The first high-rise in the history of downtown Phoenix could be the next office building to fall victim to the reset of values sweeping central business districts in cities across the country.
The Heard Building, currently in the portfolio of coworking operator Expansive, faces a foreclosure sale, the Phoenix Business Journal reported.
A filing by lender SMS Financial VW with Maricopa County indicates a Nov. 26 auction is set for the Arizona Superior Court building downtown. SMS Financial VW, a partnership of SMS Financial and Phoenix-based ViaWest Group, took over $11.7 million in debt on the building from First Interstate Bank in July.
Steven Schwarz, founding partner at ViaWest Group, confirmed the sale.
“We ended up taking over as lender and have given the borrower an opportunity to figure out solutions to the loan,” Schwarz told the Business Journal. “We’d love for the current owner to figure out their game plan — if not, we are obviously in the office business.”
Expansive declined to comment.
The eight-story, 77,000-square-foot Heard Building has stood at 112 North Central Avenue since 1919, when it first opened as headquarters of Dwight Heard’s investment and publishing ventures, including the Arizona Republic. The newspaper had its offices there from 1920 until 1948.
The property is squarely in the downtown office submarket, which has higher vacancy rates than the rest of the metro area in the wake of the pandemic. In addition, higher interest rates of recent years have pushed up overhead for landlords. The downtown submarket has seen a negative net absorption of 250,000 square feet over the past 12 months or so, according to CoStar.
The Heard Building, meanwhile, is seen by local observers as a possible option for residential conversion.
“Multifamily developers are still clearly interested in that market,” said Connor Devereux, director of market analytics for CoStar. “It might just take some time for occupiers to circle back and locate there to tap that talent, but for right now it’s not performing great from an office fundamental standpoint.”