Continuing the trend of a high transaction volume in the Texas markets, Core Real Estate and BayNorth Capital Inc. have sold The Plaza at Enclave to an affiliate of Azrieli Group, a real estate development and investment company located in Tel Aviv. Holliday Fenoglio Fowler L.P. marketed the property on behalf of the sellers and arranged financing for the buyer through Cornerstone Real Estate Advisers, an investment subsidiary of MassMutual.

Dan Miller, a senior managing director with HFF, called The Plaza “one of the finest office buildings, if not the finest, in West Houston,” after the transaction closed. The building was completed in 2008 and is currently 100 percent leased to Dow Chemical Corp. as its regional headquarters as well as to Ridgewood Energy, Petrofac and HRT America. The six-story, 344,295-square-foot Class A property is situated on eight acres of property and has LEED Gold certification.

Houston, which weathered the economic downturn better than most other metro areas in the United States, has been in the news quite a bit recently. Just yesterday, the city saw the signing of a 4.2 million-square-foot leasing-and-management contract signed by CBRE Group Inc. for the five buildings in the Houston Center complex. Last week, Cassidy Turley picked up a 2.5 million-square-foot management contract in Houston and Dallas. And, after signing a 358,100-square-foot lease at 1 Houston Center in late January, plastics and chemical manufacturer LyondellBasell saw the building renamed for the firm.

According to a fourth-quarter 2011 report by services firm Cushman & Wakefield Inc., Houston turned a corner last year by regaining all jobs lost in the recession. The office market, specifically, mirrored the overall economic climate in the city, with falling vacancy rates citywide and an increase in rent levels. “The outlook for Houston’s office market will closely follow the path of job creation in the city,” the report noted. “With a strong forecast of around 3 percent job growth in 2012, absorption is likely to be again be positive in 2012.”

J.P. Morgan Asset Management has turned over to CBRE Group Inc. the property management and leasing of five buildings totaling 4.2 MSF in the Houston Center complex on the east side of downtown Houston, CBRE announced yesterday. J.P. Morgan acted on behalf of institutional investors it advises. The five buildings are Class A office buildings 1 Houston Center, 2 Houston Center, Fulbright Tower and 4 Houston Center, as well as retail-based The Shops at Houston Center.

Built between 1974 and 1984, Houston Center helped revitalize the east side downtown area, eventually encouraging the development of other large-scale buildings such as Minute Maid Park, Toyota Center, Discovery Park, Hilton Americas Hotel and Hess Tower.

CBRE provided Commercial Property Executive with additional particulars on the individual buildings. One Houston Center/LyondellBasell Tower, located at 1221 McKinney St., spans 1.1 million square feet across 46 stories. It was built in 1978 and is 93.9 percent leased. The building was renamed LyondellBasell Tower late last month after a lease extension by the Dutch-headquartered multinational chemical company.

Two Houston Center, located at 909 Fannin St., spans just more than 1 million square feet across 40 stories. It was built in 1974 and is 91.7 percent leased. Fulbright Tower — formerly Three Houston Center — is located at 1301 McKinney St. and spans 1.25 million square feet across 51 stories. It was built in 1982 and is 86.8 percent leased. The named tenant is Fulbright & Jaworski L.L.P., one of the 50 largest law firms in the country. The final office building, Four Houston Center, is located at 1221 Lamar Ave. and spans 674,000 square feet across 16 stories. It was built in 1983 and is 91.5 percent leased.

The retail component, The Shops at Houston Center — formerly known as Park Shops — is located at 1200 McKinney St. It spans 200,000 square feet. The Shops was built in 1982 and heavily renovated in 2003; it now stands at 80.4 percent leased. As is typical of downtown, service-center retail, it has no large anchors, instead mostly convenience and lunch-oriented tenants.

According to just-released figures from the Greater Houston Partnership, the city led Texas in job growth last year, accounting for one of every three jobs created in the state. The 10-county Houston area added 75,800 jobs, a 3.0 percent increase in metro-area employment over the previous year.

Lenders are keen on the multi-family market, and the focus isn’t just on Class A communities. Acting on behalf of Santa Ana, Calif.’s Focus Development, Johnson Capital just closed a $75 million debt and equity financing deal for one of its clients, a Southern California-based full-service real estate investment and development firm, facilitating the acquisition of a 1,271-unit portfolio of Class B-minus and Class C apartment communities in Florida and Texas.

