Lakewood Sale Halted by City Council
by: Laurie Johnson, March 24, 2010 4:03:00 pm
Lakewood Church currently leases the former home of the Rockets, just off the Southwest Freeway near Greenway Plaza. The lease agreement was signed nearly a decade ago. Lakewood paid $11.8 million up front to become the tenant for 30 years.
Houston Real Estate Director Bob Christie says because the rent was prepaid, there is no additional income coming to the city for the next 22 years.
"Lakewood has an option for a second 30-year lease. And we believe that with the money that Lakewood has spent on this property — somewhere in the range of $80 million in improvements, not counting the almost $12 million in prepaid rent — that they will remain in the property for that second 30-year period."
The lease also includes a non-compete clause with the Toyota Center — meaning the facility can't be used for commercial purposes like concerts or sporting events.
So the city thinks selling the property for $7.5 million is a fair deal for both parties and wanted council to approve the deal this week.
But several councilmembers, including Stephen Costello, suggested it's a sweetheart deal.
"I understand the business model. There are a number of assumptions here that I have a problem with in terms of doing the financing. And I think this is a very large asset that we're willing to discount severely for this sale. I would prefer that we have more of a committee opportunity to talk about this more. There are a lot of details here that I think we still need to vet out."
Jarvis Johnson and Jolanda Jones also requested a committee hearing on the contract.
Houston Mayor Annise Parker says the transaction to sell the property to Lakewood began about a year ago and is already counted in this year's budget.
"This fiscal year's budget was built on the premise that the Lakewood property would be concluded within this fiscal year. This was actually part of Mayor White's original budget and we're just trying — otherwise I'm going to have to find another $7 million to fill the hole this year."
Lakewood spokesman Don Iloff was at the meeting when councilmembers suggested the price should be higher. He was hesitant to comment, but did say the delay is not a setback.
"The city approached us and we entertained the offer and we're willing to pay the $7.5 million and hopefully the city council will agree to it."
The plan to sell the property to Lakewood will go before the Budget and Fiscal Affairs Committee on Monday. If the sale doesn't go through, Lakewood will continue to lease the property, presumably for up to 52 years.