Starwood Sells Austin Office Building to BH Partners

Starwood Capital Group sold the first property in a nearly $200 million office portfolio, as the Austin office market grapples with high vacancy rates.

Los Angeles-based BH Partners acquired the Park on Barton Creek, a 205,000-square-foot, two-building office complex in South Austin, from the Miami Beach-based firm, the Austin Business Journal reported.

The sale price was not disclosed, but the property at 3711 South MoPac Expressway was appraised for tax purposes at $52.6 million. Starwood purchased the property in 2017.

The Park on Barton Creek, built in 2007, underwent $1.3 million in capital improvements in recent years, including a renovated lobby, tenant lounge and conference center. It’s currently about 50 percent leased, with tenants including Torc Robotics, software company MongoDB and law firm Clark Hill.

The sale is the first in a four-property portfolio that Starwood put up for sale last year. JLL’s Ryan Stevens and Drew Fuller have the listings. The remaining assets — Cielo Center at 1250 Capital of Texas Highway, the Crossings at Lakeline at 11001 Lakeline Boulevard, and Encino Trace at 5707 Southwest Parkway — were collectively appraised at $150 million.

BH Partners hasn’t shared its plans for the Barton Creek office.

Austin’s elevated office vacancy rate, which hit 25.2 percent in the first quarter according to JLL, has discouraged some operators, while other investors view the downturn as a buying opportunity. Stevens said it’s a window for “value-add and opportunistic investors.”

Experts agree the vacancy rate may begin to ease by the end of the year.

“Activity in the market has been good in the first quarter and we are seeing leases get signed,” Cushman & Wakefield’s Brian Liverman told the outlet. “As subleases roll off, direct vacancy may stabilize.”

Meanwhile, Austin’s construction pipeline is drying up.

Only 264,000 square feet of new office space has been delivered so far this year. Most of the remaining 2 million square feet under construction will be completed by year’s end, CBRE said. Without new projects breaking ground, the metro could soon face a lull in office development, which could help reduce stubbornly high vacancy.

As Starwood offloads office property, it’s making a massive bet on master-planned communities. In April, Starwood purchased 11 Texas communities from Houston-based Hines for about $800 million.

— Judah Duke