With property values declining and worries about a pending recession, commercial real estate lenders are keeping a close eye on developments in Dallas and across the country.
In the Dallas area, lenders are tracking more than 1,100 commercial properties financed with almost $23 billion in commercial mortgage-backed securities, according to a new report by Morningstar Credit Information & Analytics LLC.
Some of the Dallas properties with potential problems are office buildings, which have seen slower leasing and higher vacancy rates since the start of the COVID-19 pandemic. Higher interest rates and tighter lending standards have put even more pressure on some commercial properties.
“Over the past five years, the Dallas market has witnessed strong growth in the industrial sector,” Morningstar analysts say in a new report. “However, office properties are expected to see sluggish growth, primarily due to the increase in remote working.
“Two office properties, with a total exposure of $100.8 million, are with the special servicer,” the report says. “Six are on our watchlist, echoing the headwinds the sector is facing.
“We expect this number will grow as leases roll.”
The largest two Dallas area properties that lenders are scrutinizing are both in downtown Dallas – the 2100 Ross office tower near the Arts District and the Mercantile Place on Main apartments on Main Streets, Morningstar details.
Morningstar said it added 2100 Ross with more than $86 million in loans to the list of properties’ on lenders watchlist after occupancy in the building fell below 60%.
“Morningstar’s largest concern is the high vacancy rate of 31% in the Dallas central business district, which would make re-leasing challenging if any major tenant fails to renew its lease,” the analysts said.
The Mercantile Place buildings were put on notice by lenders with the estimated value fell below the current debt of more than $45 million.
Credit analysts are keeping a close eye on office properties, which have seen weakened demand during the last few years.
“The average asking rent for office properties has risen marginally during the last five years, but the office vacancy rate increased from 18.3% to 22.4% between 2017 and 2022,” according to Morningstar.
Net cash flow have fallen by about 5% from Dallas-area office properties financed by commercial mortgage backed securities. At the same time, cash flows from industrial and apartment properties have grown by more than 10%, according to Morningstar.
Nationwide office prices have fallen in value by more than 2% in just the last 12 months, according to the latest estimates by MSCI Inc.
Some commercial property owners will face tougher lending standards and higher financing costs when their current debt expires and must be renewed.
Lenders since 2019 have taken control of more than a dozen Dallas-area commercial buildings financed with more than $200 million in commercial mortgage backed securities.
The largest default was downtown Dallas’ Harwood Center skyscraper which lenders foreclosed on last year. The building had almost $82 million in debt.
Morningstar says that the largest Dallas-area property that its tracking currently financed with $465 million in debt is the landmark Crescent complex in Uptown. The Crescent has some of the highest office rents in North Texas and is almost fully leased to a blue chip list of financial firms.
“We have a cautious view of the mixed-use property, given the term rollover and high submarket vacancy,” Morningstar analysts say.
When the mortgage holder for Dallas’ Galleria shopping mall last December was handed the keys to the landmark shopping center, it was one of the largest such transfers in decades. A unit of Metropolitan Life Insurance held more than $300 million in debt on the 40-year-old regional shopping center before taking control.
Industry professionals aren’t surprised that lenders are keeping a close eye on Dallas-area properties.
“The general sentiment in markets like Dallas is one of watching, rather than meaningful concern,” said Aaron Jodka, director of research for U.S. capital markets at commercial property firm Colliers International. “There will always be assets that face challenges and in turn default. That happens in up markets, though certainly more likely in a down market.
“The recent volatility in the banking industry bears watching and its knock-on effects to commercial real estate are still playing out,” he said. “The likely outcome is for tighter lending standards, which will in turn limit investment sales activity.”
If you’re struggling to pay all the bills and food in the refrigerator know that you are not alone. There are many people that are working hard and still struggling to pay all the bills. Which is why I am excited to share with you some details regarding the Texas Department of Housing and Community Affairs reopening their Texas Rent Relief application portal.
This portal will be open to Texas residents that are in need of assistance to pay their rent, the applications portal will only be open for a short period of time. The dates that the application portal will be open are from 8:00a.m. on March 14th through 11:59 p.m. on March 28th.
