CCI-Freeway Office Properties I, LP

Location: Houston, Texas

Capital Commercial Investments, Inc. (“CCI”) is combining two properties that are under contract to take advantage of diversification within the Texas suburban office market to de-risk the investment. We are scheduled to close on the purchase of Greenhouse located at 19219 Katy Freeway in Houston, Texas for $17,600,000. We are also scheduled to close on the purchase of 750 West John Carpenter in Las Colinas for $23,000,000 on July 23rd.. Capital Commercial Investments (CCI) invites you to explore an ultra contrarian opportunity in the Texas suburban office market, which has quietly outperformed urban areas. Right now, there is an opportunity to purchase office properties at an incredible discount, and here's why: FDIC Mandates : The lack of available financing due to FDIC regulations has driven suburban office financing availability to a 30-year low, representing a 90% constriction of lending by national banks. Fears About “Return to Work”: With the rise of remote and hybrid work in recent years, many investors have been fearful of investing in office properties, and some owners have opted to offload their properties for a large loss. In addition to reducing overall risk by buying at such a favorable basis, investors acquiring properties in the suburbs of Dallas-Fort Worth and Houston will be uniquely positioned to benefit for a few key reasons: Massive In-Migration : Texas cities are booming with a significant influx of new residents. Dallas is seeing an increase of 170,000 people per year, while Houston is growing by 135,000 people annually. Short Building Supply : New construction has slowed if not stopped until existing offices are fully leased, creating a prime investment climate. Rising Replacement Costs : The increasing cost of new developments ($385-650/sqft.) underscores the value of existing properties. Drive Time: Employers are prioritizing moving their offices closer to high-ranking school districts to encourage employees to return to the office and attract top talent. One key advantage of suburban offices is the shorter drive time for employees from their homes and their children's schools, making these locations highly desirable. 750 West John Carpenter Overview 750 W John Carpenter Freeway (“750 WJC”) is well-located, fronting on the John Carpenter Freeway (SH-114) in Irving’s master planned Las Colinas community. Less than ten (10) minutes from the DFW International Airport and less than five (5) minutes from major attractions including the Toyota Music Factory, the twelve (12) story, “Class A” office building is perfect for major corporate users looking to attract talented employees to one of the most desirable areas in Dallas-Fort Worth. CCI has the opportunity to acquire the property at a total purchase price of $23 million, equivalent to 17% of the estimated replacement cost of the building ($135 million) and parking garage alone. 750 WJC has had an average occupancy of ~92% (per CoStar) for the last twenty-five (25) years, anchored by CVS/Caremark for the majority of that period. In 2023, CVS/Caremark consolidated their offices from six (6) full floors to three (3), as many of their customer service and administrative employees were sent home to work on hybrid or fully remote schedules. Now, the property sits at an occupancy of 44%, marking the first time the building has been under 75% leased since 2002. Since CVS’ downsizing, current ownership has halted leasing efforts while planning a capital improvement campaign, but CCI now has the chance to benefit from this recent dip in occupancy. 750 WJC has been institutionally managed since its construction in 1999 as a build-to-suit for IBM-owned Sterling Commerce, and it shows. With a pristine white cast stone façade, picturesque landscaping, and floor to ceiling glass in all upper-floor suites, the building’s design is timeless and allows it to compete with newer properties in the surrounding area. The twelve (12) story tower’s easily divisible, 27,000 SF (avg.) floor plates are ideal for the tenants who are most active in today’s market. Recent leases in Dallas’ suburban submarkets continue to trend toward smaller and smaller sizes, commonly ranging from 5,000 – 15,000 SF. As more leases signed before the COVID-19 pandemic expire, companies of all sizes have continued to lease high-quality office space, but often re-evaluate their workforce and shrink their real estate footprint as they do. CCI intends to capitalize on the opportunity presented by these smaller leases with the acquisition of 750 WJC, offering substantially below-market rental rates and building move-in ready suites to significantly accelerate leasing velocity. Due to its history of high-quality ownership, the entirety of 750 WJC is in outstanding condition, and the existing amenities at the Property are actively enjoyed by the current tenants. However, the aesthetics of some of the common areas in the building are slightly dated. CCI intends to modernize them to make the “tour path” through the building as stunning as the exterior. By revitalizing the building’s common areas and amenities, constructing move-in ready spec suites, and actively negotiating future renewals with in-place tenants shortly after acquisition, CCI plans to stabilize and sell the asset, realizing the potential