The city of Houston is in talks to sell the former Compaq Center property to Lakewood Church. Nationally known for having the largest congregation in the U.S., the mega church sits on seven acres along the Southwest Freeway.
The Lakewood property is one of 17 sites the city is thinking about selling. Most of the properties are vacant land, but a handful are being used by the city or being leased by another entity, like Lakewood.
“If we can sell it and generate enough money … the city would be able to monetize an asset that we wouldn’t realize any value for, for years and years to come,” Bob Christy, the city’s director of real estate, said about the church property.
That’s because Lakewood prepaid its rent, as part of its agreement signed with the city eight years ago.
The church’s leader and television pastor Joel Osteen signed a lease with the city in 2001 to occupy the 606,050-square-foot building for 30 years and then have the option to extend the lease for another 30.
The church paid nearly $12 million for the first 30-year term and agreed to spend tens of millions improving the property at 3700 Southwest Freeway.
Not ideal timing to sell
Rent on the second 30 years would cost Lakewood $22.6 million, according to the agreement.
The long-term lease makes it more complicated to put a price tag on the property.
David Lewis, CEO of Lewis Realty Advisors, said the value of the city’s interest in the property is in the $8 million range.
That’s based on the fact that there will be no income on it for more than 20 years.
But the city would be hard pressed to find a buyer other than Lakewood, said Lewis, whose company was recently hired to appraise the site.
A Lakewood spokesman said the church is discussing options with the city regarding the sale of the facility.
“We are hopeful that together we will be able to mutually benefit our city and the thousands of Houstonians who attend Lakewood Church,” said Donald Iloff.
The timing of the city’s wish to sell its properties isn’t ideal.
The economic downturn has led to a widespread credit crunch and declining property values.
More commercial real estate owners are filing for bankruptcy protection or losing properties to their lenders.
Still, the city believes now could be a good a time to try to unload real estate.
In October 2008, the city pulled a number of properties it had for sale off the market because of weak bids.
A year later, however, a property auction yielded better results.
“Unless someone can convince me that this market is going to turn around any time soon, we think that now is as good a time as we may have to make some of these sales,” Christy said.
And the city has the option of rejecting offers, too.
Bid process not needed
The city evaluates and sells property on a regular basis, former spokesman Frank Michel said last week before leaving his municipal post.
Indeed, the city sold more than two dozen properties in September, according to Christy.
Most of that real estate was in residential areas. The property with the most value was a five-acre tract off on Fairdale that sold for $2.5 million to a church.
The most recent list of properties could be sold within the next six months, although a new administration may affect the time frames of any sales.
And the city could sell the property to Lakewood without having to go through a bid process because the church is a nonprofit.
There likely would be other restrictions. The church, for example, wouldn’t be able “to turn around and sell it to somebody else for twice what they paid for it,” Christy said.