Johnson Capital orchestrated a strategic partnership with a private, low-profile equity source for the purchase of the nine apartment properties, and placed $48.6 million of Fannie Mae financing with Centerline Capital. Johnson Capital had its reasons for going with Fannie Mae as opposed to Freddie Mac. “With the Fannie Mae process, you get better pricing across the board,” Neil Bane, principal and head of the equity division at Johnson Capital, told Commercial Property Executive. “Our client gets better pricing and the lenders are able to achieve better pricing, and they sell it to the street because of the volume of the portfolio.”

And a bevy of equity providers took an interest. “The borrower has good experience in terms of renovation, redevelopment and repositioning, so there was some good upside,” he said. “And the fact that the properties were in relatively good markets that appear to have good upside and the client is buying at a pretty good cap rate — an 8.5 to 9 percent cap rate — gave those Fannie Mae lenders, who would otherwise not feel comfortable, the comfort to do the deal.”

The fixed- and floating-rate debt came in the form of loans totaling $35.8 million for five properties in Tampa and two in Orlando, and $12.8 million of bridge financing for the remaining two properties, located in Pasadena, Tex.

“It’s often hard to get floating rate programs on B and C properties, I think we did a good job of being able to identify a number of lenders who were willing to do that here,” Bane said.

Fountain Place in Dallas

Building on its “longstanding relationship with J.P. Morgan,” services firm Cassidy Turley has just landed a contract to lease and manage 2.5 million square feet of office space owned by the banking firm’s institutional investors. The assignment will span two properties: Dallas’ 1.2 million-square-foot, 60-story Fountain Place and Houston’s three-building, 1.3 million-square-foot Post Oak Central. J.P. Morgan Asset Management awarded the contract to Cassidy after a bidding process that was opened up to a number of firms, but signed the final arrangement within 60 days, Commercial Property Executive has learned.

“As a firm, we work with J.P. Morgan on multiple accounts,” Bret Bunnett, regional managing principal with Cassidy, told CPE. “And we are expanding our relationship with J.P. Morgan in a significant way with these two assignments.”

Fountain Place, at 720 feet, is the fifth-tallest building in Dallas. Its current tenant roll includes Hunton & Williams, L.L.P., Wells Fargo Bank, and Tenet Healthcare Corp. According to Bunnett, the property is 90 percent leased. Post Oak Central, which is 94 percent leased, houses Apache Corporation – which signed a nearly 600,000-square-foot lease renewal and extension earlier this week – Suez Energy North America Inc., Stewart Title and and Cox Radio.

Texas, as a whole, has fared well during the economic downturn of the last few years. According to a fourth-quarter report by services firm Marcus & Millichap Real Estate Services Inc., Houston will lead the nation in job growth in 2012, with employers adding 87,000 jobs for a 3.4 percent increase in employment levels. “Houston [led] the nation in hiring through the first three quarters [of 2011],” the report noted, “followed by nearby Dallas/Fort Worth.”

“We expect these buildings will continue their history of success,” Bunnett said. “We’re poised to take Fountain Place to at lease 96 percent [occupancy] and Post Oak all the way to 100.”

This contract brings Cassidy Turley’s Texas office management holdings to approximately 22 million square feet in Dallas and Houston alone.

It’s seen a flurry of activity in just a few months of its existence. Yesterday, Griffin-American Healthcare REIT II picked up $166.5 million worth of commercial real estate from the partnership of Westport Capital Partners and Reichmann International Development Co. in the form of ten skilled-nursing facilities across the Southwest.

Affiliates of Westport will continue to operate the facilities, and entered into a master lease with an initial term of 15 years with Griffin-American after the deal was struck. The portfolio features 1,364 beds in the ten facilities.

Just two weeks ago, Griffin-American spent $174 million on 11 facilities – ten skilled-nursing centers and one medical-office building – that totaled approximately 454,000 square feet. “Demand for healthcare services will only increase in the future,” Griffin-American CEO & president Danny Prosky told Commercial Property Executive. “As Baby Boomers continue to turn 65 over the next 18 years, and along with the general aging of the population, we’re bullish on growth and demand for the sector.”

In early December, amid its spinoff from former owner Grubb & Ellis Co., the healthcare REIT purchased an eight-property medical-office portfolio for $112 million. After that transaction, Prosky mentioned that, under his leadership, Griffin-American would be “aggressively acquiring quality, income-generating healthcare properties throughout the country and expects to own a portfolio of 73 buildings valued at nearly $710 million … in the next few months.”

Westport saw the sale as a win for its balance sheet. Russel Bernard, managing principal with the firm, noted that Westport grew the company’s operating income by a double-digit compounded growth rate for the first time since 2007. “The team was able to achieve this performance by repositioning the assts, driving improved occupancy and concentrating on census mix,” he said. “We are very pleased with the outcome of this transaction.”

