HOUSTON-Unilev Capital Corp. has expanded its footprint here, buying three class A office buildings that are connected to the Houston Galleria for $176 million. The Beverly Hills, CA-based investor acquired the towers from Walton Street Capital LLC.
Located at 2700 Post Oak Blvd., 5051 Westheimer Rd. and 5065-5075 Westheimer Rd., the properties are part of the Houston Galleria, a mixed-used development that includes 2.3 million square feet of upscale retail space, two Westin hotels with 893 rooms, three office towers and parking for 12,685 vehicles.
The acquisition nearly 1.1 million square feet to Unilev’s existing Houston portfolio, which includes nine office properties totaling 1.8 million square feet. With the addition of the new properties, Unilev has established itself as one of the largest landlords in the Galleria submarket, according to Robert Williamson, a senior managing director with HFF’s local office who led the investment sales team on behalf of Walton Street Capital.
Together, the towers are 90% leased to tenants including Air Liquide, Southern Union, Merrill Lynch, Citigroup Global Markets, UBS, Banco Santander and BBVA Bancomer. Just before Walton Street put the assets on the market, the owner inked a lease with Southern Union to backfill just under 200,000 square feet that was previously leased to Stanford Financial Group.
The gas company plans to move into Galleria Tower II next year. The property’s cash flow won’t see an increase from the lease until early 2012.
Williamson says the properties generated a lot of interest, eventually garnering nine offers. He tells GlobeSt.com that Unilev didn’t make the highest offer; however, the firm offered certainty of close and a high level of comfort and familiarity with the assets.
“Some buyers were turned off by the 5% cap rate for year one because of the Southern Union lease,” Williamson explains, adding that the cap rate increases to about 8% for the second year. “With the debt, it will provide a levered IRR in the low teens. There’s upside with vacant space and a lot of upside with the in-place rents, which are below market.”
Unilev obtained a $130 million CMBS loan to finance the acquisition. HFF secured the 10-year, fixed-rate financing through J.P. Morgan Chase Bank N.A. The loan will be serviced by HFF. Wally Reid, a senior managing director with HFF, led the team representing Unilev.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
