Delaware Street Capital Buys Distressed Houston Office Tower

The deal to trade Houston’s One City Centre is final, and its previously undisclosed buyer has been identified.

Delaware Street Capital purchased the chronically distressed office building that was 9 percent occupied in September, deed records show.

The sale represented a realized loss of $83.3 million ($137 per square foot) on the two CMBS loans backed by the property at 1021 Main Street, Morningstar Credit reported. The loans, which originated in 2015, totalled $100 million. They’ve been in special servicing since 2021 after the departure of the building’s largest tenant, Waste Management (now WM), in December 2020.

The 607,500-square-foot, 32-story building’s taxable value is $25.9 million, less than $43 per square foot, according to the Harris Central Appraisal district.

One City Centre, originally called the First City National Bank Building, was built in 1960 and is located in downtown Houston.

After owner Accesso Partners failed to lease the building’s vacant space, special servicer Midland listed the property in October 2023; potential buyers made their final offers in March. Morningstar Credit revealed a buyer was selected in September but did not identify the buyer.

JLL, which had the listing, marketed the property as a potential candidate for a conversion to multifamily. It’s also located in an Opportunity Zone and could qualify for tax breaks.

Delaware Street Capital couldn’t be reached to comment on its plans for the building.

Despite the excitement around turning empty office buildings into housing, conversions have proven to be expensive and tricky, and few have been successfully executed.

Even so, the Texas Legislature is weighing whether to make the process easier for developers by removing requirements to get zoning changes for properties that are converted into residential projects.

Figuring out how to make conversions work would be especially helpful in Houston, where the office market vacancy rate rose to 27 percent in the fourth quarter, according to Colliers. The high rate is traceable to older office properties, like One City Centre, which have become obsolete.