These two commercial seizures say a lot about the seriousness of the market

Two recent transactions involving bankrupt Class A office buildings in two different markets speak volumes about the scale of the crisis. commercial sectorcrisis. Fort Worth’s Burnett Plaza has dominated the city’s skyline as the tallest building since 1983. In San Jose, the property at 3100 North First Street was similar to one of the city’s premier shopping destinations. Both properties became distressed assets that sold for pennies on the dollar.

Standing over 500 feet tall, Burnett Plaza comprised 40 stories and one million square feet of Fort Worth’s most sought-after commercial and retail space. Surrounded by a public park, Burnett Plaza was the kind of building that businesses set up shop in to signal their arrival to the world. As is the case with any high-rise building, the upper floors were the most expensive and leases were normally triple net.

Burnett Plaza was a financial powerhouse for much of its life. In the years since its construction, its consistent rental yields helped it appreciate until 2021, when New York-based Opal Holdings LLC purchased it for $137.5 million . At the time, most people would have been confident that Burnett Plaza would continue to enjoy and make money for its new owners. However, this did not happen.

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COVID hit the commercial real estate market with all the force of a category five hurricane, and like most major cities, Fort Worth took it right on the chin. Burnett Plaza’s occupancy rate dropped to 78%, which is disastrous because the building needed 95-96% occupancy year-round to make money. There was no way Burnett Plaza could cover basic expenses with a 78% occupancy rate, and it didn’t take long before Opal Holdings fell behind.

Public records show $1.6 million in mechanic’s liens filed against Opal Holdings by unpaid contractors. Then, Opal Holdings defaulted on a $13 million loan to Pinnacle Bank, which entered foreclosure proceedings in early 2024. Although it was valued at $104 million by the state assessor’s office, Tarrant County, Burnett Plaza was purchased at auction by Pinnacle Bank for just $12.3 million. .

That works out to about $12.30 per square foot for a building that Opal Holdings originally purchased for $137.50 per square foot. It’s safe to say that even Pinnacle didn’t expect to purchase the entire building for less than the outstanding balance of the loan it foreclosed on. By all accounts, this was a financial disaster for Opal Holdings and its investors. However, Burnett Plaza is just one of many commercial assets in serious trouble.

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Tendency :

Fort Worth wasn’t the only declining business market in the country. Until recently, San Jose, California was one of the hottest commercial real estate markets in America. San Jose was conveniently located in Northern California, making it accessible to both tech giants and venture capital enthusiasts. For much of the 2000s, the office market reflected this reality and…