Troubles continue to compound for Greenway Plaza as the 4.3 million-square-foot office complex sees its worth nosedive amid waves of distress.
The sprawling complex sandwiched between River Oaks and West University Place off Richmond Avenue saw a 59 percent drop in market valuation, according to a new appraisal reported in an August remittance report, according to Morningstar. The plaza was valued at just over $1 billion during the issuance of a $465 million loan in 2017. The property’s value has dropped to $425 million, $40 million below the current loan balance, which remains at its original level. The new valuation comes in at roughly $98.84 per square foot, a far cry from its previous estimated cost of $239.53 per square foot.
The complex–owned by CPP Investments, Nuveen Real Estate and Silverpeak Real Estate Partners–comprises 10 Class A office buildings outfitted with retail and dining amenities. It is managed by Parkway Property Investments, which was acquired by CPP Investments in 2017.
The co-owners defaulted on the complex’s $465 million loan in May 2022. Initially issued by Goldman Sachs, the loan was transferred to special servicer Midland Loan Services in July 2022 after a forbearance period.
The borrowers entered into an amended forbearance agreement that expired last month. The borrowers then claimed the property would not “perform under that agreement…absent a restructure.” Midland Loan Services has rejected a restructuring proposal and is currently awaiting a consensual receivership order. A date for the court hearing is yet to be determined.
Moody’s Investor Services reported last year that Greenway Plaza had $6.6 million of cash flow in the first quarter of 2022, down 83 percent from $38 million for the same period a year earlier.
Moody’s downgraded three sets of bonds that backed the loan last month after the forbearance agreement expired. Two sets of the bonds, which were previously downgraded in November to A3 and Ba1, were further downgraded to Ba2 and Caa1, respectively.
According to a July Moody’s report, vacancies in Greenway Plaza have increased to 34 percent nearly triple the 12 percent vacancy rate it had in March 2022 as tenants continue to downsize with work-from-home employment becoming increasingly popular. Real estate research firm Avison Young found a 22 percent vacancy rate in the larger Greenway Plaza submarket, which covers 11 million square feet of office space. That compares to a 26 percent vacancy rate in the Houston metro area overall.
Houston’s office market has seen better days as distress, downsizing and appraisal dips have shaken the long-suffering sector. According to data compiled by the Houston Business Journal, as of June 28 the Bayou City has $655 million in CMBS-backed loans in distress that are set to mature in the next 18 months.
Some of Greenway Plaza’s tenants include HOK, Lifetime Fitness, Invesco and Gulf South Pipeline. Its largest occupant, Occidental Petroleum, leases 972,000 square feet.
CPP Investments, Nuveen Real Estate and Silverpeak Real Estate Partners have not responded to requests for comment.
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