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struggling Houston office building, One City Centre at 1021 Main Street, has found a new owner after being in decline since 2020 when its major tenant, Waste Management (now WM), left. This led to default on the building's loans, which totaled $100 million and were made up of two CMBS deals originated by JPMorgan. Despite efforts by Midland, which covered principal and interest payments using reserve funds and remaining cash flow, the August 2023 payment could not be made. The property's net operating income at the end of 2023 was only $2,324, according to Morningstar Credit.

    Accesso Partners, the property's owner, attempted to lease the vacant space but was unsuccessful. As a result, Midland decided to test the market and listed the building in October. JLL's Martin Hogan and Rick Goings led the listing effort, and potential buyers submitted their final offers in March. Midland interviewed the top four bidders and awarded the deal to the top bidder, who wishes to remain anonymous. The sale is expected to close in the fourth quarter, assuming no glaring issues are discovered during due diligence.

    One City Centre is now one of many aging, mostly vacant offices in downtown Houston. Approximately 90% of its 607,500 square feet remains empty, according to marketing materials. The building's structure, which extends three feet out past its glass walls, could potentially be converted into apartments, fitting around 550 units at an average size of 900 square feet each. The building is located in an Opportunity Zone, which could qualify it for tax breaks.

    While conversions of office buildings to residential use have been discussed across the country, relatively few have been completed due to the process being more technically difficult and costlier than initially thought. Despite this, downtown Houston remains an attractive prospect for such conversions due to its cluster of aging office assets and continued population growth. According to CBRE executive John Spafford's analysis of Houston office conversions last year, Houston ranked fourth in the country for office conversions, with work on five million square feet either planned or already underway. However, this represents just seven projects, far fewer than the groundswell of conversions some had imagined after the pandemic.