CMBS Loan Backed by Austin Office Heads to Special Servicing

A loan backed by an Austin office building whose occupancy has slipped below 50 percent went to special servicing.

The servicer said the CMBS loan tied to Chase Park Austin, at 7700 Chevy Chase Drive, is facing “imminent monetary default,” Morningstar Credit reported. The five-story office building is owned by Beverly Hills-based venture capital and real estate fund Omninet Capital.

A modification for the loan, which matures in September 2025, is unlikely, according to servicer commentary.

The property’s occupancy rate was 45 percent in September after the departure of multiple tenants. In 2023, its net cash flow was less than $1 million; the underwritten rate was $2.4 million.

The five-story, Class B office was built in 1969 and renovated in 2015. It’s part of a five-building office complex at the intersection of Interstate 35 and U.S. Highway 183, about seven miles north of downtown.

Distress at Chase Park Austin hasn’t soured Omninet on the office market in North Central Austin. The firm purchased the 203,000-square foot Twin Towers at 1106 Clayton Lane in July 2024, according to a release from Northmarq. The property was built in 1973 and renovated in 2014. It was 59 percent occupied when Omninet bought it.

Distress has come for older office buildings as remote work norms and the flight-to-quality trend have rendered a portion of the country’s office stock obsolete.

Austin’s office vacancy rate hit 25.2 in the first quarter, according to JLL. Experts foresee the stubbornly high number falling when the city’s development pipeline dries up.

Less than 140,000 square feet of office space was delivered in the first quarter, down 45 percent from last year, according to Partners Real Estate. Meanwhile, almost 80 percent of the 2.9 million square feet under construction is concentrated in four projects in downtown Austin. The challenging market has pushed some office operators to offload property. Miami Beach-based Starwood Capital Group, for example, listed a $200 million Austin office portfolio last summer. The first of four properties, the Park on Barton Creek at 3711 South MoPac Expressway, was sold to Los Angeles-based BH Partners.