The office building at the University Park development on the former Concordia campus is back in the lenders’ hands, according to state foreclosure listings and sources close to the project.
The building’s lenders, U.S. Bank and Texas Capital Bank, reportedly took back the property for $22 million at the foreclosure auction Tuesday at the Travis County Courthouse, a huge loss as the original construction loan was for $39 million.
Last month, the office building was posted for foreclosure after the owner, East Avenue Holdings LP, defaulted on the loan. In March 2009, lead developer Andy Sarwal disclosed that he was able to secure a $39 million loan for the office building through U.S. Bank and Texas Capital. But according to a May 10 filing, the amount promised in December 2008 was $19.5 million.
Still, Sarwal has planned a massive, mixed-use redevelopment that includes medical offices, a hotel, apartments and a movie theater on the 23-acre development. He contends that tenant activity will not be impacted by the foreclosure process, including a recently signed deal with video game maker NCSoft Corp.
The eight-story, 215,000-square-foot building is occupied currently by Texas Monthly magazine. An Aveda Institute salon training school is scheduled to move into the building this summer, and NCsoft Corp signed a five-year lease for about 41,000 square feet, the largest office lease so far for the project.
According to officials, approximately 85 percent of the space in the building is leased – a level that typically means a property has stabilized and usually doesn’t lead to a foreclosure.
“This is one of those incredibly unfortunately situations that boils down to bad timing,” Sarwal told the Austin Business Journal last month. “The ink hasn’t even had enough time to dry on the new leases, but the reality is it will take a few more months before enough revenue is generated to cover monthly payments to our lender.”
Elsewhere on the property, in March, Cypress Real Estate Advisors Inc. purchased the majority of the project’s undeveloped land, about 10 acres. Medical office specialist Onair Development has also unveiled plans for 120,000-square-foot medical office building for the site.
While it’s unclear if Sarwal’s group will be able to find more backing, Sarwal in the past has been able to secure financing in a pinch.
When the project’s initial lender, Lehman Brothers Holdings Inc., filed for bankruptcy, he went to U.S. Bank and Texas Capital for the a new loan. Meanwhile, he said he and his team invested approximately $120 million in the site to date, which includes deconstructing the former college campus, reusing or recycling 85 percent of the campus’s old materials, building new roads, and constructing a below-ground water treatment facility.