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HOUSTON-Trammell Crow Co. is ready to break ground on a 256,700-sf retail center on what the company calls a “rare” 24-acre urban infill site inside the 610 Loop. Greenway Commons will be part of a mixed-use project that TCC is doing with locally based Morgan Group Inc. and financial backing from institutional investors advised by Prudential Real Estate Investors.

The JV’s mixed-used project is located at Weslayan Road and Richmond Avenue between the Uptown Galleria area and Greenway Plaza office market. TCC’s 15.4-acre portion of the project, penciled for a summer 2008 delivery, will feature a 164,000-sf Costco with a 45,000-sf rooftop LA Fitness health club, four-level parking structure, 39,000-sf, two-story retail building and two pad sites. Morgan will build a four-story, 526-unit luxury apartment complex on the remaining 8.8 acres. It will break ground in December, with delivery eyed for one year later.

“Neither of us knew what to do with 24 acres, but we both knew we wanted to be in this location so we decided to go in together on a project,” Morgan COO Stan Levy tells GlobeSt.com. The site is the former headquarters of the Houston Independent School District, which sold the property in 2004 to capitalize on the land’s substantially increased value. TCC, Morgan and the Newark-based PREI won a sealed-bid auction to acquire the site for $38 million. Because the school district did not want to move until a new headquarters building was ready for occupancy, the deal did not close until mid-2006.

Craig Cheney, TCC’s managing director of retail development, says the high land cost forced the developer to take the unusual step of going vertical on a big box-anchored center. “Given the scarcity of inner loop sites, this represented a unique opportunity for Costco and LA Fitness to secure full-size facilities in an area that is almost impenetrable for users of their size,” he says. “Increasing the density by stacking them one on top of the other was the only way to make a retail center economically feasible, which led us to a very urban development plan.”

According to Cheney, the retail space is about 83% preleased, with annual asking rates “north of $40 per sf” for shop space. He says the development cost for the retail center will run about $80 million.

Levy doesn’t know how much Morgan’s construction will cost, but he projects rents will average about $1.65 per sf. About 70% of the units will be one-bedroom and the remainder will be two-bedroom, ranging from 655 sf to 1,470 sf. Amenities will include a high-end fitness facility, Internet/coffee lounge swimming pool and extensively landscaped courtyards.

Levy characterizes the rental market surrounding the project as being very strong. He says a Morgan project two intersections away has been doing more than 30 leases per month since it opened last year.

“Most of our renters will be renters by choice,” he says. “They’re the kind of people who want the urban infill life style. Some of best shopping and restaurants in the whole city are right here. It’s a very popular area.”

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