Monday, March 13, 2006

WSJ on the old Enron building and the downtown real estate market

A lot of interesting facts in this one, which I've tried to highlight. I thought it was curious Chevron didn't sign in the old Enron building so they could use the nifty circular pedestrian skybridge. This article doesn't explain why (Chevron is staying tight-lipped), but it at least discusses the situation.

Chevron Passes Up Old Enron Building in Houston

By Jennifer S. Forsyth

The Wall Street Journal, March 1, 2006

Enron's former headquarters will remain a dark spot on the Houston skyline for the indefinite future.

Last week, Chevron USA Inc., a potential tenant for the building at 1400 Smith St., surprised the Houston real-estate community when the Chevron Corp. unit announced that it would take space elsewhere. "It was widely anticipated that they would take that building," said Steve Biegel, a Houston-based senior vice president for Studley Inc., a real-estate firm that represents tenants.

"We're disappointed, of course, that we didn't get it," said Bill Donovan, senior vice president of Towanda Development I Ltd., the group that owns 1400 Smith.

Towanda, which bought the 50-story tower in 2003 for $55.5 million following Enron's bankruptcy, faces a challenge in luring other tenants because the building doesn't offer parking -- an essential amenity in car-dependent Houston. Towanda was led by cardiologist Antonio Pacifico, who died in a plane crash in November, but Mr. Donovan said Towanda's other investors are well-funded and can be patient.

The former Enron headquarters -- no longer sporting the tilted "E" out front that was the subject of much news footage -- has 1.27 million square feet available, making it by far the largest existing empty office building in the U.S., according to real-estate information company CoStar Group Inc. of Bethesda, Md. (This doesn't include large skyscrapers which are under construction in several markets, including the 1.7 million square feet in 7 World Trade Center in New York.) Though the market is improving, the Houston central business district had a vacancy rate of 19.4% in the fourth quarter of 2005, according to Property & Portfolio Research Inc. of Boston.

The Enron building is the largest of several options for tenants looking for space in the district. "As long as there are multiple large blocks of space available on the market, it will make it difficult for any landlord to raise rates significantly," Mr. Biegel said.

Chevron already owns and occupies 1500 Louisiana St., a skyscraper next to 1400 Smith that Enron was constructing as the company started to crumble. The two Enron towers were to work in tandem and are linked by a pedestrian walk, to which Chevron bought the rights when it acquired 1500 Louisiana. When the oil company announced it was looking for more space in central Houston, as it consolidated its work force after the acquisition of Unocal Corp., 1400 Smith was seen as a logical choice. Chevron wouldn't have faced a parking dilemma because it owns a parking garage nearby.

However, Chevron announced Friday that it had agreed to take 465,000 square feet in Continental Center I, at 1600 Smith, a building adjacent to 1500 Louisiana on the northwest side. Continental Center I is owned by Chicago-based Trizec Properties Inc., a real-estate investment trust with 6.1 million square feet in Houston's central business district. Chevron spokesman Mickey Driver said "1600 Smith was the best deal for Chevron." He wouldn't confirm whether the company had considered 1400 Smith.

Towanda had drawn plans to convert the bottom floors of 1400 Smith into parking, but those efforts were put on hold during the Chevron discussions. Now, the investors are considering that option again, Mr. Donovan said.

Write to Jennifer S. Forsyth at jennifer.forsyth@wsj.com

21 Comments:

At 7:31 PM, March 13, 2006, Anonymous RedScare said...

"It would seem to be a lot easier to buy out the tiny church across the street and put up a new parking garage there. I would think the church could make enough money out of the deal to build a much bigger and nicer facility with more amenities not far away (or, heck, if they really like that location that much, they could build a huge new building for them on top of the new parking garage)."

Boy, there's nothing in this world that throwing money at won't fix. Your last post touted how wonderful big spenders are for democracy (though, apparently union money is still bad), and now you think the little church would (or should) love to cash out if the opportunity arose.

Is everything about money and "amenities"? Even though it did not work in Enron's case, maybe the church stays on that little piece of land as a reminder to the titans of industry. Maybe they are there to suggest that there is more to life than money and power at any cost. Clearly, it is a battle they are losing, but this agnostic at least appreciates the attempt, rather than coveting their earthly real estate.

 
At 9:45 PM, March 13, 2006, Anonymous RJ said...

buy out the tiny church across the street

That would be Antioch Baptist Church, founded in the 1860s. Its first pastor was Jack Yates. That's definitely one of the most historic buildings in town, and the church played a central and crucial role in our city's history, particularly with regards to education.

I seem to remember Queen Elizabeth II and Prince Philip visiting the church when I was in college.

I think you'd have a near-riot on your hands if that building were torn down...

Maybe they are there to suggest that there is more to life than money and power at any cost.

Amen, RedScare.

 
At 10:21 PM, March 13, 2006, Anonymous John Galt said...

Shame on you, Tory.

The Antioch Baptist Church reminds us of where we came from and what made Houston the city it is.

