Tuesday, August 09, 2011

Dallas-area commercial foreclosures fall from last year

During the first half of 2011, almost a half-billion dollars in Dallas-Fort Worth area commercial properties were sold by lenders on the courthouse steps.
The total sounds big, but the dollar volume and number of commercial property foreclosures in the area are down from the same period last year. And the expected flood of commercial real estate sales by lenders just hasn’t materialized.
“What we are seeing is just phenomenal compared to what it could have been,” said George Roddy, whose Foreclosure Listing Service tracks North Texas property foreclosure postings and sales. “We heard predictions of how much commercial property would be foreclosed on, and it hasn’t gotten there yet.”
In the first six months of the year, just over 300 commercial properties — including offices, retail buildings, apartments, warehouses and development land — were sold at auction by lenders, Roddy’s data shows. That’s about a 7 percent decline from the same period last year.
The dollar volume of the foreclosures is down even more — about 30 percent less than in 2010.
In number and dollar amount, the current downturn’s commercial foreclosures are nothing like what North Texas saw in the late 1980s and early 1990s real estate crash.
“We were running in Dallas County 300 to 400 sales a month back then,” Roddy said. “Compared to that, the last few years have been anemic.”
Not that North Texas hasn’t had plenty of commercial foreclosures so far in 2011.
The largest included an LBJ Freeway office complex — the Fenton Center in Farmers Branch — and theCrowne Plaza hotel in Addison.
Lenders also foreclosed on parts of a new shopping center on State Highway 121, the Lewisville Town Crossing. And big development sites in Irving and Frisco went into lender control.
Lost land
Development land accounted for the biggest share of commercial property foreclosures so far this year in the D-FW area. More than 100 tracts with more than $178 million in debt went into foreclosure.
Office buildings, with almost $85 million in debt, and apartments, with more than $80 million in mortgages, were also sold at foreclosure, according to Foreclosure Listing Service’s data.
So far, some lenders have been reluctant to take over failed commercial real estate deals.
That’s given the market time to sort out some of its problems, said Stuart Wernick, senior vice president of Grandbridge Real Estate Capital.
“A lot of the lenders have been able to work out the problems with their borrowers,” Wernick said. “They are being patient and working with their clients, who have acted honorably.
“There is also some new capital out there that has shown up to save the day,” he said. “Interest rates have remained low, and that’s helped, too.”
Train wrecks
Still, hundreds of North Texas commercial properties face debt issues in the year ahead, analysts say.
And billions in local property loans will come due over the next few years and must be refinanced.
“There are train wrecks waiting to happen, still working their way through the system,” said Tom Fink, managing director of Trepp LLC, a New York commercial mortgage information firm.
Trepp estimates that of the more than $19 billion in outstanding commercial mortgages in the D-FW area that have been sold as securities, about 11 percent are delinquent.
“You should see some time over the next 24 months another $1.3 billion hit the courthouse steps,” Fink said.
He estimates only about a third of the problem deals have been foreclosed on so far.
“The process has gone a lot slower than anyone ever thought it would,” he said.
Top foreclosures
Some of the most expensive of the commercial properties sold at foreclosure auction in the first half of 2011 and their original loan values:
Fenton Center office complex, Farmers Branch: $62 million
Crowne Plaza Hotel, Addison: $30 million
Parts of Lewisville Towne Crossing shopping center: $20 million
Frisco Main Street and tollway mixed-use land: $19.8 million
Irving land, 109 acres, State Highway 114 and Belt Line Road: $14.3 million
SOURCE: Foreclosure Listing Service