Chevron to purchase 1400 Smith from Brookfield Office Properties

Chevron Tower set to trade

As the recent Wall Street Journal report indicates, commercial office property values are flying high in Houston with 1400 Smith (otherwise known as Four Allen Center) set to be the next record trade for the Bayou city. The Journal reports that Brookfield Office Properties is nearing a close of a deal that would sell the building to its tenant Chevron for approximately $380 million. I had to double check my math, but that equates to a $309 PSF on the 1,228,877 SF former Enron headquarter building. This figure would shatter the recent high water mark of $279.65 PSF Brookfield recently paid for Heritage Plaza. In that deal which closed in December of 2010, Brookfield bought a 83% occupied trophy asset from Goddard Investment Group for about a 6 cap.

Brookfield purchased Four Allen Center for $120 million in 2006 -- a building that will always be associated with the now infamous "crooked E" trademark signage at the front of the building. Many Houston market pros remember the see through empty floors of the building that became synonymous with the market downturn following the Enron collapse.

In a time where we are either seeing "trophies or trash" trade here in Houston it is very interesting to see the trend on prices of the recent Class A trades:

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  Unilev’s acquisition of Galleria Towers from Walton Street went for $176 million ($162/SF).


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  KBS REIT II purchase of the 388,142 SF Two West Lake Park from Younan Properties sold for $81 million ($209/SF).


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  The Opus Group bought Ten West Corporate Center II, a 250,260 SF building, for $45 million ($180/SF).


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  Wells Core REIT bought the 143,961 SF Westway One from Behringer Harvard for $31 million ($215/SF).
  

At a recent HFF capital markets event I attended I gathered that this trend is here to stay for the short term as captial is seeking a home and Houston has become very attractive to investors with many of the major gateway markets like New York and DC getting priced out. One thing is for certain, for Brookfield, the "E" now stands for "Earnings" as the savvy owner has decided to sell 1400 Smith at an ideal time in the market cycle.