44-Year-Old Value Add In Line for More Change

Alex Brown Realty of Baltimore and locally based Mission Equities GP LLC are taking on the 44-year-old building at 2000 Crawford St. St. Joseph Professional Building has a mix of retail and medical office space. It is adjacent to St. Joseph's Medical Center, which was acquired by Hospital Partners of America in 2006. Tenants in the building have access to a basement tunnel that connects directly with the center.

The Houston-based Mission Equities and ABR Chesapeake Fund III contributed equity for the purchase from Chicago-based Orix Capital Markets LLC. Although the sales price is being kept under wraps because of confidentiality agreements, Thomas Burton, Alex Brown Realty's chief investment officer, says the transaction and renovation costs are far below the $300 per sf replacement cost.

Burton says the deal was attractive for a couple reasons, one of which was the partner. "They have a good track record and a talent for this type of transaction," he explains. "They're outstanding at improving occupancy, managing and leasing and other factors."

The deal's other attraction was the value-add potential. "This was a little more than 50% occupied when we bought it so there's where our opportunity is," Burton says. "We'll make substantial capital improvements to the building." Upgrades to the 18-story building will include replacements of the HVAC and sprinkler systems. Also on tap are upgrades to the elevator, life-safety system, exterior façade and interior common areas. The renovations are anticipated to be completed within six to nine months.

Burton tells GlobeSt.com that the joint venture expects to hold onto the asset for five to seven years. In terms of future acquisitions in Houston, he says much depends on the partners. "We're a niche business driven more by finding great partners with great ideas as opposed to targeting a specific property or region," he says. "We like to buy something we think is undervalued or under-managed, and that requires a business plan to achieve value. Once that value's achieved, we like to own it for a few years."

Timothy Gregory, business development manager with Transwestern's Healthcare Advisory Services team in Houston, represented the seller. The buyer used in-house representation. Whitney National Bank in Houston provided acquisition and redevelopment financing, which was arranged through Robert LaRue with Live Oak Capital. Transwestern's Healthcare Advisory Group will continue to have the leasing assignment.