Monday , 26 September 2016
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Cousins Re-Signs Transocean, Solidifying Greenway Plaza Holdings

Larry Gellerstedt, CEO of Cousins

Larry Gellerstedt, CEO of Cousins

HOUSTON — The Transocean Ltd. energy firm renewed and extended its lease for 255,413 square feet at Greenway Plaza, according to Cousins Properties, the Atlanta-based firm that owns Greenway Plaza complex in Houston.

Cousins Properties had been criticized by Wall Street analysts following the recently collapse in oil prices because of its exposure to the Houston office market.

Larry Gellerstedt, President and Chief Executive Officer of Cousins said: “With this renewal, we continue to mitigate our lease exposure risk in Houston while achieving significant roll ups in rental rates and outperforming our original underwriting expectations. Incorporating the Transocean renewal, the weighted average lease term in our Houston portfolio now stands at approximately 7 years with no single lease greater than 100,000 square feet expiring until December 2018.”

Cousins’ stock was downgraded last year after the collapse in energy prices. Cousins owns more office space in Houston than any other market.

When West Texas Intermediate fell from $108 a barrel last summer to below $50 a barrel at the beginning on 2015, it set off shock waves in the Houston office market. Over 1 million square feet of sublease space was put on the market in the first quarter.

Transocean, the fourth largest tenant in Cousins’ Houston portfolio, currently occupies the 4 Greenway Plaza building in its entirety. This 255,413 square foot transaction renews 100 percent of their current space at 4 Greenway Plaza and extends their expiration on this space from January 2017 to January 2023. Transocean also currently occupies an additional 13,552 square feet of space in 3800 Buffalo Speedway at Greenway Plaza which expires January 2017.

Greenway Plaza is a 4.5 million square-foot Class A office complex located in the Greenway submarket, which is near the Southwest Freeway between West University Place and River Oaks.

Cousins acquired Greenway Plaza in September 2013 for $950 million or $218 per square foot. The project, developed by Kenneth Schnitzer and Century Development, is 90 percent leased.

Transocean is a leading international provider of offshore contract drilling services for energy companies, owning and operating among the world’s most versatile fleets with particular focus on deepwater and harsh-environment drilling.

Bob Boykin, Warren Savery, Bubba Harkins and Will Hightower represented Cousins in this transaction. Jay Bonano of Savills Studley represented Transocean.

In a speech to the CoreNet Emerging Leaders group in Houston earlier this year, veteran Houston office broker Dan Bellow of JLL suggested that lease extensions would be a wise tactic in 2015. And he said landlords should do whatever is necessary to retain tenants as the Houston office market suffers through this era or lower oil prices and layoffs. Transocean appears to be a classic example of what Bellow was talking about.

One of the largest threats to the Houston office market is the possibility of mergers and acquisitions among energy firms. The M&A activity could dump a lot of office space onto the market.

Since the oil price crash, Cousins has renewed and extended some major leases. Another Greenway Plaza tenant, Direct Energy, extended its 192,000 square-foot lease until 2023, in a deal inked in February.

And Stewart Title extended its 235,000 square-foot lease in Post Oak Central until September 2019. Post Oak Central, an office complex located a couple of blocks north of the Galleria, was acquired by Cousins in February 2013 for $233 million or $182 per square foot. Post Oak Central is now 95 percent leased.

 

 

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