How Much Rental Assistance Money Will Be Distributed by the State of Texas?
There is currently $96 million dollars in rent relief funds, but with so many people needing assistance the funds will go quickly. Which is why you should not wait, get your application in now if you need assistance with paying rent. Applications can be made over the phone by calling 833-989-7368.
How Much Assistance Can One Person Receive?
A first-time applicant may be eligible for up to 18 months of assistance for rent and help on utility bills. These payments can be made for current or past due bills. That doesn’t mean that you will get 18 months of assistance, but you could, it all starts by getting in your application.
Just remember if you’re needing some help, that doesn’t make you a bad person. We’ve all struggled before; it takes a strong person to stand up and ask for help.
LOOK: Here are 25 ways you could start saving money today
20 of the Best Places in Tyler to Save Money on Great Clothes
There’s no reason you can’t find some awesome new duds at reasonable prices–at least not here in East Texas.
Paragonix Technologies — a company that launched in 2010 as a response to the lack of innovation in the donor organ preservation and transport process — closed a Series B funding round on Tuesday. The $24 million round was led by Signet Healthcare Partners.
The Cambridge, Massachusetts-based company provides transplant centers and organ procurement organizations (OPOs) with medical devices designed for the preservation and transportation of donor organs.
The traditional method of preservation requires the organ to be transported in a cooler of crushed ice. Due to unstable temperatures, many facilities that receive organs preserved in this manner report that they arrive frozen and damaged, said Paragonix CEO Lisa Anderson.
“Paragonix determined there was an opportunity for a more scientifically reproducible, measurable and reliable solution to transporting an organ from a donor to recipient,” she said. “We set out to create a new standard for organ preservation and transport that would provide the care and quality of handling commensurate with transporting such a valuable gift and improve patient outcomes worldwide.”
Paragonix’s devices are made from a series of interconnected systems that work together to provide a cool and sterile environment within a consistent range of 4-8° Celsius. The company sells three devices, each designed for a different organ (heart, lung and liver). All have been cleared by the Food and Drug Administration.
Each device works slightly differently based on specific user needs related to the organ type, Anderson said. For example, the heart preservation device has pouches filled with proprietary cooling solutions that keep the organ at optimal temperatures during transport. The heart is contained within a nested canister and is then housed in a wheeled shipper container that works to protect and insulate the inner contents.
All of Paragonix’s devices display the organ’s temperature while it is being transported. They also use bluetooth monitoring and tracking technology to allow surgeons to track the organ’s exact location throughout its journey, even in flight, Anderson pointed out.
Paragonix markets and sells its devices to transplant centers and OPOs across the U.S. and Europe. Last year, over one in five thoracic donor organs transplanted in the U.S. were preserved using a Paragonix device, Anderson declared. She also said that 19 out of the 30 largest U.S. heart transplant programs rely on Paragonix devices to safely preserve, track and transport organs to their intended recipients.
There are a few other companies that make devices to preserve donor organs, such as Organ Recovery Systems and Bridge to Life. But Anderson contended Paragonix’s devices are easier to use.
“Most other organ preservation devices are extremely complicated, labor intensive and require special personal or extensive training, while Paragonix’s devices are lightweight, user friendly, and a user can be trained in less than an hour,” she declared.
Anderson explained that her company’s main competition is the legacy way of transporting organs, as many organizations still receive damaged organs that were transported using the over-ice method. The medical industry needs to move away from this method of organ preservation because devices like the ones that Paragonix sells are clinically proven to improve patient outcomes and reduce the risk of post-surgical complications, she declared.
Picture: Getty Images, ThomasVogel
Dallas-based commercial real estate giant CBRE Group saw its profits shrink in the fourth quarter, with global declines in sales and leasing activity.
And the property firm’s execs expect more softening in the commercial real estate market in the months ahead.
“Globally, we expect significant sales and leasing weakness in the first half before adverse conditions begin to ease later in 2023,” CBRE CEO Bob Sulentic said in a conference call with investors and analysts. “In all, 2023 will be a transition year and we feel good about where we’ll be when we get to the other side of the downturn.”
CBRE officials are basing their forecasts on a mild U.S. economic recession this year and recovery in 2024.
