A Houston Office Tower's Loan Loses 81 Cents on the Dollar

Key Highlights

• 3000 Post Oak Blvd., a 441,523-SF office tower in Houston's Galleria submarket, sold this week.
• The building carried an $80M loan split across three CMBS trusts.
• The trusts recognized a combined $64.8M loss -- roughly 81% of the original loan balance.
• The loss was first reported in TreppWire before reaching CRE trade press.

The Signal

• An 81% loss severity in the Galleria submarket -- not a secondary market -- shows Houston office values falling further than headline vacancy numbers suggest.
• A sale that crystallizes the loss, rather than another extend-and-pretend modification, means the special servicer decided the asset wasn't worth carrying any longer.

Implications

Loss severities this steep reset the appraisal comps other Houston office loans get marked against, including anything still sitting in special servicing nearby. Lenders holding paper on comparable towers should treat this trade -- not the original purchase price -- as their new reference point.

A Houston Galleria tower just showed CMBS investors what an 81-cent-on-the-dollar office loss actually looks like.