Bankruptcy Filing Averts Foreclosure Of Uptown Dallas Building, But Battle Between Houston REITs Drags On
Whitestone Uptown Tower LLC, the owner of the 12-story office tower, filed for Chapter 11 bankruptcy Dec. 1, ahead of a foreclosure sale scheduled for Dec. 5, according to a Securities and Exchange Commission filing.
Pillarstone said in an August SEC filing that it had received a default note on its loan for Uptown Tower at 4144 North Central Expressway in Dallas. According to the latest SEC filing, the loan was originally for $16.45M, but the payoff amount was $18.8M as of Nov. 17 due to the $14.4M outstanding and another $6.5M of default interest.
Pillarstone sought to sell the property to satisfy loan obligations, but “was blocked by Whitestone’s refusal to approve the sale,” according to the filing. That left it with little recourse but to file bankruptcy for Uptown Tower's ownership entity.
Houston-based Whitestone REIT, which owns 81.4% of Pillarstone and is a guarantor of the loan on the Uptown Tower, told Dallas Business Journal in a statement that Pillarstone failed to notify Whitestone of the bankruptcy. Whitestone also claimed Pillarstone made misleading and inaccurate statements in its public filing and announcement, including that Whitestone had interfered with potential property sales, DBJ reported.
Whitestone is actively trying to exit its partnership with Pillarstone, and the two REITs are embroiled in a pair of legal disputes that have yet to be resolved.
Whitestone previously told Bisnow that there was a court order in place prohibiting Pillarstone from “handing the keys” to Uptown Tower to the lender or otherwise abandoning the property, a statement it reiterated when lenders initiated the foreclosure process for Uptown Tower in October.
The bankruptcy is “a necessary step after Pillarstone efforts to resolve the dispute with Whitestone failed to achieve a workable solution,” Pillarstone CEO Bradford Johnson said in the SEC filing. The building was 56% leased as of March 31, according to Pillarstone.
Pillarstone owns about 927K SF of office and industrial space throughout Houston and Dallas. Uptown Tower is its only financed property, it said in an August 2022 SEC filing.
Whitestone is a retail-focused REIT with more than 50 open-air centers throughout Phoenix, Chicago, Austin, Dallas-Fort Worth, Houston and San Antonio.