The real estate firm’s profit in the final quarter of 2022 fell to just $81.1 million, down from almost $692 million in the fourth quarter of 2021. Total earnings for the year were about $1.4 billion, compared with more than $1.8 billion in 2021.
Fourth quarter revenues were lower by more than 4% year-over-year to $8.2 billion.
CBRE’s business fell off in the second half of last year as rising interest rates curtailed many property transactions. Global sales revenue was down 47% year-over-year.
The company’s worldwide property leasing revenues declined by 7% in the fourth quarter.
“Among property types, multi-family and industrial fundamentals should remain strong, albeit with occupancy declining slightly from peak levels and rent growth continuing at a more modest clip than the double-digit pace set in 2022,” Sulentic said. “Office will remain the most challenged property type as we do not expect occupancy to come close to pre-pandemic levels in the short term.”
He said worker return to office in the U.S. has been slow following the pandemic
“Our current assumption is that this downward pressure that we’ve seen on office leasing is going to sustain for the time being,” Sulentic said. “We haven’t seen much change over the last few months in the return to office.”
Lender tightening of credit has quashed some property sales, leading to a decline in transaction revenues.
“Where we’re seeing activity in sales is for good assets, even in some cases office assets if they’re Class A buildings, fully leased, but for sure industrial and multi-family,” Sulentic said. “There is a lot of capital that’s been on the sidelines wanting to acquire assets.
“With leasing, we continue to see very strong fundamentals in industrial,” he said. “There is low vacancy, there are a lot of companies out there that still need space for a variety of reasons.”
CBRE’s real estate development business suffered a $6 million operating loss in the fourth quarter, compared with a year earlier $122 million profit.
CBRE owns Dallas-based Trammell Crow Co., one of the country’s largest commercial builders.
At the end of the year, the company had $16.9 billion in development projects in progress, down $2.6 billion from third quarter 2022. Most of the building projects were for industrial and apartment development.
Robby Brown is the founder of Pinnacle Foundation Repair, a foundation repair company that has been serving Texas for over 20 years.
A faulty commercial property foundation can cause serious problems for its owners and occupants, and the longer it persists, the more likely it will cause collateral damage. This article looks at common causes of foundation problems in commercial buildings and ways to extend a foundation’s life.
Five Reasons Foundations Fail
Three of the most common types of foundations for commercial buildings are slab-on-grade, pier and beam, and strip. Builders choose which to use by balancing the soil’s stability and conditions, the building’s height and the construction cost. Whatever your foundation type, here are five reasons it may fail and what you can do to keep your foundation in good condition.
Saturated Or Frozen Soil
There isn’t much of an issue with frozen soil where I am based in Texas, but there are dramatic contrasts between wet and dry. Some soils, like clay, will expand and contract so dramatically when wet or frozen that it shifts the foundation and causes cracks.
Solution: Ensure adequate drainage in the ground with spouts away from your property so that rain doesn’t pool near the foundation. Drainage becomes even more essential if there isn’t good sloping around your property to drain away from the foundation.
If your foundation is built on clay soil that contracts during the dry season, consider a foundation watering system to keep the soil from drying out completely. This has to be done carefully since some areas of your property will get more sun than others, and you don’t want to cause erosion or other damage.
Natural landscaping around your property, like trees and grass, absorbs rainfall from the soil, so less of it gets deep enough to go underneath the foundation of your property. When soil erosion occurs due to natural causes like heavy rains or flooding, dust storms, plant removal or windstorms, moisture from rainfall penetrates through these layers all the way down and can cause erosion under the foundation.
Solution: If you notice areas of exposed subsoil or water pooling in certain areas around your property, don’t delay having a qualified landscaper add plants or ground cover to that area. Keep in mind that you want to avoid planting anything with a big, expansive root system too close to a foundation.
A drainage system is designed to carry away any excess water that may come into contact with a building’s foundation. If this system isn’t installed properly or maintained regularly, you could be looking at serious problems down the road.
Solution: To fix this problem, ensure that there are no areas where water can collect. In addition to removing standing water from your property, remove any debris from around the foundation that could collect water. Place gutters on any downspouts, so water doesn’t wash across the soil surrounding your building instead of away from it.
