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Brookfield Agrees to Buy Office Complex in Downtown Houston for $875 Million

Travis Overall, leader of Brookfield’s Houston office business.

HOUSTON – Brookfield Asset Management has agreed to pay $875 million for the 4.2 million SF Houston Center office complex in downtown in one of the largest transactions ever for Houston.

J.P. Morgan Asset Management, represented by HFF, elected to sell Houston Center as the Houston office market enters a new epoch that redefines Class A space in Houston. The new buildings coming online offer efficiencies, design features and amenities that appeal to Millennials in today’s workplace. Older buildings that fail to meet today’s standards slide toward Class B.

Houston Center, built between 1974 and 1982, is one of the properties in a position to receive significant upgrades – the so-called “value-add” investment opportunities.

Brookfield demonstrates a readiness to spend heavily to keep its urban buildings in Class A condition. The firm is paying $50 million to upgrade its Allen Center complex and plans a redo of its 350-room downtown hotel.

The acquisition will make Brookfield a dominant office landlord in downtown Houston. The Toronto-based firm already owns 8.1 million SF in downtown, including the three-building Allen Center complex, Heritage Plaza, Total Plaza and 1600 Smith, in addition to the Doubletree Hotel.

Houston Center includes: LyondellBasell Tower, a 46-story tower with 1,061,351 SF at 1221 McKinney; 2 Houston Center, a 40-story tower with 1,024,651 SF at 909 Fannin; Fulbright Tower, a 51-story, 1,247,061 SF tower at 1301 McKinney; and 4 Houston Center, which has 674,264 SF of space at 1221 and 1331 Lamar.

The deal also includes the 200,000-SF Shops at Houston Center at 1201 McKinney. The mall and food court was formerly known as the Park Shops.

The Houston Center office buildings are 75 percent leased, according to Real Estate Alert.

The Houston Center transaction ranks among the biggest deals in Houston’s real estate history, which include Cousins Properties’ purchase in 2013 of the 10-building, 4.4 million SF Greenway Plaza from Crescent Real Estate for $950 million.

Brookfield’s purchase comes as Houston’s office market suffers through a rough patch brought on by contraction in the energy industry. Houston had 1 million SF of negative absorption in the second quarter and more than 11 million SF was on the sublease market at midyear. Downtown’s second quarter office availability rate soared to 20 percent, CBRE reported.

Houston Center was started in the 1960s by Texas Eastern, which owned some 40 acres in the eastern half of downtown Houston. Over time, the east downtown filled-in as Houston Center was followed by the George R. Brown Convention Center, Enron Field (now Minute Maid Park), Toyota Center, Discovery Green and high-rise residential developments, such as One Park Place and 500 Crawford by Finger Cos.

The Houston Center transaction comes as Houston recovers from Hurricane Harvey flooding. The Houston Center buildings were not damaged.

The sale of Houston Center, expected to close at the end of the year, will punctuate a 2017 rebound in investment activity in Houston, following a couple of years in the doldrums.

Sept. 18, 2017 Realty News Report Copyright 2017

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