Adjacent Houston offices on block

Real Estate Alert, Feb 4, 2004

A DRA Advisors partnership is seeking about $50 million for adjacent office buildings in downtown Houston.

The partnership, which includes Swig Co., has retained Granite Partners to market the Esperson Buildings, which encompass 599,000 square feet. At the expected $83/sf price, the buyer's initial annual yield would be about 9.25%.

The buildings, at 808 Travis Street and 815 Walker Avenue, are 74% occupied. Professional firms make up the bulk of the rent roll, which has little exposure to the boom-and-bust energy sector. The tenants include public relations firm Vollmer, telecommunications firm Colo.com and law firm Troy Phillips. Vollmer is leasing 27,000 sf through next year. Colo.com is occupying 19,000 sf through 2012. And Troy Phillips has a lease for 17,000 sf through 2010. Asking rents are $18-$25/sf. The property includes about 30,000 sf of retail space and a 600-car garage.

The buildings, which are being marketed jointly, were constructed in 1927 and 1941 by Mellie Esperson, the widow of local businessman Niels Esperson. They are among Houston's most distinctive buildings, featuring Italian Renaissance architecture, detailed with columns and terraces.

San Francisco based Swig has owned a 50% stake in the property since 1956. DRA, working on behalf of a corporate pension fund, acquired its 50% stake in 1998 from Wells Fargo, which had assumed the stake through its earlier acquisition of First Interstate Bank. The DRA-Swig team has spent more than $6 million on renovations since 1998.