Plumbing pipes don’t just go through the walls and ceilings of your commercial building. They also go into the foundation or under the ground. Hidden pipe leaks can cause cavities beneath the foundation as the water erodes the soil. This can be more problematic for slab-on-grade or strip foundations, but enough erosion will undermine any foundation.
Solution: Remind your tenants to report suspected plumbing leaks. Monitor your water bill for unusual changes. Have regular plumbing inspections to ensure everything is in good repair.
Mold And Mildew
Anywhere water can get in, whether through plumbing leaks, poorly sealed windows or doors, or a crack in the foundation or flooring, mold and mildew will follow. Over time, mold spores will penetrate deep into wood beams and damage the structure of your building.
Solution: Do regular inspections to make sure your property is watertight. Address any water infiltration problems immediately. If you do notice mold or mildew, have it professionally remediated right away.
A Solid Foundation Is Good For Business
There are many things you can do to extend the life of your commercial property foundation. However, if yours needs repairs, don’t delay. The earlier you catch a problem, the easier and less expensive it is to fix.
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SAN ANTONIO — Vince Cantu’s bar, Moses Roses Hideout, sits on historic land.
“The warriors who fought right here,” Cantu said, pointing at the wall. “The wall was right there, the battlefield is right where we are standing, it’s incredible.”
That’s why he purchased it over a decade ago. It’s just a couple hundred feet from the Alamo, but the city and state want him to make room for a $150 million Alamo Museum project.
“And I never wanted to be in their way. I’ve just been waiting for them to have an honest negotiation with me so I can sell the property to them,” Cantu said.
Most of city council felt there’s been plenty of time to reach an agreement, so they voted to use eminent domain, which is the right of a government to seize property for public use with payment. In this case, it’s a little over $3 million.
“Is it fair for me? Is it fair for the free market? No, it’s not fair. Will they sit down with me prior to the first letter and prior to the first offer?” Cantu’s posed.
That has yet to be determined. Cantu says giving up this property is losing generational wealth.
“I’m not going to be able to put Moses Roses somewhere on the outskirts of San Antonio. This is it, this is where it’s going to die,” Cantu said. “My dreams of passing on property on to my children has died. That’s not going to happen either.”
Many bar goers told Spectrum News 1 that Moses Roses was always one big party.
It’s one of the very few properties off of the River Walk that is both Latino and locally owned. It’s what Cantu grew up with. His grandmother owned a downtown restaurant for over 60 years.
“Barbacoa and Big Red every Sunday, they had the best enchiladas, the best everything,” Cantu said.
Cantu hopes this modern day battle of the Alamo results in him receiving $8 million for this property.
“If you spend $100,000 a year, you can spend that easily. It’s easy to spend a hundred, easy, on your mortgage,” Cantu said.
If a deal isn’t met, it could take months, even years.
“Like I said, that’s the hard part. The money is nothing, but the fact that they don’t respect you enough to talk to you,” Cantu said. “If you look at their past record, it’s hard to be an optimist, but I choose to be.”
Stream Realty Partners Opens Greater Miami Office As Firm Enters Florida Commercial Real Estate Market |
DALLAS, Jan. 31, 2023 /PRNewswire/ — Stream Realty Partners, a national real estate services, development, and investment firm headquartered in Dallas, has broadened its U.S. presence by launching its first Florida office in Greater Miami.
The Greater Miami/South Florida office is Stream Realty Partners’ first in the state and 15th location across the U.S.
Executive Managing Director and Partner Greg Katz, who comes to Stream from Newmark and has lived and worked in South Florida since 2000, will lead the office and oversee the brand’s growth across the state.
The South Florida office is Stream’s 15th location across the country. In 2021, the company opened three offices– in Nashville, Northern Virginia, and Phoenix–to complement its locations in some of the strongest commercial real estate gateway markets in the nation including Atlanta, Chicago, Houston, and Southern California.
