Hines is known for developing architecturally interesting buildings that aim to enhance the surrounding community or neighborhood. The Houston-based developer is playing to this strength with its plans for The Brava, a 46-story multifamily tower it is developing in conjunction with Cresset Real Estate Partners in its hometown. Construction on the building started in 2019 and the partners expect to deliver the property to market in 2022.
The 373-unit property at 414 Milam Street is located at the convergence of the city’s central business district, theater district and historic district, and it has access to museums, theaters and parks. It is also part of an opportunity zone, notes Michael Miller, an executive managing director at Cresset.
The partners went to market to raise equity for the property shortly after Congress passed the Tax Cuts and Jobs Act of 2017, when individual investors were still wrapping their arms around the legislation and what it meant. In a nutshell, investors invest capital gains from other investments into an Opportunity Zone project and are able to achieve substantial tax benefits with a 10-year hold.
“At that time, this was not a proven solution for an equity structure,” Miller tells Real Estate Capital USA. “But this was a project that came to the top of the pile because of its scale, the quality of the developers, and the way it fit in with the legislation.”
The partners arranged low-leverage construction financing via JLL, with Miller noting this was part of the appeal of the project. “Having a conservative capital structure makes a lot of sense in this regard,” he adds.
Houston rockets back
The LEED Gold property includes a roof deck on the top floor and is part of a larger mixed-use development. The property was designed by Houston-based Munoz + Albin in a modernist style, with floor-to-ceiling windows, and has access to public transportation and other walkable amenities.
The developers anticipated delivering the building into a rising market, with Nick Parrish, a partner and managing director at Cresset noting Hines also recently delivered a one million-square-foot office building kitty corner to the property.
“I think Houston has rebounded strongly over the past few months and these two projects bring revitalization to the neighborhood,” he says. “You’ve got an area that was on the periphery of the core downtown submarket that has now been activated by these projects and the city and the skyline now look different than they did a few years ago.”
Timeline: The Brava
2015: Hines closes on the acquisition of Block 42 at 414 Milam Street in Houston, with plans to build a multifamily tower
2017: Congress passed the Tax Cuts and Jobs Act, legislation that creates Opportunity Zones throughout the US
2019: A Hines and Cresset Partners-led venture breaks ground
2022: Delivery expected