MSREI sells stake in Texas Planned Community

Spinoff of General Growth Properties has bought out its partner's share in a 28,000-acre master planned community in Houston for $117.5m.

Morgan Stanley Real Estate Investing (MSREI) has sold its majority stake in a 28,000-acre master planned community in Texas to the Howard Hughes Corporation for $117.5 million.

Upon completion of the purchase in July, The Woodlands Master Planned Community in Houston will become fully owned by The Howard Hughes Corp., a Dallas-based real estate developer that spun off from General Growth Properties last year.

MSREI has been an investor in The Woodlands since 1997. The global financial services giant invested in the asset through its second real estate fund, Morgan Stanley Real Estate Fund II, which raised $1.5 billion in 1996.

MSREI's partner Howard Hughes has been an investor since 2004. MSREI's stake was a 57.5 percent legal interest, which equates to a 47.5 percent economic interest based on the parties’ financial arrangement. The purchase consideration consists of $20 million in cash payable at closing and a $97.5 million non-interest bearing promissory note due December 1.

The Woodlands has nearly100,000 residents and covers more than 28,000 acres. At the end of March, The Woodlands had approximately 1,372 acres of unsold residential land, representing 4,532 lots and 936 acres of unsold land for commercial use.

Additionally, The Woodlands has full or partial ownership interests in commercial properties totaling 434,328 square feet of office space, 203,282 square feet of retail and service space, 865 rental apartment units and also owns and operates a 440-room conference center facility. Howard Hughes president Grant Herlitz said in a statement that the Dallas-based developer plans “to develop commercial properties at The Woodlands”.

The Woodlands generated $36.3 million for the three months ended March 31, 2011. The first quarter 2011 revenues include $18.5 million from the sale of 217 residential lots and $3.4 million from the sale of five acres of commercial lots.