The deal is now closed, money has changed hands, the CEO and Goldman Sachs are now richer ($98MM and $56MM respectively, we hear from Bloomberg), and APC is no longer traded in the NASDAQ. Where will all those folks go to work now?
News came out late last week that OXY will no longer move into the Energy Corridor, after all. This decision came shortly after sending a memo to its employees about holding off the move until after integration is complete - intended to be done towards the end of 2020.
The decision is a very interesting one, given OXY’s balance sheet. Its long-term leverage may not include the $10B bomb that Warren Buffett dropped during the bidding process, securing above-market rates (8%), preferential stock treatment, and a big check in exchange for his Good Housekeeping seal of approval. This may be offset by the $8.8B cash influx of selling a good chunk of APCs Africa operations to Total S.A. (which, we hear, was done on a last minute trip to Paris).
Back to real estate, the employees that support these Africa Operations would then soon vacate the building, creating the momentum to play shuffle with its buildings. OXY plans to keep its current ~ 1MM square feet campus in Greenway Plaza for the moment, and plans to sell the former Conoco Phillips campus on the Energy Corridor it secured in January - although OXY CAMPUS, LLC is listed as a Tenant, SMBC Leasing and Finance Inc the Landlord, and Sumitomo Mitsui Banking as the Mortgage, in the Warranty Deed (emphasis added intentionally - CFO Burgher said “sell” although they’re technically tenants. Maybe a JV?). The argument for divesting the Dairy Ashford (Conoco) campus is that it wasn’t big enough to integrate companies, leaving the Woodlands towers as the perfect candidates to bring everyone together.
To the local Woodlands economy, this is fantastic news, and provides a sigh of relief to many (former) APC employees regarding their commute. On the other hand, while highlighting the obvious, we anticipate a large influx of OXY employees making the move north to be closer to work. As always, we like to be cautious about numbers and expectations, but the decision helps sustain the rationale that our market here is poised to remain strong since jobs - although energy-heavy - continue to be close to home.
Oh, and if you read our first post about this topic, looks like OXY did nothing. Truth be told, there was a strong rumor that they were planning to sell and lease back. We’ll see. Looks like they like to play it by ear.
Sources - Houston Business Journal, Bloomberg, Yahoo Finance, LA Times, NY Times, Harris County Clerk, and local interviews.