Discount sale of KBS REIT’s Houston office fails

A troubled real estate investment trust tied to KBS Realty Advisors has hit a snag in its efforts to liquidate its office portfolio.

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

The sale would have ceded ultimate ownership of California-based KBS Growth and Income REIT.

Due to the defect, the sale was terminated. Red River lost its $800,000 deposit. This would be the company’s first deal in Houston and second investment in a Texas office.

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

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

The sale was reportedly part of the REIT’s efforts to liquidate its assets, according to a plan established in May last year. The company blamed its financial woes on the pandemic and a weak oil market.

KBS’s Growth and Income REIT is not the only trust in the troubled company.

Late 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 office space at Greenhouse in 2014. It 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. As of April, the building was 92 percent leased. Dallas-based engineering firm AECOM occupies 62 percent of the building, but its lease will expire in December.