Triten Real Estate Partners, Taconic Capital Advisors Buy Downtown Houston Office Building

Triten Real Estate Partners and Taconic Capital Advisors have purchased 1111 Fannin, a 17-story, 426.6K SF office tower in Downtown Houston.

The new owners are seeking to revitalize the property by performing various upgrades and have selected Chicago-based HPA Architecture to lead the design, which could be finalized by the end of the year.

At the time of sale, the building was 100% leased to JP Morgan Chase. However, the firm has signed a lease for 250K SF at 600 Travis in Downtown Houston, also known as JP Morgan Chase Tower, and will move its operations to that location in November 2021.

Triten Real Estate Partners managing partner Scott Arnoldy told Bisnow that redevelopment efforts for 1111 Fannin will focus on refreshing the lobby area and updating other amenities, as well as repurposing space and addressing infrastructure quirks like redundant power for data centers.

“The purchase price we were able to buy it at, I think it will afford a lot of different options,” Arnoldy said. “The primary goal is to try and find a user or a company that would want to re-lease the project.”

Arnoldy declined to disclose the seller or the purchase price of 1111 Fannin, but said that in comparison, it would likely cost 10 to 15 times more to deliver a brand new Class-A building in Downtown Houston. The property was valued at $45.6M as of Jan. 1, according to Harris County Appraisal District records. HCAD lists the property as bank-owned, and previous news reports said it had been transferred to special servicing.

1111 Fannin was built in 1971 and features a podium-style design with center-core floor plates that average 31.5K SF. On-site amenities include a conference center, card key access, 24-hour security and an attached parking garage. The property also has direct access to Houston’s tunnel network.

Arnoldy noted that the building is clad in stone and has floor-to-ceiling glass, in line with the standard for a Class-A office building. The redevelopment would largely focus on interior cosmetic improvements.

“We think we can put the same touch that we put on ... M-K-T and at our office building in Westchase, where you just try to create more of an urban, modern, progressive amenity set,” Arnoldy said. “I think we could do all of that and still offer a rent that's substantially below what certainly a new building would cost, and even below what current Class-A buildings are asking.”

Triten is partnering with Radom Capital on the industrial to mixed-use retail/restaurant M-K-T redevelopment project in The Heights.

Though it will depend on various factors, including whether a single tenant or multiple tenants show interest in the building, Arnoldy said that average rent for 1111 Fannin would likely be in the mid-to-high teens per square foot.

The coronavirus pandemic has caused significant economic uncertainty, which has led to fewer large sale transactions in Downtown Houston during 2020. Arnoldy acknowledged the difficult state of Houston's office market and noted that Triten Real Estate Partners had been looking into acquiring the building for more than a year.

As a result, the firm had already performed much of the due diligence necessary for a successful transaction.

“Fundamentally, it's great real estate,” Arnoldy said.

Over the past two decades, the city of Houston and a mix of private organizations have worked to make Downtown Houston a vibrant, entertaining and attractive place for residents and visitors. For that reason, Arnoldy is confident that the pandemic slump is only temporary.

“We don't think the urban core's dead, so to speak. We think it'll come out of this fine, and that there's so much institutional capital and investing in downtown that if you can see through the fog of COVID, you can come out the other end,” he said.

JLL Capital Markets represented the seller and procured the buyers. JLL’s Dan Miller, Martin Hogan and Ethan Goldberg led the team that represented the seller.