» KHOU: Lakewood Church building may go up for sale
Interesting ...
Hungry for cash, the city of Houston on Wednesday has hired appraisal firms to figure out how much the building that houses Lakewood Church could sell for.
The move is part of a years-long effort to evaluate city buildings that could be sold for profit, said Frank Michel, a spokesman for Mayor Bill White.
Joel Osteen's Lakewood Church leases the former Compaq Center from the City of Houston, and paid the $10 million 30-year lease up front in 2003, said Lakewood spokesman Don Iloff. The Church has an option to extend the lease through the year 2063 once the original lease expires, he said.
I include Iloff's point to emphasize that even if the building were sold, it wouldn't mean much as far as Lakewood's lease through either 2033 or 2063.
Now ... theoretically, you could get a situation whereby a new owner would prefer to raze the building and build another office tower or retail center. They wouldn't be able to break Lakewood's lease, but they might be able to nudge and prod and force some monetary decisions that could make a move by Lakewood something to consider. Again, this is the worst-case scenario.
But there's some history to consider. The firm that wanted the property back in 2003 was Crescent Real Estate, the company that essentially owns Greenway Plaza. No doubt, they're first in line in any conversation about selling the property. In the whole dust-up as to who would get the lease after the Toyota Center was opened, Crescent seemed more interested in building a new office tower. Yet, when Lakewood looked like a lock to get the lease, they raised the issue of automobile traffic in the area created by Lakewood attendees. Given the question mark about what attendance would look like then, and factoring in what a nightmare traffic was during peak Rockets seasons or during Garth Brooks concerts at the Compaq Center, I think there was some justifiability in the concern. But given the issues of parking and traffic, such as they presently exist with Greenway Plaza alone, it remains to be seen that a new office tower would be the first consideration for them these days.
Of course, nowadays we have a glut of office space and big loans are hard enough to come by that I can imagine some hesitance over a loan for that. Given the residential building and beginnings of some commercial development, it might make sense to place another strip center along the area. That's a medium-sized if, though, depending on what anyone thinks is really needed in terms of commercial business. A grocery store along Southwest Freeway doesn't strike me as plausible.
The existing building isn't of much use to anyone other than for a church. The Toyota Center was built and contracted with a non-compete clause, so it's not like there'll ever be another sports team or concert tours that come through the building as-is under new ownership.
I only point those out to demonstrate the constraints on the value of the property to an outside buyer.
My first hunch is that the first logical buyers include:
- Crescent, for the sake of just holding onto the property if and whenever it might not be leased out and if the market for office space is conducive to them rebuilding at some point in the future.
- Lakewood, if the price is right. This would remove any potential uncertainty over ownership. But given the strain on a lot of church finances these days, it strikes me as a huge open question as to whether it's feasible even at a nice price. I'm not privy to the finances the church arranged on the loan for redeveloping the previous structure, but my sense is that they made a lot of payments up-front either to get the entire debt paid off quickly, or to get the yearly payment down to a manageable level very quickly. I remember a lot of talk about a big payment due at the first year of the opening, but haven't heard word one about that since. If I were to guess, a value under $100M might make it worth considering for Lakewood ... but they'd have to go asking for another big loan to make that happen.
- Marriot Hotels ... a darkhorse. Marriot owns the Renaisance Hotel and might have some interest in protecting a major structure across the street from them. Whether they would view the investment as a hedge on protecting the value of the Rennaisance, or see the land/property as something they might want to reconfigure if and when Lakewood is no longer a tenant, I think it's early to speculate.
It's worth noting that Crescent has subsidiary companies which may be another option, and I'm not sure who owns the condo towers across from the Timmons side of the building. But there might be some marginal interest there as well.
