Photo: KBS Realty Advisors
An office building whose mortgage had been bundled into a commercial mortgage-backed security and the Almeda Mall were foreclosed upon in June’s auction, according to documents filed with the Harris County Clerk’s Office.
Two Westlake Park was acquired through foreclosure for $35 million by Rialto Capital. The price represents a 70 percent discount from the $120 million the 450,154-square-foot building fetched six years ago. The California partnership that owned Two Westlake, Bravelake Property Owner LP, used a $91 million interest-only loan to purchase the property.
The new owner is looking for a buyer for the Energy Corridor building — and how much it sells for will be a one of the first indications of how far values have fallen during the oil bust and pandemic.
The problems Two Westlake faced date to before the recent fall in oil prices. The office building was fully occupied in 2014, pulling in $10 million in rent annually, according to government filings. But its two major tenants, BP and ConocoPhillips, have since moved out and its occupancy rate is now below 5 percent, according to the investor newsletter Real Estate Alert.
COMMERCIAL MORTGAGES: One fifth of securitized hotel mortgages were delinquent in May
“Opportunistic investors — who have been hunting for distressed opportunities that have been scarce so far despite the pandemic — are expected to flock to the bidding table,” according to the newsletter. “A trade would provide a key data point to indicate how far values have dropped.”
Almeda Mall was foreclosed on for $16 million, joining other malls that went to foreclosure after the novel coronavirus exacerbated a retail slump that had already been weighting down the sector. Lenders had originally lent $24 million for the purchase of the property in 2014.
Some investors, including the billionaire Carl Icahn, have been betting against shopping mall debt by buying credit default swaps against pools of securities backed mostly by retail property loans. If those securities lose value, such bets could profit handsomely.
“The banks went out and loaned money against a lot of shopping malls, office buildings, hotels and retail,” Icahn told CNBC. “A lot of these bonds now are in grave danger.”