A distressed Midtown office building took another hit as its owner makes updates to attract users.
Midtown Central Square’s appraisal took a 44 percent haircut in three years, according to Morningstar Credit.
The 14-story building at 2100 Travis Street, is now valued at $33.5 million, dropping nearly half of its $60.2 million valuation in 2022. The updated number pegs the 270,000-square-foot building as worth $124 per square foot.
In addition, Morningstar reported that its net cashflow was down 28 percent last year from when the loan was issued in 2022.
The valuation plummet comes after a lengthy legal standoff between Claremont and its lender Wells Fargo.
The $36 million CMBS loan behind the property was transferred to special servicing a year ago for non-monetary default. The owner allegedly refused to set up agreed-upon cash management accounts, and the lender foreclosed on the property in January, the Houston Business Journal reported. Claremont tried to get a temporary restraining order to block the sale.
Claremont and Wells Fargo agreed to modify the loan in May; Claremont got a 12-month forbearance period in exchange for a principal paydown.
Midtown Central Square was built in 1957 and updated in 2015. In June, owner Claremont Property Company, which is based in Houston, told the outlet that it plans to spend $850,000 converting the property’s 11th floor into spec-suite workspaces to attract more tenants.
Such suites have become a popular option for office tenants after companies settled into hybrid work norms and shed office space during the pandemic.
This strategy for attracting tenants was already successful on the building’s third floor, Claremont’s Juliet Garcia told the outlet.
Houston’s office market has struggled to recover since the pandemic. Its vacancy rate is stubbornly high at 26.1 percent, according to the Greater Houston Partnership.
A bifurcation in the market is to blame. Newly built space with abundant amenities is hard to come by, while aging offices struggle to attract tenants and some even become obsolete.
Read more
Houston’s largest office complex goes back to lender
Foreclosure looms for billionaire Charles Cohen’s Houston asset
$400M in Texas CRE loans to hit auction block in July
