Azrieli Group Ltd. (TASE: AZRG), which is controlled by Canadian businessman David Aureli daughter, Dana, has agreed to buy three office towers in Houston, Texas, for $176 million. The Israeli company said that this is the fifth property that the group has purchased in Houston, where most of its foreign assets are located (83%). The current acquisition is a four-story 21, 000 square meter structure in the Westbelt neighborhood of Houston, which was sold by AG 8 West Centre LLC.
As of today, the buildings are 91% occupied and tenants include UBS, Bank of America Merrill Lynch, Citi, and large energy firms. Azrieli has reported, in a statement to the Tel Aviv Stock Exchange, that the leases include fixed mechanisms for raising rents over the course of the agreements, such that the net operating income (NOI) is expected to be $5.3 million annually, and the property is expected to have an annual yield of 7%.
The buildings, totaling 99, 000 square meters (1.07 million square feet), are expected to provide rental income of $14 million in 2011.
The US subsidiary Three Galleria Office Buildings, in which Azrieli owns 90%, is a special purpose entity that will deal only with managing and developing the acquired office buildings. The owners of the property’s management firm hold the other 10%.
Three Galleria received a commitment for a $130 million 10-year loan from an American financial institution.
The buildings in Houston will serve as collateral for the loan and the rest of the funding for the purchase will come from Three Galleria’s own resources.
The agreement is expected to be completed within five weeks.
Azrieli Group in June raised $680 million, Israel’s largest initial public offering by a private company on the Tel Aviv Stock Exchange (TASE).