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REA
June 19, 2019  

Cerberus, Hines to Buy Houston Skyscraper

Cerberus Capital is making a big bet on Houston, teaming up with local developer Hines to take control of the city’s tallest skyscraper, JP Morgan Chase Tower.

The duo has agreed to buy the roughly 1.7 million-square-foot building along with the adjacent 407,000-sf Chase Center. Details of the off-market agreement are unknown, but market sources put the pricing in the vicinity of $300/sf, or $627 million for the 2.1 million-sf complex. New York-based Cerberus apparently is taking a 90% stake, while Hines will hold a 10% interest and operate the property.

The seller is Hariri Interests, an investment vehicle for the family of the late Rafik Hariri, the billionaire prime minister of Lebanon who was assassinated in 2005. The vehicle, operating as Prime Asset Management, purchased Chase Tower in 1985 via a joint venture with Hines and later took full ownership. It acquired Chase Center in 2009.

Hines stayed on to manage the property. When Hariri sought to cash out, Hines apparently approached Cerberus about partnering to buy it. The duo had chased another blockbuster deal in the city in 2017, the 4.3 million-sf Houston Center. Brookfield Asset Management of Toronto won that bidding contest, paying J.P. Morgan Asset Management $855 million, or $198/sf, for the four-building property.

The Houston Center trade was the city’s biggest-ever in dollar terms, and if the deal for Chase Tower/Chase Center closes, it will rank second.

Houston’s investment-sales market has struggled in recent years, reflecting turmoil in the petroleum sector. Last year, the city failed to rank among the top 20 office markets nationally, according to Real Estate Alert’s Deal Database, which tracks sales of at least $25 million.

The 75-story Chase Tower, at 600 Travis Street, was designed by the late architect I.M. Pei and completed in 1981 under the name Texas Commerce Tower. The tallest building in the state, it occupies the block bounded by Texas Avenue and Travis, Capitol and Milam Streets. Its entrance plaza features a five-story sculpture, “Personage with Birds,” by Spanish artist Joan Miro. The building, designated LEED gold, has a rent roll heavily populated by law and financial firms. Major tenants include law firms Hunton Andrews, Locke Lord, Shook Hardy and Winstead, as well as LINN Energy, Morgan Stanley and J.P. Morgan.

The 20-story Chase Center is at 601 Travis Street. In addition to offices, it contains a fitness center, a 20-seat auditorium, retail space and a 12-level garage. It was renovated in 2011. The buildings are connected by an underground pedestrian tunnel.