Starwood Sells 41-Story Skyscraper to Energy Firm, Market briefs

In Houston, A 41-story Houston office tower, recently considered as a candidate for conversion to residential use, has been purchased by the Energy Transfer pipeline and gas company, in one of the Houston’s largest office transactions in recent years.

The 1.2 million-SF tower, located at 5555 San Felipe, was formerly known as the Marathon Oil Tower. But while the Houston office market was in its Post-Covid decline, Marathon Oil moved to a new building in West Houston. Occupancy in the San Felipe building fell as low as 15%. Times have been tough in the Houston office market, including in the Galleria area office market where the Marathon Oil tower is located.

Ownership of the Marathon Oil building transferred to Starwood Property Trust in 2022 as Starwood foreclosed on the building’s mortgage and assumed its debt. It translated to Starwood acquiring the tower for $119 million or $102 per SF.

Starwood Considered Office-to-Resi Conversion

Right after the 2022 purchase, Starwood’s CEO Barry Sternlicht said his Miami Beach-based firm would consider its options, including converting the building to residential.

“We’re trying to figure out what we ought to do with it,” Sternlicht told industry analysts in 2022. “Should we see it as an office building or convert it to a residential site?”

Challenges of converting office to residential narrowed the enthusiasm for the concept across the nation and with Houston awash in empty space, Starwood elected to sell.

Prices for Office Buildings Declined

Office investors have been making plays in Houston in recent months, but the sales prices have been shockingly low in most cases.

Last year, speculation was reported that 5555 San Felipe might receive offers as low as $35 million ($30 per SF) or as much as $82 million ($70 per SF), as stated by Real Estate Alert.