[ad_1]
News that Fort Worth’s tallest building “sold” for a fraction of its appraised value last week sparked doomsday headlines for the city’s commercial real estate market.
The Daily Mail wrote that Burnett Plaza sold for an “astonishingly low” price, while real estate news outlet The Real Deal wrote that “Fort Worth’s office market may have just bottomed out.”
The stories were based on a report that the 40-story office building, bought for more than $130 million only three years ago, had sold in foreclosure for just over $12 million. The tower was built in 1983 and boasts over 1 million square feet of office space. The foreclosure transaction was originally reported by the Dallas Business Journal.
But what the stories inferred from the foreclosure transaction was not entirely accurate, experts said.
Did Burnett Plaza really sell for $12 million?
Fort Worth’s commercial real estate market is actually on an upswing, according to Sriram Villupram, a professor of finance and real estate at UT Arlington.
“Everybody just jumped on [the story]. It was just not right,” Villupuram said.
The foreclosure by Pinnacle Bank was not on the main loan for Burnett Plaza, which totals around $70 million. UMB Bank is the primary lender.
The building’s former owner, Burnett Cherry Street LLC, an affiliate of New York-based Opal Holdings LLC, has been making payments on this primary loan, Villupuram said.
“UMB Bank is the primary lender … and looks like the landlords are making regular payments to them,” he said. “They are defaulting on all the junior liens. They’re not making payments on the second loan.”
The foreclosure was on a $13 million junior loan, an additional loan similar to a home equity loan. The lender of this loan has a secondary claim to the property.
Villapuram said it is “absolutely not true” that ownership of the building changed hands, but others interviewed by the Star-Telegram said that Pinnacle was the new owner after the foreclosure auction.
Opal Holdings and Pinnacle Bank did not respond to a request for comment. A spokesperson for Burnett Plaza management declined to comment.
What’s Burnett Plaza’s real value?
Lending banks usually do not see competition at these types of foreclosure auctions. They tend to win the lowest bid to get their loan back.
“Pinnacle basically got nothing out of this,” Villapuram said.
Burnett Plaza is still worth a pretty penny, he added. Its most recent valuation by the Tarrant Appraisal District is more than $120 million.
Tenants in the tower, which was renovated in 2021, include GM Financial, the Kimley-Horn engineering firm and a Securities and Exchange Commission region office.
“This foreclosure auction has not brought the market value of the building down,” Villapuram said. “From a market value standpoint, that building is worth more than ($12.3 million).”
Is Fort Worth’s commercial real estate market healthy?
Commercial real estate markets follow a cyclical growth pattern that waxes and wanes periodically, rotating through states of expansion, hyper supply, recession and recovery. The pandemic was a major disruptor to markets across the country, as many companies adopted hybrid work models in its wake.
A Downtown Fort Worth Inc. analysis for 2023 shows that Class A and B office space in the city’s central business district was 90% occupied, the highest level since 2015 and a significant increase from a 2020 low of about 83%. Average Class A rent in downtown last year was about $34.40 per square foot.
Burnett Plaza, which is Class A, is leasing space for $29.50 per square foot, according to listings website LoopNet.
Villapuram describes Fort Worth’s commercial real estate market as in the recovery phase, with new construction just starting to pick up after a period of recession.
“The Fort Worth market is actually doing better than the Dallas side of the Metroplex,” Villapuram said.
While the overall vacancy rate for office space in the Metroplex is 18.1%, just 12.4% of Fort Worth office space is vacant, according to Villapuram’s research.
“It’s getting better, but slowly,” he said. “Compared to the overall DFW average, this is actually better.”
Steve Troilet, senior vice president of research at Partners Real Estate, put the Fort Worth vacancy rate even lower, somewhere between 10% and 12%. He would not have used the term “bottomed out” to describe the office market in Fort Worth’s central business district, or CBD.
“The Fort Worth CBD is healthier than most other CBDs across the country,” he said. “Most CBDs across the country are in the 20-something percent vacancy rate, where the Fort Worth CBD is much healthier than that.”
[ad_2]
This article was originally published by a www.star-telegram.com . Read the Original article here. .