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HOUSTON-Following a string of Texas acquisitions, San Diego-based Equastone has entered the Houston market, purchasing the 280,435-sf, 15-story Kirkwood Atrium 3 from Hampshire Properties Ltd. of Brooklyn, NY. Sources say comparable buildings are selling for close to $100 per sf in the Energy Corridor.

The 15-story, class A building at 11757 Katy Freeway was 86% occupied at sale time. Clint Harrington, Equastone’s executive vice president of the Texas region, says Equastone liked the property for a variety of reasons, particularly the tight office submarket. He tells GlobeSt.com that the building was 70% occupied when it first went under contract, but seven new leases and renewals were inked during the escrow period. Additional leases are scheduled to close shortly to push occupancy above 90%. “That’s a good feeling, when you’re in escrow, that you’re doing 10% to 15% above the expected performance even before you close,” Harrington says.

Additionally, the existing tenant roster offers strong upside potential. “Some of the existing tenants signed leases three to four years ago that were below market,” Harrington says. “The market has improved from that time so there’s some room for rent increases.”

Equastone plans to put $1 million into capital improvements, primarily interior upgrades. Harrington says the renovation work should be completed by first quarter 2007.

H. Dan Miller, senior vice president of Trammell Crow Co.’s Houston office, represented the seller. He says 17 offers were placed, with Equastone coming in with the most aggressive bid. David Baker, John Morton and Katie Edwards, a local team with Transwestern Commercial Services, will handle leasing while the firm’s Joseph Hebert will manage the property, which includes a six-level parking garage.

Equastone, which has been on a buying spree of Texas properties throughout 2006, plans to ink several more closings by the end of the year. “We have at least one more slated to close in Houston before yearend and several more throughout the rest of the state,” Harrington says.

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