“Miami has been on our radar for years, and this partnership enables us to accelerate our expansion and build-out of service lines throughout Florida,” said Chris Jackson, President of Stream. “Greg has had tremendous success across Florida and the southeast and is a great leader. His team works well together and respects one another. This is the type of culture we want for Florida and Stream nationwide.”
Across the country, Stream leases and manages more than 271.1 million square feet of office, industrial, retail, healthcare, and data center space and has developed or acquired 47 million square feet. The firm completes more than $5.8 billion in real estate transactions annually.
About Stream Realty Partners
Stream Realty Partners is a national commercial real estate firm offering an integrated platform of services including leasing, Legendary CX property management, tenant and landlord representation, capital markets, investment management and sales, development, construction management, national program management, workplace strategies, strategic marketing, and dedicated research. The company is headquartered in Dallas and operates 15 core offices in markets that cover areas including Alexandria, VA; Arlington, VA; Atlanta; Austin; Boca Raton; Charleston; Charlotte; Chicago; Colorado Springs; Dallas; Denver; Fort Lauderdale; Fort Worth; Greenville, SC; Houston; the Inland Empire; Irvine; Los Angeles; Miami; Nashville; Orange County; Phoenix; Raleigh-Durham; Reston, VA; San Antonio; Tysons; Washington, D.C.; and West Palm Beach. Since 1996, Stream has grown to more than 1,200 professionals and now completes more than $5.8 billion annually in office, industrial, retail, healthcare, land, and data center transactions. For information, visit www.streamrealty.com and follow Stream on LinkedIn, Instagram, Twitter, and Facebook.
Brian J. Medricka
Stream Realty Partners
Director, National Communications, Public & Media Relations
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SOURCE Stream Realty Partners, L.P.
DALLAS, Jan. 12, 2023 (GLOBE NEWSWIRE) — Texas Capital Bancshares, Inc. (NASDAQ: TCBI), the parent company of Texas Capital Bank (“the Bank”), today announced that Dustin Cosper has been appointed to serve as Head of Commercial Real Estate, effective immediately.
As Head of Commercial Real Estate Mr. Cosper is responsible for driving the execution of the Bank’s real estate strategy while working cohesively with other lines of business to provide full-service solutions to clients. Mr. Cosper will report to Madison Simm, President of Real Estate, who leads the Bank’s Commercial Real Estate, Mortgage Finance, and Homebuilder and Community Finance lines of business.
“Dustin has been an instrumental leader in our Commercial Real Estate organization and has a proven track record of delivering meaningful results to our clients in Texas and across the country,” said Mr. Simm. “As a seasoned real estate banking professional with deep roots in Texas, I am confident that Dustin’s expertise and extensive industry relationships will support our program as it continues to grow while maintaining a differentiated and superior client approach.”
Mr. Cosper has invested 10 years in Texas Capital Bank’s Commercial Real Estate organization, having previously served as Senior Vice President, Group Manager. Prior to Texas Capital Bank, he served as Vice President, Senior Workout Officer for Texas Community Bank in Houston, Texas, leading the special assets team.
Mr. Cosper said, “It is my honor to assume the role of Head of Commercial Real Estate as Texas Capital Bank fulfils its vision of becoming the flagship financial services firm headquartered in Texas. I am looking forward to continuing to build trusted relationships across our core markets that earn us the right to be a client’s first call for their real estate banking needs.”
About Dustin Cosper
Mr. Cosper joined Texas Capital Bank in 2013 in the Commercial Real Estate division, as a Vice President. Over the past five years, he absorbed the Senior Housing portfolio, generated one of the largest books of business in the Bank, and developed its CRE Structured Finance practice. In 2023, Mr. Cosper was appointed to the role of Head of Commercial Real Estate for Texas Capital Bank, responsible for driving the execution of the Bank’s real estate strategy forward.
Prior to Texas Capital Bank, he served as Vice President, Senior Workout Officer for Texas Community Bank in Houston, Texas, leading the special assets team. In his role, Mr. Cosper oversaw the liquidation of criticized and non-performing assets, negotiated real estate sales, and devised litigation and bankruptcy-related strategy and ultimately the liquidation of the bank.
Mr. Cosper earned a Bachelor of Business Administration and a Master of Business Administration in Finance and Banking from Sam Houston State University.
