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Story by the Dallas Business Journal

After plans by Houston-based Occidental Petroleum Corp. (NYSE: OXY)’s partial consolidation to Houston came to light in the Dallas Business Journal exclusively last week, real estate sources say they expect the company-owned Occidental Tower to land on the market for upwards of $95 million.

Occidental Petroleum plans to relocate up to 100 employees to its new Houston headquarters. In all, Occidental’s chemical division — which will be left in Dallas — will consolidate into about 20 percent of the 24-story, 540,514-square-foot office tower at 5005 LBJ Freeway or more than 100,000 square feet of space.

The company is one of the largest oil-and-gas companies in the United States with major operations in the Permian Basin. Occidental Petroleum is one of a number of energy companies consolidating its business following the decline of oil and gas prices.

This could be a good time to sell the LBJ Freeway building as Dallas-Fort Worth becomes a hot real estate investment market, said John Alvarado, a senior vice president at CBRE.

“The fundamentals of the market have improved so dramatically and the health of the capital markets overall with the availability of debt and equity; there’s been significant price appreciation throughout Dallas,” Alvarado told me.
Even though this property is going on the market, Alvarado said he doesn’t expect the downturn in the oil and gas industry to have much of an impact on Dallas-Fort Worth real estate.

“We have very limited exposure in the oil and gas industry compared with Houston, and we have yet to see a meaningful impact on the market,” said Alvarado, adding Occidental Petroleum’s consolidation is on par with the rest of the energy industry.

“When companies go through periods like this, it’s not uncommon to see some re-trenching of corporate activity and see some consolidation and streamlining of operations in their strongholds,” he added.

Real estate sources say Occidental Petroleum has hired Colliers International through some long-standing relationships in Houston to market the property by the end of the year.

In September, a CBRE Global Investors affiliated fund acquired the Galleria Towers, a three-building, 1.4 million-square-foot property for more than $300 million. The nearby Occidental Tower will trade for roughly $1.75 per square foot, or upwards of $95 million.

Occidental Tower Corp., an affiliate of Oxy, owns the office tower, which was last valued at $85 million, according to the Dallas Central Appraisal District.

Currently, Oxy uses 11 floors in the building, but is in the midst of freeing up premium floors on the tower’s upper levels to potentially land marquee tenants. Some of the floors already are being marketed to new office tenants.

At the end of the consolidation, Oxy’s chemical division would stay in Dallas with more than 300 employees, sources say. Requests for comment from Occidental have yet to be returned.