The Redstone Companies, a prestigious private equity firm based in Houston, purchased a 6.5 acre site along Post Oak Boulevard situated in the heart of the Uptown submarket.
After interviewing numerous developers and investment firms, Redstone selects Stream as its joint-venture partner to develop, lease and manage the class AA, speculative development.
Shortly after the selection, the economy entered into the Great Recession, thereby eliminating any prospective capital sources interested in pursuing a $100 million speculative office development.
Recognizing the opportunity to commence a speculative project no longer exists; Stream and Redstone adjust their strategy and actively pursue prospective tenants capable of pre-leasing a significant portion of the trophy development.
Countless cold-calls and meetings are set to gauge demand, determine preferred design criteria and ideal square footage for the project.
The partnership confirms that significant interest remains for class AA product within Uptown although fundamentals continue to deteriorate across all submarkets.
Stream assembles a core consulting team consisting of HKS Architects, Haynes Whaley & Associates and Manhattan Construction to proceed in designing a first-class office tower unmatched in the Galleria submarket. Stream advances design development efforts with the consulting team in anticipation of being able to first to capitalize when the market recovers.
After eighteen months and numerous meetings with targeted prospects, BBVA Compass responds with mutual interest in becoming the class AA development’s anchor. Discussions advance with BBVA Compass contemplating preleasing 51.0% of the project. Additionally, the partnership approaches BBVA Compass with the possibility of providing the construction loan for 2200 Post Oak.
Once BBVA Compass lease and debt negotiations progress considerably, the partnership identifies its primary equity partner. This particular investor represents one of the very few capital sources in the country interested in pursuing a development opportunity with a speculative component of any nature.
The partnership fully executes the lease, loan agreement and joint venture agreement all within a one-week period. Stream also negotiates a “GMAX” contract with Manhattan Construction. Capitalizing on the lack of construction activity, hard cost pricing falls below the project’s pro-forma thereby immediately increasing the contingency for the project.
In July 2011, Stream broke ground on 2200 Post Oak, the Galleria’s first office development in nearly 30 years. Furthermore, BBVA Compass Plaza is the first office development in the state of Texas announced following the Great Recession.
Showcasing state-of-the-art building systems and serving as the Galleria’s only class AA office building, BBVA Compass is designed to achieve the rigorous LEED Gold certification.
The building delivered on-time and under budget in April 2013. The project is leased at rates above market and is outperforming underwriting expectations.