NEW YORK--Just over a year after acquiring the class A office property at 2200 West Loop South in Houston's Galleria submarket, New York-based APF Properties has sold the 94 percent occupied 200,000-square-foot property to the building's main office tenant, Tenaris.

APF Properties targeted the Houston market for investment based on the area's status as one of the leading population and employment growth cities in the U.S. Acquired for approximately $37 million in August 2013, the asset had an 8.3 percent cap rate and was well positioned for future growth with over 75 percent of its below-market leases set to expire by the end of 2017.

APF's initial plan was to seek an institutional joint venture partner and unlock the additional value of the asset over the next four or five years. The asset was encumbered by an existing long-term mortgage through 2022. 

“I think the combination of the longer lease expirations of more than four years at 2200 West Loop and existing CMBS loan made the deal unattractive to some investors,” Berndt Perl, principal of APF, told GlobeSt.com. “I don't know of any similar deals in the Houston market, but there are occasionally circumstances that are evident to one investor that others do not see.”

Nevertheless, APF Properties closed on the purchase last year.

Built by Hines in 1974 and designed by Skidmore, Owings and Merrill, the building, which sits on 4.2 acres, has an attractive concrete and glass façade and offers efficient floor plates that expose a large percentage of the square footage to light and air. The building was extensively renovated in 2000.

Perl, whose company is actively pursuing other older, class A properties with good locations, is keen on the Bayou City.

“I believe Houston, because of its energy sector dependence, is under the radar for some investors,” he says. “A lot of institutions got hurt in the Houston market in the past because of this sector dependence, and that makes them reluctant. Some people feel that the current drop in oil prices, while not impacting Houston area production directly, can have a negative impact as Houston is the knowledge center for energy companies active around the world.”