Behringer Harvard Opportunity REIT I Houston Property Enters Default
Northborough Tower, a Class A 14-story Houston office building owned by Behringer Harvard Opportunity REIT I Inc. is in default, according to a company filing with the Securities and Exchange Commission.
The 206,553-square-foot property was originally purchased in February 2008 from Commercial Developments International of New York City for $32.9 million. Northborough Tower was leased to Nobel Energy (NYSE: NBL), an oil and natural gas exploration and production company, until April 2018 and served as their corporate headquarters.
In 2012, the energy company announced plans to move and consolidate employees from several locations into a new property in northwest Houston. The process was expected to conclude in 2015. During the third quarter of 2015, Nobel vacated the building, but continued to make its monthly rental payments.
The CMBS loan associated with the property was scheduled to mature on January 11, 2016. The original lender was Lehman Brothers Bank FSB, and the current lender is LB-UBS Commercial Mortgage Trust, 2006-C3.
Behringer Harvard Opportunity REIT I failed to pay the outstanding principal balance of the loan at maturity, which constituted an event of default.
Under the loan terms, in an event of default, the lender can cause all funds in the property account to be deposited into a lender-controlled and administered bank account. In December 2015, the lender exercised its right to control the operating funds of the property.
As a result of the maturity default, the lender may apply all tenant rental payments towards the outstanding balance and may initiate foreclosure proceedings, sell the property, or have a receiver appointed to operate the property. The current outstanding principal balance of the loan is approximately $18.5 million.
Behringer Harvard Opportunity REIT I contacted the lender’s servicer to attempt to transfer the property to the lender to satisfy its loan obligations. However, the loan is already in the process of being transferred to a special servicer. It is unknown at this time if the special servicer will agree to accept the property as payment for the loan obligations.
While the REIT has been actively marketing the property for sale, they have not received any offers above the loan balance.
