Nifty fundamentals: Clarion says
upside potential helped its decision
to buy the 272,000-SF Westchase Park.

HOUSTON-Jobs growth, potential upside through construction of a new building and an emphasis in the energy sector were the fundamentals driving Clarion Partners to acquire the six-story, 272,361-square-foot Westchase Park from developers Simmons Vedder Partners and O’Connor Capital Partners, GlobeSt.com has learned exclusively. With the transaction, the New York City buyer also obtains an adjacent seven acres for development.

Westchase Park, situated on 8.2 acres at 3700 W. Sam Houston Pkwy., came online in 2009, and is 98% leased to tenants including ABB and MetLife

Though the office building is stable when it comes to occupancy, Clarion’s head of asset management Craig Tagen says an upside opportunity exists in the adjacent acreage, which could hold an additional 300,000 square feet of office space.  GlobeSt.com reported in 2009 that Simmons Veder had originally planned to build a second phase at Westchase Park, a twin to the first office building, but the project was halted because of the economic downturn.  Now it’s up to Clarion Partners to go north on the building which will “provide upside potential while distributing a core income stream to our client from investments in the existing office building,” Tagen says.

Furthermore, the Westchase submarket specifically and cities like Houston in general, fit nicely into his company’s acquisitions strategy. “We like Houston’s Westchase submarket and this investment as the existing building is 98% leased with several investment grade tenants,  long-term leases in place and tenants in the energy, technology and construction services and financial and consulting industries,” Tagen tells GlobeSt.com. “Phillips 66 recently announced a plan to move its global headquarters from the Energy Corridor (far west Houston) to a site in the Westchase submarket, illustrating the strength and desirability of the submarket.”

Clarion Partners acquired the property at 50% loan-to-value on the total investment. HFF represented the seller in the transaction.

Tagen goes on to say that, in the area of office investments, there has been improvement despite the sluggish economy, especially in tech and energy markets, of which Houston is one. Other cities on Clarion Partners’ target investment list include San Francisco, San Jose, Seattle and Boston.

“The winners in the office recovery have been markets with a concentration of high-growth industries such as technology, energy, professional and business services, healthcare and education,” Tagen explains. Also important, he goes on to say, are areas with a high concentration of -value-add industries and Fortune 500 companies. Jobs and population growth, along with highly educated workforces, are also attractive, as are “deep markets with significant inventory of investment of grade real estate,” Tagen comments.