Hughes Center office park being sold for $347 million

A view of the Howard Hughes Center office park taken from a helicopter May 21, 2012.

The Hughes Center is being sold for $347 million to a Wall Street investment firm, in one of the most lucrative Las Vegas office deals in years.

The Blackstone Group is expected to close its acquisition of the 68-acre office park today.

Crescent Real Estate Holdings, an investment firm owned by Barclays Capital and Goff Capital Partners, is selling the property. A mile east of the Strip, off Flamingo Road, the center consists of 10 office buildings, 1.4 million square feet of space and several restaurants.

Big-money office sales are rare these days in Las Vegas, one of the worst office markets in the country.

The most recent major transaction was last fall, when mall owner General Growth Properties sold 32 office buildings in Summerlin to Hines Interests and Oaktree Capital Management for about $120 million. The buildings reportedly were half vacant at the time.

Blackstone, one of the largest investment firms in the world, said it is acquiring Hughes Center through its Blackstone Real Estate Partners VII fund. Subsidiary Equity Office Properties will manage it.

This is the fourth time in the past decade that the complex has changed hands.

“We see this as a tremendous opportunity,” Frank Campbell, Southern California managing director for Equity Office, said in a news release.

Though it is widely viewed as Las Vegas’ top office park, given its high-quality buildings and prominent tenants, the center’s vacancy rate is on par with the rest of the valley.

Southern Nevada had a 22.7 percent office vacancy rate in the second quarter this year, compared to 7.9 percent in 2006 during the real estate bubble, according to Colliers International.

The Hughes Center is 22 percent vacant, according to data provided by Randy Hall, a spokesman for the new management. When Crescent bought it roughly 10 years ago, the property was almost fully leased with a 2.3 percent vacancy rate, a filing with the Securities and Exchange Commission shows.

This is not Blackstone’s first foray into the valley. The New York company has spent billions acquiring and fixing up homes in markets battered by the recession, including Las Vegas, Phoenix and Southern California’s Inland Empire.

Lately, though, the firm has tapered back on home purchases locally amid skyrocketing prices.

Crescent, based in Fort Worth, Texas, acquired the Hughes Center in phases in late 2003 and the first half of 2004 for $242.5 million. In 2007, shortly before the real estate market crashed, Wall Street giant Morgan Stanley bought Crescent for $6.5 billion, taking control of its then-portfolio of 54 office buildings nationwide.

Within a few years, Morgan Stanley had lost almost $1 billion on the deal and was about to default on the $2 billion loan from Barclays that had financed the buyout, according to news reports.

In fall 2009, the company essentially handed over the keys: Barclays teamed with Goff to take control of Crescent and its 17 million square feet of office holdings.