A court-appointed receivership for Greenway Plaza has appointed Lincoln Property Company to manage the once-thriving downtown Houston office complex.
The Dallas-based firm will take on property management of the 4.5 million-square-foot complex of 10 office buildings. Parkway Property Investments is the previous property manager, hired in 2022.
The move comes after the complex’s co-owners, CPP Investments, Nuveen Real Estate and Silverpeak Real Estate Partners, declined to continue repayment on the complex’s $465 million CMBS loan and entered into a receivership. An extended forbearance expired in July.
A court-appointed receiver is an impartial third party that wields the authority to assume control of an asset. In instances where an office building has significantly depreciated, the receiver serves as a legal mechanism to ensure effective operation and financial stability. The primary role is to oversee the efficient management of the property and safeguard its value.
The co-owners initially defaulted on the loan, issued by Goldman Sachs in 2017, after it matured in May 2022. The loan was transferred to special servicer Midland Loan Services that July, during the first forbearance.
Financial distress hit the complex as it struggled to rebound post-Covid. Its occupancy was almost 90 percent when the loan was issued. As of October, occupancy has fallen to a low of 66 percent, according to Morningstar. The broader eponymous Greenway Plaza submarket, which encompasses 11 million square feet, had a 24 percent vacancy rate in the third quarter, according to JLL.
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Woes compounded for the sprawling office complex after its final forbearance ended. Its market valuation plummeted $575 million, down 59 percent since issuance, according to an August remittance report. Its value has diminished to $425 million, from an previous billion-dollar valuation, putting its current worth below its outstanding loan balance.
Greenway Plaza has long been a symbol of Houston’s bustling business scene, but the distress that has engulfed it showcases the wider challenges facing the city’s office market. With tenants downsizing and embracing work-from-home arrangements, vacancies have surged. The court-ordered transition to Lincoln Property Company’s management is seen as a crucial step to address the financial challenges that have beset the behemoth Greenway Plaza.