Commercial office foreclosures are on the rise in North Texas.
The owner of an eight-story office tower in Addison has defaulted on a nearly $32 million loan from New York Life Insurance, The Dallas Morning News reported.
Built in 1998, One Hanover Park is a roughly 196,000-square-foot Class A office building located at 16633 North Dallas Pkwy., a few blocks north of Addison Circle and five minutes from LBJ Freeway.
The office building currently has 11 leasable suites, making up over 105,000 square feet of available space for rent – meaning more than 50% of the building is vacant. The average lease rate per square foot per year is $28.00. The building’s tenants include Happy State Bank & Trust, Fidelity Information Services, and Metavante Corp.
In 2018, New York Life Insurance issued a $31.77 million loan to Houston-based One Hanover Investors LP, which has owned the office building since 2014. However, due to rising interest rates, the owner could not service its loan debt, leading the lender to foreclose on the property.
According to the Dallas Central Appraisal District, the One Hanover Park building has a current market value of $27.75 million. Dallas-based real estate firm Avison Young is currently marketing the property.
The One Hanover Park building is just one of several distressed office properties in the Dallas-Fort Worth area. In total, more than $6 billion of commercial office loans will mature in DFW in 2024, with an estimated $3 billion currently in distress, according to the DMN.
According to Steve Triolet, vice president of research and market forecasting for Partners Real Estate, rising interest rates mean more expensive debt.
When you combine more expensive debt with less demand for space, the result will be more office properties falling under distress, Triolet explained.