Real Estate Round-up
Turning distressed real estate into gold: Houston's Boxer Property targetsoffice buildings others ignore
It’s a smallish four-story, brown-brick office building somewhere in the suburbs. The parking lot is mostly vacant and its paint stripes are dim. The building has bare bones landscaping with some dead, brown shrubs.
Most people, if they notice it at all, see it as a barely mediocre office building. Andrew Segal sees the building as an opportunity.
Segal, founder of Houston-based Boxer Property, has bought and sold scores of these distressed types of buildings since he went into real estate in the early 1990s.
Segal does it the way it should be. Boxer buys when prices are low and sells when they are high. A few a years ago when the market was strong, Boxer was unloading buildings from its portfolio, raking in profits with every sale.
If you are looking for an indicator of which way the real estate market is going, it’s worth noting that Boxer is buying again.
Boxer has purchased two buildings in October: One Northwest Centre, a six-story building on Highway 290 in northwest Houston and a three-story building at 12808 W. Airport Blvd. in Sugar Land. Both buildings are about 50 percent occupied. So far this year, Boxer has purchased 10 buildings — a total of 2.2 million square feet. And the company has more acquisitions in the pipeline.
Prices are probably near the bottom and a rebound is probably not far away. And some sellers appear willing to be more flexible and lower asking prices.
Boxer typically slashes rental rates and fills up the buildings with aggressive marketing. The formula works. Boxer’s advertising is ripped from the bargain basement handbook. Boxer will use signs to encourage potential tenants to dial its special phone number: 713-777-RENT.
The Houston office market has shown signs of improving.
For the last two years, Houston’s office space has been getting emptier in the citywide surveys conducted by the CB Richard Ellis commercial real estate company. But that trend changed in the third quarter. Overall, more Houston office space was filled than vacated in the third quarter.
“Things are getting less bad,” says CB Richard Ellis office leasing broker Cody Armbrister.
It’s not like the Houston office market has achieved complete recovery. Rents are going lower and vacancy is still a problem. “The city is still slightly negative,” Armbrister says.
Companies have been conservative as they lease space, opting to run lean. Until companies ramp up hiring again, the demand for office space will be muted.
On the positive side, few new buildings are being started. That will give the market time to absorb some of the vacant space. However, downtown Houston, with two major towers under construction, is going to get softer as large tenants vacate office space.
No, we aren’t talking about something funny that your big brother used to smoke.
Sweetgrass is the name of the new community for “active adults” under development in Richmond in Fort Bend County. The name of the new project was disclosed in a recent ceremony at the site.
Del Webb develops communities for people over 55 years of age. Del Webb Sweetgrass will have 1,500 homes on a 500-acre site on of FM 762.
All of the homes will be single-story. Eliminating stairs can be an attractive selling point for a Baby Boomer with failing knees. The homes will range from 1,500 to 2,500 square feet with either two or three bedrooms that will be occupied by the initial residents in 2011.
Houston developer Fred Caldwell of Houston-based Caldwell Cos. is a partner in the Sweetgrass development.
And the Sweetgrass name? It was derived from the native grass on the property, says Jim Rorison, president of Del Webb’s Houston operations.
Ralph Bivins, former president of the National Association of Real Estate Editors, is editor-in-chief of RealtyNewsReport.com.