of 750 WJC as one of the premier properties of Las Colinas. Greenhouse Overview The Offices at Greenhouse, located at 19219 Katy Freeway (“Greenhouse”). The Property has a highly visible location along the Katy Freeway (I-10) in Houston’s particularly desirable Energy Corridor submarket. Greenhouse is less than twenty-five (25) minutes from the Houston Galleria, less than fifteen (15) minutes from Downtown Katy, in the immediate proximity of both the Houston Methodist West Hospital and Texas Children’s Hospital West Campus. It also has multiple daycare and fitness center options nearby, and is within five (5) minute walking distance of a variety of food options and other neighborhood amenities. Built in 2014, this five (5) story, “Class A” office building is ideally suited for corporate users seeking to attract workforce talent in one of the most desirable areas in Houston. CCI has the opportunity to acquire the Property at a total purchase price of $17.6 million, equivalent to 20% of the estimated replacement cost ($86.4 million) of the building and four-level parking garage. Greenhouse has a total of 203,284 SF, currently anchored by AECOM, which has a lease for the entire top three stories of the building and part of the ground floor, together totaling 66.8% of the building. AECOM’s lease expires December 31, 2024, at which point they will vacate the building, however, their current subtenant for the 5th floor (SPB Hospitality, 42,290 SF) has already signed a lease to remain in that space through May 2030. Following AECOM’s expiration, the building will be 44.7% occupied. This has led current ownership to explore options to dispose of the asset and reduce their perceived risk, but CCI now has the chance to benefit from the upcoming dip in occupancy at an exceptionally high-quality, strategically located, and highly visible building, with access to prime neighborhood amenities. The Property has been institutionally owned and managed since its construction in 2014. It was developed by Stream Realty Partners (designed by Powers-Brown) and has been owned by KBS REIT since they purchased it for $47 million ($231/SF) in Q4 2016. The Property showcases a modern and attractive design with a LEED Silver Certification, establishing itself as a high-quality, “Class A” office building in Houston's Energy Corridor. The Property's architecture features a double-height lobby with well executed stone, marble, and travertine finishes, along with floor-to-ceiling glass that floods the common areas and tenant suites with natural light. Featuring center-core floor plates that are highly functional and column-free, the building offers an ideal space for tenants of various sizes. Moreover, the Property boasts mature landscaping, outdoor communal areas, and a four-level parking garage with a parking ratio of 4.0 per 1,000 square feet, enhancing its overall appeal to occupants. The uniquely walkable and amenity-rich location of Greenhouse aligns perfectly with the current trend of tenants seeking high-quality office spaces in vibrant environments, making it a highly desirable choice for businesses looking for a top-tier office experience within Katy ISD, the #1 ranked Houston public school district. The property last sold in November 2016 for $47,000,000 ($232/SF) at a 5.50 cap rate. CCI’s business plan for Greenhouse is to re-lease the expiring AECOM space (135,727 SF) in 3 years, accounting for SPB early term. CCI anticipates constructing spec suits on the 3rd and 4th floors with target lease rates starting at $18.00/SF NNN. Capitalization CCI is seeking total capital commitments for the CCI-Freeway Office Properties I partnership of $15,000,000. The $15 million of equity will be available as Class A LP shares, Class B notes or Class C LP shares. Within the Freeway Office Properties partnership, Greenhouse will be allocated $5,000,000 of equity and 750 WJC will be allocated $10,000,000 of equity. Any LP share is available as full shares of $100,000, half shares of $50,000 and quarter shares of $25,000. Minimum investment is $25,000. INVESTMENT OPTION 1 - Class A LP Shares $25,000 Minimum (Up to $15,000,000 Available) Investors who purchase Class “A” Units will become Class “A” Limited Partners in the Partnership. 15% Preferred return, and 10% pro-rata allocation of net profits. CCI anticipates accruing the preferred return to the limited partners until the property is sold. Projected 18.03% IRR and 1.95x equity multiple INVESTMENT OPTION 2 – Class B Note $25,000 Minimum (12% Yield Paid Current) Investors who purchase Freeway Office Property notes will have Class “B” Limited Partners shares as collateral for the note. The note principal and interest will be guaranteed by Paul D. Agarwal. The note will have a 12% yield and is paid current monthly. Investment term options of either 2 or 3 years. INVESTMENT OPTION 3 - Class C LP Shares $25,000 Minimum (14% Preferred Return, Accrued) Investors who purchase Class “C” Units will become Class “C” Limited Partners in the Partnership. 14% Preferred return, and no additional allocation of net profits. The LP share capital will be guaranteed by Paul D. Agarwal. CCI anticipates accruing the preferred return current to the limited partners until the property is sold. Funds received will be accepted on a first come first serve basis until fully subscribed .