Three Dallas-area office buildings threatened with foreclosure

Three Dallas-area office properties are facing potential foreclosures next month with lenders putting the owners on notice.

The foreclosure filings for buildings in downtown Dallas, Addison and Plano come as commercial property lending has sharply dropped in the last year, leaving building owners in a crunch to obtain new financing.

One of the properties listed for potential foreclosure in September is an 18-story office tower at 211 N. Ervay in downtown Dallas. The high-rise built in 1958 is known for its bright exterior of azure and aquamarine panels.

In April, the midcentury tower sold to Plano-based Wolfe Investments, which is converting the building to apartments. The acquisition was financed with a $13.475 million loan from a Utah lender, which has now scheduled a Sept. 5 foreclosure.

A Wolfe Investments official said the owners are obtaining new construction financing for the project, which will replace the existing financing.

In many cases properties posted for foreclosure are not sold at monthly auctions. The borrower and lender often reach new loan agreements that prevent the forced sales.

Lenders have also filed foreclosure documents on a high-profile Addison office tower on the Dallas North Tollway.

The One Hanover Park building is an eight-story office at 16633 North Dallas Parkway. Since 2014, the building has been owned by a Houston-based investment group. A lender that holds $31.77 million in debt on the property has scheduled a foreclosure next month.

In Plano’s Legacy business park, a five-story office building on Legacy Drive was posted for a possible foreclosure sale. The 6400 Legacy building is located west of the Dallas North Tollway and is owned by an Austin-based investor.

In 2019, United Bank of Texas made a $15 million loan on the property, according to foreclosure filings. The loan was extended last year and scheduled to expire at the end of June.

Tight financing standards and high mortgage costs have made it difficult for commercial real estate owners to extend loans and refinance properties.

Nationwide, commercial property mortgage originations plunged by more than 50% in the second quarter compared to a year earlier, according to a report from the Mortgage Bankers Association.

“High interest rates, uncertainty about property values, and questions about some property fundamentals are all contributing to the slowdown,” mortgage bankers’ Jamie Woodwell said in a statement. “We expect the logjam to begin to break in coming quarters, but the path forward will depend on where interest rates and other aspects of the economy go from here.”

Loans across the country for office properties fell by 66% in the most recent quarter, according to the bankers’ association. There was a 55% decline in lending for industrial real estate.

Commercial property lending so far in 2023 has been at one of the lowest volumes in a decade.

The slowdown in lending has put a pinch on some real estate owners, who must obtain new financing when existing loans expire or when purchasing new properties.

Commercial property acquisitions in Dallas-Fort Worth fell by more than 72% in the first half of 2023, compared to a year earlier, according to a report by MSCI Inc.

At midyear, about two dozen D-FW commercial properties financed with mortgage-backed securities were under special servicing by lenders — often an indication of possible loan defaults.

About half of those troubled properties were hotels, according to the study by Trepp LLC.

Properties on that list include the Courtyard Plano Legacy Park and Residence Inn Plano owned by Dallas-based Ashford Hospitality Trust Inc. Those North Texas hotels are among the 19 properties Ashford said it is handing over to lenders because the owner could not obtain new debt at…