North Dallas 10-story Office Tower to Consider Sale Due to Lack of Tenants

After years of financial challenges and tenant retention issues, Preston Plaza Commercial Property in North Dallas is being prepared for sale. The decision comes after the owner, Houston-based Tanglewood Property Group (TPG), announced it would no longer cover the property's financial losses.

Owner's Financial Support Ends

TPG had been financially supporting the property, covering its monthly shortfalls until the end of the previous year. TPG Preston Plaza Ltd., the entity connected to TPG, has decided to cease funding the center's losses, leading to the decision to sell.

Receiver Appointed for Sale Process

Chris Neilson, managing partner of Trigild, was appointed as the receiver of the property during a civil proceeding in Collin County on February 8, 2024. As a court-appointed receiver, Neilson is responsible for managing the property through the litigation process, typically occurring when a property defaults on its loan payments.

Financial Background and Loan Details

The 10-story office tower, located at 17950 Preston Road, was initially financed with a $27.7 million commercial mortgage-backed securities (CMBS) loan originated by Deutsche Bank through Wells Fargo Bank. The loan's servicing was handled by Midland Loan Services, with K-Star Asset Management LLC becoming the special servicer after the property's mortgage payment default in September 2023. As of July 15, the loan balance stood at approximately $25.8 million, with $1.87 million of the original loan paid off.

Occupancy Challenges and Tenant Composition

Built in 1986, the office tower houses a variety of businesses, including doctor’s offices, law firms, and healthcare centers. Despite renovations in 2015, the building has struggled to maintain occupancy, dropping from 90% in 2017 to 65% currently. This decline reflects ongoing difficulties in retaining tenants and generating significant rental revenue. The property is leased by Stream Realty, with representation by Chase Lopez and Tim Terrell.

Current Tenants and Property Value

Tenants in the tower include law firm Slater Mastil, The Ayco Company (affiliated with Goldman Sachs), insurance agency Risk Transfer Partners, real estate trust CIM Commercial Trust, and Texas Health Surgery Center. The last appraisal in 2017 valued the building at $41.8 million.

Regional Context and Future Outlook

Situated near the cities of Richardson, Addison, and Plano, the Preston Plaza tower is part of a broader trend in the region where office buildings face challenges due to shifting workplace preferences. The Dallas-Fort Worth area has seen developers focus on transforming office spaces into attractive destinations to accommodate hybrid work environments and encourage employee presence through enhanced amenities.