Jack Yates, born a slave, became one of the most influential men in Houston. It is fitting that his church remains six blocks from where his house now stands (Sam Houston park).

The Reverend Yates deserves to be remembered long after Jeff Skilling is as forgotten as Samuel Insull.

Your attitude that history should be bulldozed when it "reduces efficiency" represents everything contemptible and mean about the American capitalism.

 
At 10:32 PM, March 13, 2006, Blogger Tory Gattis said...

Wow, I had no idea that church had that much historic significance. My apologies. I'll have to edit my post. If the church did not have historic significance, then I would suggest that they do sell out, because they can do a lot more good extending their mission rebuilding on cheaper land and using the difference to, well, make a difference - either in the lives of their congregation members, members of the community, potential new members, or any other mission they'd like to take on.

 
At 10:35 PM, March 13, 2006, Blogger Tory Gattis said...

For reference, so these comments make sense to future readers, here was the paragraph I removed after understanding the historic significance of the church:

"Commenting on the last paragraph, I can't imagine how one converts the bottom floors of that building to parking. It would seem to be a lot easier to buy out the tiny church across the street and put up a new parking garage there. I would think the church could make enough money out of the deal to build a much bigger and nicer facility with more amenities not far away (or, heck, if they really like that location that much, they could build a huge new building for them on top of the new parking garage)."

My apologies for any offense my ignorance caused.

 
At 9:03 AM, March 14, 2006, Anonymous Christof Spieler said...

Another comment on the church -- this is the last leftover of an old residential neighborhood. Before 45 was built through here, Freedman's Town extended well into what we now call downtown. Some interesting historical photos (the church is just of of frame to the left) from texasfreeways.com show how sudden the change was when the freeway came:

1961
1964

The churches that are now sprinkled through Downtown and Midtown - Annunciation, Trinity, and First Methodist, for example -- are all old neighborhood churches that lost their neighborhoods. When they were built, each was in the city's nicest neighborhood; now there's little trace that any of these were ever residential neighborhoods. But the churches remain -- neighborhoods are transient, but institutions are stubborn things.

 
At 9:18 AM, March 14, 2006, Anonymous Dave said...

The only reason the church is still there at all is that they don't have to worry about paying property taxes on a piece of (otherwise) prime real estate. (I don't feel non-profits should be exempt from property tax, but that's another discussion.)

The residential neighborhood is long gone, the congregation has been scattered to the winds for decades, and they really could make gobs of money that they could then use for social justice initiatives or any other charitable purpose they wish. But no, they continue to squat.

And maybe I'm just cynical, but "a reminder to titans of industry???" Please. Cue the swelling violins.

 
At 10:16 AM, March 14, 2006, Anonymous Anonymous said...

"But no, they continue to squat."

Squat?? It's their land, and has been for about a century and a half!

"and they really could make gobs of money"

So much for chasing out the money changers.

 
At 10:50 AM, March 14, 2006, Anonymous Dave said...

I meant "squat" in the figurative sense. Perhaps that wasn't a good choice of words.

My point was that the congregation long ago lost any relationship to the real estate or connection to the neighborhood (or more accurately, the neighborhood they were a part of disappeared). They have no ongoing link to the area like a school, a recreation building, a music hall, etc.

Institutions do tend to stay put because of the difficulty of moving, but we're talking one sanctuary building, not a whole university campus. And even institutions don't last forever. Schools close, hospitals relocate, and how many times did our courthouse move?

Sooner or later the last of the congregation will die off or get sick of driving downtown, and the real estate will transition to some other use. I don't think there's anything offensive in suggesting that money might be involved, or that more money might speed up the decision.

I love my house, and the area it's in, and I don't want to move, but if the lot became worth millions because the neighborhood evaporated around it, you bet I'll take the cash.

It's interesting how the church turned into a hot topic. I wonder what they would say to the question they must have been asked a million times.

 
At 11:10 AM, March 14, 2006, Anonymous Dave said...

One more thing and then I promise to give up the soapbox. :)

I think the church *is* historically significant, but, right or wrong, Houstonians have rarely let historic significance deter us from tearing something down.

 
At 11:14 AM, March 14, 2006, Anonymous Anonymous said...

"It's interesting how the church turned into a hot topic. I wonder what they would say to the question they must have been asked a million times."

that's an excellent question

 
At 11:21 AM, March 14, 2006, Blogger Owen said...

I think some people have gone on a bit too much of a tear about this. The Archdiocese is about to bulldoze the old Sacred-Heart Co-cathedral, where my great-grandparents were married, and where I was married this February, but you don't see me wagging my finger. I'd rather it not happen, but just because a structure is historical doesn't make it profane to suggest that they consider more efficient uses.

I think Dave is correct in that there are concerns on both sides, even though I would certainly be against bulldozing the church.

 
At 6:55 PM, March 14, 2006, Anonymous nmainguy said...

