Comerica Bank Tower in Dallas is not an easy building to own. Nearly 500,000 square feet of the 1.5 million-square-foot office tower lie empty. While the tower cuts a famous figure in the skyline — it has stood at 1717 Main Street since 1987 — even some new towers have trouble finding tenants, let alone ones old enough to be president.
When lender Slate Asset Management took over the building in May from TriGate Capital and Pacific Elm Properties, Comerica Bank Tower’s future was unclear. There were basic problems with the property, like spotty cell phone reception and high vacancy. Larger questions loomed, too: Could a large portion of the building be converted to residences, as the old owners had planned?
As trillions of dollars in commercial debt nears maturity, lenders and building owners are facing similar questions, as their once-prized buildings turn to hornet nests. Many are not equipped to handle them. Stream Realty Partners has worked on a slew of these types of properties since the pandemic, and now it sees a way to extend that experience to buildings like Comerica Bank Tower.
The Dallas-based commercial services firm is launching an advisory business for owners and lenders dealing with “challenging situations.” The group, whose name “Value Preservation Advisors” is a sign of the times, includes employees from asset management, investment management, brokerage and property management backgrounds. Its portfolio covers everything from leasing and amenities to full-scale repositionings.
Comerica Bank Tower is one of the group’s first big projects.
“It wasn’t a viable option for them to take the asset back and then just immediately put it onto the market,” March said. “It was basically a loan that they had inherited, and they effectively needed a sponsor to take over the project and establish an action plan for the next three to five years.”
While each distressed situation is different, Stream sees the broader need for this type of service growing. For much of last year, lenders were willing to extend maturing loans and give landlords space to work out a plan.
“There was a 12-month period where everybody had hope — like ‘Okay, surely you can come up with a structure that works and grind it out,’” March said. Banks are not in the business of real estate management, but some signs, like a recent surge in commercial foreclosures, suggest lenders are losing patience and more willing to take on troubled properties.
“If you’re a lender, at a certain point, after months and months, you have to figure out what your best solution is going forward. A lot of that is coming to a head,” March said.
Borrowers who run into trouble, meanwhile, are often so focused on refinancing that they lose focus on the asset itself, March said.
“When there’s a looming foreclosure, or there’s a borrower that has already acknowledged that their equity is wiped out, you have a period of time in advance of the asset changing ownership where it loses energy,” he said.
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The group focuses on quick wins to start. At Comerica Bank Tower, it is fixing the cell service issue and beefing up security. Longer-term planning continues.
“Some lenders have decided that they need to do it for their own capital preservation,” said Alex Roberto, an investment management executive with the group. “At some point, even if the building is going to sit on your balance sheet for a little bit, you have to figure out how you can get out of this.”