Hines Unit Acquiring Houston Skyline Icon
By Nancy Sarnoff, Houston Chronicle
Mar. 26–A subsidiary of Hines Real Estate Investment Trust is buying Williams Tower, the Galleria-area landmark developed in the early 1980s by the company founded by Gerald Hines.
The 64-story skyscraper is expected to sell for $271.5 million when the deal closes on May 1, according to a document filed with the Securities and Exchange Commission.
The REIT has put down a $30 million earnest money deposit on the property, which includes a parking garage, a 2.3-acre plot of land across the street from the tower and an undivided interest in a 2.8-acre park and waterwall, the remainder of which is owned by an affiliate of Hines Interests.
The Hines REIT was started in 2004 to allow individuals to buy into properties identified and operated by Hines, the real estate firm that developed the Galleria mall, Pennzoil Place and real estate projects around the world.
When the building went on the market last year, industry analysts said it could go for up to $500 million.
Now some say the sale price of the former Transco Tower reflects the turmoil in the nation’s credit markets, as well as the building’s lower rents relative to current lease rates for top-end properties.
"From what I’ve heard, pricing was more a function of where the current rents are on long-term leasing in the building," said John Fenoglio, a partner in commercial mortgage banking firm Live Oak Capital.
Owners of the best buildings in the Galleria area are asking $24 per square foot on a "triple net" basis, meaning the tenants pay expenses as well, brokers say.
Another factor that could have affected pricing is the subprime mortgage meltdown, which has spread into the commercial real estate world.
Lenders have implemented more conservative guidelines, and the market for commercial mortgage-backed securities, which financed a large amount of the nation’s commercial real estate deals, has fallen off dramatically.
Hines, which manages Williams Tower, does not comment on transactions until they have closed.
The 1.5-million-square-foot tower at 2800 Post Oak is 91 percent leased.
Transcontinental Gas Pipe Line Corp., an affiliate of the Williams Cos. — the building’s namesake — has a lease for 250,001 square feet that expires in March 2014 and contains options to renew for three additional five-year periods.
"We look forward to continuing to build our close working relationship after the deal closes," George Shahadi, director of corporate real estate at Williams, said Tuesday through a spokeswoman.
Black Box Network Services, formerly known as NextiraOne, a telecommunications infrastructure provider, rents 186,777 square feet in a lease that expires in March 2009.
The remaining space is leased to 48 tenants, none of which occupies more than 10 percent of the building’s rentable area.
The Houston-based investment trust owns interests in 43 properties, primarily in the U.S.
Cushman & Wakefield’s Ken Page, David Chuoke and Scott Myers listed the property for sale for its Kuwaiti owners, who are represented by Fosterlane Holdings of Atlanta.
nancy.sarnoff@chron.com
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