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HOUSTON-EastGroup Properties has exercised an option to buy the Freeport Tech Center in northwest Houston on Texas Highway 249 near Beltway 8. The distribution facility with 188,000 sf, is so named because the area is famous for its Freeport tax exemptions and is considered a high-tech corridor because of its proximity to the former Compaq headquarters which was recently merged into the Hewlett-Packard Co.

Houston-based Insite Commercial Realty originally developed the center in 2000 with a $5.8-million construction loan from EastGroup. As a part of the acquisition agreement, the loan, which carried a 9% interest rate was repaid in full. The full terms of the sales agreement were not disclosed.

David H. Hoster II, president and CEO of the Jackson, MI-based REIT, tells GlobeSt.com EastGroup has been working with Insite on a variety of projects for more than five years. Insite will continue to handle the leasing activities at Freeport Tech Center. The facility is currently 66% leased to two tenants.

“As a value investor, we believe that the exercise of our purchase option of this recently completed, state-of-the-art distribution facility gives us the opportunity to achieve, upon lease-up, a development level yield for an asset with only limited leasing risk,” says Hoster in a prepared statement. “The purchase increases our ownership in the Houston market to over 2.5 million sf.”

Hoster says while the Houston industrial market has seen too much new construction over the last six months, he believes there are still development opportunities in the market. Such as the work EastGroup continues at their World Houston development near George Bush Intercontinental Airport. EastGroup has 13 completely-leased buildings on the site, says Hoster, totaling more than 1 million sf. A 14th building is in the lease-up phase with two additional buildings under construction.

“We are very bullish on the market near Bush Intercontinental,” Hoster confides.

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