Houston office sale fails amid KBS REIT’s liquidation effort

Would have offloaded property at 62% discount from 2016 purchase

KBS REIT’s Discounted Houston Office Sale Falls Through
KBS Realty Advisors' Marc DeLuca with Red River MP's Bruce Stern and Offices at Green River (KBS, Red River Asset Management)

A troubled real estate investment trust linked to KBS Realty Advisors hit a snag in its effort to liquidate its office portfolio.

The sale of Offices at Greenhouse, at 19219 Katy Freeway in West Houston, fell through when the prospective buyer, New Jersey-based Red River Asset Management, failed to pay the balance of the purchase price, according to SEC documents. 

The sale would have offloaded California-based KBS Growth and Income REIT’s final property. 

As a result of the default, the sale was terminated. Red River forfeited its $800,000 deposit. It would have been the firm’s first Houston deal and second office investment in Texas.

The REIT planned to sell the 203,000-square foot office for $18.3 million, just $90 per square foot. That would have been a 62 percent-discount from the $47 million — more than $231 per square foot — the REIT paid for it in 2016. 

JP Morgan Chase loaned the REIT $72 million at the time of purchase and has struggled to pay off the debt; its maturity has been extended four times. 

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The sale would have been part of the REIT’s effort to liquidate its assets, according to a plan established in May of last year. The firm has blamed its financial woes on the pandemic and a downtown in the oil market.  

KBS’ Growth and Income REIT isn’t the firm’s only trust in trouble. 

At the end of last year, KBS Real Estate Investment Trust III said it had experienced a $350 million decline in the value of its portfolio since September 2022. 

Stream Realty Partners developed the 5-acre Offices at Greenhouse in 2014. It had originally planned for the office to be part of a 12-acre mixed use project. 

The five-story building is located at the intersection of Interstate 10 and Greenhouse Road. In April, the building was 92 percent leased. Dallas-based engineering firm AECOM occupies 62 percent of the building, but its lease is set to expire in December.

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