A series of foreclosure notices in Texas has highlighted significant challenges for the state’s commercial real estate sector, particularly in Dallas. Starwood has foreclosed on The National, a major mixed-use redevelopment by Todd Interests. The project, which involved converting the former First National Bank Tower, cost $460 million to develop. According to Todd Interests’ Shawn Todd, there is still about $230 million outstanding on the original $245 million loan from Starwood.
This development comes as Downtown Dallas faces additional setbacks, including AT&T’s recent decision to relocate its headquarters from downtown to Plano. Todd Interests also recently sold its stake in the nearby East Quarter to J.P. Morgan Asset Management.
The Starwood loan represents over a quarter of all troubled loans scheduled for auction this month in the Texas Triangle. In total, these loans amount to $805 million for February, marking the third consecutive month that troubled commercial real estate debt in Texas has exceeded $800 million.
In Houston, Harris County’s largest new loan up for auction involves nearly 150 acres of partially developed industrial land at 2012 Miller Cut Off Road in La Porte. Genover provided a $30 million loan for this property in 2022. The owner, Trak Commercial of St. Petersburg, Florida, recently secured new financing with a $38.8 million loan from JGB Capital.
Austin-based One Development is facing default accusations less than a year after securing a $14 million loan from Arixa for Rosemark Woodland, a 27-unit condo community at 2209 Woodland Avenue.
In San Antonio, Quantum Leap Property Management reportedly defaulted on a $31.3 million CBRE loan tied to Acadia on the Lake Apartments at 4031 Thousand Oaks Drive. This follows similar issues at another San Antonio property managed by Quantum Leap last month. Quantum Leap partnered with Edcouch Community Housing Finance Corporation to obtain property tax breaks using what is known as a “traveling” housing finance corporation loophole—a practice recently targeted by legislation signed by Governor Greg Abbott. Some appraisal districts have interpreted this law as grounds to remove tax credits from those who used the loophole.
In Dallas, The National remains the largest troubled loan this cycle. Alongside Starwood’s financing, the redevelopment received about $100 million in historic credits and $50 million through city tax increment financing incentives.
Fort Worth saw Vertical Street Ventures face foreclosure on The Sherry apartments at 2208 East Park Row Drive in Arlington after receiving a $24.4 million mortgage from ReadyCap in 2021.
Nine properties set for auction have been flagged multiple times before due to factors such as ongoing litigation or attempts at loan modification:
– Latitude 2976 (Houston): 734 units; $77.2M loan
– Veranda Village (Pasadena): 330 units; $47.2M loan
– The Co-Op at the Med Center (Houston): 199 units; $25M loan
– San Antonio Marriott Northwest Medical Center: $18.5M loan
– Wyndham Garden Austin: $13.4M loan
– Office building at 10777 Clay Road (Houston): $10.5M loan
– Retail building at 6610 Low Bid Lane (San Antonio): $10.5M loan
– Mar Del Sol Apartments (Houston): 248 units; $10M loan
– La Bella Vista Apartments (Houston): 152 units; $9.2M loan
Industry observers note that some borrowers and lenders may reach agreements before auctions proceed.
