Houston Office Building Sells for $83M, way Under Appraisal

A landmark Uptown-Houston office tower just sold for much less than its last appraised value of $219 million.

Sovereign Partners, led by brothers Darius and Cyrus Sakhai, bought the San Felipe Plaza, a 959,000-square-foot building at 5847 San Felipe Street, from Orlando-based Parkway Property Investments for nearly $83 million, the Houston Business Journal reported. That’s roughly $86 per square foot.

Transactions for the 1980s-built office tower have fluctuated each time it’s changed hands. Thomas Properties Group paid $165 million for the site in 2005, and then Jayson Lipsey’s Parkway acquired it through a stock-for-stock exchange worth $1.2 billion in 2013.

San Felipe Plaza’s sharp decline in value can be attributed to factors including high vacancy caused by the pandemic, rising interest rates and newer buildings being favored over older ones, the outlet said.

In the Uptown Galleria district, office vacancy rates hovered around 30 percent in the fourth quarter of 2022, according to a report by Colliers. Citywide vacancy rates were at 23 percent.

Like many cities around the country, developers and commercial investors are relying on newer, flashier structures to lure tenants back into the office after the COVID-19 sparked the work-from-home trend.

“For the next three to five years, you might see more building owners throw in the towel and hand the keys over to the bank,” Houston real estate expert Jon Silberman told the outlet in January. “It’s not good for the owners, but for the market in general, it is sort of a cleansing process.”

San Felipe Plaza amenities include a landscaped plaza with seating areas, a conference center, fitness center, salon and car wash service.

—Quinn Donoghue