If anyone remembers Ken Schnitzer and the developement of Allen Center, they would know the history of Antioch and the attempts to take it over. The parishioners have had numorous oppertunities to make millions of dollars and have turned down each and every one of them.
Why? Antioch is one of the last vestiges of Freedman's Town-an area that many of the parishioner's ancestors not to mention current parihioners are still a member of.
I'm sorry everyone got off on a tear here, Tory, but it is a sore point...as you now well know.
;-)
I agree regarding converting the bottom of 1400 to a garage. it's a bone-headed idea on so many levels.
Parking issues can be addressed in other manners.

 
At 7:33 PM, March 14, 2006, Anonymous HH Gwin said...

Dave said "Sooner or later the last of the congregation will die off or get sick of driving downtown, and the real estate will transition to some other use."

Speaking for myself, I drive in from the suburbs every week to attend church...it's not that different from my workday commute, except it's got less traffic.

NMainguy said: "If anyone remembers Ken Schnitzer and the developement of Allen Center, they would know the history of Antioch and the attempts to take it over."

I Googled his name and all I learned was that he was tried for some kind of fraud in 1996 (was convicted but it was nullified by the judge, see the Houston Press) and he founded a car dealership in 1987.

If you know the story, post it...

 
At 7:48 PM, March 14, 2006, Anonymous HH Gwin said...

cristof: Thanks for the links. I've heard older Houstonians mention that the Kirby mansion at Pierce and Smith was only one of several similar houses that were torn down to make way for I-45. I wonder if anyone has pictures?

I've always enjoyed seeing Antioch amid the towers. It kind of reminds me of the Episcopal church on Wall Street.

 
At 8:22 PM, March 14, 2006, Anonymous ringzero said...

The church may have won many takeover battles in the old days, but things have changed. Local governments have manipulated the heck out of eminent domain laws, and the holdouts are losing to the formidable team of government plus corporation. Some examples here.
To me, this is just plain wrong. The good news is that I finally agree with Sean Hannity on something.

 
At 10:33 PM, March 14, 2006, Anonymous Anonymous said...

Yeah, I'm sure that church has been offered tons of money for that plot and obviously to the church, its not an issue of money. Any good capitalist should appreciate the fact that some things aren't for sale. Didn't Texas legislature pass some limitations on eminent domain recently? Not sure what the limitations were. I can see the value of eminent domain in certain cases, however leaving it up to govt to decide those certain cases is not something I would be in favor of doing. But obviously, w/o it, it could make some works impossible. Maybe alter the emiment domain where the new developer has to secure a certain percentage of land before they can use it? Maybe like 90% or whatever. It would prevent the tiny church from getting hit w/ it b/c they own the entire plot I assume. And it would prevent a single homeowner in a big expansion project from holding out as long as they could retain the necessary percentage.

I seem to recall a mall that was built in the DFW area, somewhere in one of the little cities (Irving maybe?). If you go there, there is one single little house w/ a little yard in the middle of the parking lot. I heard it was b/c they held out on the developer and the developer gave up and literally built the mall around the house. Pretty funny.

 
At 12:09 PM, March 15, 2006, Anonymous HH Gwin said...

ringzero said...
"The church may have won many takeover battles in the old days, but things have changed. Local governments have manipulated the heck out of eminent domain laws, and the holdouts are losing to the formidable team of government plus corporation."

Texans are pretty religious and are suspicious of "Big Government," plus Antioch is a historically African American church.

Any eminent domain case would combine Race, Religion, and Property Rights...I can't think of any way to infuriate all Houstonians more completely, unless you were planning to open a Baby Seal Clubbing Amusement Park and have the Mayor Pro Tem hand out bonuses on the site.

I'd almost enjoy seeing the fur fly.....

 
At 5:47 PM, March 15, 2006, Anonymous ringzero said...

Judging by the number of "W" decals I still see, it would appear Houstonians are not easily infuriated, and not that concerned about big government either.

Anyway, I hope you're right about Houstonians not putting up with an eminent domain grab of the church for corporate profit rather than public good.

 
At 8:39 PM, March 15, 2006, Anonymous nmainguy said...

HH Gwin:
Google Kenneth L. Schnitzer with Allen Center and/or Greenway Plaza.
His company developed both sites.

 
At 9:22 PM, March 21, 2006, Blogger Tory Gattis said...

From Otis White's Urban Notebook at Governing.com:

Footnote: There's another side to the downtown renewal story for churches. Their land is suddenly worth a fortune. That's why First United Methodist Church of Seattle is selling its beautiful 1907 brick and terracotta building to a developer who plans a high-rise office tower. First United Methodist will relocate to nearby Belltown, where it will get more space and an underground parking garage. With the move, the senior pastor told the Seattle Post-Intelligencer, the church will be in a better position to grow the congregation and support its programs for the homeless. "It will be wonderful to be in a vibrant neighborhood instead of a commercial district," she added.

 

Post a Comment

Links to this post:

Create a Link

<< Home