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HOUSTON-Boca Raton, FL-based Koger Equity Inc. has signed contracts to shell out $102 million for the three Houston office buildings that make up the 1.2-million-sf Lakes on Post Oak complex. The 23-acre complex was originally developed by Houston’s Hines Interests in the late 1970′s and early 1980′s.

However, the 20-story, 462,000-sf building at 3000 Post Oak Blvd. and the 17-story, 349,000-sf building at 3050 Post Oak Blvd. were sold to Dallas-based opportunity fund, Cottonwood Partners in 1997. The third building at 3040 Post Oak Blvd., which has 22 stories and 442,000 sf, was sold to Osaka, Japan-based West Oak/Nissei Associates, an entity of Nippon Insurance Life Co., in 1988. Hines still manages this building.

Koger plans to close on all three properties by the end of this year. Jeff Hollinden, senior director with the Houston office of Holliday Fenoglio Fowler listed the two buildings owned by Cottonwood Partners. He tells GlobeSt.com the buildings have been on the market for more than 18 months and had two previous buyers before Koger, but each time the deals fell through. Hollinden marketed the properties with fellow Holliday senior managing director, Jim Savage also in the Houston office and Drew Kiesling of the firm’s Dallas office.

Hollinden says Cottonwood’s decision to sell the buildings was merely a part of its business plan for the properties.

The three buildings have an average occupancy rate of 76% with 3000 Post Oak Blvd. being 100% leased to San Francisco-based Bechtel Corp. Bechtel is one year into a renewal at the building, which serves as the firm’s petroleum and chemical business headquarters.

Koger will purchase the properties at a projected discount to replacement costs of 50%. Thomas J. Crocker, Koger’s CEO could not be reached by press time due to travel, but he did reveal in a statement that the agreement “represents a great buy at substantially below replacement cost with upside derived from both our reunification of the asset and a significant physical upgrade we will undertake immediately.”

This is Koger’s first Houston purchase. The REIT owns and operates 121 office buildings totaling 7.7 million sf in the southeastern US. A spokesperson confirms that the decision to buy in Houston was centered more around specific properties being purchased than any preset goal to enter the Houston market. The spokesperson says the REIT has no immediate plans to purchase additional properties in Houston.

Hollinden says that as the Uptown/Galleria submarket’s core begins shifting south with the 700,000-sf Galleria expansion now underway and the significant reworking of the area’s roadways, which will include a direct exit off Loop 610 to the complex, the Lakes on Post Oak are poised to be at the heart of that market.

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