National Bank of Kuwait Moves to Foreclose on Office Building

UPDATED: 8:45 p.m., May 1, 2023: Distress continues to percolate in Houston, this time hitting the office market.

UPDATED: 4:26 P.M., June 16, 2023: The National Bank of Kuwait did not complete its scheduled foreclosure sale initially expected for May 2.

The National Bank of Kuwait filed a notice of foreclosure on a $52 million loan for the Galleria-area building on March 28. The 283,000-square-foot office building sits off the West Loop, at 2425 West Loop South, less than a mile northeast of the Galleria Mall. The 11-story building is expected to be auctioned Tuesday, May 2, according to public records.

Property ownership is linked to an LLC where Houston-based real estate businessman, Ali Choudhri, is listed as the sole member. Choudhri is the CEO of family-owned real estate firm Jetall Companies, which operates over 2 million square feet of office buildings across the Texas Triangle. The 2425 West Loop South building is listed under the company’s commercial properties.

The National Bank of Kuwait, through its New York office, loaned $52 million to the LLC for 2425 West Loop South in May 2018, according to the notice of foreclosure. That came after a 2015 lease and renovation by now-defunct department store operator Stage Stores.

As evidenced by the “STAGE” insignia that still decorates its face, the Class B building housed the headquarters of the firm that operated Palais Royal, Bealls and Peebles. It leased 189,000 square feet, or about 67 percent of the building, from 2015 until its dissolution in 2020. The company filed for Chapter 11 bankruptcy in May 2020 and shuttered all 780 stores across the country before the end of the year.

Prior to its dissolution, Stage Stores filed a $1.4 million lawsuit against the building owner, alleging HVAC system issues that damaged its offices, and threats “to unlawfully lock tenant out of the premises.” The lawsuit said “four conference rooms and a restroom, on three separate floors” had to be closed because of disrepair. Stage Stores withdrew the lawsuit three months later.

Despite the legal dispute, Choudhri offered to buy the bankrupt company, according to an interview with CoStar, but the deal never closed, as Stage headed for liquidation, and the building’s top tenant was lost. The flight-to-quality trend soon took over the Houston office market, and the building struggled to find tenants to offset that departure.

Current tenants include a bank and a security services firm.

Choudhri has been involved in dozens of lawsuits related to his properties, businesses and professional relationships since 2016. The National Bank of Kuwait did not immediately return a request for comment. Choudhri did not immediately return a request for comment.

Correction: A previous version of this story misstated the National Bank of Kuwait’s action. The bank filed a notice of foreclosure.