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HOUSTON-Following months of suburban office acquisitions, Younan Properties Inc. has staked its first claim in the CBD, acquiring the 255,115-sf 1010 Lamar for roughly $40 million from Newport Beach, CA-based KBS Realty Advisors. The Los Angeles-based buyer is planning to put $2 million into upgrading the 23-year-old building.

“KBS is an institutional investor and did a very good job of taking care of the asset so it can compete very well,” says Zaya S. Younan, chairman and CEO. Upgrades will be made to the mechanical system and common areas. Younan’s newest asset sits on a 20,000-sf tract and is across the street from the 544,000-sf Houston Pavilions mixed-use development, which is under construction.

Younan says the 88%-leased building’s upside potential is tied to rent increases as leases roll. “The current rent there is, on average, about 30% below market,” he tells GlobeSt.com, adding the annual roll is 15%. According to Grubb & Ellis Co., the average CBD class rent is $33.33 per sf.

Younan also is looking into converting the first floor of the attached garage, totaling 25,000 sf, into retail space. He says the team is performing due diligence to determine if the estimated $2-million to $3-million conversion tab will be cost-effective in the long run.

Younan says he’s investigating other potential CBD investments although he acknowledges that competing for Downtown assets can be a challenge. “Everyone realizes that the fundamentals Downtown have been strong,” he says. “We had to compete much harder to win this asset.”

KBS Realty was represented by Cushman & Wakefield of Texas Inc.’s executive director Ken Page and associate director Scott Myers, both in the Houston office. Younan was self-represented.

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