Westport and RIDC have held a majority interest in the Westport portfolio since 2007.

Eight years after selling The Plaza at Legacy in Plano, Tex., Hines has welcomed the 215,000-square-foot office property back into its portfolio. Hines just acquired the seven-story, suburban Dallas building and an adjacent 12-acre parcel of land in a joint venture with institutional investors advised by J.P. Morgan Asset Management-Global Real Assets.

Not only did Hines previously own The Plaza, but the firm also developed it. In 2001, Hines constructed the Class A office tower that would be known as Computer Associates Plaza, as a build-to-suit for Computer Associates International Inc. at a cost of approximately $42 million. Hines sold the asset for $53 million in 2004 and continued to manage it until 2006. Financial terms of Hines and J.P. Morgan’s recent purchase of the property have not been revealed; however, Hines disclosed that the company relied on the investment-banking team of commercial real estate services firm Jones Lang LaSalle Inc. as exclusive advisor on the arrangement of the joint venture equity and the debt.

Computer Associates continues to call the building at 5465 Legacy Dr. home, but the company recently reconfigured its occupancy with a 10-year lease agreement that leaves it with 77,000 square feet of space and the option to expand into an additional 16,000 square feet.

With The Plaza no longer occupied by a single tenant, Hines has 120,000 square feet of premier space to lease, and financial assistance from U.S. Bank to fund the transformation of the property to suitably accommodate an additional user or users. “Since Hines developed the asset, we know it inside and out, and with this opportunity to reposition it for multi-tenant use, we believe it will be well-received in the market,” Ran Holman, a vice president with Hines, said.

Hines will work with real estate services firm Cassidy Turley to fill up the tenant roster. While the metropolitan Dallas office vacancy rate remains high — 21.8 percent in the fourth quarter according to a JLL study–the timing may be just right for securing a large user. JLL reports that as options for large contiguous blocks of space continue to dwindle in Far North Dallas, Uptown and Preston Center, the three submarkets that have been leading the city’s slow-but-sure recovery, absorption of such spaces will pick up this year in the Central Expressway, Las Colinas and Richardson/Plano submarkets.

Additionally, with the Dallas area’s strong job growth and corporate relocations and expansions, Hines and J.P. Morgan may very well find use for the newly acquired 12-acre parcel, which can accommodate a build-to-suit project as large as 300,000 square feet.

The new Republic at Lubbock housing community.

Aided by $52 million of financing placed by Holliday Fenoglio Fowler L.P., The Scion Group and Arch Street Capital Advisors have snapped up two student housing properties in Texas. The Retreat at Denton and The Retreat at Lubbock, renamed The Republic at Denton and The Republic at Lubbock following the acquisition, offer an aggregate 1,345 beds near the University of North Texas in Denton, and Texas Tech University in Lubbock, respectively.

Scion and Arch Street purchased the off-campus apartment communities from a joint venture between the developer and an institutional real estate private equity fund.

The financing came in the form of two five-year, fixed-rate, interest-only loans, one for $18.2 million and another in the amount of $34 million, placed through Freddie Mac’s CME Program. As a sub-sector of the thriving apartment sector, student housing is an appealing risk to the lending community and the high-quality assets that Scion and Arch Street recently acquired have particularly desirable features.

Age is more than just a number, it is a coveted characteristic in commercial real estate financing and The Republican at Denton and the Republican at Lubbock are brand new, both having opened their doors in 2011. High occupancy rates are also a draw and in that category, the assets get high marks with respective occupancy levels of 97 percent and 98 percent. Additionally, student housing in general has a bright future. Population growth and a boom in the college-age population — Generation Y, or the babies of the Baby Boomers — continue to push up enrollment.

With strong fundamentals in place, student housing is hot and getting hotter and the lending community’s fondness for the sub-sector is pushing up the already high transaction volume even higher. “Given the current lower cap rate environment, the high demand by owners/developers to monetize and the high demand by investors to deploy equity, 2012 should see a substantial increase in activity for both total transactions and total dollar volume,” a report by the ARA National Student Housing Group noted.

HFF has certainly been active in the financing of student housing trades these days. Just one week ago, the commercial real estate and capital markets services provider announced that it had secured a $56 million loan for the refinancing for AIG Global Real Estate Investment Corp.’s 260-unit Sterling Collwood student housing community near San Diego State University in California.

