As Contrarian Bets Heat Up On Distressed Dallas Offices, A Newcomer Enters The Ring
Gulf Coast Western owner Matt Fleeger is quite familiar with his company’s latest acquisition. The oil and gas exploration company is now the co-owner of the two distressed nine-story office towers it has called home for the last 12-plus years.
And to get the deal done, Gulf Coast Western teamed up with newly launched Enverra Real Estate Partners, the latest in a growing list of distressed office buyers betting on the reemergence of the sector.
The duo joined to acquire Parkway Office Center North and Parkway Office Center South through their affiliate Parkway Towers LLC. The deal for the two properties totaling 230K SF closed earlier this month, according to a press release.
Gulf Coast Western is the property’s largest tenant, and Fleeger has committed to an overhaul of the property following years of underinvestment.
For Enverra, a new commercial real estate investment group headed up by Tommy Spinosa and Macki McKim, the distressed towers align with the firm’s strategy to invest in underperforming properties in high-potential growth markets.
“Our goal is to reintroduce institutional-quality asset and property management to these buildings and extend that standard to future acquisitions,” Spinosa said in a statement.
Spinosa was previously with Bridge Investment Group and CP Group and had a joint venture partnership with Fortress Investment Group. McKim was previously with JLL.
Interest in distressed office is on the rise locally and nationally. During the first half of 2024, eight office properties sold at discounts of more than $100M from their prior sale price, according to Moody’s data provided to Bisnow. That is more than in the previous two years combined.
With distressed office buildings becoming cheaper to pick up, the DFW market has also seen other players emerge to take advantage.
SkyWalker Property Partners established a $250M fund last year aimed at acquiring distressed assets and new developments across Texas and beyond. SkyWalker's The Leverage Strikes Back fund was seeded with $20M of capital raised in the first quarter of 2023 to target properties between $10M and $30M.
Dallas-based Bradford Cos. launched a $100M fund in April 2023 to capitalize on distress in the market by acquiring value-add properties across North Texas. That fund was set up to target industrial and office assets emerging from capital market challenges.
At the two Parkway buildings, Enterra and Gulf Coast Western are betting leasing in the towers will pick up following their capital investment and planned renovations. With floor plates ranging from 12K SF to 14K SF, Enverra is targeting smaller companies looking for a whole floor.
“We’re committed to revitalizing this asset,” Fleeger said in a statement. “Immediate improvements will include facade, garage and landscaping enhancements, 38,000 SF of spec suites, significant improvements to the existing lobbies, cafe and common areas, and the addition of tenant amenities such as a fitness facility, tenant lounge, large tenant conference room and a golf simulator.”
The partnership acquired the property’s loan from Principal Financial, which was represented in the deal by JLL. Parkway Towers LLC then foreclosed on the borrower.
