08/17/2011

Brookfield Makes Play for Crescent Portfolio

A Barclays partnership took bids last week on six office properties owned by its Crescent Real Estate operation, with some investors unexpectedly pursuing the whole portfolio.

Market pros initially assumed the 8.2 million-square-foot package would be divided among multiple buyers, because the properties are in disparate markets: Houston, Las Vegas, Denver and Fort Worth, Texas. But Brookfield Office Properties and a few other investors made offers for the entire portfolio, whose value is estimated at more than $1 billion.

Among bidders targeting individual properties, demand was especially strong for the 4.25 million-sf Greenway Plaza in Houston. The initial bids weighed in at more than $700 million, or $165/sf. That was well above the initial projection of $150/sf, or $638 million. The strong bidding is the latest example of heated demand for core office properties in Houston, where capitalization rates for such buildings have dipped as low as 6%.

Now the Barclays partnership, which is being advised by HFF, is weighing whether the best execution is to sell the portfolio to one buyer or slice it up. “It’s like a jigsaw puzzle,” said one market pro. A second round of bids will be taken this week.

New York-based Brookfield made at least two bids: one for the whole portfolio and another to acquire both Greenway Plaza and the 955,000-sf Carter Burgess Plaza in Fort Worth, which has an estimated value of about $100/sf, or $96 million.

Market players said San Francisco-based Shorenstein Properties was also among the bidders for Greenway Plaza. Cousins Properties of Atlanta kicked the tires on the 10-building complex, but it’s unclear if the company is still in the hunt. Cousins was in talks to buy Greenway Plaza for about $700 million in October 2008, but the deal collapsed amid the downturn.

Also up for grabs are the 1.4 million-sf Hughes Center in Las Vegas and three Denver properties: the 694,000-sf Johns Manville Plaza, the 563,000-sf building at 707 17th Street and the 264,000-sf Peakview Tower. Hughes Center is widely viewed as the premier office property in Las Vegas. Its value is estimated at roughly $200 million, or $143/sf — but there are no recent comparables. The Denver properties could be worth about $130/sf, or $195 million.

The listed properties make up nearly half of a 17.3 million-sf portfolio that Barclays took over in November 2009, after Morgan Stanley Real Estate defaulted on loans it had used to buy Crescent Real Estate Equities for $6.5 billion in August 2007, near the peak of the real estate market. Barclays decided to hold the properties until prices rebounded.

Barclays tapped Goff Capital of Fort Worth as its partner to manage the assumed company, which was renamed Crescent Real Estate Holdings. Goff’s founder, John Goff, had been the head of Crescent Real Estate Equities when it was sold to Morgan Stanley.

The properties now up for sale represent all of the office properties in the Crescent portfolio that the Barclay’s partnership wholly owns. The rest of the portfolio consists of stakes in 9.1 million sf of office properties, as well as in resort and residential developments. Those assets are also expected to hit the block eventually.

Greenway Plaza was developed from 1969 to 1982. Crescent acquired it in 1996 for $206 million from a Northwestern Mutual partnership. The office buildings are on Richmond Avenue, between Buffalo Speedway and Edloe Street. They are part of a 127-acre complex that includes a hotel and residences that are separately owned.

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