While it appears that there may be a slight slow down in foreclosures next month, things are set to look less rosy for commercial properties in the State Capital of Texas.
Over 300 commercial properties in Fort Worth, Dallas – worth $879 million in terms of original debt – are up for foreclosure next month. These include a full spread of shopping centers, apartments, offices and warehouses. What’s more, this number has remained static for the past few months.
George Roddy, President of Roddy Real Estate in Addison, expects the trend to continue. “I think it likely that, with so little lending going on, we’ll stay in the same rut where un-sold commercial property ends up getting foreclosed,” he told me yesterday. “Mortgages keep on falling due, and there is frequently nobody prepared to re-issue finance. In other cases the problem is low occupancy rates with not enough income to cover the debt.”
One of the major drivers stonewalling re-financing is the tougher lending rules that banks have introduced. What was easy to achieve just a few years ago has become impossible, and this is squeezing commercial landlords even more.
Although most of the affected mortgages were taken out in 2005 with a low average value of $3.3 million, there are some bigger exceptions too. California based investor Bentley-Forbes borrowed $193 million from CW Capital to finance the purchase of the 431-room Four Seasons Hotel and Resort in Irving, Texas. Now CW Capital is ringing the bell for foreclosure while Bentley-Forbes continues to negotiate.
Four Seasons Hotel and Resort Living is not the only headache for the investors. Bentley-Forbes also holds an interest in the Park Center office building in Dallas Park, Plano. In this case the hunter-down is JPMorgan-Chase, which is about to foreclose against an original loan of $43.4 million.
Another classic example is the Mosaic Apartment Complex in downtown Dallas which is once again posted for foreclosure by Prudential Insurance Company. The mortgage value on the loft residential building is $66.5 million, and analysts are predicting that the high foreclosure trend in Dallas commercial property will continue.
Latest estimates from Delta Associates & Real Capital Analytics suggest that there are $5.4 billion distressed commercial properties in Dallas and its immediate surrounds, with over 50% of the pain lying in offices and retail facilities.
In March this year the Dallas area held the 6th worst spot on America’s ranking for distressed commercial real estate, according to influential Delta Associates’ Top Ten ranking scorecard. Those above it include Manhattan, Florida, Los Angeles, Washington, D.C. and Chicago – all previously regarded as good places for commercial real estate investment.
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