Harwood International is looking to recapitalize its office portfolio in Uptown Dallas, a neighborhood emerging as a hub for Y’all Street, after it hit a patch of distress.
The Dallas-based firm tapped Newmark to help it find equity partners and debt for the next phase of its 30-acre Harwood District, Bisnow reported. The move comes amid booming investor interest in the area, but also growing scrutiny of Harwood’s holdings.
The recap effort follows two foreclosure events in Harwood’s portfolio within just three months, The Real Deal previously reported.
Harwood narrowly avoided foreclosure on Saint Ann Court, also known as Harwood No. 6, through a last-minute deal in January. But Harwood No. 4, a 221,000-square-foot office building at 2828 North Harwood Street, was taken back by San Francisco-based Spear Street Capital via a $73 million credit bid on April 1. Deed records show Spear Street had purchased the building’s mortgage from Affinius Capital Management days earlier.
Sources told TRD the distress could spread. Harwood No. 1, built in 1984 at 2651 North Harwood, is only 54 percent leased. And Harwood No. 3, which is 80 percent leased at 2727 North Harwood, is set to lose its anchor tenant when law firm Jones Day relocates to Harwood’s forthcoming Harwood No. 15, expected in 2027.
Rather than invest in upgrades, Harwood may allow some of its underperforming assets, particularly older buildings, to return to lenders. “In the past, you’d be blacklisted,” said Steve Triolet, senior vice president of research and market forecasting at Partners Real Estate. “It appears that in more recent years, the market is more forgiving.”
The situation with Saint Ann Court, which is nearly 90 percent leased and underwent renovations in 2020, suggests the firm is selective about which assets it fights to retain.
The firm’s development efforts kickstarted Uptown’s transition into an office hot spot decades ago. Now the area is a destination for financial heavyhitters.
Goldman Sachs is building a $500 million corporate campus near the Perot Museum of Nature and Science, expected to open in 2027.
The Texas Stock Exchange, backed by BlackRock and Citadel Securities, ignited the Y’all Street movement in 2023 with a $120 million fundraising round. The exchange plans to launch listings in 2026 and establish a headquarters in Dallas. Legacy exchanges followed suit: the New York Stock Exchange reincorporated its Chicago office in Dallas earlier this year, and Nasdaq is planning a regional headquarters in the city.
The influx of financial players and corporate relocations is transforming Uptown into Dallas’ most desirable submarket. Uptown had the lowest office vacancy rate in Dallas-Fort Worth in the first quarter, at just 8.5 percent, according to Savills. Average rents topped $60 per square foot, the highest in the Metroplex.
Uptown is also drawing employers from traditional business hubs. Insurance giant Lockton Companies recently leased 100,000 square feet at Victory Commons One, at 2601 Victory Avenue, where landlord Hillwood is shelling out $9 million for tenant improvements.
More than $1 billion in real estate investment is headed for Uptown, driven by major developments like Hunt Realty’s NorthEnd, which includes the Goldman Sachs campus, and Pacific Elm’s Parkside Uptown, where Bank of America pre-leased 238,000 square feet and will have naming rights.
—Rachel Stone
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