Three Westlake Park, which once housed BP Corp. and Conoco Phillips, has sold at a $67.4M loss after sitting vacant through the pandemic.
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The 420K SF office at 550 Westlake Park was built in 1983, and has been empty since 2019, when ConocoPhillips' lease expired and it completed its move to a new headquarters facility a few miles away. BP, which occupied more than 40% of the property when it was securitized, vacated in 2015.
Facing imminent default, Three Westlake Park was transferred to special servicing in October 2018 and became real estate owned in July 2019, according to Fitch Ratings, which downgraded the property last year, citing "further certainty of losses" of an estimated 10.1% to 18.6%.
According to the Harris County appraiser, the building had been owned by Goldman Sachs Mortgage Securities Trust with Miami-based LNR Partners acting as special servicer. No immediate sales information was available, although TreppWire reported resolution proceeds on the property's loan ended at $20.6M, according to TreppWire, lower than its $25.2M appraised value.
The property was valued as high as $121.2M in 2014. By 2018, it was listed as one of the largest properties in Houston under special servicing, Bisnow reported previously.
The asset had an outstanding balance of $76.3M as of January, according to TreppWire. With liquidation expenses of $11.7M, CMBS investors were left with losses exceeding $67.4M.
It was an expected loss, according to TreppWire commentary. In 2017, Kroll Bond Rating Agency had eyed a $27M loss for the property, with its loan being $80M at the time. But the oil slump worsened its predicament, as vacant and underperforming office properties are typical for energy downturns. The coronavirus pandemic added yet another drag, one the property struggled to get out from under.
Three Westlake struggled to find a tenant to sublease vacant space as early as 2017, according to the Houston Chronicle.
Energy Corridor properties, despite some office troubles, are selling elsewhere. Skanska USA earlier this month sold the 715K SF West Memorial Place I and II, the Houston Chronicle reported. It was sold to Fuller Realty Investments for $147M. Those buildings, however, were finished in 2016, and Fuller Realty partner Stephen Darnall told the Chronicle the buildings, which are Class-A, were appealing based on the fact that they are LEED Platinum-certified, ranking them as sustainable.
"This was an opportunity to purchase buildings well below replacement cost with existing tenancy in place,” Darnall told the Chronicle.
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