Foreclosures at Harwood Raise Questions About Firm’s Portfolio

Two foreclosures in three months have Dallas real estate insiders asking: What’s going on at Harwood International?

There appears to be something amiss in the portfolio of the Dallas developer with the namesake district in the region’s hottest office submarket.

Harwood just avoided losing Saint Ann Court (Harwood No. 6) to foreclosure in January with a midnight-hour recapitalization deal.

It wasn’t so lucky with Harwood No. 4; it lost the 221,000-square-foot property on the Dallas County Courthouse steps April 1 to Spear Street Capital, which took back the building in a $73 million credit bid, deed records show. That’s $330 per square foot. Spear Street Capital bought the mortgage from Affinius Capital Management in late March.

The distress may not end with those two properties.

Harwood No. 1, which was built in 1984, is just 54.1 percent leased. Though it’s currently 80 percent leased, the 1999-built Harwood No. 3 will take a major hit when law firm Jones Day moves to Harwood’s upcoming project, Harwood No. 15, which is set to be delivered in June 2027.

For Harwood Nos. 1, 3 and 4, the company may be content to let the poorly performing buildings go back to the bank rather than spending to update them. Harwood No. 1 was built in 1984. Nos. 3 and 4 were built in 1999 and 2000, respectively.

Letting a building go back to the bank doesn’t ruin a firm’s reputation with lenders the way it used to, Partners’ Steve Triolet said.

“In the past, you’d be blacklisted,” he said. “It appears that in more recent years, the market is more forgiving.”

That doesn’t explain what happened with Saint Ann Court, which is 89.2 percent leased. It makes sense that Harwood would take pains to keep it, since it renovated the property in 2020.

Harwood did not respond to requests for comment.

Uptown was the Metroplex submarket with the lowest office vacancy rate (8.5 percent) in the first quarter, according to Savills. Meanwhile, it’s fetching the highest rental rates at an average of $60.49 per square foot.

It’s a popular destination for companies in search of amenity-rich offices, like Lockton Companies. The insurance brokerage became the latest major employer to ditch downtown for Uptown when it leased 100,000 square feet at Victory Commons One, a 15-story office tower at 2601 Victory Avenue developed by Ross Perot Jr.’s Hillwood Urban in 2022.

Uptown is also becoming the de facto headquarters of “Y’all Street.” The neighborhood will be on the receiving end of more than $1 billion in investment over the next few years, with the development of NorthEnd, a Hunt Realty project that will include a $500 million campus for Goldman Sachs, and Parkside Uptown, a Pacific Elm building that will house Bank of America.