About Texas Capital Bank
Texas Capital Bancshares, Inc. (NASDAQ: TCBI), a member of the Russell 2000® Index and the S&P MidCap 400®, is the parent company of Texas Capital Bank, a full-service financial services firm that delivers customized solutions to businesses, entrepreneurs, and individual customers. Founded in 1998, the institution is headquartered in Dallas with offices in Austin, Houston, San Antonio, and Fort Worth, and has built a network of clients across the country. With the ability to service clients through their entire lifecycles, Texas Capital Bank has established commercial banking, consumer banking, investment banking and wealth management capabilities.
TCBI Securities, Inc., doing business as Texas Capital Securities, is a member of FINRA and SIPC and has registered with the SEC and other state securities regulators as a broker dealer. TCBI Securities, Inc. is a subsidiary of Texas Capital Bank. Securities and other investment products offered by TCBI Securities, Inc. are not FDIC insured, may lose value and are not bank guaranteed. For more information, please visit www.texascapitalbank.com.
A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/68044028-dcfb-4c5a-969e-306fe7e2a2f6
If you just count all the construction cranes, Dallas-Fort Worth is headed into 2023 with a booming commercial real estate market.
But headwinds of higher borrowing costs and the threat of recession are putting the brakes on many property deals going into the new year.
Dramatic interest rate increases during the last six months have changed the dynamics for most commercial property transactions. While North Texas’ real estate is expected to outperform the nation next year, industry leaders say there will be fewer sales and project starts.
“There is a slowdown in the pipeline,” said Byron Carlock, who heads PricewaterhouseCoopers’ U.S. real estate practice. “People are only moving forward with the projects they believe higher rents will support. There is still pretty healthy demand on the street for a lot of product.”
With thousands of people moving to Dallas-Fort Worth and the area seeing near-record employment growth, demand for most types of commercial real estate remains strong.
That’s why the D-FW area was ranked second in the country for property prospects in 2023 in the just-released annual Emerging Trends in Real Estate report. D-FW was highlighted in the report for its ability to draw funding for investment and building and to attract new business.
North Texas led the country in commercial property trades in the first nine months of 2022 with more than $30 billion in properties sold. In mid-December, one of Uptown Dallas’ most successful office and retail properties — the high-rise McKinney & Olive project — changed hands for a record price of nearly $400 million.
D-FW is also this year’s top sales market for apartments and industrial buildings, and it’s second to New York City in commercial construction, with more than $8 billion in project starts in just the first half of 2022.
Several big developments are poised to start in early 2023, including Wells Fargo’s new regional campus in Irving and Goldman Sachs’ new office center just north of downtown Dallas.
Unlike in previous economic slowdowns, there are still billions of investment dollars looking at North Texas for real estate.
“When we think back about all the cycles in commercial real estate, this is unique because we didn’t cause it,” said Mark Gibson, chief executive of Jones Lang LaSalle’s Americas capital markets division. “This is not a supply issue. It’s not necessarily a demand issue right now.
“This is a cost of capital issue,” Gibson said. “There is plenty of capital. You might not like the price at least right now.”
The cost of borrowing has more than doubled since a year ago.
Higher commercial mortgage rates are already causing a decline in property values and causing buyers to hit the pause button on new deals until they can better gauge pricing. Some real estate service firms have begun staff and spending cuts in anticipation of a decline in business next year.
“Whether it’s residential or on the commercial side and the capital markets and lending for new projects, everything is tied to interest rates,” said Jeff Ellerman, vice chairman in the Dallas office of CBRE Group. “We are in territory we have not been through in decades. That is creating a lot of uncertainty. That’s causing people to change plans.”
Ellerman and other top D-FW property execs expect that Texas will weather next year’s economic changes better than most parts of the country. That was the case in the Great Recession, when D-FW bounced back with record commercial real estate activity.
A recession in 2023 isn’t expected to have the impact of the latest downturn.
“It doesn’t feel like 2008 and 2009 for sure,” Ellerman said. “Businesses here are still growing and are doing well. The increase in population we are seeing makes this economy hum whether it’s housing or warehouse space or apartments.”