7421 Burnet Road, Suite 300-291, Austin, TX 78757

 512.590.8315 phone             512.590.8313 fax

4801 Woodway - 4801 Woodway is a 220,583 SF, four-story office building built in 1976 with 548 covered parking spaces and 154 surface spaces (702 total spaces) for a parking ratio of 3.24:1,000.  The building is located in the Galleria submarket of Houston at the southeast corner of Woodway Drive and South Post Oak Lane.

During their ownership, the seller of the asset discovered a structural issue which required over $7 million in repairs which deterred many likely buyers for this asset.  Falcon Southwest had a personal relationship with the seller and was able to review the scope of the structural repairs to determine that further issues with the building were unlikely to occur.  The seller engaged the firm that was managing and leasing the property to sell the asset.  Falcon Southwest was already using that firm for management and leasing on other properties and our pledge to retain that firm for management and leasing after the sale cemented our position as the logical buyer for the asset.

We purchased teh79% leased property for less than $70/RSF which was a 9.61% cap rate on the in-place rents.  Our strategy was to invest $500,000 to remodel and update the common areas to encourage leasing and monitor the re-engineered foundation to prove that the previous owner's improvements solved the structural problem.  The goal was to stabilize the occupancy at 92% within three years and sell into improved submarket and national economic conditions.

When the asset was purchased in 2003, the Galleria submarket was experiencing higher levels of vacancy due to the widening of West Loop (I-610) and some large tenant relocations.  We timed our purchase of this asset with the conclusion of the freeway construction and this investment thesis proved accurate.  We completed the remodeling of the building, increased the occupancy and raised the average rental rate over the three years that we held this asset.  We also obtained survey data each year to verify that the structural repairs were performing as designed.  The asset was sold in August of 2006 (36 month hold) for 40% more than purchase price and this sale generated a leveraged internal rate of return in excess of 25%.