Office Properties Income Trust dumps Men’s Wearhouse Houston HQ for $10M

Sale is part of REIT’s $500M disposition program

OPIT's Christopher Bilotto with 6380 Rogerdale Road (OPIT, LoopNet)
OPIT's Christopher Bilotto with 6380 Rogerdale Road (OPIT, LoopNet)

Office Properties Income Trust agreed to sell Houston-based Men’s Wearhouse’s headquarters for $9.8 million in the first quarter of 2022, excluding closing costs, according to the company’s first-quarter earnings report.

Houston-based Garden Capital Partners picked up Oak Park Office Center II, a 206,400-square-foot two-story office building, 49 percent of which is occupied by Men’s Wearhouse.

The property sits on 18 acres at 6380 Rogerdale Road at the intersection of Beltway 8 and Westpark Tollway in Houston’s Westchase submarket.

The sale is a part of Office Properties Income Trust’s $500 million disposition program, which is focused on dumping properties that cannot grow the Newton, Massachusetts-based REIT’s net operating income.

“It’s really to kind of get out of markets where we don’t feel like we can grow NOI or those that are going to kind of have a larger capital burden for various circumstances,” said Chris Bilotto, Office Properties Income Trust’s president and chief operating officer, during the company’s first-quarter earnings call in April 2022.

According to Harris County Appraisal District records, Oak Park Office Center II’s market value is $31 million.

Michael Carroll, an analyst who covers Office Properties Income Trust for Royal Bank of Canada Capital Markets told The Real Deal that it’s a safe assumption Garden Capital Partners got Oak Park Office Center II for $20 million off its appraised market value because its occupancy rates below 50 percent.

“They’re (Office Properties Income Trust) trying to sell assets post-CAPEX and reinvest those proceeds into buildings that have tenants with long-term leases,” Carroll said.

With hybrid work arrangements and tenants seeking newer or renovated digs, Office Properties Income Trust is trying to sell off buildings that will be expensive to renovate.

“A local buyer might be better equipped to handle that,” Carroll added.

It’s not clear what Garden Capital Partners plans to do with Oak Park Office Center II. The firm did not reply to TRD’s requests for comment.

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JLL Capital Markets’ Kevin McConn, Marty Hogan and Jack Moody brokered the sale on behalf of Office Properties Income Trust.

The Houston office market is in flux. Even though the Bayou City recorded two consecutive quarters of occupancy gains in the first half of the year, absorption is still negative and the vacancy rate was at 25.5 percent, according to JLL’s Houston office report for the second quarter of 2022.

Company relocations, a “flight to quality” and hybrid work arrangements are disrupting Houston’s office market.

Historically, the city’s office space has been dominated by big tenants that are now moving to smaller digs or improved spaces.

Notably, Hewlett Packard sold its 66-acre campus to liquor distributor, Mexcor, in the first quarter of 2022.

In July, engineering and construction company Bechtel moved its 1,500 Houston-based employees out of the company’s 40-year-old Galleria-area building into a new Westchase building.

Hines’ brand new Texas Tower in downtown Houston got Cheniere Energy to move into the 151,490 square-foot office building with 16,700 square feet of outdoor space in late June.

The possible move of most of Chevron’s employees to Houston also has the potential to drastically change Houston’s downtown office real estate market.

Chevron’s Texas offices employ 6,000 people about three times as many as the San Ramon headquarters. The oil giant is selling its 92-acre headquarters campus in San Ramon, Calif., and offering to pay moving costs for employees that voluntarily make the trek to Houston.

In 2013, Chevron agreed to build an office tower in downtown Houston in exchange for $12 million from the Texas Enterprise Fund. It looks like money is now going towards the costs of relocating its California employees to Texas.

Read more

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Bechtel is moving — and reducing its Houston office space by half
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Chevron to sell 92-acre HQ campus in San Ramon