CalSTRS, Thomas Properties buy jumbo Austin portfolio

The venture between the California pension plan and the Los Angeles-based real estate investment firm has paid nearly $860 million to buy out its partners in a 3 million-square-foot office portfolio in downtown and suburban Austin.

The California State Teachers’ Retirement System (CalSTRS) and Thomas Properties Group have teamed up to buy out its partners in a three million square foot office portfolio in downtown and suburban Austin, Texas. 

The venture bought the eight-building portfolio from TPG-Austin Portfolio Syndication Partners, a larger venture in which it jointly owned a 25 percent interest. Lehman Brothers Holdings was a 50 percent owner in TPG-Austin Portfolio Syndication Partners, while an unnamed sovereign wealth fund was the other 25 percent owner. 

CalSTRS and Thomas Properties purchased the portfolio for $859 million. As part of the purchase price, the venture assumed five existing first mortgage loans totalling $626 million. The transaction also reduced the existing leverage on the portfolio by repaying approximately $200 million owed to Lehman Commercial Paper. 

Following the purchase, Thomas Properties and CalSTRS formed a new venture, known simply enough as TPG/CalSTRS Austin, to own the Austin portfolio. A subsidiary of Thomas Properties is the managing member with a 50 percent interest, and CalSTRS owns the remaining 50 percent interest. 

Concurrently, Thomas Properties has entered into an agreement with an affiliate of Madison International Realty, whereby its affiliate will acquire a one-third interest in the Thomas Properties subsidiary that owns the interest in TPG/CalSTRS Austin. 

James Thomas, chief executive officer of the Los Angeles real estate investment firm, said the acquisition keeps with the Thomas Properties’ plan “to acquire wholly-owned or equally-controlled properties that are accretive to our after-tax cash flow.”

The Austin portfolio includes five downtown Austin properties, including Frost Bank Tower, 300 West 6th Street, One American Center, San Jacinto Center and One Congress Plaza, as well as three suburban properties – Westech 360, Park Centre and Great Hills Plaza in northwest Austin. Separately, Thomas Properties also owns Four Points Centre in far northwest Austin and operates downtown’s 816 Congress and Austin Center for owner Lehman Brothers.