TIAA Shops Half-Interest in Houston Complex

TIAA-CREF is looking to sell a 50% stake in a large office complex in Houston, where surging demand for core office properties has led to a flurry of deals.

The 1.8 million-square-foot Four Oaks Place, which encompasses four buildings and a parcel, is worth an estimated $400 million, or roughly $230/sf. At that valuation, a buyer’s initial annual yield would be about 6.25%. But a potential deal to construct another building on the parcel could dramatically boost the value.

The complex, in the West Loop/Galleria submarket, is 93% leased. TIAA, which acquired the property in 2004 from an L&B Realty Advisors partnership for $255.4 million, has awarded the listing to Eastdil Secured, but marketing isn’t expected to begin until after Labor Day. By that time, the pension system expects to know whether Four Oaks Place has been chosen as the site for an 800,000-sf build-to-suit office building for Apache Corp., a big energy company that has its headquarters nearby.

The development and long-term lease with a major tenant would greatly increase the value of the complex — but the buzz is that TIAA is a long shot to win the Apache deal. Regardless of the outcome, TIAA plans to market the stake. It seeks to continue operating the property and collect an asset-management fee from its new partner.

TIAA’s move comes on the heels of another recapitalization of a big Houston office property that illustrates the intense demand for core assets in the market. In June, ING Clarion, acting on behalf of New York Common Fund, agreed to buy a 50% stake in Wells Fargo Plaza from MetLife for $255 million. HFF is the broker. The transaction values the 1.7 million-sf tower at $300/sf, or $510 million — the highest dollar price ever attached to a single Houston office property in a trade.

Houston posted $791 million of big office sales during the first half, according to Real Estate Alert’s Deal Database, which tracks trades of at least $25 million. That was a 137% jump from the same period last year and made Houston the seventh most active market in the nation for office sales, up from ninth place for all of 2010.

Four Oaks Place is between San Felipe Road and Loop 610. The largest building, a 589,000-sf structure that is 87% leased, is at 1330 Post Oak Boulevard. The 30-story building is flanked by two 25-story structures: the 500,000-sf BHP Billiton Tower at 1360 Post Oak Boulevard (97% leased) and the 492,000-sf Wells Fargo Tower at 1300 Post Oak Boulevard (93% leased). The 12-story, 159,000-sf Interfin Building, at 1400 Post Oak Boulevard, is 97% leased. Average asking rents are $25/sf, on a triple-net basis. The complex has a garage with 4,200 spaces.

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