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CMA
June 21, 2019  

Cerberus Team Seeking Loan for Houston Deal

A Cerberus Capital partnership wants to line up $560 million of floating-rate debt for its pending acquisition of a Houston office complex.

Cerberus is teaming up with local developer Hines to buy the roughly 1.7 million-square-foot JP Morgan Chase Tower and the adjacent 407,000-sf Chase Center. Details of the off-market agreement are unknown, but sources put the price in the vicinity of $300/sf, or $627 million. 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 loan, with a term of up to five years, would likely include a roughly $80 million future-funding component, which the Cerberus team could draw down over time to cover leasing and other expenses. Eastdil Secured is advising the partnership on the loan.

Hariri, operating under the name Prime Asset Management, purchased Chase Tower in 1985 via a joint venture with Hines, and later took full ownership. It bought Chase Center in 2009.

Hines has been managing the complex. When Hariri sought to cash out, Hines apparently approached New York-based Cerberus about teaming up on an acquisition. Under the deal, Cerberus would take a roughly 90% stake, and Hines would hold the remaining interest and operate the property.

Cerberus and Hines had chased another blockbuster deal in the city in 2017, but Brookfield Asset Management of Toronto ended up winning that bidding contest for the 4.3 million-sf Houston Center. Brookfield paid $855 million, or $198/sf, for the four-building property. The seller was J.P. Morgan Asset Management.

The sale of Chase Tower/Chase Center would rank as Houston’s second biggest trade ever, after the Houston Center deal.

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. 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 280-seat auditorium, retail space and a 12-level garage. It was renovated in 2011. The buildings are connected by an underground pedestrian tunnel.