Houston-based Baker Katz LLC has joined the flock of commercial developers scooping up valuable assets at a fraction of their appraised cost.

The retail brokerage purchased a 40,000-square-feet property containing a 12,000-square-foot building at 1805 Ella Boulevard for roughly half of the property’s 2015 listed value, said Kenneth Katz, co-founder of Baker Katz. A purchase price wasn’t disclosed, but the building was appraised at $786,399 in 2015, according to Harris County Appraisal District records.

The building’s sole tenant is Houston-based Foodarama. Foodarama has at least five years remaining on its lease. The property is in Timbergrove, a subdivision slightly northwest of the Heights and the Rice Military area.

“The (original) value was twice what we paid – (it’s) what a multifamily developer could have afforded to pay for the site around a year ago,” said Neal Wade, development partner with Baker Katz. Wade said a multifamily developer would’ve had trouble developing the site, though, based on Foodarama’s existing lease term and the lack of surrounding land.

The deal closed in March. The seller was a private family, and this was their only property in Houston, Wade said. Baker Katz doesn’t have much flexibility in terms of renovating the center until Foodarama leaves, and the firm bought the property at a “relatively low return,” Katz said, given the lack of investments that can be made while Foodarama occupies the space. However, Wade said that Baker Katz couldn’t have afforded the property around a year ago, back when Houston’s multifamily market was red hot and developers were more likely to place more competitive bids on properties.

“That’s helped us be a little more competitive in this area,” Wade said.

The Timbergrove subdivision is mostly made up of older ranch-style homes, Wade said, but the homes have experienced rapid price appreciation in the past several years. Timbergrove has become more attractive to young people and is experiencing the same growth and revitalization that the Heights is going through, he said. The shopping center and its returns “only have room for growth,” Katz said.

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