Standing 29 stories tall with nearly 845,000 square feet of premier office space, Hess Tower is one of the first new buildings constructed in Houston’s Entertainment District. Trammell Crow Company (TCC) and its venture partner Principal Real Estate Investors of Des Moines, Iowa, purchased the site in March 2007. They developed an iconic, LEED® Platinum office tower in front of a new 12-acre urban park called Discovery Green, within walking distance of restaurants, retail, sports arenas, hotels and entertainment destinations. The development was completed in June 2011, helping to revitalize the central business district and to set a new standard in efficiency and sustainable design.
In November 2008, just eight months after groundbreaking, global energy firm Hess Corporation signed a long-term lease to occupy the entire building. Significant design changes were made to customize the tower for them, including removing a full office floor to increase ceiling heights for amenity floors. The building was delivered ahead of schedule and under budget, and sold in December 2011 to H&R REIT, a Canadian open-ended Real Estate Investment Trust whose debt financing for the acquisition was secured by a CBRE Capital Markets team. The transaction well exceeded the previous price per square foot record for an office asset sale in Houston.
The transaction wasn’t without challenges. “If we had started six months later, it never would have happened from a financial or leasing standpoint,” said Aaron Thielhorn, TCC Managing Director. “We broke ground in March 2008 — right before the global economic crisis — so we were fortunate to start when we did. When the crisis peaked, we were already locked in with construction financing and the leasing market still had strong fundamentals.”
“The success of the project really hinged on our collective ability to close on the land in a timely manner and quickly design a project in order to be the first out of the ground. Our efforts were rewarded with a historic lease transaction and subsequent record-breaking sale,” said Joe Wanninger, Assistant Managing Director/Asset Management at Principal Real Estate Investors.
“This transaction illustrates the full integration of CBRE’s service lines, and the depth, breadth and scope of services TCC and CBRE can bring to clients,” said Cody Armbrister, CBRE Executive Vice President, Leasing. “Nearly every one of our service offerings touched this transaction — from conception to purchasing the site, development planning, investment analysis, venturing with an equity partner, market underwriting and leasing, development and asset management all the way through to disposition.”
“Based on prior experience, Principal Real Estate Investors was confident in TCC and CBRE to deliver on a significant speculative office development from groundbreaking all the way to disposition,” Wanninger added. “They saw that the center of the Houston central business district was shifting to the east and that vision kick-started the whole project.”
“CBRE was built on providing synergistic services that span the life cycle of an asset and this is a perfect example,” says Russell Ingrum, Executive Vice President and Managing Director, CBRE Capital Markets. “Every step along the way, CBRE was able to deliver market-leading services. But our seamless capabilities—Trammell Crow Company development, CBRE leasing, sales, property management, financing and valuation—are only half the story. The remainder is the team of people who worked to create a world-class asset; it’s the depth and quality of individuals that really sets CBRE apart.”