Houston's 5 Biggest Office Loans In Special Servicing
With widespread oversupply and high vacancy plaguing the Bayou City, California-based CRE analytics company Trepp is keeping an eye on Houston's office market.
Houston is climbing out of the 2014 oil downturn due to improved oil prices (though those recently slipped back down) and a recovering energy sector. Overall office vacancy declined to 23.4% in Q4 2018, nearly double the 13.4% vacancy of Q4 2014, according to JLL Houston's quarterly office report.
Trepp outlined the five largest office loans in special servicing in a new report:
Two Westlake Park
Current Balance: $90.8M
Occupancy Rate: 68% as of June 2018
Delinquency Status: In Grace Period
Special Servicing Transfer Date: July 2018
Built in 1982, Two Westlake Park, a 450K SF office tower in the Energy Corridor, was added to the watchlist due to occupancy dropping below 80%.
Between June 2017 and March 2018, occupancy decreased from 89.21% to 68.18%. Several tenants vacated the property, including Amoco, which occupied 96K SF, and ConocoPhillips, which moved out of 102K SF in June 2017. All of ConocoPhillips' space has been subleased except for 66K SF and the lease will expire in November.
Property managers have been urged to sign renewals with the subtenants, actively market the space and look for new tenants, which can be difficult in a soft market, Trepp's loan notes say.
Three Westlake Park
Current Balance: $80M
Occupancy Rate: 59% as of June 2018
Delinquency Status: One Month Delinquent
Special Servicing Transfer Date: October 2018
Three Westlake Park is a 420K SF building within the 2.8M SF Westlake Park office complex in the Energy Corridor. The loan was transferred to a special servicer due to imminent monetary default, Bisnow previously reported.
ConocoPhillips will not renew its 242K SF lease, which will expire in February. That accounts for more than 55% of the rentable space, Trepp reports.
10333 Richmond
Current Balance: $34.7M
Occupancy Rate: 58% as of June 2018
Delinquency Status: Current
Special Servicing Transfer Date: December 2017
The 291K SF, 11-story office building on a 3-acre site at 10333 Richmond was transferred to a special servicer for imminent default due to tenancy issues, according to loan notes. The asset was built in 1983 and renovated in 2012.
Within the last two years, Williams Morgan P.C., Docs On Demand Inc., Focus Exploration LLC and Mattress Discounters combined to vacate more than 40K SF. The lender will continue to pursue a potential resolution with the borrower, per the loan notes.
World Houston Plaza
Current Balance: $17.2M
Occupancy Rate: 40% as of June 2018
Delinquency Status: REO
Special Servicing Transfer Date: June 2017
World Houston Plaza lost a 109K SF lease by Weatherford U.S. L.P. in May 2017. That represented more than half of the leasable space, and the 217K SF property has yet to recover from losing its anchor. U.S. Bank also has an 11K SF lease expiring in December.
Kingwood Office
Current Balance: $14.3M
Occupancy Rate: 84% as of February 2017
Delinquency Status: REO
Special Servicing Transfer Date: June 2017
Kingwood Office, a 199K SF office building near Kingwood Medical Center, was foreclosed on in January 2018, according to the loan notes.
An undisclosed trust was the only bidder, and NAI Partners is providing property management and leasing for the property at 600-900 Rockmead Drive in Kingwood. The asset was built in 1976 and renovated in 1982.
