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Empty Enron Tower Looms Over Houston

The skyscraper is the largest unused corporate site in the U.S. Its owner is talking with potential tenants.

September 29, 2003|Dana Calvo | Special to The Times

HOUSTON — The 40-story tower where Enron Corp. once ruled the energy realm is now the largest corporate ghost ship in the country.

The building's last tenant, UBS, moved out this summer. Intell Management & Investment Co. of New York, which paid $102 million for the tower and the block of land surrounding it last year, is hoping to begin refilling the floors soon.

"We are actively negotiating with several large, reputable tenants," a company spokeswoman said.

On a recent weekday a lone security guard stood in the front lobby, gazing through the green-tinted doors while two escalators cycled up and down with no one aboard. The outside is well-maintained, with tightly trimmed shrubs and pink flowers out front. But to many downtown workers, it's an eyesore.

"It's a huge waste of money," said Read Taylor, 44, who works for Devon Energy nearby. "It's pretty nice in there -- it's just a shame that there's not enough growth to support it."

The 1.1-million-square-foot, glass-and-chrome skyscraper once symbolized the power of capitalism. Today it is known as the only space larger than another well-known empty office building: Three World Financial Center, a 1-million-square-foot space next to Ground Zero that suffered serious damage in the Sept. 11 terrorist attacks.

In the late 1990s, Enron paid award-winning architect Cesar Pelli $300 million to design the light-splashed tower at 1500 Louisiana St., next to the company's original office on Smith Street. (The Smith Street building had the famous tilted "E" outside.)

With a glass, circular "skybridge" that looked like a hollow disk suspended over traffic, the Louisiana Street tower was linked to the Enron office on Smith Street.

It was Houston's first serious skyscraper in more than a decade, and the business community was abuzz with details of the building's Enron-specific touches. Those included an elaborate energy trading floor with circular staircases scrolling up to the offices of Kenneth L. Lay and Jeffrey K. Skilling, the top executives at the time. One of the lobbies featured a huge etched-glass sculpture of the world.

Once a darling of Wall Street, Enron began to unravel in 2001 amid disclosures that it concealed debt and liabilities through a series of murky, off-the-books partnerships run by company insiders, including former Chief Financial Officer Andrew S. Fastow.

As the company melted down, 20,000 Enron employees worldwide were put out of work -- 7,800 of them in Houston -- and the company was forced to moved out of its glitzy tower. Enron's spectacular fall tainted the entire energy sector, sparking layoffs at Dynegy Inc. and other Houston-based companies.

The numbers added up quickly in terms of empty offices. In downtown Houston the office vacancy rate, which was at about 10% at the beginning of 2002, is now at 22%, according to Cushman & Wakefield.

"You had the Enron crash and a bunch of buildings being built and then the Chevron-Texaco merger. All that adds up to a lot of extra space," said attorney Trey Henderson, president of the Greater Houston Business Council.

Richard Ziegler, director of Research for O'Connor & Associates, a real estate consulting firm, said landlords have been dropping rents in a bid to win tenants.

"Houston's lost 10,000 to 12,000 jobs in the past year," he said. "People are jumping from one building to another, but we need real job growth."

The last major tenant in the Enron building was financial services firm UBS, which purchased the trading operation from Enron in 2001. It abandoned its 145,000 square feet this summer for the company's corporate headquarters in Connecticut.

And more drafty office space is yet to come. Enron's original office on Smith Street was put into foreclosure this month, and the remaining 1,200 of the original 9,000-employee workforce will move to a smaller office building, company spokeswoman Karen Denne said. The building will be given to the highest bidder in a sealed bid auction this fall.

"We've got a lot of the floors being used for storage of surplus equipment, and furniture that is being prepared for auction," Denne said. "Some floors are housing the millions of pages of documents that we've archived for the more than two dozen government investigations that we're cooperating with."

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