M-M Properties scored a loan for an iconic Houston skyscraper that it was hanging onto by a thread.
The local firm refinanced the 56-story TC Energy Center, at 700 Louisiana Street, with a $252 million loan from Starwood Property Trust, the Houston Chronicle reported.
As of March 2024, the building had the largest delinquent loan in the country, with a balance of $96 million. When M-M Properties listed it for $285 million in October, foreclosure seemed imminent, given its financial troubles and the unlikelihood of landing a buyer.
The Starwood loan not only averts foreclosure but also sets the stage for a more secure future for the landmark office tower. The refinancing included M-M Properties buying out its original equity partner in the tower, a corporate pension fund. The firm also raised $30 million to renovate the building and ramp up efforts to attract tenants, adding to the $20 million it has invested in updates since 2017.
“We’ve crossed the bridge to financial stability, we have enough cash flow to cover the loan, and we have this $30 million that allows us to aggressively pursue new tenants,” M-M CEO Ken Moczulski told the outlet.
The TC Energy Center has graced the Houston skyline since Hines developed it in 1983. M-M Properties bought it in 2007 for $370 million.
Although the loan technically defaulted in September, ongoing negotiations prevented M-M from receiving a default notice. The deal with Starwood extends the loan for another four years, providing M-M Properties with time to increase the building’s 68 percent occupancy.
Houston’s office vacancy stood at nearly 23 percent in the fourth quarter, shedding light on the lingering impact of the remote-work movement. Roughly 27 percent of office properties tied to commercial mortgage-backed securities loans in the Houston area were in special servicing as of January, the outlet reported, citing Trepp.
John Spafford, executive vice president at CBRE, emphasized the refinancing’s significance in instilling confidence in the market, adding that prospective tenants “will absolutely consider where the building sits in the debt cycle.”
—Quinn Donoghue
