HOUSTON – (By Ralph Bivins, Realty News Report) – A 41-story Houston office tower, recently considered as a candidate for conversion to residential use, has been acquired by the Energy Transfer pipeline and gas company, in one of the Houston’s largest office transactions in recent years.
The 1.2 million-SF tower, located at 5555 San Felipe, was formerly known as the Marathon Oil Tower. But while the Houston office market was in its Post-Covid decline, Marathon Oil moved to a new building in West Houston. Occupancy in the San Felipe building fell as low as 15%. Times have been tough in the Houston office market, including in the Galleria area office market where the Marathon Oil tower is located.
Ownership of the Marathon Oil building transferred to Starwood Property Trust in 2022 as Starwood foreclosed on the building’s mortgage and assumed its debt. It translated to Starwood acquiring the tower for $119 million or $102 per SF.
Starwood Considered Office-to-Resi Conversion
Right after the 2022 acquisition, Starwood’s CEO Barry Sternlicht said his Miami Beach-based firm would consider its options, including converting the building to residential.
“We’re trying to figure out what we ought to do with it,” Sternlicht told industry analysts in 2022. “Should we see it as an office building or convert it to a residential site?”
Challenges of converting office to residential narrowed the enthusiasm for the concept across the nation and with Houston awash in empty space, Starwood elected to sell.
Prices for Office Buildings Declined
Office investors have been making plays in Houston in recent months, but the sales prices have been shockingly low in most cases.
Last year, speculation was reported that 5555 San Felipe might receive offers as low as $35 million ($30 per SF) or as much as $82 million ($70 per SF), according to Real Estate Alert.
To be clear, the San Felipe building is no dilapidated, Class C ruin. It’s held Class A status and its location on five acres between Chimney Rock and Sage Road on the northwest side of the Galleria area is accessible to quality retail and upscale housing. In 2013, the tower was acquired by CBRE Investment Management for $245.5 million – a price that far exceeds today’s market value.
The price Energy Transfer paid to Starwood last week has not been disclosed.
But Energy Transfer is no investor wanting to buy low and sell high in a few years. The Dallas-based energy firm, which operates a 130,000-mile pipeline network crisscrossing the nation, is expected to occupy the 5555 San Felipe building for the long-term.
The acquisition just closed and the company has not announced any details. Stream Realty Partners represented the energy firm in the transaction.
Why Did Energy Transfer Buy the 5555 San Felipe Building?
Energy Transfer is ensconced in its headquarters building in Dallas. A subsidiary, Energy Transfer LNG Export LLC, is developing a major liquified natural gas facility in Lake Charles, La.
Houston, the Energy Capital of the World, has a workforce with deep experience in all aspects of energy, including LNG exporting. The reasoning for the purchase of 5555 San Felipe goes beyond talent recruitment, though. It probably involves a future cross-town relocation of Energy Transfer’s offices.
Energy Transfer’s Existing Offices in Downtown Houston
In Houston, Energy Transfer owns and occupies a 510,000-SF building in downtown Houston at 1300 Main. The 21-story building, which was completed in 1955, is next door to First United Methodist Church and a block away from the GreenStreet mixed-use development.
However, Energy Transfer may be planning to relocate employees from its 70-year-old downtown building to its newer – and bigger – 5555 San Felipe tower, which has been renovated..
Such a move would be a lift to the Galleria/Uptown Market because it would mean having the 41-story building fully occupied again.
Maybe someday, Energy Transfer’s leadership will follow the example of Chevron and Exxon Mobil and relocate the company’s headquarters to Houston. And if Energy Transfer elects to stay downtown on Main Street, they will be just a few blocks from the headquarters of Cheniere Energy, the largest liquified natural gas producer in the nation.
April 16, 2025 Realty News Report Copyright 2025
Photos credit: Ralph Bivins, Realty News Report, Copyright 2025
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File: Starwood Sells 41-Story Skyscraper to Energy Firm