Five Post Oak Park

Houston, Texas

Historical Transaction

NRSF: 567,396
Total Capital: $64.75 million
Equity Invested: $20.5 million
Status: Sold
Realized Multiple: 4.3x
Realized IRR: 32%

Five Post Oak Park is a 28-story Class A office tower (“5POP”) that was developed in 1982 and is located in the Galleria submarket of Houston. 5POP was acquired in December 2002 with a plan to enhance the building’s lobbies and common areas, increase the occupancy and extend the weighted average lease term. Key competitive advantages included 5POP’s location on the eastern side of Loop 610 (less heavily traveled side of freeway), proximity to Houston’s upscale River Oaks neighborhood, park-like setting, and the property’s diverse rent roll of prominent firms.

Opportunity

  • Seller was a major insurance company with detached management and tenant relations, which presented an opportunity to reposition the asset and lease up to stabilization.
  • Asset strategy supported by market research, which identified tenant demand and improving market fundamentals (market occupancy then 88%).
  • Capitalize on 5POP’s competitive advantages included the location along the eastern side of the Loop, unobstructed surrounding views, park-like setting, and access to River Oaks to drive leasing activity.

Value Enhancement Strategy

  • Increased occupancy to 91% and weighted average lease term to 6.5 years upon disposition (from 82% and 3.5 years respectively).
  • Ownership renovated lobbies and common areas, in addition to investing $5.4 million in capital improvements (elevator modernization, curtail wall, cooling towers, roof replacement) to reposition the asset equal to newer properties.
  • Largest tenant was renewed on long-term lease at rental rate 33% greater than previous term.