San Antonio Office Complex Sells for $31M in Foreclosure

An office complex on San Antonio’s Northwest Side has changed hands via foreclosure sale, marking the latest sign of distress in the city.

Special servicer LNR Partners paid a little more than $31 million for the 11-building Brass Professional Center at 4400 Piedras Drive earlier this month, the San Antonio Business Journal reported.

The previous owner, Brass Real Estate, defaulted on its $57 million loan earlier this year, triggering the foreclosure. With a remaining balance of roughly $31 million, the loan was set to mature in 2030. The default was because of delinquent payments, the outlet said.

The Oct. 3 foreclosure sale was handled by Mark Patterson of Duane Morris LLP. The purchase price is less than half of the estimated cost basis of $70 million, the outlet reported, citing CMBS data.

In July, Brass and LNR negotiated a loan modification as the property struggled to cover debt service due to high operating costs and low occupancy. In August, Brass proposed an A/B loan modification, a strategy in which the borrower continues making payments on a reduced “A” loan while the “B” loan becomes due at the original maturity date, allowing for the original loan to be paid off or refinanced.

However, LNR rejected this proposal, and the lender’s lawyers issued a debt acceleration notice, demanding immediate full payment as per the original loan agreement.

As of July, the Brass Professional Center, which spans 140,000 square feet across multiple two-story buildings, was 71 percent leased, down from 85 percent in 2020 before the pandemic hit.

As lingering remote-work trends, rising interest rates and wary lenders continue to plague San Antonio’s office sector, distress is beginning to rear its head in the city. Two months ago, San Francisco-based RBL Real Estate revealed that it had no plans to pay off its $15 million debt balance on the 192,000-square-foot Alamo Plaza office building, which matured this month.

—Quinn Donoghue