WP Carey Spinoff Offloads 40-Story Houston Tower at Discount

A New York-based real estate investment trust shed a massive downtown Houston office tower at a fraction of its prior value, selling the 1 million-square-foot headquarters building of engineering contractor KBR to Namdar Realty Group.

Net Lease Office Properties, an externally managed REIT advised by affiliates of W.P. Carey, sold the building at 601 Jefferson Street for $66 million on Jan. 15, according to a Jan. 20 filing with the Securities and Exchange Commission. JLL Capital Markets confirmed the deal Monday in a news release, the Houston Business Journal reported. The price equates to roughly $62 per square foot, a steep discount for a 40-story, trophy tower in the city’s central business district.

Harris County records and industry reports identified Namdar Realty Group and Mason Asset Management, both based in Great Neck, New York, as the purchasers. The deal also included the adjacent parking garage at 701 Jefferson Street, according to JLL.

KBR anchors the building, occupying close to 900,000 square feet, or nearly 90 percent of the tower, which is 92 percent leased overall, according to JLL. The 2.94-acre property includes two basement levels in addition to its 40 above-ground floors.

JLL’s Capital Markets Investment Sales and Advisory team represented the seller, led by managing director Kevin McConn and senior managing director Jeff Hollinden. McConn said in a statement that the building generated “tremendous interest” from private capital sources due to its immediate yield, including several investors new to the Houston market.

Harris Central Appraisal District records peg the property’s appraised value at $120.4 million as of Jan. 1, underscoring the valuation reset facing downtown office buildings even when backed by long-term corporate tenants.

The sale marks a dramatic markdown from the building’s last major trade. A W.P. Carey subsidiary bought the tower, then known as KBR Tower, in 2012 for $174.6 million, meaning the January sale amounts to a 62 percent drop in value.

W.P. Carey spun off 59 office properties, including the one at 601 Jefferson Street, into Net Lease Office Properties in 2023, as it reduced its exposure to the struggling office sector.

The Namdar acquisition adds another large-format downtown office to its portfolio.

— Eric Weilbacher