Three Allen Center: Office Tower At 333 Clay St.

[hokieone]

Three Allen Center: Office Tower At 333 Clay St.

[ChannelTwoNews]

https://www.bizjournals.com/houston/news/2023/08/29/american-national-insurance-allen-center-office.html?cx_testId=40&cx_testVariant=cx_27&cx_artPos=1#cxrecs_s

"American National leased 5,047 square feet of space at Three Allen Center, which is located at 333 Clay St. and is part of New York-based Brookfield Properties’ Allen Center office complex. The new office opened the week of Aug. 28 with about 30 employees, and the company said it plans to grow its headcount there."

[strickn]

Smacks of a soft building, since Toronto-based Brookfield also controls American National (the same company that the Moody family of Galveston built, and which a Brookfield subsidiary BAMR acquired last year).

 

https://finance.yahoo.com/news/brookfield-asset-management-reinsurance-partners-105500010.html

[Houston19514]

16 hours ago, strickn said:

Smacks of a soft building, since Toronto-based Brookfield also controls American National (the same company that the Moody family of Galveston built, and which a Brookfield subsidiary BAMR acquired last year).

 

https://finance.yahoo.com/news/brookfield-asset-management-reinsurance-partners-105500010.html

Interesting, but I don't think it smacks of a soft building.  Why wouldn't they want to pay rent to their sister company, rather than to someone else?

[strickn]

You can see how far below the downtown average this building has listed a full floor sublease:  https://www.commercialcafe.com/commercial-property/us/tx/houston/three-allen-center-1/

Not an expert in accounting but I would also expect that renting to yourself depresses the value more than it elevates the market clearing price.  I would expect, even when you are involved with a third party CBRE/JLL leasing agent/broker, that there are tax rules about how hard a bargain you can agree to when a transaction isn't arms' length.  If there were none then private equity vulture capital could even more easily strip cashflow from one subsidiary to another, under the guise of holding the keys to one asset or another that the first one has agreed to lease back.  

[Houston19514]

19 hours ago, strickn said:

You can see how far below the downtown average this building has listed a full floor sublease:  https://www.commercialcafe.com/commercial-property/us/tx/houston/three-allen-center-1/

Not an expert in accounting but I would also expect that renting to yourself depresses the value more than it elevates the market clearing price.  I would expect, even when you are involved with a third party CBRE/JLL leasing agent/broker, that there are tax rules about how hard a bargain you can agree to when a transaction isn't arms' length.  If there were none then private equity vulture capital could even more easily strip cashflow from one subsidiary to another, under the guise of holding the keys to one asset or another that the first one has agreed to lease back.  

Not seeing how it would depress the value.  They may indeed be required to charge their sister company a market rent.  But by definition, charging market rent neither depresses nor elevates the value of the building.  And more to the original point, renting to a sister company tells us nothing about the softness of the building.  Again, if the lessee sister company is going to pay market rent for office space, why would they not pay it to their lessor sister company, rather than to a third party? It would be kinda odd to do otherwise.

[strickn]

Just got promoted by the HAIF brass from Condominium to Convention Center so I'm afraid you'll just have to wait 

[strickn]

The next rung is likely going to be George R Brown II... I think this ship has sailed, sorry.

[strickn]

A par value rent rate opts out of the opportunity to negotiate any better terms, so that that market value is lesser use of the word.  To be exact it's a lagging market valuation versus the normally optimistic sense of a supplier finding out what a market will value by rising/pushing market value.  The idea that cutting one's risk in this way strips one's profit more than strictly proportionally would be based on a theory that if you create tighter supply, by signing a term sheet, then the other suppliers benefit from the new market clearing price more effectively than you can; you have already reduced your exposure to the new demand at the new level of risk and reward by eating the par.  Other buildings have just as much space to sell or rent out as before but their negotiating potential just rose, thanks to this, while this owner has less space than before.

Edited September 5, 2023 by strickn
will make sure to recommend Three Allen Center gets a red white blue rehab and matches my namesake nautical actual convention center

[strickn]

The idea that cutting your risk strips your profit more than proportionately:

I'm going to guess if you create tighter supply by signing a deal, then the other market suppliers benefit from the new market clearing price more effectively than you can; you have already reduced your exposure to the new demand at the new level of risk and reward by eating the par.  You as a building owner would prefer not to hand others that price feedback if you had a better option to avoid downside.  
 

If it's indicative of an immediate sensitivity to a need for reportable cashflows, as Brookfield has shown in Denver for instance, a belief that the tide is sinking, a belief that their product would cost too much to renovate, or that Houston Center will reap the rewards and they already doubled down on it and have too much exposure to O&G now, whatever the combination might be, it is the case that now other building owners have just as much space to sell or rent out as they did before.  All their negotiating potential to lock in higher prices just appreciated thanks to increased scarcity -- while the first will have even less space that can benefit than before.