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CMA
November 03, 2017  

Brookfield Taps Citi for Houston Office Deal

Citigroup has won the mandate for an $850 million floating-rate loan that will help Brookfield Asset Management finance its pending acquisition of the Houston Center office complex.

Citi will hold a portion of the debt on its balance sheet and likely syndicate the rest.

Brookfield, a Toronto investment manager, has agreed to buy the 4.2 million-square-foot property from J.P. Morgan Asset Management for about $875 million, or $208/sf.

Brookfield initially sought $921 million of financing, including a portion that would be funded over time to cover the cost of renovating and leasing up the four-building complex. Citi’s loan presumably also includes a future-funding component.

The complex’s 4 million-sf office portion is only 75% leased, and the 200,000 sf of retail space is about 70% occupied.

Brookfield’s purchase is seen as a vote of confidence for Houston, where commercial properties have suffered from a prolonged slump in the oil-and-gas industry. Houston Center is somewhat insulated, though, because only about 16% of the occupied space is leased to energy companies, while about half is occupied by legal and financial firms. Major tenants include LyondellBasell Industries and law firms Haynes & Boone and Norton Rose.

Houston Center includes three Class-A buildings: the 1.2 million-sf Fulbright Tower, at 1301 McKinney Street; the 1.1 million-sf LyondellBassell Tower, at 1221 McKinney Street; and the 1 million-sf Two Houston Center, at 909 Fannin Street. There is also a Class-B building — the 674,000-sf Four Houston Center, at 1221 Lamar Avenue.