The gleaming Frost Tower, which became a distinctive part of San Antonio’s skyline the moment it was completed three years ago, is up for sale.
The move is not unprecedented, said one commercial real estate expert, and despite a market battered by the pandemic, Frost Tower could bring healthy returns for the developer.
Owners of the tower, a partnership led by developer Weston Urban, put the 24-story building and its parking garage on the market late last year.
Completed in 2019, the tower at 111 W. Houston St. was the first high-rise office structure added to the skyline since 1989. The project was part of a multimillion-dollar real estate deal with the city of San Antonio, which acquired the former Frost Bank headquarters at 100 W. Houston St. as part of the agreement.
Weston Urban CEO Randy Smith did not respond to repeated requests for comment on the sale.
It’s not unusual that a developer would be looking to sell after three years, even such a high profile project. There’s a lot of risk associated with developing a building, said Leah Gallagher, a senior vice president for the commercial real estate firm Transwestern.
“[Developers] need to get a pretty high rate of return in order to take that risk, to jumpstart the project, and so it’s rare that a developer will hold on to an asset much longer after they’ve stabilized it or gotten up to 90-plus percent occupancy,” she said.
A high-rise office building with stable, long-term leases will be especially attractive to investors, Gallagher said. While no asking price has been made public, the tower is new construction, “and a very iconic building in downtown San Antonio,” she said. “I think that you’re going to see somebody pay a strong price for it.”
Commercial real estate broker Newmark is representing Weston Urban in the sale. The asking price is not available. Tax records show the 462,000-square-foot tower designed by architecture firm Pelli Clarke Pelli appraised at $99.5 million.
Frost Bank employees began moving into the building’s first 14 floors in June 2019 and the bank’s lobby and financial center opened the following month.
The sale does not affect the bank’s long-term lease that extends to 2039, said a Frost Bank spokesman. About 600 bank employees work in the tower, though most have the option to work remotely at least some of the time, he said.
The building is 80% leased, according to a LoopNet listing. More than 92,000 square feet of retail and Class A++ office space remains available for lease in the building, including storefronts along Houston Street and 18,000 square feet on the topmost floor, which offers panoramic views of the city.
In September 2019, Smith said there were several proposals pending for the 24th floor. Months later, the pandemic upended the office real estate market as people began working from home.
The commercial real estate market has seen a demand shift back to office space after investors shied away in 2020, Gallagher said, and that’s especially true in San Antonio.
“Our office market was not nearly as hurt as many other major markets were in 2020 and 2021,” she said. “We have a lot of local and regional firms in San Antonio that continued to find ways that they could occupy their office space.”
According to Cushman & Wakefield, San Antonio’s office market was maintaining its positive trajectory in the fourth quarter of 2021, with office vacancy rates declining to 13.4%, as part of the city’s “slow and steady” growth.
Weston Urban owns several properties in the central business district, including the historic Rand, Milam and Savoy office buildings, as well as the Weston Centre, which is downtown San Antonio’s tallest office building at 444 feet.
In late 2020, the developer completed work on a 1.2-acre green space adjacent to the tower. Open to the public, Legacy Park is anchored by Pinkerton’s Barbecue restaurant. But, nearby, construction is ongoing at the former Frost Bank building where major renovations are expected to be complete next year.
In December last year, a city panel gave conceptual approval to Weston Urban for a new 32-story structure that will be built on a narrow acre of land just steps from Frost Tower. The new tower at 305 Soledad St. will feature 354 residential units, a 456-space garage and over 6,000 square feet of ground-floor retail space.