HOUSTON — Shell Oil, in the world’s largest office lease of 2011, has renewed its 1.2 million square foot lease in One Shell Plaza and Two Shell Plaza in downtown Houston.
Shell has executed a lease renewal at One Shell Plaza for 804,491 square feet and at Two Shell Plaza for 471,934 square feet, for a total of 1,222,425 square feet.
The 15-year lease term commences retroactively on January 1, 2011 and expires in 2025, at which time Shell will have been a tenant for more than 55 years.
Cushman & Wakefield Vice Chairman Tim Relyea and Executive Vice President Joe Peddie represented Shell in the transaction, while Senior Vice President Charles Elder and Vice President Chrissy Wilson of Hines represented the owner, the Hines U.S. Core Office Fund.
This renewal represents the culmination of Shell’s downtown space- consolidation plan, and a commitment to keep a major presence in Houston’s CBD. In West Houston, Hines continues to work with Shell to expand its Woodcreek and Westhollow campuses.
Shell Plaza is a two million-square-foot, two-building Class A office property that has been continuously owned, managed and leased by Hines since it was originally developed by the firm in 1970. Designed by renowned architect Bruce Graham with the Chicago office of Skidmore, Owings & Merrill, the 50-story One Shell Plaza was the first major high-rise project by Hines. It was developed as the North American headquarters for the Royal Dutch Shell Company, which relocated to Houston from New York City in 1970, and occupied 650,000 square feet in the building as it was nearing completion.
Clad in Roman travertine marble, One Shell Plaza remains the tallest lightweight concrete structure in the world. The 26-story sister building, Two Shell Plaza consists of office, retail and parking. Both properties were acquired by the Hines U.S. Core Office Fund in 2004.
The original Shell lease was signed by Shell Oil Company and Hines Founder and Chairman Gerald Hines himself in 1967, which enabled his firm to get the financing and proceed with construction. He signed the lease renewal in 1990, and as a continuation of this tradition, he personally signed the current lease renewal.
In 1990, Shell’s lease was renewed for an additional 25-year term. Based on the strength of Shell’s credit, the Shell Plaza buildings were refinanced, and a substantial portion of the proceeds were invested back into the buildings in the form of major capital improvements that updated them to then-current Class A standards. Work performed included elevator modernization, new life-safety systems, major mechanical and electrical upgrades, asbestos removal and architectural lobby upgrades.
In return for Shell agreeing to a new 15-year lease term, Hines has again committed to upgrade the buildings through a major capital improvements program. All of the dual-pane glass in both buildings has already been replaced with windows that are more energy efficient and transmit more daylight into the buildings. Stone repairs are being completed on the buildings’ exteriors, and major mechanical and electrical upgrades will be made in 2012. The outdoor plaza areas are being completely redesigned to make them more people-friendly and accessible.
“We are excited about securing our future in the heart of downtown Houston,” said Jeri Ballard, vice president, strategy & portfolio, Shell Oil Company. “Shell remains committed to strengthening Houston as a vibrant commercial hub and as the energy capital of the United States. In addition, our lease renewal with Hines offers a great opportunity for Shell and its employees to demonstrate our commitment to energy and water conservation and to sustainable practices.”
“Our partnership with Shell over the course of the past four decades has been extraordinary,” stated Hines Senior Vice President Charles Elder, who has been affiliated with the buildings since 1983. “We have worked together to keep the buildings current, safe and efficient, so that Shell can provide its employees with the best work environment possible.”
“Even though Shell’s existing lease agreement did not expire until the end of 2015, they started almost three and a half years ago in order to evaluate all possible options for such a large transaction because this much lead time is required,” Relyea said. “I am happy the transaction successfully concluded in one of the most recognized landmark buildings in the city, if not the country, that is still in the 100 percent location of Houston’s CBD.”
Peddie added, “The renewal of Shell’s lease in One and Two Shell made the most economic and logical sense, particularly given the extensive base building modifications Hines agreed to make to both buildings. It resulted in a win-win for Shell and Hines.”
In 2009, One Shell Plaza and Two Shell Plaza each received LEED Gold certification from the U.S. Green Building Council under the Existing Buildings (EB) Rating System. In addition, the buildings are ENERGY STAR® qualified and together have earned a total of 19 labels.
Shell Plaza is more than 97 percent leased primarily to Shell and the Baker Botts law firm.