Tanglewood Property Group Surrenders Preston Plaza to Lender

An increasing number of landlords with older buildings in the DFW market are making major renovations to compete with the “flight to quality” trend of tenants leasing in newer Class A offerings with plentiful amenities

Not all of them will make the grade.

The latter seems to be the case for the Preston Plaza office building in Far North Dallas, which Tanglewood Property Group will hand back to its lenders rather than continue to subsidize operating losses, the Dallas Business Journal reported.

The Houston-based landlord has been “covering shortfalls” at the 10-story, 259,000-square-foot building at 17950 Preston Road, where struggles retaining tenants landed the property in receivership in February. The building shares a similar name but is not associated with the Plaza at Preston Center in Preston Hollow.

Receiver Trigild Texas now plans to put the tower — which was financed by a commercial mortgage-backed securities loan through Wells Fargo Bank — on the market.

K-Star Asset Management LLC was named special servicer of the loan after a mortgage default last September. The loan has a current balance of about $26 million.

The 1980s-era building counts largely on doctor’s offices, other healthcare tenants and law firms for tenants. Tanglewood renovated the building in 2015, upgrading the lobby with retail space and a conference center.

Stream Realty handles leasing at the building.

Current tenants include the Slater Mastil law firm, Goldman Sachs unit Ayco Company, CIM Commercial Trust and Texas Health Surgery Center.

The property, located in a part of Dallas that is in Collin County, was 90 percent full in 2019 and is now about 65 percent occupied. Its most recent appraisal came in 2017 and put its value at $42 million.

Some landlords of older office buildings in the Dallas area have boosted or kept their tenant bases with renovations in the face of tighter demand and work-from-trends that give newer products an edge.

For example, Goldenrod Companies, the Nebraska-based firm that is increasingly a DFW power player, has had success with renovations of Collins Crossing office building in nearby Richardson.