By Ralph Bivins
Canyon-Johnson, a group headlined by former Los Angeles Lakers star Magic Johnson, and Houston-based developer Midway have acquired the Houston Pavilions mixed-used project in downtown Houston.
The 560,000-sf project, built in 2008, covers several blocks near the intersection of Fannin and Dallas streets. The property, developed with government assistance designed to enhance downtown, was taken into receivership last year.
The purchase price was not disclosed, although real estate experts have been expecting the sales price to be around $125 million.
The 260,000-sf 11-story office tower is fully leased with NRG Energy as its tenant. Demand for downtown office space is high and Class A rents are averaging $40 per sf, according to CBRE realty.
But the 300,000-sf retail portion of the Pavilions is only 60 percent occupied. Tenants include the House of Blues, Forever XXI, McCormick & Schmick’s and Lucky Strike. But those tenants have not been required to pay full rent because retail occupancy has not risen above the occupancy threshold designated in their leases.
Since Houston’s regional malls were born in the suburbs decades ago, retailing in downtown Houston has been a challenging proposition. Converting some of the Pavilions’ retail space into office space could be a viable option with a near-term boost in revenue.
The Canyon-Johnson and Midway venture has a strong track record that is perfectly suited to revitalizing the Houston Pavilions.
Midway is a Houston-based firm that has developed City Centre, a highly successful mixed use project with retail, residential, office and hotel components in West Houston. Magic Johnson purchased the Hotel Icon in downtown Houston and the Marq-E retail project on the Katy Freeway, among other investments. Johnson obtained a Marriott flag for the 135-room hotel and successfully reconfigured the Marq-E with the Fidelis firm.
The Pavilions was developed by Geoff Jones and William Denton, who developed the Pavilions on the 16th Street Mall in Denver.
Ralph Bivins, founding editor of RealtyNewsReport.com, is a past president of the National Association of Real Estate Editors.