HOUSTON-An $18.5 million investment and subsequent two-year hold of 1200 Enclave paid off handsomely for Piedmont Office Realty Trust as the Atlanta REIT sold the 149,683-square-food, class A office building to Griffin Capital Essential Asset REIT Inc. for $48.75 million. The transaction broke out to approximately $326 per square foot – well above the $124 per square foot the seller paid to C-III Asset Management during the spring of 2011.
Jeffrey A. Hollinden, senior managing director with HFF tells GlobeSt.com that while it owned 1200 Enclave, Piedmont worked hard to get the then-empty building in lease-ready condition, spending money on tenant improvements and leasing commissions, and expanding the garage. Less than a year later, a subsidiary of oil company Schlumberger took down the bulk of the west Houston building.
Hollinden, who worked with HFF colleague, senior managing director Robert Williamson to market the building on behalf of the seller, says Piedmont acquired the almost empty building at a reasonable price in 2011, based on the fact it had been in foreclosure. He points out that even in 2011, the 18%-occupied 1200 Enclave had attracted a lot of interest from potential buyers.
And when Hollinden, Williamson and Piedmont's director-capital markets Karen Purdy began marketing the fully leased building earlier this year, the asset attracted a great deal of interest once again. "It was a hotly contested asset," Hollinden notes. "There's a lot of interest in stable, core assets in the Energy Corridor." In addition to The Woodlands, the Galleria and CBD submarkets, the far west submarket is hot when it comes to leasing and sales, he adds.
Hollinden says many potential, quality buyers bid on 1200 Enclave, and ultimately Griffin's aggressive pricing allowed it to claim the office building. Hollinden believes office assets will trade at a similar price per pound, especially given the fact that investors continue to obtain decent yield after debt payments. "We saw this kind of pricing last year, so it's nothing too new," he comments.
Hollinden adds that buildings similar to 1200 Enclave could come to market as 2013 rolls on; especially those that are currently under construction. "There are a lot of buildings in west Houston that are coming out of the ground and are getting preleased," he observes. "When those buildings are full and operational, they'll come to market. It's a great time to be a seller."
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