birmingham, AL.

From a financial perspective, Smith says three factors made CityCentre very popular among lenders: location, high-end demographics and the developer's research process. "Midway really put a lot of time, effort and thought into the plan, which will really make for what a lot of people consider will be a landmark deal in Houston," Smith says.

Midway will handle all retail and office development. The developer is teaming with Page Realty Partners Ltd. in Houston to prelease the retail and Colvill Office Properties, also local, for the office. On the residential side, Midway has aligned with locally based Chancellor Property Management Co. to build the lofts. Meanwhile, local companies Simmons Vedder & Co. and McGuire Homebuilders Inc. will build the multifamily complex and townhouses, respectively.

Brinsden says retail preleasing has filled 33%, but he believes it will be pushing toward 90% by delivery time. The quoted rate is in the low $40 per sf range, net.

Brinsden says office occupancy possibly could end up at 85% to 90% by late 2008. "We're talking with a number of large office tenants, and have committed to a full-floor, 25,000-sf deal," he says. "We'll get several lead tenants, then switch to multi-tenant format, in the 5,000-sf to 10,000-sf range." Office space is being quoted in the low $20 per sf.

CityCentre's architects are local companies Gensler and Kirksey Architecture, and Los Angeles-based Peter Remedius. Other local firms playing roles in the planning were James Burnett, Walter P. Moore & Associates, Windrose Land Services, Haynes Whaley Associates, Garza McClain, I.A. Naman & Associates Inc. and Henderson Engineers Inc.