A commitment can go a long way and in the case of LydondellBasell Tower, it’s going all the way to the top — the top of the 1 million-square-foot 1 Houston Tower office building in Houston. The plastics and chemical manufacturer has entered into an agreement to extend its 358,100-square-foot lease with Crescent Real Estate Holdings L.L.C., an agreement that will result in 1 Houston Tower being renamed LydondellBasell Tower.

LydondellBasell has called 1 Houston home for approximately 25 years. Carrying the address of 1221 McKinney St, the 46-story high-rise occupies a full city block in the city’s central business district. The building, which first opened its doors in 1978, is one of four office structures encompassing an aggregate 4.2 million square feet of Class A office space at the mixed-use Houston Center complex.

While LydondellBasell may or may not have been able to have its own namesake tower if it had chosen to leave its longtime home at Houston Center, the company did have options for office digs elsewhere in the city. The office vacancy rate in metropolitan Houston in the fourth quarter was 16 percent, according to a report by commercial real estate services firm Grubb & Ellis Co., and there were a few large blocks of space available for occupancy. Options included 370,000 square feet vacated by the Hess Corp. at One Allen Center and a 360,000-square-foot space at BG Group Place.

Financial details of LydondellBasell’s lease with Crescent have not been disclosed, but outside of what was certainly an agreement with favorable terms, the company had other reasons for staying put. “Houston Center is one of the foremost addresses in the Central Business District and we have a long history in this complex,” Kevin Brown, executive vice president with LydondellBasell, noted in a prepared statement.

The apartments a 2222 Smith St. in Houston.

The Morgan Group, a company focused on development, construction and property management of luxury multi-family properties, has arranged financing of $146 million on behalf of its affiliated investment partnerships. The proceeds were obtained from bank, agency and insurance company loans with terms ranging from five to ten years, collateralized by five apartment properties in Texas, Florida and North Carolina.

“Current loan rates for multifamily projects were extremely attractive,” Mike Morgan, the firm’s chairman & CEO, said. “It appeared to be a good time to lock in terms for stable, core assets. The five apartment properties we refinanced represent more than 1,700 units in our portfolio.”

These properties include: 2222 Smith Apartments and 33Thirty-Three Weslayan Apartments in Houston, financed by BBVA Compass Bank and Northwestern Mutual Life; The Village at Lake Lily in Maitland, Florida, and Arelia James Island Apartments, in Jacksonville, Florida, which were financed by FNMA and Metropolitan Life; and Spectrum South End Apartments in Charlotte, North Carolina, financed by New York Life.

Finding financing for apartment properties is unlikely to prove difficult in the coming year, as the sector just came off an extremely positive 2011. “The multi-family sector continued its marathon-like recovery in 2011, and has entered full expansion mode in virtually every market,” Hessam Nadji, managing director, of research and advisory services for Marcus & Millichap Real Estate Services Inc., said. “Favorable demographics, the release of pent-up demand as young adults debundle from family and roommates, and increased renter demand due to changing attitudes towards homeownership — which has become increasingly difficult in this country — drove more people into renting. Although the private sector created 1.8 million jobs last year, even greater job creation will be needed to sustain the white-hot levels absorption recorded after the recession.”

In a $66 million deal that completes the second phase of the Scottsdale Promenade sale, Lucescu Realty has sold the Promenade Corporate Center to Excel Trust, a publicly traded REIT. In July of last year, the San Diego-based Excel Trust purchased The Promenade, a 730,000 square-foot shopping center in Scottsdale, Ariz., in a $110 million transaction.

Scottsdale Promenade, a 1 million-square-foot, mixed-use project, is one of the largest commercial properties in the Phoenix metropolitan area, located on 84 acres of land. The office component of the space consists of two four-story Class A buildings that total 256,176 square feet.

In July, Mark Lucescu, president of Lucescu Realty, told Commercial Property Executive that the Promenade is “a flagship property” that is outperforming most other mixed-use centers in the area. “If there are a handful of properties like this to invest in Phoenix, this is the one you’d want to buy,” he said. At the time of the transaction, “the property was 100 percent leased [and] had plenty of equity,” he noted.

According to NAI Horizon, the Phoenix office market, though in the doldrums through most of 2011, is starting to see some upward moves. A three-year run of continued unemployment, coupled with a flight to quality – which left many properties empty – left the market battered. But the fourth quarter of 2011 saw the office-vacancy rate drop 40 basis points from the previous quarter, finally resting at 20.7 percent. Rental rates, at year’s end, sat at $20.29 per square foot on average.

The center’s retail component is anchored by Lowe’s, PetSmart and Trader Joe’s.