HOUSTON-Playing out as an off-market transaction, the gist of the $442-million deal between Inland American Real Estate Trust Inc. and locally based NewQuest Properties Inc. is it allows both companies to grow.

"This is a good marriage for us both, in that it allowed us to recapitalize our companies so we could continue to grow, and it allowed Inland to have a stronger entry into the Houston market," Jay Sears, a NewQuest principal, tells GlobeSt.com. The all-cash deal turned keys to 1.8 million sf in 36 properties, all relatively new retail and office space that is at least 90% leased.

Sears says the agreement keeps NewQuest in place to lease the assets for the next five years while using funds from the sale to capitalize properties currently under construction, including the 430-acre Brazos Town Center, which is serving the Richmond-Rosenberg areas of Texas.

Sears says Inland was an obvious target investor for the portfolio. "There are few people or companies with the capitalization to pull off a portfolio transaction of this size," he says. "Inland needed to increase its presence in Texas, where they're trying to grow their company."

The portfolio primarily is made up of properties in the Houston region. "This is a good mix of stuff built between 2000 and 2003 and a good portion that either is still under construction or just finished," says Matt Tice, acquisitions coordinator for the Oak Brook, IL-based Inland.

The Houston piece consists of the 55,216-sf Tomball Town Center at US Highway 249 and FM 2920 in Tomball; 51,592-sf CyFair Town Center at US Highway 290 and Spring Cypress Road in Cypress; 55,000-sf Cypress Town Center at Jones and Cypress roads in Houston; and 71,778-sf Eldridge Town Center at 12266 FM 1960, also in Houston. Also included in the portfolio are Cinemark movie theaters in Houston, Webster and Pearland, TX and several 24-Hour Fitness health clubs. Inland also acquired the 58,182-sf Saratoga Town Center at Saratoga Boulevard and Staples Street in Corpus Christi and 378,569-sf Sherman Town Center in Sherman, north of Dallas. The only asset outside Texas is a Walgreens in Springfield, MO.

While much of the portfolio consists of newer properties, Tice says the arrangement does not include any future development by NewQuest. "Everything in there is either currently being completed or has been completed," Tice tells GlobeSt.com.

NewQuest has 2.5 million sf under development within a remaining portfolio valued at more than $250 million. The company's leasing portfolio totals approximately seven million sf.

Tice says the transaction boosted Inland's Greater Houston portfolio to close to two million sf. "There were a couple other deals we'd already purchased, but this brings us up," he notes. "It is a good way to make a large entrance into the Houston market."

And, it's not the end of Inland's buying plan in Houston or elsewhere in Texas. "We like Texas. We like all the markets and have been looking to buy more in the Houston market," Tice says. "We're looking for good assets in good locations--if the right asset comes along, we're happy to take a good look at it."