Office distress has unleashed on Big D, as a trio of Dallas-area properties are on the brink of foreclosure.
Lenders have filed foreclosure notices for the 18-story office tower at 211 North Ervay in downtown Dallas, the eight-story One Hanover Park building in Addison, and the 6400 Legacy building in Plano’s Legacy business park, the Dallas Morning News reported.
Red tape could envelop all of these properties next month, a sign that Dallas’ office sector is still reeling from the remote-work movement, which has been compounded by hiked interest rates and a tight lending climate in recent months. Refinancing a property is like pulling teeth in today’s market, and office landlords across the metro are in a scramble to save their assets.
The 211 North Ervay building was sold to Plano-based Wolfe Investments in April. Wolfe borrowed $13 million from a Utah lender, which has scheduled a Sept. 5 foreclosure. However, the firm secured new construction financing, with plans to convert the site into apartments — an increasingly common tactic among office landlords, despite the high costs to perform such conversions.
One Hanover Park at 16633 North Dallas Parkway in Addison is owned by a Houston-based investment group. It is buried in nearly $32 million of debt. Its lender could also foreclosure on the property next month unless a new loan is provided with more favorable terms. Surrendering the site via deed-in-lieu is another potential option to stave off foreclosure.
The five-story Legacy Drive building was recently posted for a possible foreclosure sale, the outlet said. United Bank of Texas made a $15 million loan on the property in 2019. Last year, United and the owner, an Austin-based investor, agreed to a loan extension, which expired at the end of June.
Unless Dallas-Fort Worth’s office market undergoes a miraculous recovery, distress could proliferate. Halfway through 2023, roughly two dozen commercial properties in DFW backed with CMBS loans went into special servicing — a sign of a severely struggling property. Although, half of those properties were hotels.
—Quinn Donoghue
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