The historic Esperson is comprised of two buildings that were originally built separately.
HOUSTON—The approximately 600,000-square-foot historic Esperson is comprised of two buildings that were originally built separately in downtown: the 32-story Niels Esperson building built in 1927 and the 19-story Mellie Esperson building built in 1941. The buildings were connected in the 1950s and today encompass an entire city block bound by Walker, Rusk, Milam and Travis streets.
Due to maturing debt on the property, JLL's Capital Markets recently secured $52.8 million to refinance the buildings on behalf of a partnership between Contrarian Capital Management and Cameron Management. MetLife Investment Management provided the loan that replaces the debt. JLL executive managing director Tom Melody, managing director Paul House, senior vice president John Ream and Associate Connor Harrell led the JLL team on the transaction.
“The cost of debt remains attractive to owners and we're seeing lenders very active in the Houston market,” House said. “Backed by strong, experienced ownership and as one of the only historic office buildings in downtown Houston, Esperson presented lenders with a one-of-a-kind opportunity.”
Since acquiring Esperson in 2012, Contrarian Capital Management and Cameron Management have completed approximately $11 million in capital improvements. The building's upgrades showcase historic design features including original floors, finishes and wall elements.
Esperson has direct tunnel access and is centrally located to downtown Houston's amenity base including restaurants, hotels, shops, services and public transportation. The building features a mix of tenants from energy, law and banking sectors with no industry accounting for more than 20% of the tenant base.
“Houston continues to enjoy robust job and population growth,” House tells GlobeSt.com. “Even through the recent oil and gas downturn, the city still added jobs. Houston's dogged determination to grow is attracting new capital.”
The JLL fourth quarter office report shows the improvements from the previous quarter were not an aberration, but a meaningful sign of Houston's office recovery. In other words, the Houston office market begins a new positive streak.
The report points to back-to-back quarters of positive net absorption and falling vacancy, firsts since the third quarter of 2012. In fact, the fourth quarter 2018 net absorption of 1.6 million square feet was the highest it's been since 2013, and while the total net absorption for the year was still negative, it was not nearly as bad as recent years.
Specifically, 2018 recorded -226,309 square feet, whereas 2017 was -2.1 million square feet and 2016 was -2.6 million square feet. Meanwhile, vacancy decreased to 23.4% and fourth quarter leasing activity of 2.6 million square feet was nearly double the year-over-year leasing activity of 1.2 million square feet.
Finally, tenants are making longer commitments with an average lease term of 123.2 months in the fourth quarter, according to the JLL report.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
